PROJECT REPORT FOR

THE COPPER WORLD

For

Setting up of Copper Storage and

Trading Facility at Sharjah, UAE

October, 2018
Contents

Executive Summary...................................................................................................................6

Management Assessment of the Firm.......................................................................................7

Technical Assessment.............................................................................................................11

Industry and Market Assessment.............................................................................................22

Project Proposal.......................................................................................................................26

Financial Projections................................................................................................................30

SWOT Analysis........................................................................................................................36

Risk Analysis............................................................................................................................38

Conclusion...............................................................................................................................41
 Chapter 1

Executive Summary

The Copper World is proposed to set a Copper Storage and Trading facility at
Sharjah, UAE, which is promoted by Mr. Wasim Khan and Mr. . The said
venture would be under constitution of a closely held public limited company.

Promoters have been allotted land on lease basis for 25 + 25 years.

Total project cost is proposed to be Rs. Crore to be funded by term loan of Rs.
45.00 Crore and balance Rs. Crore by promoter’s contribution and Rs. Crore by
way of Unsecured Loan.

COD is expected as September 2019. Disbursements are projected in February

2018 with a moratorium of 18 months.
st
Turnover of around Rs. Crore are projected in 1 year of operations for 6
months i.e. FY 2019- 20. The same is expected to grow gradually around Rs. Crore
in FY 2020-21.

Current ratio, DSCR, and Interest coverage ratio are generally expected to be
above benchmark levels throughout the projected period.

The firm ensures the retention/induction of adequate technically qualified and

experienced professionals to ensure the smooth operations of the unit.

All regulatory compliances are to be ensured.

In view of anticipated demand, debt-service indicators, other operational aspects

and risk mitigation suggestions detailed in the report, it may be concluded that the
proposed project of The Copper World, mentioned in the report is economically and
technically viable subject to its achievement of projected revenue along with
adherence to the estimated project cost and cost structure and timely compliances for
the project.
 Chapter 2

Management Assessment of the

Firm

Brief Profile of the Firm:

1. Brief Profile:

Name of the Firm The Copper World

Year of Establishment 2018

Registered office

Factory Office Sharjah

Nature of Business Storage And Trading of Copper

Constitution

2. Particulars of Directors

Name Designation
Mr. Wasim Khan Director
Director

2.1. Firm Assessment

The Copper World was incorporated as a Limited company on. The objective of the
firm is to set-up a Storage Facility for the Copper and Trading of the same at Sharjah,
UAE.
The corporate office is located at , and the proposed unit is coming up at
Sharjah, UAE .

The plant would have a capacity of 5,000 tonnes of Storage in the form of Vaults of 10
Tonnes each, with a provision of enhancement up to 10000 tonnes. The company will
have the copper manufactured from scarp on job work. The company proposes to
undertake contract manufacturing for its own brand The Copper World.
2.2 Promoter / Director Assessment
1. Mr. Wasim Khan: - aged years is the founder of The Copper World. He has been also
involved in the in-depth study of copper industry. He has been fully involved in the project
since its inception and has been able to build this project.

2. Mr.: - aged Years is Technical Director in The Copper World. He has in depth knowledge and
strong analytical skill about the Copper Industry. Being in the business for more than 25
years, he has seen all the phases of market and handled all the matters efficiently. He
looks after the policy, vision and major part of the operational activities of the group. His
excellent inter-personal communication skills provide him the liberty to innovate and
implement new ideas to business. He is a person with the bent of unmatched integrity &
vision, which always help him in winning over the heart of his customers
2.3 Promoters/ Director’s Net worth

Net worth of Directors, were as follows:

Fig 2.1: Promoters/ Director’s Net worth

Net Worth (Amount in Rs.
Name of Partners Crore)

Mr. Wasim Khan

TOTAL

Net worth certificate is attached elsewhere.

2.4 Overall Management Assessment

The Copper World is the company which is being set up to trade in copper with a view to hold
large amount of copper in physical form by warehousing the same in the vaults at the premises
set up at Sharjah, UAE. The copper shall be purchased by various different buyers and shall be
traded with the rates decided by the market factors. Beyond the sale of copper the company shall
be benefited in the form of commission on copper transaction which will be handled by the
company, which shall be calculated as a percentage of the value of commodity being sold,
delivered etc. Further the storage cost shall be levied on the buyers who shall be paying the
same after a specified period on the vault space occupied.

The company is having experienced personnel from different fields which would help
company to understand the business from different perspectives. Accordingly, prompt and
effective management decisions may be expected which would help the smooth operations of
the company.
 Chapter-3

Technical Assessment

3.1 Project Rationale

The Copper World was incorporated with the objective of setting up a Storage and Trading
Facility of Copper in UAE, promoted by a team of intellectuals, eminent trade & industry
experts.

The Copper World is setting up the Project at Sharjah, UAE.

The company initially plans to establish a Copper Storage facility with a capacity of 5,000
Tonnes with a provision of enhancement up to 10000 tonnes. The company will store the
copper in the form of bricks of one tonne each under its own brand.

The company has got NOC from and have planned to start construction at the site.

Regulatory approvals

The industry is highly regulated and requires set of approvals and licenses for construction
of building, storage and sale of the copper.

The required land for establishment of a brewery factory has already been allotted and taken
on lease for 25 + 25 years in the name of the company. As informed by the management,
the details of all the necessary approvals and clearances from the concerned departments are
given in the table below:
Fig 3.1 Regulatory approvals
Clearance / approval Obtained

Land Allotment Letter Obtained

LOI Obtained
Pollution Board Letter Obtained
Gram Panchayat NOC Obtained
Possession letter Obtained
Licence for brewery Obtained

Regulatory Approvals mentioned in the above table is attached as Annexure C.

3.2 Project Location

The proposed project is located at

3.2.1 Connectivity

. It is located 35 KM towards west from

By Rail

Fig 3.2 Connectivity

Location Approx. distance from
proposed site (KM)

Airport
Port
3.2.2 Raw Material

The main raw materials for the production of copper is copper scrap which shall be got converted to
copper bricks on one tonne each in the brand name The copper world exclusively for trading and
storage.
As the major raw materials are available in the market, the company may not face problem
in raw material procurement.

3.2.3 Power Supply

The company will obtain power supply from SEWA at the rate of Rs. 6.50 per unit.

3.2.4 Water Supply

The Company will use water from its own industrial Bore well water supply, installed in its premises.

3.2.6 Primary Utilities

The utilities and machinery proposed to be used in the facility are easily available and shall
be installed at site.

3.2.7 Location competitiveness and transportation ease

The project has connectivity to . It may be easy for the company to procure raw-
material and desired manpower as it located near to highway.

3.3 Market Strategy

The Company proposes to undertake the sale of Copper innthe form of copper bricks of one
tonne each with a minimum purchase quantity of ……….

3.4 Construction details:

The company has already acquired land on lease basis for the purpose of setting up of the
proposed project.

Some of the major progress so far has been as informed by the management:-

 Levelling of land
 Boundary wall constructed
 Administrative block constructed
 75% construction of the main process area
3.5 Manpower:
The tentative staff strength proposed for the unit as informed by company is as follows:
Figure 3.3 Manpower Details
Nature No of labour force
Technical
Administrative
Marketing Personnel
Unskilled Labour
Total

The organizational chart is attached as Annexure E.

3.6 Production and

Utility: Fig 3.4 Production
details

Sales Turnover Year 1 Year 2

Commission on Sale and

Purchase @ 0.5% of the value
Storage Rent
3.6 Project Implementation Schedule:

The total proposed land of 69000 Sq. Meters has been allotted to the company in February 2002,
but clear possession of land was handed over to company in December, 2015. Some of the
major progress so far has been as informed by the management:-

 Levelling of land
 Boundary wall constructed

The detailed project implementation schedule as informed by company is as below:

Fig 3.5 Project Implementation Schedule:

Event Date of commencement Date of completion
Civil Structure
Structure Work
Miscellaneous Work
Electrical Works

Procurement of Equipment & Machinery

Testing of Plant & Machinery
Commissioning of Plant
Current status of project implementation:

The Land proposed for the storage facility has already been allotted to the company on
lease basis for 25 years. Management has already obtained approvals and licenses for the plant.
 Chapter 4

Industry and Market Assessment

4.1 Overview of Copper Market

Copper and its deep links to society and the business cycle
From at least 10,000 years ago, copper, one of the first metals harnessed by humans, has been used to produce
everything from coins to ornaments. Today, copper and its alloys are used to produce a range of products
necessary to modern life, from cars to electronics. Accordingly, copper demand has grown in line with global
economic growth, which makes copper a reliable metal with which to track business cycles over the long term.
An ‘electrifying society’ and copper’s new growth path
We believe that copper consumption is entering a new growth phase driven by an “electrifying society”. With the
electrification of energy, we expect demand for electricity to outstrip the growth in total primary energy demand
going forward. The production, distribution and transmission of all that power will require a great deal of copper.
In particular, the electrification of transportation will be a mega-trend. Copper, with its superb electrical
conductivity and lack of price-competitive substitutes, will be the key metal wherever electricity is used. Already,
c.72% of copper consumption is in the power and utilities sector, and in electrical products. We forecast that
demand will grow at an annual 3.1% until 2022, exceeding growth over previous decades.
Electric vehicles, a key driver of copper demand
The transition to electric vehicles (EVs) from internal combustion engine vehicles (ICEVs) is inevitable despite
controversies over the speed of implementation. Our regional automotive analyst, Rachel Miu, expects the global
electric-vehicles market to grow 22% annually to 2030, led by China’s 25% market growth, which is bolstered by
government policy. With a battery-powered electric vehicle (BEVs) containing four times as much copper as an
ICEV (80kg versus 20kg), the red metal is expected to emerge a big winner from the electrification of light-duty
vehicles. We expect copper demand from electric vehicles to rise from 208k tonnes in 2017 to 1.91m tonnes in
2030, up 19% annually. Copper consumption from electric vehicles, estimated at 0.9% of the global total in 2017,
will rise to 8.2% of 2017’s total copper demand in 2030.
Renewable energy growth to accelerate copper demand growth
8%6%4%2% 0%0
Renewable energy uses copper more intensely than conventional power generation – copper usage per
megawatt hour of offshore wind and solar power generation is significantly higher than that for coal or nuclear
power generation. Based on International Energy Agency (IEA) forecasts on global average annual net capacity
addition between 2017-2040 (74GW for solar photovoltaic, 50GW for wind and 36GW of all other renewables),
c.635k tonnes of copper demand (c.3% of global copper consumption in 2017) will be generated every year on
average until 2040.

Copper’s second consumption peak and its huge growth potential in China, India.
In our analysis of peak copper consumption, we see that developed economies such as the United States and
Japan had one peak at c.11kg/capita, when their gross domestic product (GDP) was around US$20,000-30,000
per capita, and a second peak at US$40,000-50,000 GDP per capita. This feature distinguishes copper from
other metals and brightens its demand outlook. We are especially optimistic on copper demand growth in the
emerging markets. China, the world’s biggest copper consumer at 50%, has a per capita copper consumption of
just 8.2kg while India was at a mere 0.4kg in 2017.

Copper ore supply growth constrained by structural challenges

Growth in the global copper mine supply is expected to decelerate as existing mines experience higher
production costs from systematic grade declines and resource depletion, while tepid exploration activities in
recent years limit new discoveries. Net cash cost at mines globally in 2017 is about three times the levels in 2000,
while the copper ore grade at mines in Chile, world’s largest producer, has declined by 0.76ppts to 0.65% in
2016, from 1.41% in 1999. Of the 20 biggest copper mines globally, only four have begun production in the 21st
century. The latest newly discovered mines are mostly in Latin America and sub-Saharan Africa, where political
and social stability is weak. We forecast that global mine production will grow at a CAGR of 2.9% during 2017-
2022F, slower than the 4% achieved over 2010-2016.

Refined copper supply growth to lag demand growth

Copper is refined to the 99.99% cathode form through three broad methods: primary production from copper
concentrate or solvent extraction and electrowinning (SX-EW), and secondary production from scrap. These
accounted for a respective 67%, 15% and 18% of global total refined copper production in 2017. There is strong
refining capacity growth in China, but ore supply will remain a key determinant of refined metal production going
forward. We expect 2.6% CAGR growth in global refining capacity and 3% CAGR growth in global refined copper
supply in 2017-2022, driven by China and India. In 2018, production is expected to outstrip capacity increases
and drive the strong recovery of output, compared to 2016-2017, when weather and labour issues disrupted
mines and flattened output. However, output will still grow at a slower pace than demand, keeping the copper
market tight. Meanwhile, China’s ban on low-grade copper scrap imports has introduced uncertainties for
secondary refined copper production, and the prognosis remains unclear, given the stricter environmental
regulations on smelters.
Copper price range-bound in near term
After ending 2017 30.1% higher at US$7,157 per tonne, the London Metal Exchange (LME) spot copper price has
retreated slightly into 2018, down by c.5% year-to-date as of end-April. Both fundamentals and sentiments put
pressure on copper prices last year as global major mines faced disruptions and were expected to continue
facing them in 2018 with a significant portion of global mine output subject to the renewal of labour contracts.
However, as the year progresses, the market is factoring in a smaller risk to copper supply Y-o-Y and in-line with
this, we expect a positive growth in copper ore and metal supply this year. As such, we forecast a stagnant
copper price averaging US$6,900 per tonne in 2018.
Long-term bullish perspective on copper prices
Given strong demand growth, we expect a copper shortage over the mid-term. The global copper market last
registered a surplus in 2015, which turned into a deficit of 326k tonnes in 2016, and remains 262k tonnes short. In
2018, we expect the deficit to narrow to 136k tonnes. We expect shortages until 2022, with the deficits increasing.
Accordingly, we expect LME copper prices to generally trend up, subject to fluctuations from market dynamics
such as warehouse inventory, supply disruptions stemming from weather and labour strikes, and macroeconomic
indicators. We forecast that LME copper prices on average will remain above US$7,000 per tonne and gradually
rise.
Copper prices, affected by factors beyond fundamentals
Copper is one of the most traded commodities around the world. Market participants tend to trade on sentiment
and expectation rather than fundamentals, given the time lag in the release of data on actual demand and supply.
So, copper prices are affected by various economic indicators, and news and money flows in relation to the
financial markets. Copper prices are strongly correlated with the global economy and generally swing with the
business cycle, as seen from the OECD system of Composite Leading Indicators (CLI). Commodity prices have
an obvious negative correlation with the US dollar and copper is no exception.

Long-term outlook: Copper market to remain tight; strong demand growth

Copper prices to be supported long term by solid global demand – EV, renewable energy and economic growth.
China, which accounts for 50% of global copper demand, will keep demand growth bolstered by its power and
construction sectors, which account for approximately 46% and 9.4% of copper end-use, respectively.
Meanwhile, the growing market for electric vehicles (EVs) and the shift to renewable energy systems will
generate fresh demand for copper. Also, demand from fast-growing developing countries, especially India and
within ASEAN, remains strong and should continue to grow as their infrastructure investments, including on
power supply, rise. In particular, electric vehicles are projected to consume 8.2% of 2017’s total copper demand
in 2030, from a mere 0.9% in 2017. All in all, we forecast that global copper demand will register a CAGR of 3.1%
in 2022 from 2017.
Supply growth shrinking in face of falling ore grades and structural resource depletion. We do not expect the
supply of refined copper to keep pace with demand. Over the coming decade, primary output from currently
operating mines is set to fall, due to the decline in ore grades endemic to the porphyry-type resource base that
dominates global supply. With weak metal prices in the wake of the global financial crisis, investment in mines
also became inactive. In addition, China’s latest restrictions on copper scrap imports should significantly reduce
the supply of secondary refined copper for the world’s largest copper consumer, with impact estimated to be
equivalent to a 2% reduction in global copper production in 2018. We expect refined copper supply to register just
3% growth annually for the next five years.
Copper prices to be boosted by supply shortage in mid-term. Global refined copper supply last registered a
surplus in 2015 before a deficit of 326k tonnes in 2016, which narrowed to 262k tonnes in 2017. In 2018, we
expect the shortage to further shrink to 136k tonnes. However, we expect the copper market to stay in shortage
until 2022, with bigger deficits. Accordingly, we expect London Metal Exchange (LME) copper prices to generally
trend upwards, with fluctuations influenced by market dynamics, such as warehouse inventory levels, supply
disruptions stemming from weather or labour strikes, and macroeconomic indicators. We forecast that LME
copper prices on average will remain above US$7,000/tonne and gradually rise.
Copper prices: Affected by factors beyond fundamentals
Copper is one of the world’s most traded commodities. Copper traders tend to trade on sentiment and
expectation rather than fundamentals, given the time lag in the release of data on actual demand and supply.
Considering the active trading activities of copper through platforms such as LME, this leads to price movements
that can be divergent from market fundamentals. For instance, annual average copper prices fell after 2011
despite the refined copper deficit widening every year from 2012 to 2014. During this period, we note that
sentiment on metals weakened along with signs of China’s economic growth turning sluggish.
Copper prices vs macro variables. Copper prices are affected by various economic indicators, news and money
flows in the financial markets. Generally, copper prices are strongly correlated to global economic performance
and hence, the global purchasing managers’ index (PMI), as manufacturing activity directly affects metal demand.
However, during 2012-2014, this correlation was outweighed by negative sentiment due to copper oversupply
and the demand slowdown in China, resulting in copper prices moving sideways despite a recovery in the OECD
system of Composite Leading Indicators (CLI), usually a precursor of a turning point in the business cycle. Prices
for copper, as well as for other LME metals, also generally move with interest rates when higher rates imply an
improving business cycle. An appreciating US dollar is likely to have a negative impact on copper prices, given
the obvious negative correlation between the greenback and commodity prices.
Copper trading band is US$4,500-8,500, much less volatile compared to other metals. Since 2005, copper has
plunged to as low as US$2,770 per tonne on 24 December 2008, pushed down by the global financial crisis. It
has also jumped to as high as US$10,148 per tonne on 14 February 2014, driven by a weak US dollar, and
Cyclone Yasi hitting mine output at major producers BHP Billiton, Xtrata and Rio Tinto after two years of
shortages. Excluding outliers, the copper price band was US$4,500-8,500 per tonne, with price volatility the
second lowest among LME- traded metals.
Near-term outlook: Copper price muted in 2018; to resume gains towards 2019
Prices up by 27% in 2017, fuelled by supply disruption. Copper prices recorded a seven-year low of US$4,311
per tonne in Jan 2016 and moved sideways for much of the rest of the year until the United States presidential
election on November 8, after which the metal gained 11.4% in just two days. The turnaround was backed by
growing optimism about demand for metals following US President Donald Trump’s promise to spend massively
on infrastructure. Since then, the copper price has risen by another 30.1% in 2017, averaging 26.8% higher Y-o-Y
(2016 average: US$4,863 per tonne; 2017: US$6,166 per tonne). Copper’s outstanding performance in 2017 can
be attributed to 1.) an overall strengthening of base metal prices throughout the year on the global economic
recovery, 2.) mine supply disruptions such as the 44-day labour strike (February-March 2017) at BHP’s
Escondida mine in Chile, the world’s biggest copper mine accounting for c.5% of global mine production in 2016,
and 3.) China’s solid economic performance despite earlier worries of its slowdown affecting metal demand. The
July 2017 news of China banning low-grade copper scrap imports from 2018 also helped to push the price higher
in 2H17.
Supply to ease in 2018 with more primary refined products available. In 2017, a series of planned and unplanned
shutdowns at major smelters and lower output at solvent extraction and electrowinning (SX-EW) plants
significantly reduced primary refined production in major producers such as Chile, Japan and the US, leading to
world growth of only 0.7%. In 2018, the expected recovery of smelter production, the restarting of SX-EW
capacities, and adequate availability of concentrates will support a 6.2% growth in primary refined output. This will
more than offset an anticipated 7.2% decline in secondary refined production (from scrap) due to China’s scrap
import restrictions. All in all, total refined copper supply is estimated to grow by 3.8%.
Copper to trade sideways in 1H18 before gaining momentum in 2H. The copper price rally seen over 2H17 has
begun to lose steam heading into 2018 with signs of faltering Chinese demand growth. Since the beginning of
2018, copper has traded sideways just below US$7,000 per tonne on rising expectations of slow Chinese
demand due to the property market’s tight credit policy. We expect copper to trade between US$6,500 and
US$7,000 per tonne in the near term before resuming the uptrend towards 2H18. Overall, copper price gains will
be limited in 2018 compared to the strong gains over 2017, and this is reflected in our forecast for a slightly
smaller global refined copper deficit of 103k tonnes in 2018. Nonetheless, steady demand growth will underpin
continued tightness in the copper market and copper prices. In 2019, copper prices are likely to perform better
with supply growth constrained by tightness in concentrate availability.
The criticality of copper to economic development
Long history of copper usage. From at least 10,000 years ago, copper, one of the first metals used by humans,
has been used to produce everything from coins to ornaments. Today, copper and its alloys are used in the
production of a range of goods necessary to modern life, from cars to electronics.
Copper is a representative metal for economic cycle. Copper is often viewed as a good proxy for the global
economic conditions. Accordingly, copper demand has been growing in line with global economic growth, which
makes copper a good metal to represent economic cycle. Backing this, the growth trend in global refined copper
demand and global GDP growth in the past 55 years display a decent positive correlation. Since 1960, the copper
consumption has grown 2.8% annually slightly lower than annual world GDP growth rate of 3.5%.

The twin peaks of copper consumption

0 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Source: Bloomberg Finance L.P., DBS Bank
Two peaks of copper consumption over the economic development. Copper consumption in a country tends to
increase along with economic growth at the initial phase. In the US and Japan, copper consumption reached its
first peak at c.11kg/capita, when gross domestic product (GDP) per capita was around US$20,000-30,000. We
see this as rising demand for copper-intensive activities or products, such as investment in infrastructure and
electronics, as the country gets richer. This consumption then wanes until the replacement demand pushes it up
again. In US and Japan, copper consumption reached the second peak at US$40,000-50,000 GDP per capita.
With key developing countries such as China and India yet to reach even the first peak, we expect future growth
in copper demand to be well supported.

Copper consumption peaked at US$30,000 per capita GDP in major developed countries. The peak consumption
analysis in major countries is in line with our prior thesis (see table below). These countries hit peak copper
consumption in1991-2010, averaging 11.5kg of copper consumption per capital. Their urbanisation rates were
over 67%, averaged 77.6%, with average GDP per capita at c.US$29,000. Also per capita power consumption
was up to 8,266KW and contribution of the added value of the tertiary industry to GDP registered over 58%, and
averaged at 68.8%. At the peak of copper consumption, the economic environment suggests the widespread
usage of copper across industries in daily life.
Huge consumption growth potential in developing countries
Promising outlook for copper demand in developing countries. In the conventional aspect of demand, the outlook
is also promising. China, the world’s biggest copper consumer (50%), is transforming into a consumption-driven
economy, which should boost copper demand across a range of end-use sectors, including for automotives,
smart technology products, and household appliances like air-conditioners. In addition, the growth of urban
consumers and infrastructure investment in India and the ASEAN economies will be a major driver of copper
demand growth over the next few decades.

China seen as high-intensity copper consumer. Since 2000, China’s copper consumption has been grown rapidly
in line with industrialisation. In 2017, this reached 8.4kg per capita, an 11% annual growth since 2000. This level
of consumption is similar to what developed economies recorded when they grew to about c.US$20,000 per
capita GDP, a level at which China is not. This could be interpreted as China’s higher intensity for copper
consumption, as its economy has grown by focusing on manufacturing industries and fixed-asset investment.
Thanks to strong demand growth, China now consumes 50% of the world’s copper, as of 2017, up from 12% in
2000. Power made up 50% of China’s total copper demand in 2016, followed by air-conditioning and refrigeration
(15%), transportation (10%), construction (9%), and electronics (7%).

Chinese copper consumption to peak after 2027. According to Antaike, the research arm of the China Nonferrous
Industry Association, China’s copper consumption peak will come after 2027 and hit more than 10kg per capita.
To support the projection, Antaike believes that China can 1) reach US$16,000 per capita GDP by around 2027,
closing gap with industrialised countries, 2) exceed 10kg per capita copper consumption by around 2030, 3) its
tertiary industries can contribute to 59% of its GDP, and that 4) by about 2031, China can grow its per capita
power consumption to 7,534kW per hour, about the middle level in developed countries. With the growing use of
electric vehicles in China set to take a key role in copper demand growth for next decade, we forecast that
Chinese copper demand will grow by a CAGR of 3.1% by 2022.
India in very early stage of copper consumption growth. In 2017, the copper consumption per capita in India was
a mere 0.4kg, implying huge growth potential. India’s GDP per capita was US$1,983 which is 1⁄4 of China’s, while
its population, at 1.32bn, was slightly lower than China’s 1.40bn. In light of India’s economy entering a phase of
rapid growth, we forecast that copper consumption in India will post one of the world’s strongest growth rates, at
6.2% during 2017-2022.
What is copper used for? Electricity, mainly
Copper’s outstanding electrical conductivity... Copper is the most conductive base metal in the world, with ideal
properties such as strength, ductility, corrosion-resistance and energy efficiency. It is widely used in electric wires,
power cables, and other electronic equipment. Power utilities and electrical products together account for more
than 70% of copper consumption globally. Substitution risk is very limited, as it is not cost effective to use silver or
gold, the world’s first and third most conductive elements, instead of copper, which is the second most.
...makes it key beneficiary of electrification trend. Demand for copper will brighten with the electrification of energy
demand, which we expect to outstrip the growth in total primary energy demand going forward. The production,
distribution and transmission of all that power will require a great deal of copper. As will the growth of the electric
vehicle market.
Copper to remain an important building material... Copper is also used in construction, to make plumbing, taps,
valves and fittings. It is a preferred building material and should remain so, thanks to its advantageous properties
– as it does not burn, melt or release toxic fumes in case of fire. Also, copper is antimicrobial, naturally resisting
pathogens and preventing diseases from spreading; for example, copper tubes help protect water systems from
potential bacterial infection. Accordingly, copper demand will grow following With Asia’s urbanisation and the
need
for more buildings, copper demand will grow as high rising commercial and residential building requires more
consumption of copper.
...while coinage demand could fall. Another use of copper is in coins and ammunition, which was responsible for
10% of copper demand in 2016. Copper’s malleability and anti-bacterial properties – coins pass many hands –
make it an ideal coinage metal. According to the International Copper Study Group (ICSG), one cent and five cent
US coins contain 2.5% and 7.5% of copper respectively, while other coins contain a pure copper core with 75%
copper face; the 10,20 and 50 euro cents coins consist of 89% copper. However, we expect technological
advancements in electronic payment to threaten demand for coins, and so demand for copper for coinage to fall
according.

New path of growth in copper demand

Copper’s demand growth to scale greater heights... Global copper demand has grown at 2.5% annually since
1970, with 2000s and the period of 2010-2017 registering the strongest demand growth of 2.8% each. Particularly
in the 2000s, growth was dampened as demand from US and Europe flagged during the global financial crisis,
offsetting a whopping 14.7% annual growth from China. In 2010 to 2017, demand recovery was led by the
developed world as China’s growth decelerated to 6.9% on average. The worst period for copper demand was in
the 1990s, which was driven by negative CAGR of 12.5% and 3.2% in demand from China and US, respectively.
...along with society’s electrification. We believe copper consumption is entering a new growth phase driven by an
“electrifying society”. Electrification of transportation should be a mega-trend and the strong government push for
electric vehicles will keep copper demand strong in China. The growing need for renewable energy is another
critical factor. We forecast that global copper demand will register its highest growth of an annual 3.1% for the
next five years. This will also be bolstered by emerging economies, including India and ASEAN, entering the high
copper-consuming phase.

We believe copper consumption is entering a new growth phase driven by an “electrifying society”. With the
electrification of energy demand, we expect demand for electricity to outstrip the growth in total primary energy
demand going forward. The production, distribution and transmission of all that power will require a great deal of
copper. A mega trend will be the transition to electric vehicles from internal combustion engine vehicles. Also
driving demand is renewable energy, which has higher intensity of copper consumption – copper usage per
megawatt hour of offshore wind and solar power generation is significantly higher than that for conventional
power generation.

Electric vehicle market to enter strongest growth phase in the next decade

Electric vehicle market to register strong growth to 2030. This is attributed to 1.) purchasing incentives as part of
national policy, 2.) high consumer acceptance of electric vehicles, 3.) cheaper batteries due to substantial
capacity expansion, and 4.) fast-expanding charging infrastructure in cities. As of 2017, there are 1.02m EVs*
produced, up from 48,000 in 2011, a CAGR of 87%, according to our auto Analyst, Rachel Miu. This is set to
achieve an CAGR of 28% over the next decade to 12.3m units in 2030, according to Miu.
Sales of electric and hybrid electric vehicles** rising. In 2017, sales of these vehicles reached 3.2m units, up
65.7% annually, from 254k units in 2012. We expect sales to increase to 28.7m units in 2030 from 3.2m in 2017,
up 18% annually. Hybrid electric vehicles are expected to make a key contribution to the overall electric vehicle
market with a 16% CAGR in light of less cost competitiveness of batteries in EVs and low oil prices bolstered by
US shale oil’s output.

China In 2016, implementation of the fourth stage of the fuel consumption standard framework
 Acquisition tax and excise tax exemption (depending on engine displacement and price, in the range of
RMB35,000-60,000 or US$5,100-8,700)

Circulation and ownership tax exemption

Possibility of local subsidies within the limit of 50% of the amount granted via central subsidies

From 2017, 20% reduction from 2016 subsidies, with the plan to adjust policies according to market
response until 2020

In seven major urban centres, exemptions from licence plate access restrictions

Locally, access to bus lanes, exemption from access restrictions at peak times, free charging, free parking

EU tailpipe emission standard (Euro 6 in 2016), EU fuel economy regulation

Purchase rebates of EUR4,000 (US$4,400) for BEVs and EUR3,000 (US$3,300) for PHEVs, at the limit of
400,000 cars until 2020 or EUR600m (US$674m)

German Automakers should provide half of the incentive amount, the government covering the other half
y Ten-year circulation tax exemption, reduced to five years from 2021

Tax deduction for company cars

Differentiated plates for EVs, allowing for differentiated measures

Locally, free parking, dedicated parking and access to bus lanes

Tailpipe emission standard (Bharat 3, equivalent Euro 6)

India FAME Scheme (includes several components, such as demand incentives and pilot projects)

In some states, registration tax and VAT rebates or exemptions

Tailpipe emissions standard (PNLT 2009, equivalent to Euro 6)

Battery capacity and electric range-based purchase subsidy of JPY850,000 (US$7,700) maximum, e.g. 30
Japan
kWh-battery Nissan Leaf: JPY330,000 (US$3,000)

Locally, waivers on fees, access to restricted traffic

Corporate Average Fuel Economy (CAFE) standard with multipliers for EVs and alternative powertrains

Tax credit of US$2,500-7,500 to be phased out after 200,000 units per manufacturer are sold for use within
US the country

ZEV production mandates in place in nine states

In some states, purchase rebates and registration tax exemptions

Copper to benefit significantly and consistently from growth of EV market

Copper, batteries and the growing EV market. Copper, the irreplaceable metal for electric conductivity, will be in
greater demand than ever in the production of electric vehicles. This is because the electric vehicle, which uses
an electric motor powered by batteries or fuel cells, requires more copper to manufacture than the conventional
internal combustion engine vehicle (ICEV), which is powered by gasoline or diesel. The greater the reliance in
electricity, the more copper is needed to make the vehicle. So, a battery-operated vehicle (BEV), which operates
exclusively on battery power, requires more copper than a plugged-in hybrid electric vehicle (PHEV), which has a
battery that can be recharged from plugging into an external electric power source and also operates on gasoline
or diesel. Among BEVs, buses would use up more copper than cars because they need bigger batteries to run.
Hybrid electric vehicles (HEVs), which can’t be plugged in, we do not include in our term of “EV”.
BEVs consume four times more copper than ICEVs. According to research commissioned by the International
Copper Association (ICA), electric vehicles require a substantial amount of copper in the batteries, windings and
copper rotors used in their electric motors, and in wiring, busbars and the charging infrastructure. It takes 83kg of
copper to make one BEV, and 40kg to make one HEV, which is four and two times respectively what is required
for an ICEV. The BEV battery pack alone contains 40kg of copper (half of its total copper content) and is the
single biggest area of copper consumption.

Contribution of copper demand from EVs to rise to 6.6% in 2030 from 0.9% in 2017.

Based on our EV forecasts, we project that copper demand from EVs will rise from 208k tonnes in 2017 to 1.91m
tonnes in 2030, up 19% annually. Copper demand from EVs is estimated to equate 8.2% of total copper
consumed in 2017 by 2030, up from an estimated 0.9% in 2017. For next five years, copper demand from EVs
will register the strongest growth of 29% in CAGR, in line with our EV forecasts. In 2022, copper usage in EVs
should contribute to 2.3% of total copper demand. In our pessimistic case scenario, we have factored in the
possibility of oil prices staying low and leading to slower adoption of EVs globally. We assume that HEVs’
contribution in terms of unit sales to the total HEV and EV market will gradually lower to 49% in 2030 from 64% in
2017. Where EVs’ contribution exceeds the premise, we expect a positive impact on copper demand.
EV infrastructure an additional spur to copper demand growth.
Outside of the copper demand projections based on usage in electric vehicles, we also expect copper uses
associated with infrastructure. First, each 3.3kW charger will add 0.7 kg of copper demand with fast chargers, say
a 200kW one, adding up to 8kg of copper each. On top of that, copper will be needed in power generation and
grid infrastructure, and grid storage and charging infrastructure. Copper consumption in these areas, negligible in
the early stages, is set to grow strongly as electric vehicles become more popular. According to industry experts,
copper demand from electric-vehicle infrastructure is likely to register 29% growth during 2020~30, with share of
consumption expanding to 37% in 2030 from 29% in 2020.

Renewable energy: A wild card for copper demand growth

Copper is also the key metal in the renewable energy theme. Renewable energy consumes copper more
intensely than conventional power generation – copper usage per megawatt hour of offshore wind and solar
power generation is significantly higher than that for coal or nuclear power generation. As such, the expansion of
renewable energy globally should be another driver of copper demand going forward. Based on International
Energy Agency’s (IEA) forecasts on global average annual net capacity addition between 2017-2040 (74GW for
solar photovoltaic systems, 50GW for wind and 36GW of all other renewables), c.635k tonnes of copper demand
(c.3% of global copper consumption in 2017) would be generated every year on average until 2040. This is up
37% from copper consumption between 2010-2016. The IEA also expects renewables to contribute 40% of total
power generation by 2040, led by the strong adoption of solar photovoltaics in China and India.

Major sources of refined copper supply: Copper ore and scrap

Copper can be produced from ores (i.e. primary production) or scrap (i.e. secondary production). There are three
broad methods to produce refined copper – i) primary production from copper concentrates, ii) primary production
through SX-EW, and iii) secondary production from copper scrap. Most commonly, copper ore is mined,
processed into concentrate (which would contain around 30% of copper), and then refined to form copper
cathode. Intermediate steps post-concentrating constitute of smelting to form matte with around 50-70% copper
content, converting to blister with 98.5-99.5% copper content and, finally, electrolytic refining into cathode with
99.99% copper content. Increasingly, the hydrometallurgy method is being adopted, where the copper oxide ore
goes through electrowinning (SX-EW process) to form cathode.
Secondary production accounts for 18% of refined copper metal supply. In 2017, refined copper production
through the SX-EW method accounted for around 15% of the total supply of refined copper, while the electrolytic
method (from copper concentrates) accounted for 67%. Thanks to copper’s ability to be recycled without any loss
of properties, refined copper of the same quality can also be produced from copper scrap. In 2017, secondary
refined production amounted to the remaining 18% of total refined copper production.
Global refining capacity to continue expanding steadily
Explosive growth in Chinese smelting capacity drove global refining capacity. Total global refinery capacity has
grown by 60% over the past 17 years, to reach 27.4m tonnes in 2017 from 17.1m tonnes in 2000 (CAGR of 2.8%)
This was largely driven by the smelting expansion in China, where, by 2016, both smelting and refining capacity
had expanded by six times to 6.5m tonnes (from 1.1m tons in 2000) and 10.9m tonnes (from 1.7m tonnes in
2000), respectively. By 2017, nine out of the world’s 20 largest copper refineries were located in China.
More capacity additions across regions until 2022. Global refining capacity is expected to grow 14% (annual
growth of 2.6%) to 31.1m tonnes by 2022 with the major contributions of China and India. China is expected to
carry on with capacity addition and contribute the most to global refining capacity growth in in the next couple of
years, albeit at a decelerated pace. There are at least around 1.7m tonnes of smelting projects currently in the
pipeline for China from 2018 to 2020, which should also lead to a similar increase in its refining capacity by over
20%. In India, one of world’s largest smelters, owned by Vedanta, has plans to double its smelting capacity.
There will also be some increases from DRC and Poland, while South America will be the only region
experiencing a negative change in refining capacity.

Developing countries to step up their share of global refined copper production. In line with the huge growth in
refining capacity, China’s refined production has gained substantial presence in the global refined copper market.
From a mere 9% in 2000, China’s contribution to global refined production rose to a whopping 38% in 2017,
making it the largest copper producer in the world. While we observe declining contribution from developed
countries such as the US, whose share dropped form 12% in 2000 to 5% in 2017, we should see more
developing countries stepping up. In particular, we expect to see a higher contribution from India going forward; it
has become the sixth biggest refined copper producer, with a 4% share in 2017 (from less than 2% in 2000), and
has plans for further capacity expansion.
 4.4 Current Market
Scenario

In 1980 the market volume was about 9 million t. Today, the quantity of refined copper produced and processed
is roughly 22 million t.
Asia has become the main region of growth -- China alone accounts for around 45 % of total world demand, with
an annual copper demand of nearly 10 million t. This demand continues to grow and is expected to reach 11.5
million t by the end of the decade.

About 3.6 million t of copper are required in Europe annually, making it another center of global copper demand.
Since only around 3 million t of copper are produced here, there is a supply gap that has to be closed with
imports.

Europe is thus even more reliant on its copper production industry, which has an excellent international
reputation in many aspects. Aurubis is an established company with a leading position, especially when it comes
to environmental protection, energy efficiency and energy management.

The copper price

The copper price is determined by the supply and demand dynamics on the metal exchanges, particularly the
London Metal Exchange (LME). After the global financial crisis in 2008 and temporary highs of up to US$ 10,000/t
in 2011, the copper price slowly moved downward. It remained stable at an average of around US$ 7,000/t in
2014. At the beginning of this year, the price decreased to below US$ 6,000/t.

The uses of copper

The uses of copper reflect its variety of material properties: because of its excellent electrical and thermal
conductivity, it is ideally suited for use in electrical engineering, electronics and telecommunications. Its electrical
conductivity is 1.5 times as high as that of aluminum, which makes copper the preferred input material for
electrical mains. Despite its very good formability, copper is extremely strong with high corrosion resistance.

The increasing interconnectedness in our offices and households, growing demands on information and
communication technology, a sustainable and environmentally sound energy supply and high safety and comfort
standards, for example in automotive engineering, ensure a constant rise in copper demand. Every mid-range car
contains about 25 kg of copper – luxury class models can have more than twice this amount. Modern life
wouldn’t be possible without copper.

Copper also has an established role in architecture and construction: apart from electrical wiring made of copper,
copper pipes are also used in buildings’ air conditioning and water supply technology. Copper is often used for
roofing and facades due to its good corrosion resistance and, last but not least, because of its attractive
appearance.
 4.5 Industry Drivers

1. Emerging Market Demand: Copper demand has surged in recent years thanks to urbanization in emerging
markets such as China and India. As emerging market populations move to cities, the need for new residential
housing, transportation infrastructure, and other construction has climbed. China in particular is a major copper
buyer, and the health of the Chinese economy is a major factor in determining copper prices. With the health of
these popular emerging markets coming into question as of late, copper could be hit especially hard if new
construction slows down. While it may seem somewhat removed from the commodity’s price, keeping an eye
on developments in these massive markets would be a best practice for anyone with capital allocated to
copper.
2. Health of the Homebuilding Industry: In the U.S., the homebuilding industry is a major buyer of copper which is
used in pipes, wiring, and other components of residential buildings. Copper prices plummeted during the
recent recession when homebuilders were battered, and surged during the subsequent “recovery”, which many
feel is still a long way from being complete. Similar to news and developments concerning emerging markets,
U.S. figures will be equally if not more significant. It should also be noted that U.S. data is far more frequent,
with housing and construction data coming out every few weeks, commenting on varying corners of the
economy [see also Jim Rogers Says: Buy Commodities Now, Or You’ll Hate Yourself Later].
3. Supply Disruptions: Because a significant portion of global supplies come from South America, supply
disruptions in the region can have a major bearing on global prices. Strikes at major copper producing mines
are relatively common, and natural disasters—such as earthquakes or landslides—occur from time to time as
well. To give you a better idea for just how significant the Southwestern hemisphere is, Chile and Peru combine
to account for nearly 40% of the world’s proven reserves and produce around 40% of the world’s supply in a
given year. To be fair, the U.S. is still among the top producers in the world, but its output is not nearly that of
its southern neighbors.
4. Use of Substitutes: Technological advancements have made possible substitutions of cheaper metals for
copper in certain applications. For example, aluminum now substitutes for copper in power cables, electrical
equipment, automobile radiators, and cooling and refrigeration tubes, while titanium and steel are used in heat
exchangers. To the extent that additional substitutes are developed for roles traditionally performed by copper,
there could be downward pressure on prices. Note that copper prices have fully recovered from the recession
(save for a slide at the end of 2011), so the prevalence of substitutes may be closer than you think; keep your
 Chapter: 5

Project Proposal
5.1 Project Cost

Aggregate cost for the proposed project is estimated to be Rs. 75.00

Crore. The break-up of costs is given below:

Fig. 5.1: Project Cost

Particulars Rs.in Crore

Land (Lease) 1
Building & Civil Work 10
Plant & Machinery 1
Miscellaneous Fixed Assets .50
Contingencies .25
Preliminary and preoperative exp .80
Raw Material Procurement 42.00
TOTAL 55.55

Components of the project cost:

5.1.1 Land
The Land is located at SAIF Zone Industrial Area, Sharjah, UAE with Plot of land measuring 2500
Sq. Mts. which have been allotted to the company on lease basis for 30 years.
Land Allotted Document is attached.

5.1.2 Building & Civil Works

Cost of construction has been projected at Rs. 10 Crore which include Office Block, Car Parking,
Boundary Wall, Copper Storage Facility, Interior Work, RCC Work, etc.
Quotation for Building Construction is attached.
5.1.3Plant and machinery

The projected cost for the plant and machinery and other Equipment’s Cost is Rs. 1.00
Crore.

Quotations for Plant & Machinery are attached.

5.1.4 Miscellaneous Fixed Assets

The cost of Miscellaneous Fixed Assets is projected at Rs. 0.50 Crore which includes Electrical
Fitting, Water Supply System, Fire Fitting Equipment, Furniture & Fixtures, etc.
The cost have been assumed on the basis of current market price which are readily
available in the market.

5.1.5Contingencies
The Contingencies is projected at Rs. 0.25 Crore.

5.1.6 Preliminary and pre-operative expenses

Rs. 0.80 Crore has been considered as preliminary and pre-operative expenses for legal,
processing charges, various consultancy fees and operational expenses till the production
commences.

5.1.7 Working Capital Expenses

Rs. 42 Crore has been considered as expenses for the arrangement of material required.
5.4 Means of Finance:

The proposed project is to be financed by the mix of debt and

equity. The means of finance for the Project have been envisaged

as under: Fig. 5.2: Means of Finance

MEANS OF FINANCE Amount in (Rs.

Crore)
Equity Capital 3.55
Unsecured Loan 2.00
Term loan 50.00
TOTAL 55.55

5.4.1 Promoter Equity

To finance the project cost, promoter proposes to bring in Rs. 3.55 Crore. Till now, the
promoter has infused Rs. 2.50 Crore. The unsecured loan of Rs. 2.00 Crore would be availed by
the Promoters as the part of means of Finance.

Capital Infusion Certificate is attached.

5.4.2 Term Loan

The term loan estimated for the project is Rs. 50.00 Crore. The rate of interest assumed is 5.00%
p.a.
 Chapter 6

Financial Projections
6.1 Financial Projections
 Financials are projected by the company considering the existing practices followed by the
group, recent industry scenario and various regulations.

Detailed Projections are given in Annexure I. Key projected financials for the loan tenure is as under:

Fig. 6.1: Key Financial Projections:

(Rs. in Crore)

Particulars Year 1 Year 2 Year 3 Year 4 Year 5

Income from
Operations 480.00 750.00 1000.00 1250.00 1500.00
PAT 3.73 7.15 13.20 18.17 18.87
Net worth 13.73 20.88 34.08 52.25 71.12
Capital Employed 10.00 10.00 10.00 10.00 10.00
Gross Cash Accruals 5.23 8.50 14.41 19.27 19.85
Current Ratio (times) 23.41 13.49 11.75 10.83 11.97
Debt Equity Ratio
(times)** 3.64 2.04 1.03 0.53 0.30
DSCR (times)
*Interest Coverage Ratio includes interest on Term Loan and Interest on Working Capital
** Debt Equity Ratio includes Unsecured Loan in Equity Portion.
 6.3 Break Even Analysis

The Break Even Analysis as provided by the company is given below:

Fig. 6.9: Break –Even Assumptions

(Rs.in Crore)
Particulars Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9
Total Sales 21.36 76.89 84.58 93.04 102.34 112.58 123.84 136.22 149.84
Variable Cost 12.03 36.97 38.92 43.00 47.54 51.56 56.58 62.00 67.90
Contribution
Margin 9.33 39.92 45.66 50.04 54.80 61.01 67.26 74.22 81.94
% margin 52% 52% 54% 54% 55% 55% 55% 55% 55%
Fixed Cost (Rs.) 11.93 29.67 28.80 29.26 30.26 31.21 32.82 34.78 37.11
Break Even Point 23.09 56.52 52.94 53.72 55.51 57.20 60.11 63.70 67.97

As can be seen above the projected sale is above BEP except for the year 1 as operations
would be only for 6 months.
 Chapter – 7

SWOT Analysis

1. Strengths:

 Experienced promoters
The company will be promoted by experienced promoters which would help company to
establish new manufacturing unit in Sharjah and may help management to take suitable
decisions.

 Good Location
The plant is located centrally .

 Recurring Business

The company is going have recurring business from its customers. This will help
company to achieve its sales and profits.

2. Weakness:

 New entrant in the market

The company although has an experienced promoter base would need some time to absorb
the intricacies of copper business. The company might use their personal expertise and
coherence of the command to overcome the difficulties.

3. Opportunity

 Demand driven sector

The copper industry is highly demand driven.
 Room for growth
There is abundant room for the growth of copper industry.
 Chapter 8

Risk Analysis

CARE Advisory has prepared risk matrix and also commented on mitigation strategy keeping in
mind the probable risks that may be faced by the project.

No. Risk Details Comments Risk Allocated

A. General Risk
1 Regulatory Changes in The industry is highly regulated in TEFCIL
policy/ Government policies/ terms of the quality standards, Breweries Ltd.
Licensing regulatory pricing and distribution and
requirements compliances maintenance of plant. The
company shall ensure to adhere to
the regulations and compliances.
2 Partners TBL is to be owned The directors have experience in TEFCIL
knowledge of and managed by its the field of beer industry. Skilled Breweries Ltd.
the market directors Labor force to be hired.
3 Sponsor risk Infusion of Equity The promoter to bring shortfall in TEFCIL
and Unsecured loan financial closure. Also he shall Breweries Ltd.
if required infuse capital to service term loan
obligations, in case cash balance
is not enough.

No. Risk Details Comments Risk Allocated

B. Risks during construction
1 Completion Any delay in As informed by the management, TEFCIL
the
risk - Time construction of approval with regards to setting up Breweries Ltd.
of
and Cost projects and also the distillery is already obtained. As
there
Overrun. cost overrun will is only single window clearance
affect the cash flows required to set-up the company.
of the project.

2 Legal Approvals from State Required approvals have been TEFCIL

Approvals Pollution Board received. Breweries Ltd.
would
be required for
clearing the project
from any
Environmental related
concerns.
No. Risk Details Comments Risk Allocated
3 Licenses Licenses from State The licenses are already obtained by TEFCIL
government the company. Breweries Ltd.
authorities is
mandatory to start
the alcohol
production process
4 Land The firm has already The land is already allotted to the Mitigated
availability acquired the Land company on lease basis for 95
required on lease years.
basis.

No. Risk Details Comments Risk Allocated

to
C. Operational Risk
1 Market Risk Ability to generate As discussed earlier in our report, TEFCIL
the projected the location is advantageous but Breweries Ltd.
revenue. the product cannot be marketed
openly due to government norms.
The company should use its
resources and market reach to
mitigate the risk.
2 Competitive- The Firm should be Company may use its director’s TEFCIL
ness competitive in respect expertise in industry to maintain Breweries Ltd.
of quality and cost. the product quality and increase
competitiveness.
3 Natural Risk involved in loss To mitigate the risk, TEFCIL Insurer &
Calamities/ due to natural Breweries Ltd. is suggested to take TEFCIL
Contingencies calamities/contingenci insurance covering all the Breweries Ltd.
es like fire/theft contingencies.

D. Funding Risk The project Timely financial closure to be Promoter

is expected ensured
to be
financed through
equity contribution
and long term
borrowings from
Banks
E Credit risk Risk involved in Projections are made on Lenders
servicing the conservative basis. Sensitivity
repayment and analysis has also been done.
DSCR and interest coverage ratio
interest obligations
projected are above benchmark
level. However, project is sensitive
to the selling price assumption.
No. Risk Details Comments Risk Allocated
to
F Energy Risk Power being an Himachal Pradesh is state where TEFCIL
important input for power is available in abundance. Breweries Ltd.
the industry, supply The company is going to obtained
power from Himachal Electricity
risk to be analyzed
Board once the construction is
completed. The company has also
plan for DG set as a back-up of
power.
G Utility Risk The company shall be Ground Water is available. The TEFCIL
using water. water Breweries Ltd.
(Water)
can be taken out from bore-well as
well.
H Quality High technical and The firm should employ and retain TEFCIL
Control precision business. enough technical and qualified Breweries Ltd.
Regulatory staff.
requirementsto be
fulfilled
 Chapter – 9

Conclusion

Based on the assumptions considered and information shared by TEFCIL Breweries Ltd.,
post understanding the industrial and economic scenarios we conclude:

 The Directors is having experience in the beer market industry.

 Due to good connectivity from road and railway, procurement of raw materials would
be an easier task for the client.

 Considering the availability of manpower, raw materials and suitable location,

projected financials are satisfactory.

 The firm needs to ensure the all civil, machinery installation work to be completed on
time so as to start the operations by September 2018 onwards.

 The project is sensitive to the projected interest cost assumptions than to other
variations in the cost considered in the above chapter.

 In view of anticipated demand, debt-service indicators, other operational aspects and

risk mitigation suggestions detailed in the report, it may be concluded that the
proposed unit of TEFCIL Breweries Ltd., mentioned in the report is economically and
technically viable subject to its achievement of projected revenue along with
adherence to the projected project cost and cost structure and timely compliances
and timely receipt of approvals required for the project.