VCE Summer Internship Program 2021

Smart Task Submission Format

Intern’s Details
Name Tejas Pukale

Email-ID Tejaspukale3@gmail.com

Smart Task No. 1

Project Topic Financial Modelling and Analysis

Smart Task (Solution)

Task Q1 : What is Finance? How is Finance different from Accounting? What are important basic points
that should be learned to pursue a career in finance?

Task Q1 Solution :

Finance is a term for matters regarding the management, creation, and study of money and investments.
Specifically, it deals with the questions of how an individual, company or government acquires money –
called capital in the context of a business – and how they spend or invest that money. Finance is then often
split into the following major categories: personal finance, corporate finance, and public finance.

Difference between finance and accounting:-

Parameter of
Comparison Accounting Finance

Accounting involves the management Finance is a wider and broader term that
of day-to-day financial transactions and involves the effective management of
the flow of money and then preparing business assets and liabilities, and further
Definition the financial statements. planning for positive future growth.

It is a pre-term activity where the

comprehensive study is done to realize the
It is a kind of post-mortem activity that funds or assets requirements of an
Activity Type records what has already happened. organization or business.

The main aim of Accounting is to

collect, classify, and present the current The main aim of Finance is to manage,
financial information about the control, strategize, and make decisions
business that can be used internally as about business finances. It involves the
Aim well as externally. view-point of futuristic benefits.

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Future: The scope of work involves

Current: The scope of work involves assessing financial statements or analyzing
the formulation of the financial and planning for future financial
Scope statements of the current year. transactions.

Communicating the health of the Finding the ways & means on how more
business financial position i.e. whether value in terms of financial position can be
Purpose incurring profits or loss. added.

Accounting activity is carried by the Finance is driven by Analysis that is based

specific rules that are defined for them on the expertise and capabilities of the
Driven By i.e. what, when, and how. person or agency in charge.

Public/private accounting firms,

Used In corporations. Banks, Consultancy, Corporations,

Determination of funds in Finance is based

The determination of funds in on the accrual system, i.e. revenue is
Accounting is based on cash flow and recognized at the time when the sale is done
receipts & payments that are realized not when it is collected. Expenses are also
Fund Realization for revenue and returns. realized when they are incurred

Important basic points that should be learned to pursue a career in finance: -

1. Interpersonal Skills
2. Formal Qualifications
3. Problem Solving Skills
4. Analytical Skills
5. Technologically Savvy
6. Desire to Innovate
7. Relationship Management Skills
8. Exceptional Leadership

500 Words (Max.)

Task Q2 : What is project finance? How is project finance different from corporate finance? Why can’t we
put project finance under corporate finance? Define 20 terminologies related to project finance.

Task Q2 Solution :

Project finance:- Project finance is basically raising necessary capital to finance such capital intensive
infrastructure projects. Is financing of a long-term infrastructure or industrial project using a non-recourse

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Smart Task Submission Format

financial structure, which relies only on the project’s cash flows for debt repayment, with the project’s assets
held as a collateral.

Project finance different from corporate finance:-

Reasons why we can’t put project finance under corporate finance:-

In corporate finance investors and lenders inject capital into a holding company which then initiates multiple
different projects. These different projects serve as a collateral for the debt in case there’s problem with debt
repayment or interest payments the lender can go after all the assets of the holding company and recover the
debt through the sale of those assets that holding company owns.
In project finance the project sponsor can have myltiple
SPVs with a specific project in each SPV and project sponsor can be holding company too and when there is
a problem with the specific project the lenders cannot go after project sponsors other assets they must rely on
the assets and cashflows from that specific SPV.

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500 Words (Max.)

Task Q3 : What is non-recourse debt / loan? What is mezzanine finance, explain with an example.

Task Q3 Solution :
1.Lenders rely on SPV’s cash flow only.
2.If something goes wrong project cash flows decrease resulting in SPV not being able to service the debt.
3.Lenders cannot go after the investors other assets.
Therefore, the project finance is called a non- recourse financing.
Mezzanine finance:- Mezzanine financing is a hybrid of debt and equity financing that gives the lender the
right to convert to an equity interest in the company in case of default, generally, after venture capital
companies and other senior lenders are paid.
Mezzanine debt has embedded equity instruments attached,
often known as warrants, which increase the value of the subordinated debt and allow greater flexibility when
dealing with bondholders. Mezzanine financing is frequently associated with acquisitions and buyouts, for
which it may be used to prioritize new owners ahead of existing owners in case of bankruptcy.

For example, Bank XYZ provides Company ABC, a maker of surgical

devices, with $15 million in mezzanine financing. The funding replaced a higher interest $10 million credit
line with more favorable terms. Company ABC gained more working capital to help bring additional products
to the market and paid off a higher interest debt. Bank XYZ will collect 10% a year in interest payments and
will be able to convert to an equity stake if the company defaults.

500 Words (Max.)

Task Q4 : Explain in detail with reasons of what the sectors are or which type of projects are
suitable for project finance?

Task Q4 Solution :

Project finance is generally used in oil extraction, power production, and infrastructure sectors.
These are the most appropriate sectors for developing this structured financing technique, as they

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have low technological risk, a reasonably predictable market, and the possibility of selling to a
single buyer or a few large buyers based on multi-year contracts.

Type of Project suitable for project finance :

1. Manufacturing Projects :
Where the final result is a vehicle, ship, aircraft, a piece of machinery etc.
2. Construction Projects:
Resulting in the erection of buildings, bridges, roads, tunnels etc. Mining and petro-chemical
projects can be included in this group.
3. Management Projects:
Which include the organization or reorganization of work without necessarily producing a tangible
result. Examples would be the design and testing of a new computer software package, relocation
of a company’s headquarters or the production of a stage show

500 Words (Max.)

4. Research Projects:
In which the objectives may be difficult to establish, and where the results are unpredictable.

Cost Estimating and Budgeting of Project:

Once the scope of a project has been defined clearly in a sales specification, it is necessary to
estimate the likely costs of fulfilling all the work. Cost estimates form the basis of subsequent
budgets for management control. They also provide a foundation for pricing.

500 Words (Max.)

Please add /delete blocks for if needed.

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