Loans | Monei Matters

DSCR, IRR and debt-equity ratio answer different questions. A project can offer an attractive estimated return and still fail to generate enough cash when loan repayments fall due. Understanding the distinction makes funding discussions more useful. Image: Side of office building by Alanthebox; CC0 1.0 . Unmodified, illustrative photograph. DSCR: can scheduled debt be serviced? Debt-service coverage compares the agreed cash available for debt service with the relevant interest and principal payments. Lenders may define the numerator and testing period differently; use the sanction’s definition consistently. In a simplified illustrative period, ₹12 crore available against ₹10 crore debt service produces 1.20 times coverage. That is arithmetic, not a universal acceptable minimum. A strong annual average can conceal a weak quarter or a large final repayment. SBI’s Surya Shakti page includes an average gross DSCR condition for that particular product. It is a lender-specific...

There is no single promoter-contribution percentage that answers every ₹100 crore project proposal. The requirement depends on eligible project cost, lender policy, the financing product, existing leverage and the project’s cash capacity. Image: Cyber city Gurgaon by Daksh Sammi; CC BY-SA 4.0 . Unmodified, illustrative photograph. Define the ₹100 crore first Establish whether the figure includes interest during construction, contingencies, taxes and initial working capital. Identify costs the lender will not finance. A contribution calculated only on eligible cost can leave other expenditure unfunded. Check how land already owned, expenditure already incurred and related-party assets will be valued and recognised. Do not assume book value automatically counts as fresh promoter cash. Distinguish arithmetic from approval If an illustrative project uses ₹70 crore debt and ₹30 crore recognised equity, its project debt-equity ratio is approximately 2.33:1. That calculation ...

A factory proposal needs more than a machinery quotation and a sales target. Before approaching banks or investors, build seven connected measures that explain the full funding requirement and the project’s ability to sustain itself. Image: Side of office building by Alanthebox; CC0 1.0 . Unmodified, illustrative photograph. The seven measures Total completion cost: land and development, buildings, equipment, installation, pre-operative costs, financing costs and contingency, as applicable. Identify exclusions and avoid double counting. Promoter funds available: distinguish cash already committed from hoped-for asset sales or future profits. Reconcile the source and date of each contribution. Capacity utilisation: estimate the ramp-up by period using production constraints and demand evidence. Installed capacity is not guaranteed saleable output. Contribution margin: test selling prices against variable production and distribution costs. Identify sensitivity ...

Expansion can be financed from retained cash, debt, equity or a combination. Each option changes risk and flexibility. The right mix depends on cash generation, uncertainty and how much financial strain the existing business can absorb. Image: Side of office building by Alanthebox; CC0 1.0 . Unmodified, illustrative photograph. Internal accruals are not free surplus Start with cash actually available after tax, existing debt service, essential maintenance and operating needs. Accounting profit and bank cash are different measures. Receivables and stock can absorb profits before they become available for investment. MoSPI’s CAPEX survey identifies internal accruals and domestic debt as important funding sources. Its aggregate findings do not prescribe a mix for an individual company. Term debt creates a payment commitment Compare the loan’s repayment profile with the project’s cash ramp-up. A moratorium may defer principal while interest continues; use the actual propos...

A decision to expand should rest on demand, execution capability and financeable cash flows. National investment statistics provide context, but they cannot establish whether a particular company should build another line or factory. Image: Cyber city Gurgaon by Daksh Sammi; CC BY-SA 4.0 . Unmodified, illustrative photograph. Read the survey carefully MoSPI’s March 2026 release reports provisional private corporate CAPEX of ₹11,43,879 crore for FY 2025–26 and intentions of ₹9,55,281 crore for FY 2026–27. These are different reporting stages; intentions are not completed expenditure or a universal expansion signal. Use industry demand and your own utilisation, order book and margins to test the commercial case. Separate firm orders from customer enquiries. Divide expenditure into decisions Identify essential replacement, productivity improvements and new capacity. Each has a different benefit and execution risk. A replacement machine may protect current output, while a ...

Combining several funding sources can help complete a financing plan, but it also creates dependencies. Each provider must understand where its money sits, when the others contribute and which cash flows service the obligations. Image: Cyber city Gurgaon by Daksh Sammi; CC BY-SA 4.0 . Unmodified, illustrative photograph. Begin with a complete sources-and-uses statement For an illustrative ₹100 crore requirement, assume ₹50 crore bank debt, ₹20 crore private credit and ₹30 crore equity. This is a modelling example, not a prescribed ratio or a funding offer. Include fees, interest during construction, contingencies and initial working capital in uses. If these are outside the ₹100 crore estimate, the apparent funding balance is misleading. Do not treat every contribution as equity Share capital, subordinated debt and redeemable instruments have different legal and economic features. Obtain each lender’s definition of acceptable promoter contribution. Funding carrying a r...

The headline interest rate is only one part of a private-credit proposal. Promoters should understand how the documents change cash obligations, management choices and exposure if performance falls short. Image: Side of office building by Alanthebox; CC0 1.0 . Unmodified, illustrative photograph. Build an all-in payment schedule List every drawdown and payment: upfront fees, cash interest, capitalised interest, principal, redemption amounts and other contractual charges. Use actual dates and distinguish amounts deducted from proceeds from amounts payable later. An illustrative ₹20 crore commitment with ₹1 crore withheld produces ₹19 crore of initial cash, before any other deductions. Comparing its cost with a facility delivering the full ₹20 crore requires more than comparing coupon rates. These figures illustrate mechanics, not market pricing. Translate covenants into decisions Identify financial tests and how they are calculated. Check measurement dates, reporting ob...

A rejected bank proposal is useful information. Before seeking private credit, establish whether the problem is eligibility, leverage, security, timing or the underlying ability to repay. A new provider does not automatically solve a weak transaction. Image: Side of office building by Alanthebox; CC0 1.0 . Unmodified, illustrative photograph. Avoid an outdated assumption about acquisitions It is no longer accurate to say that Indian banks categorically cannot finance acquisitions. RBI’s current commercial-bank credit directions contain a specific acquisition-finance framework with eligibility, contribution, leverage and other conditions. The existence of that framework does not make every buyer or acquisition eligible. Ask the bank to identify the applicable provision and its own credit requirements. Private credit may still be relevant where a lawful structure and investor mandate fit the transaction better. Acquisition: test the combined business Model integration co...

A real-estate project can own valuable land and still run short of cash. Construction payments, approvals and customer collections occur on different dates. A private-credit proposal should be assessed against that timing mismatch and the project’s legal position. Image: Cyber city Gurgaon by Daksh Sammi; CC BY-SA 4.0 . Unmodified, illustrative photograph. Separate market activity from project quality EY’s H1 2026 research identifies real estate as 35% of tracked Indian private-credit deal value. Its survey also flags perceived default risk in the sector. Deal activity is not evidence that a particular project is safe; perceived risk is not an observed default rate. Follow cash through the project Prepare a monthly schedule of construction expenditure, customer receipts, taxes and financing payments. Separate bookings from collected cash and identify cancellations, refunds and overdue instalments. Have counsel establish the restrictions on project accounts and permitte...

Choosing a lender starts with the purpose and repayment capacity of the business. A bank facility and a private-credit transaction may solve different problems, even when the headline funding amount is identical. Image: Cyber city Gurgaon by Daksh Sammi; CC BY-SA 4.0 . Unmodified, illustrative photograph. Compare the structure before the price A working-capital line supports an operating cycle; a term facility funds expenditure over a defined period. Private credit may use a loan or securities structure, depending on the provider and applicable law. The label does not establish the regulatory route. RBI’s current commercial-bank credit directions and SEBI’s AIF framework apply to different regulated participants. Neither creates an entitlement to finance. Identify the actual lending or investing entity before assessing its proposal. Ask the same questions of both providers Request a written comparison of net proceeds, payment dates, all fees, interest or redemption amo...

When an investor withdraws after diligence, immediately approaching more investors with the same materials may reproduce the problem. First establish whether the issue was business quality, transaction terms, investor fit or execution. Image: Side of office building by Alanthebox; CC0 1.0 . Unmodified, illustrative photograph. Seven possible causes Earnings changed: adjustments reveal weaker recurring profitability than the headline figures suggested. Cash needs increased: working capital or completion cost makes the proposed cheque insufficient. Ownership remained uncertain: old securities, options or family claims were not reconciled. Material risks emerged late: litigation, tax or related-party exposure was not clearly disclosed. Valuation could not be supported: projections required assumptions the investor would not accept. Governance expectations conflicted: the parties disagreed on information, control or management roles. The investor’s own...

A data room should let an investor verify the investment case without repeatedly asking management to reconstruct basic records. It is most useful when the folders reflect how the business operates and how the proposed transaction will close. Image: Side of office building by Alanthebox; CC0 1.0 . Unmodified, illustrative photograph. Start with a clear index Use folders for corporate records, ownership, financials, tax, borrowing and security, material contracts, property, people, intellectual property, litigation and the proposed transaction. Adapt the structure to the business; a factory and a software company do not have identical evidence needs. IFC’s governance tools include document-request material, which can help identify governance evidence. The following preparation approach is a practical recommendation, not a statutory checklist. Establish a single financial story Provide audited statements, recent management accounts and reconciliations to the model. Expla...

A term sheet can create momentum without ensuring completion. Conditions precedent identify matters that must be satisfied or validly waived before the investment closes. Image: Side of office building by Alanthebox; CC0 1.0 . Unmodified, illustrative photograph. Identify what is actually binding Read the document rather than assuming the entire term sheet is non-binding or fully binding. Confidentiality, exclusivity, costs and dispute provisions may have a different status from the proposed investment. Contract Act principles and the wording require legal review. Turn conditions into evidence Typical workstreams can include corporate approvals, title remediation, lender consent, valuation, regulatory permissions and key contracts. Each condition should specify what evidence satisfies it and who accepts that evidence. “Clean up all compliance” is difficult to close. A specific list of filings, approvals or corrected records is easier to manage. Have professionals decid...

An equity investor usually wants a way to monitor the business and protect important decisions. Promoters should understand the purpose and scope of each requested right before treating it as either routine or unacceptable. Image: Side of office building by Alanthebox; CC0 1.0 . Unmodified, illustrative photograph. Board representation A board seat provides participation in governance. It also brings responsibilities under the applicable law. A nominee director is not simply a messenger free to ignore duties to the company. Have counsel review the appointment, duties, conflicts and disclosure arrangements under the Companies Act. An observer may attend without the same voting role, but confidentiality, access and exclusion from conflicted discussions still need definition. Reserved matters These are decisions requiring specified consent. Examples may include major borrowing, new securities, changes to the business or related-party transactions. They are negotiated prot...

Investors bringing the same amount of money can have different reasons for investing. The right fit depends on what the business needs beyond cash and what obligations the promoter is prepared to accept. Image: Side of office building by Alanthebox; CC0 1.0 . Unmodified, illustrative photograph. A strategic investor A commercial partner may be interested in technology, customers, distribution or supply security. Ask whether the investment comes with exclusivity, procurement commitments, intellectual-property access or limits on dealing with competitors. Test those conditions against the company’s independent growth plan. A private-equity fund Examine the fund’s mandate, decision process, remaining investment period, follow-on capacity and exit expectations. A fund manager’s enthusiasm is not the same as investment-committee approval. If an AIF structure is involved, the fund’s regulatory framework and scheme mandate are part of the context, not a guarantee of funding. ...

Promoters often ask for funding without losing control. Start by defining control: ownership percentage, board authority, freedom to run the business and the ability to make major decisions are related but different. Image: Cyber city Gurgaon by Daksh Sammi; CC BY-SA 4.0 . Unmodified, illustrative photograph. Define the decisions that matter List decisions such as borrowing, annual budgets, new products, senior hiring, related-party dealings, dividends and asset sales. Then identify who approves each under the proposed arrangement. An investor holding a minority stake may request consent over major actions. A lender may impose restrictions that affect the same decisions. Keeping all shares does not necessarily mean retaining unrestricted operating freedom. Compare three trade-offs Debt avoids immediate ownership dilution but adds payment obligations and covenants. The business must be able to service it in a downside case. CCPS can defer or structure the ownership ...

A CCPS term sheet can allocate value very differently from ordinary equity even where both show the same ownership percentage. Promoters should ask for worked examples of the clauses that change distributions and conversion. Image: Cyber city Gurgaon by Daksh Sammi; CC BY-SA 4.0 . Unmodified, illustrative photograph. Conversion Identify when preference shares convert, the calculation and the effect of later securities. For foreign investment, qualifying fully mandatory conversion and upfront pricing requirements need to be checked under RBI’s equity-instrument framework. Do not assume that an optional redemption feature is harmless. Liquidation preference A preference determines an agreed priority in relevant distributions, subject to the applicable law and documents. A non-participating preference commonly involves choosing between a preference amount and an as-converted share; a participating structure may provide additional participation. Actual drafting controls. I...

An offer of ₹20 crore for 20% sounds easy to evaluate. It implies a ₹100 crore post-money value only under a simple primary-equity structure. Promoters should establish what the investor receives and where the money goes. Image: Side of office building by Alanthebox; CC0 1.0 . Unmodified, illustrative photograph. The simple case If all ₹20 crore enters the company for newly issued ordinary shares representing 20% after completion, the implied post-money valuation is ₹100 crore and pre-money is ₹80 crore. This assumes no simultaneous option pool, conversion or other adjustment. If instead the investor buys 20% from an existing shareholder, the company receives no growth capital from that purchase. The transaction may still imply ₹100 crore for the existing equity, but it is not a ₹20 crore injection into operations. Five questions before accepting Is the cheque primary capital, a secondary purchase or a mixture? Is 20% calculated on current shares or a fully dilut...

Two term sheets can both say “₹100 crore valuation” and give the investor different ownership. The missing words are often pre-money or post-money. Image: Side of office building by Alanthebox; CC0 1.0 . Unmodified, illustrative photograph. Start with the basic arithmetic For a simple primary ordinary-equity issue, post-money value equals pre-money value plus the new investment. The investor’s percentage is new investment divided by post-money value. These simplified relationships assume no other securities, fees, secondary sale or simultaneous dilution. If ₹100 crore is pre-money and an investor adds ₹20 crore, post-money is ₹120 crore and the new investor owns approximately 16.67%. If ₹100 crore is post-money after a ₹20 crore investment, pre-money is ₹80 crore and the investor owns 20%. Those are illustrative calculations, not opinions about the value of any business. Ask what sits in the denominator Outstanding options, warrants and convertible securities can...