Names and identifying details in this case study have been changed. The structure, the numbers and the sequence are as they happened.
The requirement
A precision-engineering company in western Maharashtra — call it Meridian Engineering — had been supplying two large OEMs for eleven years. It had won a nomination for a new programme that its existing plant could not physically absorb: the machines fitted, the floor space did not.
The requirement was a second plant on land the promoter already owned. Total project cost was ₹24 crore, of which ₹18 crore was to be borrowed and ₹6 crore brought in by the promoters.
Why it had already been declined once
The company had approached its own bank directly and been declined. The reason given was debt-service capacity, and on the face of it the bank was right: the projected repayment did not fit inside the current year's cash flow.
But the new plant would not produce anything for a year. Construction, machine installation and customer approval had to happen first. The file had been submitted with repayment starting from month one, which no lender could have sanctioned — the company would have been repaying a loan out of a plant that was not yet running.
What we structured
- ₹18 crore project term loan, sanctioned against the project as security along with the existing plant
- A 12-month moratorium on principal, aligned to construction, installation and the customer's approval cycle
- Disbursement in six tranches against verified milestones, so the borrowing cost started only as the money was actually used
- A separate working-capital enhancement, sanctioned at the same time but drawable only once commercial production began
The last point mattered more than it sounds. A new plant needs working capital from the day it starts, and arranging that separately six months later would have meant a second appraisal at exactly the moment the company was busiest.
The outcome
Sanction came through in under seven weeks from the date the complete file was submitted. The plant was commissioned within the moratorium period and the first repayment fell due after the programme had started billing.
What this case shows
The company was always viable and the project was always sound. What changed was the presentation: the same numbers, arranged so that repayment began when the plant could pay for it.
A moratorium is not a concession a lender grants reluctantly. It is a normal feature of project finance, and a file that does not ask for one when the project needs one is a file that will be declined for the wrong reason.