Why TEV Study Is Important For A New Business Venture/Expansion Project?
May 29, 2021
Techno-Economic Viability (TEV) Study provides an appraisal of technological parameters of projects and their impact on the financial viability of projects. A TEV study is a risk mitigation exercise undertaken by banks and financial institutions prior to a decision taken by a bank or financial institutions on its lending decisions for projects.
No project can be absolutely riskless and hence the analysis of the degree of technical risk and associated financial viability, through a Techno-Economic Viability Study (TEVS) is to assist lenders to take a view on the acceptability of the degree of risk involved in a project.
A TEV study takes into account an analysis of technological risk, market risk, regulatory risk, financial risk. A critical evaluation of these parameters is essential for a meaningful TEV study. The TEV study is a continuous process, carried out from the development phase till the execution of the project.
Resurgent India, with the right skill sets to deliver, assists banks and financial institutions perform TEV studies.
Aim of TEV study
- Reveal the strengths and weaknesses of an existing business.
- Analyze the threats and opportunities in the current environment.
- Streamline all the resources required to make it a success.
- Understand the prospects of the project.
This study is required by banks, asset reconstruction companies (ARCs), engineering firms, and other institutions for the following purposes:
- Project loans appraisal
- Project financing (that includes term loans)
- Revitalizing distress assets
- Sharpen leadership skills to manage your team
- Cut expenses without compromising on quality
- Automate your business
The key objective of this study is to get a detailed insight into the project descriptions, accounting statements, resource allocations, legal requirements, financial data, tax obligations, etc.
This study is mandatory before technical development and project execution to identify if the project is profitable or not.
- Acquire a crystal-clear idea of whether the project is likely to be successful even before you decide on the human resources, time, and effort.
- Improve the project team’s focus and efficiency.
- Allow you to detect and capitalize on new opportunities.
- Help you to understand the how’s and why’s of the project before even starting it.
- Give you time to streamline your business alternatives.
- Detect problems beforehand and aid in troubleshooting it.
- Enables risk mitigation.
- Get valuable insights to the team members and stakeholders about all the possibilities of the project.
The TEV Study encompasses of all the elements required to conclude at an informed judgment to accept a project for lending or investment purpose. Rakesh Narula & Co. provides you with a TEV Report that projects a realistic view of both the positive and negative aspects of a project.
Critical Areas of TEV Study
Given below is all the knowledge you need while getting a TEV study report prepared.
- Evaluating the project's sponsors- Getting funds for a business venture also depends on the profile of the sponsors. Hence a TEV report must include the personal and financial profile of the promoters. Their record is also an important factor in determining if you will get the requisite funding for your project.
- Choosing a skilled team for handling the project- A project's success also depends on its people. It is recommended that the project members have expertise from different fields such as HR, Finance, Project implementation, etc.
- Technical evaluation- It is important to assess the project's technical components to reap good results in the future. One must conduct in-depth research on the latest technological equipment and other important resources in advance.
- Financial feasibility- One of the most vital aspects of a TEV study is that the project must be financially viable. It means that the project when executed, must bring good returns, or generate appropriate cash flows to clear the debt. While determining its financial workability, many factors are kept in mind, such as the requirement of the term loan, capital requirement, ratio analysis, etc.
- Market Evaluation- The project idea should be such that it meets the demands of the future market. The demand and supply for future needs must be enough to meet the marketing trends. Hence one must keep in mind this factor while preparing a feasibility study.
- Simulation analysis/Sensitivity analysis– In this method, you carry out infinite calculations to obtain possible outcomes and probabilities for any choice of action. This financial model is commonly used to predict the outcome of a decision using certain variables In this case, you analyse the impact of variation in key assumptions like selling and raw material prices to know the financial viability of the project.
- SWOT Analysis- SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. It is a strategic planning tool that includes identifying internal and external factors or highlighting the objectives of the project to find the favorable and unfavorable elements to achieve the desired goal.
- Risk Analysis- Last but definitely not least, risk analysis is mandatory. It is conducted by identifying operational risk, market risk, financial risk, and risk in resource mobilization, project execution, regulatory and political risk. The simple reason to include this study is to mitigate the identified risk and come up with preventive measures to overcome issues in the near future.
TEV is an integral component of project management, such as starting a new business venture or an expansion project. A reliable TEV study will assist you in reducing the risks associated with the project and help you get an unbiased view of the pros and cons of your project. Eliminating the flaws of your project before executing to bring huge returns, and you can obtain more funding to turn your dreams into reality.
Hence always choose experts from the investment banking field while preparing your TEV study. The experts from Resurgent India will guide you step by step for the feasibility report and make you achieve your business goals. For more information visit our website.