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1.
AUG
15

Financial appraisal


Learn from pages 36 to 72 . The topics that are there, you have learnt it already
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2.
AUG
14

Technical appraisal


TECHNICAL APPRAISAL

1. Inputs and utilities number of raw materials, supplies, consumables, etc., and their cost, quantity
to stocked, etc.,
2. Product ranges single or product mix/ by product, plant capacity
3. Process know-how- plant layout, work schedule,
4. plant location- localization, socio-economic conditions of the project and off-site facilties
5. plant and machinery import licenses, installed capacity, investment
6. People organization chart, HR policies and training and Development facilities
7. methods - project purchase mgt, vendor selection,, contract administration, procurement of
equipment and materials



Refer your text and Project mgt by Prasanna Chandra
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3.
AUG
14

Market Appraisal


Market and Demand Analysis
Market analysis: market share the project wants to enjoy
Demand analysis: how many consumers and customers will your product have

What is demand analysis and demand forecasting? ]
Demand forecasting using primary data and secondary data. ]
Advantages and Disadvantages ] Refer page
no. 107
What are sampling learn from statistics text. ]

Key steps are :
Situational analysis and specification of objectives:
Collection of secondary information census of India, NSS reports, plan reports, statistical abstract of Indian Union
(CSO), India Year book, statistical year book, economic survey, guideline to industries, annual survey of industries,
annual reports of MoCI, Techno economic surveys, The stock exchange directory, monthly studies of production of
select industries, monthly bulletin of RBI, publication of advertising agencies, others like exim reports, IIFT, etc.,
There are also industry specific reports automobiles, chemical, fertilizers, drugs and pharmaceuticals, electrical
and electronics, industrial machiners, metallurgical, textiles

Conduct of market survey -census or sample survey - steps
Chaterization of markets effective demand = consumption = production +imports- exports changes in stock
level, price, breakdown of dd, distribution, consumers,government policy

Demand forecasting qualitative : jury of executive opion method, Delphi method, market survey ( Refer
Chapter 8 in the text)

Time series : trend projection, moving average (Text book pg. no. 107-110), omit exponential
smoothing method.

Casual methods : chain ratio, consumption level, end use method, leading indicator method (handout )

Also refer to Project analysis .. By Prasanna Chandra



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4.
AUG
14

Corporate Analysis - an example of Microsoft

(corporate appraisal) SWOT ANALYSIS - MICRO SOFT INDIA
STRENGTHS
Strong based image. Ranked second globally with a brand value of $58.7 billion in , behind coco-cola; Spent over
$6 billion contiuously on R&D for the last five years and increased R&D workforce to 31,000 employees
(approximately 40% of the total workforce); Leading position in operating systems and browsers
In fiscal 2007, no sales to an individual customer accounted for more than 10 % of the total revenue. In comparison,
for Dell, this figure was approximately 11 % an 10% of the total revenues in fiscal year 2006 and 2005,
respectively. Evenly-spread revenues buffer the company from fluctuating sources of income, note ovum analysts.
WEAKNESS
Low search engine market share; In financial year 2007, Microsoft earned nearly 61% of its revenues from the US
region out of more than 100 countries that it is operating in. In contrast, competitors like IBM and Sun Micro
systems have more diversified revenue structure.
The companys online services business accounts for jsst over 5 % of its total revenues. However, the global internet
software and services market is forecasted to grow at 112% to $942 billion by 2011
OPPORTUNITIES
Healthcare is being considered a key vertical by Microsoft, as seen in its recent move in the European healthcare
market with the European launch of Microsoft Amalga-its new unified intelligence system for hospitals. In Inda, it
has done a lot of work in Gujarat and has tie-ups with private players like Apollo Hospitals and Fortis healthcare. It
has also introduced a Health Vault concept here.
The global market for IT applications is projected to grow at a CGAR of 10.08% between 2007 and 2012, out of
which small and medium sixed enterprises will grow at 11.1% and 10.91% respectively. Microsoft India has made
significant inroads here.
THREATS
Software vendors globally are losing close to $40 billion annually because of piracy. Legal proceedings in countries
like India and China against software pirates have yet to bear fruit.
It faces intense competition across all markets for its products and services. Internet as a distribution channel and
non-commercial software model has further reduced barriers to entry.
Microsofts business coduct and products face scrutiny from government agencies under the US competition laws
and the laws of other countries

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5.
AUG
14

Industry and Corporate analysis

INDUSTRY ANALYSIS (Environment Analysis): studying the environment based on the sector:
Economic sector: state of the economy, overall rate of growth, growth rate of primary, secondary and tertiary
sectors, cyclical fluctuations, linkages with the world economy, trade surplus/deficit and balance of payments
Government sector: industrial policy, government programmes/projects, tax framework, subsidies, incentives, and
concessions, import and export policies, financing norms, lending conditions of financial institutions and
commercial banks
Technological sector: emergence of new technologies, access to technical know-how, foreign as well as indigenous
and receptiveness on the part of industry
Socio-technological sector: population trends, age shifts in population, income distribution, educational profile,
employment of women and attitudes toward consumption and investment
Competition sector: number of firms in the industry and the market share of the top few, degree of homogeneity
and differentiation among products, entry barriers, comparison with substitutes in terms of quality, price, appeal and
functional performance, marketing policies and practices
Supplier sector: Availabillity and cost of raw materials and sub-assemblies, availability and cost of energy and
availability and cost of money

Corporate appraisal: (Swot analysis, pest analysis, porter model: profit potential model, life cycle
approach etc.,)
It is essential for identifying investment opportunities which can be profitably exploited.
Marketing and Distribution: Market image, product line, market share, distribution network, customer loyality,
marketing and distribution costs
Production and operations : condition and capacity of plant and machinery, availability of raw materials, sub-
assemblies, and power, degree of vertical integration, locational advantages and cost structure
Research and development: research capabilities of the firm, track record of new product developments,
laboratories and testing facilities, coordination between research and operations
Corporate resources and personnel: corporate image, clout with governmental and regulatory agencies,
dynamism of top mgt, competence and commitment of employees and state of industrial relations
Finance and accounting: financial leverage and borrowing capacity, cost of capital, tax situation, relations with
shareholders and creditors, accounting and control system, cashflows and liquidity.

Source: Projects: planning, analysis, selection .. by Prasanna Chandra, Chapter 3

Pls also learn from your text pg. no. 84- 92

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6.
AUG
14

Individual and Group creativity


REATIVITY- PROJECT IDEAS-INNOVATION
Initiating process:
idea generation - stages, individual ( preparation, incubation illumination, Verification), group (delphi technique,
brain storming, nominal group technique)
Corporate appraisal (production, operations, R&D, HR, Finance, Accounts, Marketing, distribution)
Scanning the environment (Economic, govt, Technological, socio-demographic, competition)
Searching for new ideas ( study existing ,observe the inputs and output of various industries, observe new
technology, psychological needs, study thr government guidelines)
Screening rating index


IDEA GENERATION:
Learning gives creativity, Creativity leads to thinking, Thinking provides knowledge, Knowledge makes you
great:
Minnesto Minning and Manufacturing (3M) fosters a culture of innovation throughout the firm. The company
manages the innovation process through a sophisticated tool called stagegate system. In this system, the entire
innovation process is divided into several stages. There will be a gate or check point at the end of each stage. The
project leader, who works with a cross-functional team, brings a set of known requirements to each gate before the
project passes from one stage to the next stage. The project leader also performs a technical appraisal, competitive
analysis and a market study of customer interests and preferences. Senior managers review the criteria at each stage
to judge whether the project deserves to move to the next stage. Finally, the gatekeepers make one of four
decisions: go, kill, hold or recyle. The idea is passed to the next stage in a go decision, completely rejected
in a kill decision, considered in the future in a hold decision. In a recyle decision, the process is
repeated. Since all the steps are visible to all the people involved, these systems put a strong discipline into the
innovation process. Lego, the Danish toy maker follows the same procedure to replace about one-third of its
product line with new products every year.
Pureit - Water Purifier -An innovation
Pureit, a breakthrough offering of Hindustan Unilever, is with many unique benefits complete protection
from all water-borne diseases, great convenience, and unmatched affordability. Pureits unique Germkill
BatteryTM technology kills all harmful viruses and bacteria and removes parasites and pesticide impurities, giving
you water that's 'as safe as boiled water'TM. It assures your family of 100% protection from all water-borne
diseases like jaundice, diarrhea, typhoid and cholera. Whats more, it doesnt need gas, electricity or continuous tap
water supply. You will be further reassured to know that Pureit meets the stringent germ-kill criteria of the
Environmental Protection Agency (EPA), the toughest regulatory agency in the USA.
The Delphi method at BHEL
BHEL the largest heavy-electrical equipment company in India, uses the Delphi process to explore new ideas and to
decide the future directions of its systems. The process is carried out in three steps. In the first step, an open-ended
questionnaire is given to all the prospective respondents. All the possible ideas regarding major
technological breakthrough for next 30 to 40 years are gathered. Participants also mention when the technological
breakthrough is likely to occur. Then the coordinator collects the questionnaires from all respondents and prepares
the list of technological breakthroughs and its estimated timings. In the second step, the summarized list of
technologies with its expected arrival I fed back to the participants. Participants are then asked to reconsider their
earlier time estimates and give new ones with proper reasons. The information obtained at this stage provides a
priority ranking for each technological development in terms of the urgency of each requirement.
In the third stage, participants are given the new information about estimated timings that was collected in the
second stage. In the final stage, participants are asked for their final estimates with their rationale for their
forecasts. The company feels that the obtained ideas will be useful for corporate planning.



Pls learn also from your Text on Individual and group Creativity pg no, 93-95
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7.
AUG
14


Project selection : Screening the ideas
A Finance models
1. scoring model: factor/ project rating index( it requires project evaluation factors- refer Table :2.1 from your table
chapter 2, page no. 45)
2. profit model: payback, ARR, DCF
B. non-finance models
Sacred cow, operating necessity, the competitive necessity, product line extension, comparative benefit model.

Pls refer to the material given in the class

Criteria for choosing the project selection model
Realism, capability, flexibility, ease of use, cost and easy computerization

Example: Purchase of a car- How will you adopt project rating index?
Table A : Criteria and weights for automobile purchase

A. appearance - 1.5 criteria 1 2 3 4 5
B. Comfort - 3 A ugly Poor adequate good wow
C. Cost - 2 B ugly Poor adequate good wow
D. Handling - 2 C >4 > 3 2.5 2 2.5 1.45 -2
E. Mileage- 1 D
F. Maintenance - .5 E
F
Project Rating Index
It is an evaluation method that helps mgt to streamline the process of initial screening. Factors for rating have to be
identified and weights to be assigned, scores have to be given score. The steps involved are:
1. Identify the relevant factors useful for rating a project
2. Assign factor weights to each factor, based on the relative importance of each factor
3. Use an appropriate rating scale and rate the project on the listed factors.
4. Multiply the factor rating with the factor weight to calculate the factor score for each factor
5. Add all the factor scores to determine the rating index of the project
6. Reject the project if the rating index of the project is less than the desired value.
Construction of a rating index
Factor Factor
weight
Rating Scale
Factor score






















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8.
JUL
27

Kindly follow the link

http://innovationgrow.com/importance-of-innovation-and-creativity-in-business.htm
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9.
JUL
21

Assignment
As was told in the last class to submit an assignment on CIAL case, next class come prepared and
submit the assignment, This is for all.
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10.
JUL
21


Project Appraisal and financing

Scope of Project Management & Project financing in Practice and inter-disciplinary nature

Starting a business- you need money, men, machine and methods- of all money is required- money
: your own, venture capitalist, Banks , public, private etc., -
You cannot invest all your money. Hence you need to approach the financiers who may
be bankers, FIs, friends and relatives
How do you make an approach for borrowing - you go with your creditworthiness (capacity and
capital ) and ability to convert your idea into a product or service( management skills).
How will you express your ability to start, run and make profits in your business.

By preparing DPR/Business plan
(What is the difference between the two- DPR and Business plan and how it is prepared)

In practice, you want to start your business, you will do industry analysis/corporate analysis, map
the environment , which product/service to produced or supplied. Once you decide the product, you
should know the capital is sufficient or not. When you need more money, you have to approach a
banker or consultant who would help in getting finance after explaining about the feasibility. So an
initiator would receive inputs with respect to the product for which finance is available similarly,
venture capitalist (example: Government organizations- MSME )would help in the same job. They
approve the idea and the preparation of DPR and supply of finance. There are also supplier of
projects who initiate the project, implement the project and sell it to the purchaser.

What is the sequence of all these activities: Project formulation, Project appraisal and Project
Management

Project formulation
a. to idea generation
b. to scanning the environment: business, political, social, technological and legal.
c. to carry out feasibility studies market, technical, financial, economic etc,
d. to prepare preliminary proposals DPR preparation/business plan
e. to finalise and consolidate
f. to submit for approval

Project appraisal -checking out feasibility by the Banks and Financial Institutions
1. to discuss and approve

Project management-
1. Planning
2. Implementation
3. closure
Example: Another example: metroliner by L& Larsen & Toubro Metro Rail (Hyderabad) Limited, a
subsidiary and a special purpose vehicle of the L&T Infrastructure Development Projects, has achieved
financial closure for the Rs 12,132-crore Hyderabad metro rail project.
A consortium of 10 banks led by SBI has sanctioned the entire debt requirement of Rs 11,480 crore and
the equity component of around Rs 3,440 crore would be infused by the L&T group for the project,
according to a company release today. The project would get a viability gap grant of Rs 1,458 crore from
the central government through the state, it said. L&T signed the concession agreement with the
government of Andhra Pradesh on September 4, 2010. L&T Metro Rail (Hyderabad) Ltd has already
submitted a performance guarantee of Rs 360 crore to the state government. The pre-construction works
of the project has already started, and the soil testing and topographical surveys have been completed in
most locations along the alignment and conceptual engineering is near to completion. As per the
agreement, construction would have to be completed in five years and the concession period for the
project is 35 years (including 5 years of construction) and is extendable by an additional 25 years.

What is DPR- details about various aspects of your business. : Technical aspects, Market aspects,
finance aspects, economic aspect etc., Hence it is document which covers various aspects and a
roadmap for your business.

Interdisciplinary nature

II Topic - Session 2

Project, Project characteristics and Types Project Vs Programme, Project Life cycle
Projects are set to achieve objectives, because it provides org with tools that increases the ability of
planning, implementing and control its activities as well as the way in which it utilizes the people and
resources.

Some people argue that construction of Tower of Babels and Egyptian were some of the first
projects as cavemen were set and sent for raw material for mammoth stew. Initially projects started
by Military system than other sector. For example:
1. NASAs Apollo space prog. , and the development of bombs missiles are few instances ( govt)
2. soft ware industries

The responses to the above requires setting up of projects as it talks about utilization of people and
resources. Slow transformation, technology supplementary and special service.

Q`(Ex: Advertising co, advances from blanket print ads to regionally focused television ads to
personally focused internet ads)

Project definition :
A TEMPRORARY ENDEAVOUR UNDERTAKEN TO CREATE A UNIQUE PRODUCT OR
SERVICE - Project Management Institute, 2001

Basic purpose of initiating a project is to accomplish specific goals.
The three project objectives are: 1. Performance/quality 2. Time 3. Cost

PROJECT MANAGEMENT
In India, development process in the real sense, using technology, engineering and construction,
began only in the year 1951, that is with the five year plan. Since then govt spends on
developmental projects like Agricultural projects like rural tech, irrigation etc., Industry minerals,
Transport, communications, science, Technology and environ, special area programmes, housing
and general economic services.

Project characteristics
Unique activities - ship building yard
Attainment of specific goals different projects with different objectives: no objectives are the
same- Ex: marketing project for demand analysis/sale
Sequence of activities - sequence should be followed which depend upon the technical
requirements and interdependency, Ex. Construction project stars with soil testing, foundation,
outline structure etc.,
Specified time start and completion date to be fixed with duration expressed in
hrs/days/months/years.
Inter-related activities- output becomes input for the next job. Ex. Interior designing requires
completion of flooring and fixtures.


APPLIED THEORY
1.Make it fast, make it good, make it cheap is what senior managers always ask of their project
managers. But the project managers always wanted a traded-off between these three project
variables. Why do you think the top management and project managers take such stands when
implementing a project.

Learn something about Olympic torch relay, Manhattan project and construction of Egypt pyramids

Project Vs Programme -
Project Vs Programme
Plan - a comprehensive view of something involving large resource generation and availability and
its allocation for different projects with well defined objectives. Ex. Five year Plan

Programme :
It is a group of projects in a coordinated way to obtain benefits not available had it been performed
individual . Ex : ISRO undertakes many projects like INSAT, GSLV, PSLV etc., other programmes
are health programs, education programs, rural development programs etc.,

FOR EXAMPLE : A company wants to increase its revenue from 10 crores to 20 crores in three
years. The company has to undertake a programme consisting of projects
Project I : Enhance the existing product - upgrade
Project ii: launch a basic version of new product
Project III: launch a revised version of new product with all types of features
Project iv : decrease the delivery time, increase the speed
Project v : increase quality and decrease defects

TYPES OF PROJECT
1. Size of Investment Mega, Major, Medium Mini
2. Ownership Public Private Joint sector Cooperative
3. Area of
concern Local regional National International
4. Sector of activity Industrial agricultural service sector general
5. Object new expansion modernization enrichment
6. Time below 3 mths 3-9 mths 9-18 mths more 18 mths
7. Level of complexity high medium low very low
8. Tech breakthrough contemprory best practical
9. Risk 100 no below 50 above 50 100 yes


PROJECT LIFE CYCLE

INITIATING PROCESS : idea generation - stages, individual & group (delphi technique, brain storming,
nominal group technique) - background of idea generation.
Scanning the environment ( Business, Economic, Political, Technological, legal etc.)
Corporate appraisal (production, operations, R&D, HR, Finance, Accounts, Marketing, distribution)
g. Project selection : Screening rating index and to carry out feasibility studies market, technical,
financial, economic etc,
PLANNING PROCESS:
a. to prepare preliminary proposals DPR preparation - activity definition and scope, schedule and
sequencing, cost estimating and sources and budget, duration etc.,
b. to finalise and consolidate final DPR
c. to submit for approval


IMPLEMENTATION PROCESS: bringing in the team under the supervision of the project manager
and project under the top mgt to support one another and co-ordinate one another

CONTROLLING and closure PROCESS : performance reporting,



Pls also learn from the Material given in the class
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11.
JUL
21

syllabus

VIGNANA JYOTHI INSTITUTE OF MANAGEMENT
Post Graduate Diploma in Management (PGDM)
Batch XIX 2011-2013


TERM IV


Title of the Course: PROJECT APPRAISAL AND FINANCING


Learning outcomes: At the end of the course, the students should be able to:

Adopt the techniques used for preparing a good project
Learn the project appraisal criteria adopted by Financial Institutions.
Appraise the projects with respect to its feasibility
Preparation of detailed project report


Abstract of the course:

The projects and operations are often considered similar as both are planned, implemented and
controlled to produce results within specified resource constraints. But a project is undertaken to
produce unique deliverable. The course enables the students to learn the techniques adopted by
Financial Institutions for project appraisal and equips them with skill of preparation of detailed
projects for the projects planned based on the criteria of financing of projects.


Session plan:



Session
No.
Topic & Issues Reading Reference
1
Overview of the Course:
Scope of Project Management & Project financing in Practice
and inter-disciplinary nature

2-3 Project, Project characteristics and Types Project Vs
Programme, Project Life cycle
Ch 1 & Handout
4-6 Project selection: Generation of Project ideas, Criteria for
selection of models, nature and types of selection models,
factoring rating index.
Ch 3 Text

7-8 Technical Appraisal and Market Appraisal Ch. 4 Text
9- 22 Financial Appraisal: cost of projects, sources of finance- long
term, working capital, Break even point, cash flow-NPV & IRR
and Profitability estimates, ratios and sensitivity analysis
Ch. 5, 6 Text
23-24 Economic Appraisal: Social Cost Benefit Analysis
Management Appraisal
Handout
25-27 Preparation of Detailed Project Report, Project appraisal by FIs
and Financial agencies, Techniques and steps.
Handout and
Pahwa.
H.P.S (6
th
Edition)
28-30 Presentation of DPRs



Pedagogy:

The Pedagogy consists of right blend of the various methods for effective learning of the course - a
mix of lectures on conceptual basics, exercise and real life situation analysis, discussion of case
studies.



Recommended text:

Project Appraisal and Financing


Additional references:


Project Management and Appraisal : Khatua, Sitangshu

Project Management : Bhavesh
Practical Project Management : Ghattas R.G. & Sandra
Project Management : PMP Wiley Edition
Project Report & Appraisal : Pahwa. H.P.S (6
th
Edition)
Project Financing : Pahwa. H.P.S (4
th
Edition)
Project Finance of the Total Project Management : Joy. P.K. (PKJ)
Project Management : Patel, Bhavesh
Projects Preparation, Appraisal, : Chandra, Prasanna (PCA)
Budgeting Implementation
Project Management : Sharma. K.R

Students are free to refer any book on the subject

Journals & Dailies : Project -ICFAI, Chartered Accountant, Chartered Financial Analyst, Business
Analyst, Money and Finance, Business India, Business World, Business Today, Business Standard,
Economic Times, Business line.

Evaluation:

Mode of Evaluation Weightage
Quizz 15% (2 Quizzes of 7.5 marks each)
Selection of project idea using
Project rating Index
10%
Review Examination
15%
Preparation of DPR 15%(15% for the project +10 % for
presentation)
End Term Examination 50 %
Total 100%


Quizzes to be conducted during the 9
th
session, 1
th
session of the course for a duration of 20
minutes each.Quizzes are to be conducted only in the written form.

Each student has to pick up 3 project ideas of various nature and should apply Factor rating index
technique for all the projects ideas selected in order to rank them. This individual assignment has
to be submitted on the 10
th
session of the course.

DPR to be prepared for the select project as a group and to be submitted not later than the
25
th
session of the course.




Evaluation Criteria for the Group Project

Conceptual clarity
Self analysis with reasoning and drawing results from various tests
Ability to relate and draw inferences from various experiences and incidences
Relevance of the content( no superfluous or irrelevant information)
Information source, suitable referencing and bibliography
Format and language: clear division into sections, page numbering, language etc.
Students original contribution and creativity
Any plagiarism shall be viewed seriously and the students have to rework.




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