Project Finance Module (Intermediate) Practice Exam

The National Institute of Securities Markets (NISM) offers the Project Finance Module (Intermediate) Exam to assess your in-depth understanding of project financing concepts and practices. Earning this certification demonstrates your ability to analyze, evaluate, and participate in project financing transactions, particularly relevant for individuals seeking careers in infrastructure development and corporate finance.

Who Should Take This Exam?

• Project Finance Analysts
• Investment Bankers (Infrastructure)
• Corporate Finance Professionals involved in Project Financing
• Credit Analysts specializing in Project Finance

Are There Prerequisites?

While NISM doesn't list formal prerequisites, a solid foundation in core financial concepts and some understanding of project management principles would be advantageous. Ideally, you might have already passed the NISM Series VII: Derivatives or possess experience in a related field.

Roles and Responsibilities 

• Project Finance Analyst: Evaluating project feasibility, structuring financing solutions, and managing project finance transactions.
• Investment Banker (Infrastructure): Originating, structuring, and executing project finance deals for infrastructure projects.
• Credit Analyst (Project Finance): Assessing the creditworthiness of project financing deals and managing associated risks.
• Financial Modeling Specialist (Project Finance): Developing and analyzing complex financial models for project financing transactions.

Exam Details 

• Duration: 120 minutes
• No. of questions: 60
• Maximum marks: 100, Passing marks: 60 (60%); There is negative marking for incorrect answers.

Course Outline

The Project Finance Module (Intermediate) examination covers the following topics:

Project Finance Background

• Evolution of project finance
• Project Types
• Critical steps in a project
• Market Analysis
• Background
• Market Sizing:
• Demand function estimation
• Rule of Thumb
• Experts’ Poll
• Consumer, Customer and Influencer

Market Insight areas

• Market Research Approaches
• Business Model, Competencies and Promoter Analysis
• Business Model
• Competencies: (i) Core competency (ii) Competency Match
• Promoter Analysis: (i) Track Record (ii) Financial Standing (iii) Integrity

Estimating Cost of Project

• Project specifications
• Estimating Fixed Capital Investment in Project
• Estimating working capital investment in the project
• Project Feasibility Analysis
• Background
• Net Present Value (NPV)
• Profit v/s Cash Flow
• Discount Rate
• Tax-Shield on Interest
• Tax-Shield on depreciation
• Internal Rate of Return (IRR)
• XIRR
• MIRR
• Project IRR and Equity IRR
• Payback Period
• Discounted payback period
• Economic IRR

Financial Projections

• Background
• Assumptions
• Cost of Project & Means of Financing
• Projected Profit & Loss Account
• Next, Projected Balance Sheet
• Projected Funds Flow
• Project IRR
• Equity IRR
• Loan Servicing Capability: (i) Interest Coverage Ratio (ICR) (ii)
• Debt Service Coverage Ratio (DSCR) (iii) Long Term Debt Service
• Coverage Ratio (LDR)

Sensitivity Analysis

• Building Scenarios
• Project Finance and their Sources
• Prudence in Mix of Long Term and Short Term Finance
• Forms of Long Term Project Finance
• Forms of Short Term Project Finance

Lease

• Role of Non-Banking Finance Companies (NBFC)
• Loan Documentation
• Infrastructure and Public Private Partnerships
• Background
• PPP Models
• Parties to a PPP Model
• PPP Process
• Model Concession Agreements (MCA): (i) Highways (ii) Greenfield
• Airports (iii) Transmission of Electricity

Novel Structures in Infrastructure Finance

• Background
• Take-out Financing
• Securitisation
• Viability Gap Financing (VGF)
• Infrastructure Debt Fund
• High Level Committee on Financing of Infrastructure

Taxation and Incentives

• Taxation: (i) Depreciation (ii) Amortisation of Preliminary Expenses (iii) Amortisation of Telecom License Fees (iv) Interest on borrowed capital (v) Disallowances under the Act (vi) Expenses, in General (vii)
• Compulsory Audit
• Incentives
• Maharashtra Package Scheme of Incentives

Project Risks and their mitigation

• Background
• Project Conceptualisation Risk
• Financial Closure Risk
• Project Construction Risk
• Political Risk
• Market Risk
• Supply Chain Risk
• Policy Risk
• Exchange Risk
• Environmental Risk
• Force Majeure