Project Viability Analysis in Barmer

What Is Project Viability Analysis?

Project viability analysis assesses whether a project, whether new, under implementation or already operating, can sustain itself financially and service its debt over time. It combines commercial, technical and financial checks and focuses on survival and repayment: can the project cover its costs, meet its obligations and withstand adverse conditions.

The analysis uses measures such as break-even level, margin of safety, projected profitability, cash flow, DSCR and ratios of leverage and liquidity. It tests the project under stress, for example lower sales, delayed start, cost overruns or higher interest, to see where it becomes unviable.

Viability analysis is often used by lenders at sanction and also later, when a project is behind schedule, over budget or facing repayment difficulty. It differs from a feasibility study, which asks whether a project should be undertaken at all, and from a financial feasibility report, which focuses on the returns on investment.

Who Needs Project Viability Analysis?

• Promoters applying for finance who need to show viability to a lender
• Borrowers whose project is delayed, over budget or underperforming
• Businesses discussing rescheduling or restructuring with lenders
• Investors reviewing an ongoing or stressed project
• Existing units evaluating expansion on a stand-alone basis
• Developers assessing whether a project can sustain its funding
• Lenders and advisers seeking an independent view

When Is Project Viability Analysis Required?

It is not a legal requirement for every project, but it is useful when:

• A lender asks for a viability report along with a proposal
• A project has experienced cost or time overruns
• Repayment is under stress or a moratorium extension is being considered
• Sales or margins have fallen short of projections
• The borrower wants to know whether to continue, change or stop a project
• New funding or additional capital is being sought
• An investor or partner is considering coming into a distressed project

What Our Project Viability Analysis Includes

• Understanding the project, its stage and the question to be answered
• Review of market position, demand and competition
• Review of technical aspects, capacity and operations
• Review of project cost, overruns and funding
• Past and projected profitability and cash flow
• Break-even point and margin of safety
• DSCR and repayment capacity
• Liquidity, leverage and working capital position
• Sensitivity and stress scenarios: sales, price, cost, delay, interest
• Identification of weaknesses and corrective actions
• Funding gaps and options to bridge them
• Conclusion on viability and recommended course of action

Legal and Practical Considerations

Lender's own assessment. Lenders conduct their own appraisal and may rely on their own or independent assessments. A viability report supports discussions but does not bind the lender.

Stressed accounts. Where repayment is stressed, resolution is governed by RBI's directions on resolution of stressed assets and the lender's policy. Viability assessment is commonly one input into those decisions. Remedies available to secured lenders include action under the SARFAESI Act, 2002 and, for corporate borrowers, the Insolvency and Bankruptcy Code, 2016, which is why early assessment matters.

Information integrity. The analysis depends on accurate information about costs, sales, liabilities and orders. Information shared with lenders must be accurate.

Statutory dues and approvals. Pending statutory dues, litigation and lapsed approvals can affect viability and should be disclosed in the analysis.

Assumption-based. Conclusions depend on assumptions, which are documented and tested, and cannot guarantee results.

Common Mistakes in Viability Assessments

• Testing only the base case
• Ignoring working capital stress
• Treating overruns as one-off without funding them
• Not separating viable operations from an unviable capital structure
• Optimistic revival plans without evidence of orders or demand
• Late assessment, after defaults have already occurred
• Overlooking statutory dues and litigation
• No corrective action plan alongside the analysis

Professional Fees, Government Fees and Timeline

Viability analysis carries no government fee. Lender and valuation fees, if any, are separate. Professional fees depend on the size and stage of the project, availability of data, number of scenarios and the depth of review. An analysis is typically ready in 7 to 12 working days after information is received.

Project Viability Analysis vs Feasibility Study vs DSCR Analysis

Viability analysis tests whether a project can sustain itself and repay debt, including under stress. A feasibility study asks whether to undertake the project. DSCR analysis focuses on one ratio. Related services include Project Feasibility Study, DSCR Analysis and Break-Even Analysis.

Need Professional Assistance With Project Viability Analysis?

An honest viability view helps you decide whether to proceed, correct course or restructure. The Legal Bank can help you prepare it. We prepare analysis and documentation; the decision to sanction a loan rests with the lender concerned. Share your requirement to discuss the next steps.