Summary
An EPC company won a big project for installations of renewable power plant to be completed in 6 months’ time. Company had to raise funds immediately for successful completion but was constrained by weak financials.
Our advisory helped the company raise Rs.600 Mn within 5 weeks’ time which enabled the company to complete the project in time.
The Full Story
The Situation
XYZ* was a two year old EPC company in the exciting renewable energy sector. The company had won a large order to set up a renewable energy park and had to procure the parts, construct and commission the project in a period of 6 months.
The company had to raise working capital to procure parts and pay salaries. Also the company had to open letter of guarantees in favour of foreign companies for buying imported parts. Company had to raise 85% of the project cost in form of working capital. Also the fund requirement had to be met quickly to ensure timely construction of project. Company however had weak financials due to initial losses.
Our Approach
- We understood the Financials of company and group companies to identify strengths areas
- Thorough analysis of renewable energy sector was carried out to consider future trends.
- The project risk was analysed from the point of view of technical, part sourcing and execution risk. Regulatory approvals to be taken were also reviewed.
Our Recommendations
To take care of financial risk, elaborate structuring of the transaction was recommended to procure funds from financial institutions in shortest possible time.
- Tripartite agreement was entered into between XYZ, the contractor and the bank for control of cash flow
- Escrow of receivable of Cash Flow of the company
- LCs against parts to be liquidated from Receivable in escrow account
- Corporate guarantee of sister company
The Results
- Sanction of Rs. 600 Million Fund based and Non-Fund Based Limit (Letter of Credit) managed for the company
- Limits were sanctioned within 5 weeks and disbursement was carried out in time to ensure imports were done in time.
- XYZ did finish the project in time and recorded excellent profitability in the project and is now one of the leading EPC contractors in the field.
* We take our clients’ confidentiality seriously. While we’ve changed their names, the results are real.