Project Finance Explained: From Project Cost to Funding Structure

Project finance involves long-term debt structuring for new industrial plants, infrastructure, or commercial real estate developments.

Underwriting Architecture

1. Project Feasibility Evaluation: Independent evaluation of technical viability, raw material availability, and market demand.
2. Promoter Equity Contribution: Lenders require promoters to inject equity contribution before debt disbursement.
3. Debt Service Capability: Projected cash flows must demonstrate strong debt coverage over the repayment tenure.

Construction Phase Moratorium

Project debt incorporates a moratorium on principal repayment during project construction, with servicing of interest during construction.

Note: Syndication terms, debt-equity ratios, and covenants depend on sector dynamics and project appraisal.