The situation
The project generates ₹42 crore cash available for debt service. Annual scheduled principal is ₹25 crore and interest is ₹10 crore. Covenant minimum is 1.25×.
Your task
Does the project pay its debt and meet the covenant?
Reveal step-by-step solution
Set up the problem
Scheduled debt service = ₹25 + ₹10 = ₹35 crore.
Work through the numbers
DSCR = ₹42 ÷ ₹35 = 1.20×. Minimum cash needed for the covenant is ₹35 × 1.25 = ₹43.75 crore.
Interpret the result
It can pay scheduled debt with ₹7 crore left and still falls ₹1.75 crore short of covenant cash coverage.
What to remember
Use contractual CFADS and scheduled principal plus interest. Treat cash payment and covenant compliance as separate checks.