During 1974, the State Bank of India started financing a sheep rearing programme, in the drought-prone Hosur Taluka of Dharmapuri district, Tamil Nadu. The project was refinanced by ARDC and its duration was five years. Considerable time and effort went into the preparation of the project. Care was taken to prepare the project by using sophisticated techniques such as cost-benefit analysis, cash flow, internal rate of return, etc. These exercises and the follow-up appraisal revealed that the project was economically viable. The estimated gross income and IRR per sheep unit were highly attractive. However, an evaluation of the first three years' working of the project conducted by the Evaluation and Monitoring Cell of SBI showed that the performance of the project in every respect was far below the expected level. The case presented in two parts brings out the reasons for this poor performance and the lessons the project offers.