🧾 Key Characteristics of Project Finance
| Feature | Details |
|---|---|
| 💰 Loan Amount | ₹10 crore to ₹1000+ crore |
| ⏳ Tenure | 5 to 20 years (depending on project type and revenue timeline) |
| 🔄 Repayment | Through future cash flows (like tolls, electricity sales, leases) |
| 🧾 Security | Project assets and rights are used as collateral |
| 🧮 Disbursement | In phases, based on completion milestones |
| 👥 Involves multiple parties | Developers, lenders, government, contractors, off-takers, etc. |
✅ Ideal Projects for Project Finance Loans
🛣️ Infrastructure – Highways, ports, airports, metro rail
⚡ Energy – Solar farms, thermal plants, wind parks
🏗️ Industrial – Refineries, steel plants, textile zones
🏘️ Urban development – Townships, SEZs, smart city projects
🚈 Public-private partnerships (PPP) – Government-backed infrastructure
Apply Loan
📋 Documents Required
Detailed Project Report (DPR)
Financial projections (cash flow, IRR, ROI, break-even)
Land/title deeds
Regulatory approvals (environmental, government licenses)
EPC (Engineering Procurement Construction) contracts
Concession agreements (for PPPs)
Promoter’s financial statements
Risk analysis & mitigation plan
🧮 Why It’s Unique
Non-recourse financing: Lenders rely only on project cash flow, not the promoter’s personal assets.
Risk Sharing: Risks (construction, operational, market) are shared across parties (sponsors, lenders, contractors).
Special Purpose Vehicle (SPV): A separate legal entity is usually created for the project.
🏦 Major Institutions Offering Project Finance in India
| Institution | Known For |
|---|---|
| State Bank of India (SBI) | Large infrastructure projects |
| Power Finance Corporation (PFC) | Power and renewable energy projects |
| REC Limited | Rural and renewable projects |
| IDFC First Bank / ICICI Bank | Infra finance and PPP projects |
| NABARD | Rural infra, irrigation, agri-processing |
| Capital Small Finance Bank | May fund smaller project loans in rural sectors |
📈 Example
A company sets up a 100 MW solar power plant in Gujarat.
The project cost is ₹600 crore.
₹150 crore is raised as equity by promoters and investors.
₹450 crore is taken as a Project Finance Loan from a consortium of banks.
The project repays the loan over 15 years from the sale of electricity to DISCOMs under long-term Power Purchase Agreements (PPAs).
⚠️ Risks in Project Finance
Delay in regulatory approvals or land acquisition
Construction overruns
Change in government policies
Demand risk (especially in transport or commercial infra)
Currency fluctuation (in international borrowing)
🧠 Benefits of Project Finance
✅ Protects the parent company’s balance sheet
✅ Helps finance large-scale, capital-intensive projects
✅ Promotes public-private partnerships (PPP)
✅ Aligns risk with parties best able to manage it