Bond-Based Project Finance

Facilitating FDI Investment

Raising money for new businesses or expansion is tough for business owners. A strong business plan is crucial for any kind of investment. Be ready to work hard to secure funding to grow your business. Make sure your business plan is flawless and convincing. It helps if your idea or product is popular with a large audience. Using your existing assets is one of the easiest ways to get capital. Clearly explaining your company’s potential increases your chances of getting funding.

Remember, investors might want a quick return on their money and will stick around until they get their investment back with profit.

Most banks and investors don’t usually invest in early-stage businesses.

We look for investors who are interested in high-risk, high-reward opportunities.

Important Points to Note for Bond-Based Project Finance:

1. Sovereign Rating of the Project Country:
   • The sovereign rating of the country where the project is based is critically important. It impacts the cost and feasibility of funding.
2. Genuine Projects Only:
   • Only legitimate and viable projects are entertained. Projects must be well-documented and realistic.
3. Experienced Promoters/Team:
   • Promoters and the project team must have relevant experience in the type of project being proposed. This experience is crucial for gaining investor confidence.
4. Company Size and Justification:
   • The current size and financial health of the company promoting the project should justify the scale of the proposed project.
5. Startups:
   • Startups are eligible, but promoters must be financially capable of bearing initial costs as outlined in the process flow. This includes fees for KYC, mandates, and deposits.
6. Healthy Credit Rating:
   • The current credit rating of the promoters should be healthy to ensure credibility and reduce perceived risk, a structured analysis evaluates market demand, expenses, potential earnings, risks, and financial stability, guiding decisions on launching, expanding, or adjusting the service.
7. Accurate Application Form:
   • The initial bond raise application form must be filled out accurately and completely. Any inaccuracies can delay the process or result in rejection.

By adhering to these points, applicants can improve their chances of securing funding through bond-based project finance.

1. Application Submission:

   • The applicant submits an application to a category trade finance bank.
2. Initial Verification and Consultation:
   • The lender’s project head verifies the application and conducts a joint call with the customer.
3. Proposal Approval:
   • If the initial response is positive, the proposal is sent to the finance bank’s expert core committee for approval.
4. KYC Process:
   • Upon approval, the KYC process is initiated for the applicants.
   • Applicants pay a one-time lifetime fee of USD 1550 to upload all documents on the bank’s eKYC portal.
5. Mandate Agreement:
   • After a positive KYC result, the customer signs a mandate agreement and pays a non-refundable fee of USD 25,000.
6. Detailed Project Report (DPR):
   • The applicant prepares and submits a Detailed Project Report (DPR) to the lender finance bank.
7. Credit Rating:
   • Obtain a credit rating for the project from a local credit rating agency.
8. Techno-Economic Analysis:
   • Conduct a techno-economic analysis of the project.
   • The coupon rate or interest payable to investors ranges from 4.5-5% for AAA+ rated projects to 6.5-7% for BBB+ rated projects.
   • The total cost to the customer, including hedging and bank commission, amortized over 12 years, will be no more than 9-12% per annum.
9. Customer Deposit:
   • Upon a positive techno-economic analysis, the customer deposits USD 250,000 (fully refundable) into an offshore account, held in escrow.
10. Establish USA Office:
    • A USA office is opened with assistance from US merchant bankers.
11. SEC Empanelment:
    • The project is empaneled with the Securities and Exchange Commission (SEC) in the USA.
12. Prospectus Issuance:
    • A prospectus is issued against the project.
13. Corporate Bond Issuance:
    • Corporate bonds are issued against the project as per the issued prospectus.
14. Bond Listing:
    • The bonds are listed on the US stock exchange.
15. Marketing and Roadshows:
    • Roadshows and marketing efforts are initiated with the assistance of US merchant bankers to attract investors to the bond.
16. Investment and Fund Allocation:
    • Upon investment by investors, the amount is credited to the offshore account.
    • The bank deducts expenses at each stage from the offshore escrow account based on direct debit instructions from the applicant.
    • The bank deducts a commission of 2% up to USD 50 million and 1.5% for amounts from USD 50 to 100 million.
    • Bank bond management charges are 0.75% per annum.
    • The bank manages the bond for up to 12 years or until closure.
17. Success Fee:
    • A success fee of 2% plus taxes of the bond listed is applied.

Key Benefits:

1. Large-Scale FDI:
   • Project finance through FDI starts at $10 million USD, Euros, or Pounds for viable global projects.
2. 100% Debt Funding:
   • Full debt funding for preferred sectors with no equity dilution and no secondary collateral required.
3. Interest-Only Payments Until Redemption:
   • During the moratorium period, borrowers only need to pay interest. The principal is repaid upon bond redemption.
4. Bond Security:
   • The project is secured by raising bonds against it.
5. Efficient Process:
   • The process takes approximately 4-6 months.
6. Long-Term Listing:
   • Corporate bonds can be listed for up to 12 years for legitimate projects worldwide.
7. Trade Finance Bank Facilitation:
   • The entire process is facilitated by a category trade finance bank.
8. Competitive Funding Costs:
   • Funding costs range from 9-12% per annum, subject to the project’s credit rating, applicant, and sovereign rating of the project country.
9. Proven Track Record:
   • The lender has listed bonds worth $81 billion USD, with the highest amount for a single customer being $20 billion USD. In India, bonds worth $1 billion USD have been successfully listed.

1. • The initial bond raise application form must be filled out accurately and completely. Any inaccuracies can delay the process or result in rejection.

By adhering to these points, applicants can improve their chances of securing funding through bond-based project finance.