VCE Summer Internship Program 2021

Smart Task Submission Format

Intern’s Details
Name Akash Awasthi

Email-ID [email protected]

Smart Task No. 3

Project Topic  Project Finance - Modeling and Analysis

Smart Task (Solution)

Task Q1: - How a new venture is assessed to qualify as project finance. What are the factors that
needed to be considered?

Task Q1 Solution: - 1. Character of the business partners: - The people behind an idea
or company and, more importantly, their character is extremely important. You could have
the best idea in the world, but it might never get off the ground with the wrong team in
place.

“Their reliability, honesty, potential for a long-term relationship and work ethic all come
into play. A team who understands their roles and performs them with love and
enthusiasm is very hard to beat. I have to feel completely confident in the abilities as well
as the character of the team before investing,” says Basel.

2. Capacity of the business partners: - You can’t just fill startup roles for the sake of
creating a team and launching. You need to make sure each person is highly qualified and
possesses the ability to take the business to the next level. For example, a CFO with
limited financial experience is a disaster waiting to happen, while a CMO with limited
marketing experience is a severe handicap.

“There has to be a capable team with potential to grow the business and to carry it to high
levels of success,” explains Basel. Experience and past track records play a major role in
providing a little more confidence. Building the right founding team greatly increases the
odds of securing VC money.

3. Innovative idea -

Every new startup is the Uber of something, and it’s played out.

With less than 1 percent of all U.S. companies ever receiving VC money, you need to

ST Solution Page 1 https://techvardhan.com

 VCE Summer Internship Program 2021
Smart Task Submission Format

stand out, and the way to do that is by having something truly innovative and unique. You
are only going to attract initial interest if your idea is something that the VC hasn’t been
pitched several times already.

Basel elaborates, “It needs to be new and something that no one has ever tried before, or
succeeded at before. Something innovative with extensive research and development will
pique my interest enough for me to at least look at the pitch.”

4. Communal benefit -

Startups come and go, and while nobody has an exact percentage, most people put the
startup failure rate between 80 and 90 percent. The few startups that experience massive
success all solve a problem. 

Uber made commuting much easier. Snapchat made communication easier. Airbnb made
travel easier. You get the point.

“I like startups that bring value to the community and to humanity in general. Do they
solve a large-scale problem? Do they provide a benefit that a large percent of the
population will desire to utilize? If the answer to those questions is yes, then they have a
much greater chance of attracting interest,” offers Basel.

5. Long-term sustainability -

“It has to be something with longevity to make it worthwhile from an investor standpoint.

A short-term idea might still be viable and profitable, but not typically from a VC point of
view,” suggests Basel.

Venture capitalists deploy millions of dollars, wanting multiple times return on that

investment. That is why VCs focus heavily on the long-term sustainability of an idea. If
they don't believe the shelf life is large enough, they simply won't invest.

6. Financial outlook -

VCs invest to make money. There is no other reason. It’s a business.

Basel is no different from other VCs, stating, “The last thing I look at is the financial
outlook of the business, determining when it will start becoming profitable.” The deal

ST Solution Page 2 https://techvardhan.com

 VCE Summer Internship Program 2021
Smart Task Submission Format

needs to make financial sense and not tie up money too long. The goal is to recoup the
initial investment and re-invest in another project. 

Not every opportunity is going to produce overnight returns, and the risk versus the
reward is always taken into consideration. While every deal is different, profit potential
and the probability of a return on the initial investment is always analyzed heavily.

500 Words (Max.)

Task Q2: - Explain in detail the revenue model for Solar PV Project, Residential Building,
Manufacturing Unit and other PPP projects.

Task Q2 Solution: - The unique issues associated with solar projects result in a highly
specialized practice. For instance, the comparatively low technical risk of constructing and
operating a properly sited solar facility, the reliance on large volumes of mass-produced
component parts available in a global market, and the opportunities for developing
distributed generation projects on residential rooftops and in community solar gardens set
solar projects apart from other electricity-generating projects. Before we touch the revenue
model, the cost of finance has to be reckoned.
A revenue model is a conceptual structure that states and explains the revenue earning
strategy of the solar business. It includes the product and/or service of value, the revenue
generation techniques, the revenue sources, and the target consumer of the product offered.
Revenue can be generated from a myriad of sources, can be in the form of commission,
markup, arbitrage, rent, bids, etc. and can include recurring payments or just a one-time
payment. A revenue model includes every aspect of the revenue generation strategy of the
business.
A revenue model is how a business makes money. Residential unit is clear in terms of
money differential compared with main utility charges. Manufacturing is based generally
on cost plus profit concept. PPP model will depend on cost of finance and the
instruments/contributing elements.
Revenue model is very simple to start with but become complicated if you want to use it to
get loan etc.

ST Solution Page 3 https://techvardhan.com

 VCE Summer Internship Program 2021
Smart Task Submission Format

1. Estimate your generation (for solar it depends on radiation, EPC cost, land cost
etc.)
2. Tariff at which you will sell the energy (if for captive use then the cost of
existing energy)
3. Recurring expenses
4. Interests
5. Depreciation
6. Taxes

500 Words (Max.)

Task Q3: - What should be the additional points that needed to be included in a financial model, if
the financing bank is from abroad and the debt is in US$ but revenue is in INR.

Task Q3 Solution: - A financial model is simply a tool that’s usually built in Excel to
forecast, or project, a business’ financial performance into the future. The forecast is
typically based on the company’s historical performance and requires preparing an income
statement, balance sheet, cash flow statement, and supporting schedules (known as a
“three statement model”). From there, more advanced types of models can be built, such
as discounted cash flow analysis (DCF model), leveraged-buyout, mergers and
acquisitions, and sensitivity analysis.

The output of a financial model is used for decision making and performing financial
analysis, whether inside or outside of the company. Inside a company, executives use
financial models to make decisions about:

 Raising capital (debt and/or equity)

 Making acquisitions (businesses and/or assets)
 Growing the business organically (e.g., opening new stores, entering new markets,
etc.)
 Selling or divesting assets and business units
 Budgeting and forecasting (planning for the years ahead)
 Capital allocation (prioritize which projects to invest in)
 Valuing a business

ST Solution Page 4 https://techvardhan.com

 VCE Summer Internship Program 2021
Smart Task Submission Format

500 Words (Max.)

Please add /delete blocks for if needed.

ST Solution Page 5 https://techvardhan.com