Due Diligence


Due diligence is a term used for a number of concepts involving either an investigation of a business or person prior to signing a contract, or an act with a certain standard of care. It helps a company get an unbiased assessment of the project before making an investment.

Coverage/ Methodology :

Any company, either an existing player interested in expanding its business or a new one, or as a prospective stakeholder in a project, whether as an equity partner or a lender, one possibly seeks a variety of reassurances in three key phases.

Phase I: Initial Due Diligence

Location & Capacity

  • Is the plant strategically located, i.e., appropriateness of capacity location vis-à-vis key markets, raw materials, competitive environment locations and logistics?
  • Is the project technically sound, are the various design components balanced and does the plant employ contemporary technology?
  • Do the key performance parameters ensure cost-competitiveness?
  • Are the contracting arrangements, including the method of sub-contracting, quality assurance, risk mitigation, cost certainty, acceptance testing, handover arrangements, etc., appropriate?
  • Are all infrastructure requirements adequate for plant construction and operations?
  • Are the project implementation plans & execution arrangements, reasonable?
  • What are the possible construction risks including project schedule, cost overrun, completion delays and any factors which could have a significant bearing on the project’s ability to achieve production and distribution objectives?


  • Are there adequate and sustainable captive and bought-out raw materials to support the plant over its life?
  • What are the sources for power, fuel and water and their usage norms, etc?
  • Do the raw materials require special design intervention, such as a by-pass, which influence the plant design and CAPEX?
  • Will the cement produced adhere to international and local standards?


  • What is the current and future scenario for cement demand and price in the markets relevant to the project?
  • Are there any import threats?
  • What is/ would be the status of competition?
  • Based on the market scenario and its relative competitiveness, what are the achievable volumes that could be sold by the plant? Where? When?
  • What would be the likely revenue?

Human Resources

  • Is the staffing adequate and locally available? If not, what are the sourcing plans to ensure adequacy?

Environmental Considerations

  • Does the project design comply with IFC (International Finance Corporation)’s PS (Performance Standards) & EHS (Environmental, Health & Safety) guidelines and local standards and laws?
  • Are the ESIA (Environmental & Social Impact Assessment) & ESMP (Environmental & Social Management Plan) Reports comprehensive and adequate to mitigate all environment related risks?

Time Schedule

  • Is the construction schedule, conceived for the project, realistic?
  • What are the critical activities/ project milestones that can significantly affect timely realisation?
  • Based on the possible variables in the execution time for critical activities, what could be the variability in the overall realisation schedule?

Financial Implications

  • Is the CAPEX adequate? What is the probability of CAPEX under or over exceeding the budget?
  • Is the forecasted OPEX realistic? Are all expense heads accounted for?
  • What will be the value to the stakeholders in terms of return on investment, net present value, payback, debt-servicing ability, etc?

Project Risks

  • What are the risks associated with the project in relation to the markets, inputs, technology, environment, staffing, mode of execution, realisation schedule and financial performance?
  • Are the measures conceived for mitigation, adequate? If not, what additional measures need to be factored in?

Phase II: Due Diligence during Project Execution

Project Management and Monitoring

  • Progress of work (planned vs. actual), with specific reference to the time schedule of each activity, as well as the overall time schedule and mitigation measures in the event of any variations.
  • Progress of cost (planned vs. actual), including assessment of cash flow requirements.
  • Progress and latest status (especially construction and start-up) of environment and social requirements.
  • Assessment of variation orders (if any) and mitigation measures.
  • Checking of Performance Targets/ Guarantees.
  • Verification of Physical Completion of the Project.

Phase III: Due Diligence during Plant Operations

During the operational phase:

  • Perform an annual operational review covering operational parameters, capacity utilisation, energy consumption, environmental issues, manpower and training, cost of production and profitability.
  • Review the compliance with various contractual obligations covering the service provision, the management of the plant, etc.
  • Review:
    • Any performance failures and subsequent corrective actions taken to protect the future project cash flows and identify repetitive failures.
    • The forecasted performance indicators and the management plan.
    • The annual life cycle programme including cost and content and make necessary recommendations, as appropriate.

 Depending upon our client’s requirements, Holtec may undertake any one or more phases, as defined above, as part of its engagement.


It helps an investor to:

  • Make an unbiased assessment of the project/ plant.
  • Make an informed decision.
  • Make the right investment.
  • Substantially reduce the risk of making a sub-optimal decision.