state bank of india ; pulin & kushal
DESCRIPTION
State bank of india ; pulin & kushalTRANSCRIPT
PROJECT REPORT ON
FINANCING MEDIUM ENTERPRISE
AT
STATE BANK OF INDIA
BY
KUSHAL PAREKH (Roll no. 31)PULIN PATEL (Roll no. 39)
1
ACKNOWLEDGEMENT
We would like to thank SBI for giving us such a great learning experience.
We are especially thankful to Mr. T. Chandrasekaran (AGM Sales Hub) for his guidance and motivation.
We would also like to thank Mr. Anmol (Customer Support Officer), Mr. Pramod (Relationship Manager, Medium Enterprise) and Mr. Sushil (CFA, Medium Enterprise) for their continuous guidance and support.
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INDEX
STATE BANK OF INDIA – ORIGIN…………………………………04
STATE BANK OF INDIA – TODAY…………………………………06
SBI – MISSION, VISION & VALUES………………………………..07
SBI – MODERNIZATION PROGRAMME………………………….,08
SMALL & MEDIUM ENTERPRISE (SME) – OVERVIEW…………10
SME – ROLES, POLICIES & ISSUES……………………………....11
SME – PRODUCTS…………………………………………………….13
FINANCING STOCK BROKERS……………………………………..19
EVALUATION OF LOAN PROPOSALS OF MEDIUM ENTERPRISES……………………………………………..21
PROPOSAL OF CITIZEN INDUSTRIES…………………………….22
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STATE BANK OF INDIA – ORIGIN
The origin of the State Bank of India goes back to the first decade of the nineteenth century with the establishment of the Bank of Calcutta in Calcutta on 2 June 1806. Three years later the bank received its charter and was re-designed as the Bank of Bengal (2 January 1809). A unique institution, it was the first joint-stock bank of British India sponsored by the Government of Bengal. The Bank of Bombay (15 April 1840) and the Bank of Madras (1 July 1843) followed the Bank of Bengal. These three banks remained at the apex of modern banking in India till their amalgamation as the Imperial Bank of India on 27 January 1921.
Primarily Anglo-Indian creations, the three presidency banks came into existence either as a result of the compulsions of imperial finance or by the felt needs of local European commerce and were not imposed from outside in an arbitrary manner to modernise India's economy. Their evolution was, however, shaped by ideas culled from similar developments in Europe and England, and was influenced by changes occurring in the structure of both the local trading environment and those in the relations of the Indian economy to the economy of Europe and the global economic framework.
Bank of Bengal H.O.
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Establishment
The establishment of the Bank of Bengal marked the advent of limited liability, joint-stock banking in India. So was the associated innovation in banking, viz. the decision to allow the Bank of Bengal to issue notes, which would be accepted for payment of public revenues within a restricted geographical area. This right of note issue was very valuable not only for the Bank of Bengal but also its two siblings, the Banks of Bombay and Madras. It meant an accretion to the capital of the banks, a capital on which the proprietors did not have to pay any interest. The concept of deposit banking was also an innovation because the practice of accepting money for safekeeping (and in some cases, even investment on behalf of the clients) by the indigenous bankers had not spread as a general habit in most parts of India. But, for a long time, and especially upto the time that the three presidency banks had a right of note issue, bank notes and government balances made up the bulk of the investible resources of the banks.
The three banks were governed by royal charters, which were revised from time to time. Each charter provided for a share capital, four-fifth of which were privately subscribed and the rest owned by the provincial government. The members of the board of directors, which managed the affairs of each bank, were mostly proprietary directors representing the large European managing agency houses in India. The rest were government nominees, invariably civil servants, one of whom was elected as the president of the board.
STATE BANK OF INDIA – TODAY5
State Bank of India is the premier commercial bank of the country, and among its strengths, the following would merit attention. The largest commercial bank in the country with branches spread all over India, besides having presence in all the time zones of the world covering several countries.
As the largest financial institution in India, SBI is well positioned to capture growth in India’s dynamic banking market and is seen as a macro economic proxy for the Indian economy.
The bank along with its non-banking subsidiaries has emerged as a financial services supermarket offering the entire gamut of financial services including investment banking, housing finance, factoring, project finance, asset management primary dealership, securities trading, credit card, gold banking, insurance, etc. The subsidiaries have been built into highly focused, efficient and tech- savy organisation which works closely with the customer relationship groups in order to cross-sell products building on Group synergy.
SBI is an excellent brand name that is synonymous with trust and security. SBI is the only bank in India to be ranked among the top 100 banks in the world and also among the top 20 banks in Asia in the annual survey by “The Banker”.
The bank has long standing relationship with 80% of Indian Bluechip corporates. Substantial part of the corporate business of the bank is handled in five Strategic Business Units (SBUs) - Corporate Accounts Group, Leasing SBU, Project Finance SBU, Mid Corporate Group (MCG) and Stressed Assets Management Group (SAMG). The Corporate Accounts Group (CAG) is a dedicated service group catering to about 298 top corporates and offers our top clients high quality relationship banking a broad product portfolio, competitive pricing and skilled credit expertise. The bank has developed an excellent inhouse staff training infrastructure including a College, an Academy, an Institute for Rural Development and an Institute for Information Management and Communication Technology. Efforts are continuously made to improve the motivation and morale of the bank’s employees through on-going training and on-site initiatives.
MISSION STATEMENT
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To retain the bank’s position as the Premier Indian Financial Services Group, with world class standards and significant global business committed to excellence in customer, shareholder and employee satisfaction and to play a leading role in the expanding and diversifying financial services sector while continuing emphasis on its development banking role.
VISION STATEMENT
1. Premier Indian Financial Services Group with global perspective, world class standards of efficiency and professionalism and core institutional values.
2. Retain its position in the country as a pioneer in development banking.
3. Maximise shareholder value through high sustained earnings per share.
4. An institution with a culture of mutual care and commitment, a satisfying and exciting work environment and continuous learning opportunities.
VALUES
1. Excellence in customer service.
2. Profit orientation.
3. Belonging and commitment to the bank.
4. Fairness in all dealings and relations.
5. Risk-taking and innovation.
6. Team-playing.
7. Learning and renewal.
8. Integrity.
9. Transparency anddiscipline in policies & systems.
SBI Modernization Programme
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SBI’s Information Technology Programme aims at achieving efficiency in operations, meeting customer and market expectations and facing competition. Our achievements are summarized below:
FULL BRANCH COMPUTERISATION
All the branches of the Bank are now fully computerised. This strategy has contributed to improvement in customer Service.
ATM SERVICES
There are 10,200 ATMs on the ATM Network in the State Bank Group spread across the length and breadth of the country, thereby creating a truly national network of ATMs with an unparalleled reach. . In January 2006, the Bank recorded 3.3 crore ATM transactions and withdrawals of around Rs 5,800 crore and the transactions are growing at the rate of 15% month-on-month. Value added services like ATM locator, payment of fees for college students, multilingual screens, voice over and drawal of cash advance by SBI credit card holders have been introduced. The Bank is planning to extend the BS7799 certification that it received for its data centre in Mumbai and disaster recovery centre in Chennai to its ATMs. Our customers have access to the largest reach and convenience of “Anywhere – Anytime” banking. State Bank ATM cum Debit cards are also acceptable at more than 1,23,000 Points of Sale / Merchant Establishments, which display Maestro logo.
INTERNET BANKING
This on-line channel enables customers to access their account information and initiate transactions on a 24x7, boundary less basis. 3308 branches are extending INB service to their customers. All functionalities other than Cash and Clearing have been extended to individual retail customers. A separate Internet Banking Module for Corporate customers has been launched and available at 1070 branches. Bulk upload of data for Corporate, Inter-branch funds transfer for Retail customers, Online payment of Customs duty and Govt. tax, Electronic Bill Payment, SMS Alerts, E-Poll, IIT GATE Fee Collection, Off-line Customer Registration Process and Railway Ticket Booking are the new features deployed.
STEPS
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Under STEPS, the bank’s electronic funds transfer system, the Products offered are eTransfer (eT), eRealisation (eR), eDebit (CMP) and ATM reconciliation. STEPS handles payment messages and reconciliation simultaneously.
SEFT
SBI has launched the Special Electronic Fund Transfer (SEFT) Scheme of RBI, to facilitate efficient and expeditious Inter-bank transfer of funds. Many branches of our Bank in various LHO Centres are participating in the scheme. Security of message transmission has been enhanced.
CORE BANKING
The Core Banking Solution provides the state-of-the-art anywhere anytime banking for our customers. The facility is available at 2704 branches of SBI covering 49% of the Bank’s business at 612 centres and at all the 4715 branches of the Associate Banks covering 100% of their business at 2341 centres.
CREDIT CARD
The SBI Card has 2.3 million card holders at present and it is targeting to cross 3 million mark by December this year. SBI Card is now available at 85 locations which is expected to go up to 100 by December 2006. SBI Card has launched three new co-branded credit cards — TATA Card, SBI Railway Card and SBI Vishal Mega Mart Card — in February 2006 aimed to tap the niche segments. SBI Card has 19 products targeting various segments of the society and issues over one lakh cards per month. SBI Card has the widest distribution network in the country through SBI and its associate banks with over 13,600 branches.
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SMALL & MEDIUM ENTERPRISES (SMEs) – OVERVIEW
Small Scale Industries (SSI) sector comprises small scale units, tiny enterprises and small service and business enterprises.
The official (Government of India) definition of SSI is as under:
(a) Small scale industrial units which are engaged in the manufacture, processing and preservation of grades and whose investment in plant and machinery does not exceed Rs. 10 crores.
(b) Tiny enterprises where investment in plant and machinery is upto Rs.25 lakhs.
(c) Small scale service and business enterprises with an investment upto Rs. 10 lakhs in fixed assets including land and building.
Over the years, the process of graduation of several SSI units into medium enterprises has been witnessed. Therefore, the Working Group on Flow of Credit to SSI Sector, appointed by the Reserve Bank of India, recommended for the creation of a separate category of Medium Enterprises (ME). While ME may not qualify for priority sector lending, they must be seen as contiguous with SSI. As per the recommendation of the Group, Small and Medium Enterprises (SME) comprising tiny, small and medium enterprises, are defined as under:
(a) Tiny: Turnover being upto the financial limit of Rs.2 crores.
(b) Small: Turnover being above Rs. 2 crores but less than Rs. 10 crores.
(c) Medium : Turnover being between Rs. 10 crores and Rs. 50 crores.
SMES - ROLE, POLICIES AND ISSUES
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SMES – ROLE & IMPORTANCE:
SMEs contributes to around 56% of manufactured products, 35.8% of the exports and ranks second in providing employment next only to agriculture.
Incentives: reservation of items, concessionary finance, simplification of procedures, imports under OGL, duty free import of select items, simplified credit sanctioning system
Major issues: Inadequate credit, delay in sanction, lack of transparency, lack coordination among financing agencies.
The relative importance of the SSI in the national economy can be gauged from the fact that registered SSI units increased from 7.90 lakh units in 1990- 91 to 15.54 lakhs in 2003-04; the level of production achieved was of the order of Rs. 351427 crores (at current prices) in 2003-04; goods worth of Rs.86013 crores were exported (in 2002-03) and the level of employment was 271.36 lakhs in 2003-04 which is next only to agriculture. It contributes around 56 per cent of the manufactured products and 35.8 per cent of the exports of the country. The unregistered units have increased from 59.97 lakhs in 1990-91 to 98.41 lakhs in 2003-04. Thus, total units in operation in 2003-04 were 113.95 lakhs.
SMES – POLICIES:
The Government policy provides for special incentives to the SME units, by way of reservation of items exclusively for the manufacture of SSIs, supply of raw materials through SIDCs, provision of finance on concessional terms to micro and tiny units, fiscal reliefs in terms of excise duty, and assistance in marketing. Recognizing the role of the small scale sector in providing employment, and increasing production and exports, the government has streamlined procedures for imports and reduced points of control. In order to meet the financial requirements of SMEs, banks and Development Financial Institutions [both National and State level] offer various facilities, incentives and special schemes.
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SMES – ISSUES:
The following are the current issues relating to the SME sector:
Non-availability of bank credit to the SSI sector is a major issue. This relates to:
(a) Inadequate credit sanction, and
Inadequate sanction takes place due to (i) lack of understanding of business and requirements of genuine
needs (ii) lack of transparency on the part of borrowers,(iii) lack of information made available by borrowers to banks for credit
appraisal (iv) lack of appreciation on the part of the borrower regarding bank
formalities (v) diversion of funds by borrowers which prevents bankers from being
liberal in credit sanction (vi) lack of coordination between banks and financial institutions in
carrying out a joint appraisal(vii) lack of skills in appraising hi-tech projects(viii) Inadequate support from controlling office and legal / technical cells
in banks.
(b) Delays in credit sanction.
Similarly, delays in credit sanction include (i) asking information from borrowers in piecemeal, (ii) appraisal being done in parts, (iii) ineffective arrangements of loan consortium, (iv) inadequate organizational arrangements to carry out speedy
appraisal, and (v) lack of cooperation on the part of the borrower to comply with
banker's requirements. Along with bank credit, lack of coordination between SFCs and banks, which has resulted in the lack of flow of working capital to the SMEs leading to industrial sickness and lack of finance for marketing, is another major issue.
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SMES – PRODUCTS
The following are the key SME products of SBI on which we focused.
OPEN TERM LOAN
1. Target Group : SMEs in manufacturing sector
2. Eligibility : Existing or new corporate or non – corporate customers in SME – manufacturing sector with credit ratings of SB3/SBTL3 AND ABOVE.Units with SB4/SBTL4 can be considered selectively with administrative approval of CGM( Circle) Non customers also can be considered subject o fulfillment of take – over norms and after due obtention of opinion reports from their existing bankers.
3. Purpose : Any genuine commercial purpose such as expansion / modernisation substitution of high cost debt of other banks / FIs Upgradation of technology Energy conservation systems Acquisition of software, hardware, consumables, tools,
jigs, fixtures, etc. ISO and other such certifications Visits abroad for acquiring technology, finalizing deals,
participation in fairs, market promotion, etc.4. Type of facilities : Term Loans
5.Quantum of Finance
:Maximum Rs.250lacsFor amounts more than this, prior administrative approval fro the CGM(Circle) is to be obtained and the sanction would have to be accorded by CCC - 1
6. Margin : 10% uniformly
7. Rate of Interest : As per the credit rating of the borrower linked to SBAR on floating rate basis
8. Security:- Primary
- Collateral
: Hypothecation of the machinery proposed to be purchased out of the Term loan
Extension of charge over current assets, fixed Assets and other existing collateral Obtention of additional collateral should be explored In all cases, personal guarantees of the promoters of the
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unit have to be invariably obtained.In case of corporate borrowers, pledge of promoters equity should be explored
9. Processing fees As applicable to the unit for term loans10. Repayment : Generally not to exceed 3 years. May be extended upto 5 years
selectively if considered necessary.
11. Documentation : Usual Term Loan Agreement for the TL limit to be obtained upfront and supported by exchange of suitable letters at the time of each disbursement
12. Special features This is a unique facility of a pre-sanctioned term loan limit with the option of multiple disbursements for multiple purposes to be sanctioned along with the working capital limits.
This facility is to be made available at our erstwhile commercial network branches, industrial estate branches, SSI branches, which are headed by CMs and such other branches identified for the purpose by the CGM(Circle)/GM(Network)
Other branches may get such loans processed and sanctioned by SECC/CPCs irrespective of the amount.
Borrowers can utilize the facility on multiple occasions as per their needs.
Each disbursal can be made by the branch manger without reference to the sanctioning authority
The repayment for each term loan is to be calculated by reference to the date of the first drawdown
Each disbursal should be supported by an exchange of letters between the borrower and the Bank.
The sanction is valid for 12 months only and any unutilized portion will lapse after 12 months.
Each term loan has to be treated as an individual TL for accounting purposes.
The discretionary powers are as applicable to term loans as usual.
There is no need to refer these proposals to the Consultancy cells for techno-economic viability study.
Product Highlights:
This is a unique facility, the first of its kind aimed at our existing units, both our customers, especially those who are rated high as well as those banking elsewhere to facilitate them to negotiate for acquisition of assets, etc. with the comfort of a pre-sanctioned term loan limit. There is no need for routine references to the Consultancy cells for TEV study for this product.
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GENERAL PURPOSE TERM LOAN FOR SSI SECTOR
1. Target Group : Existing SSI borrowers with CRA rating of SB3 and above
2 Eligibility : Should have earned profits in each of the preceding 3 years
The unit should not have a history of default The unit should be CRA rated unit with a minimum
limit of Rs.25 lacs (as far as possible).3 Purpose : Any general commercial purpose such as shoring up NWC,
substitution of high cost debt, R&D, quality upgradation for ISO certification, etc.
4 Type of facilities : Term Loan
5 Quantum of Finance : Maximum of Rs.50lacs
6 Margin : Minimum of 25% for acquisition of assets, i.e., quantum of loan should be restricted to 75% of project cost.
7 Rate of Interest : As per CRA rating
8 Security:- Primary
- Collateral
:Extension of Hypothecation charge over current and fixed assets Extension of charge over existing collateral Obtention of additional collateral by way of tangible
security to be explored Personal guarantees of proprietor/ partners / promoters
to be invariably obtained
9 Processing fees As applicable to SSI units
10 Repayment In monthly /quarterly instalments normally in 3 years, extendable upto 5 years in deserving cases.
11 Documentation : Specially designed document on the lines of the Composite Loan Agreement
12 Special features : Term Loan to be disbursed in line with the approved purpose
Loans , deposits, from friends and relatives can be treated as quasi-equity to arrive at TNW subject to undertaking from them that the amounts will not be withdrawn during the currency of the loan.
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CORPORATE LOAN
1. Target Group : Existing C&I and SSI customers and also non customers.
2 Eligibility : .Existing non-corporate customers in C&I and SSI segments with SB4 or SBTL4 rating. Non–customers can also be offered this product after ensuring the creditworthiness and obtention of opinion report from their bankers.
3 Purpose : Repayment of high cost debt, VRS scheme, acquisition of trademarks, patents, shoring up of net working capital, etc..
4 Type of facilities : Clean Term Loan5 Quantum of Finance : Minimum Rs.25lacs
Maximum Rs.10 crores for non corporate borrowersNo cap for corporate borrowers
6 Margin : Not applicable
7 Rate of Interest : Normally one step higher than the applicable rating as per the CRA rating but sanctioning authority may selectively offer same price as applicable to CRA rating of the account on business considerations.
8 Security:- Primary
- Collateral
:First charge on assets created from bank finance or extension of first charge on current assets as the case may be.1. First charge on fixed assets on pari passu basis with
other term lenders In case this is not possible for valid reasons, second charge on fixed assets should be obtained.
2. Personal Guarantee of promoters/partners/ proprietor should be obtained. In the case of Corporates, pledge of promoters' equity should be explored.
9 Processing fees As applicable to SSI / C&I
10 Repayment Repayment period generally not to exceed 3 years but may be extended to 5 years selectively.
11 Documentation : As applicable to clean term loan in the respective segment
12 Special features : The discretionary powers are those applicable to term loans.
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WORKING CAPITAL FINANCE TO T&S SECTOR
1. Target Group : .Retail and wholesale traders in agricultural and industrial commodities, Dealers in consumer durables, consumer goods, vehicles, showrooms, etc.
2 Eligibility : Units in C&I segment established with profits at least in the preceding 3 years with CRA rating of SB4 and above
3 Purpose : Working capital requirements
4 Type of facilities : Cash credit limit with a sub-limit for LCs if required
5 Quantum of Finance : 15% of projected annual turnover which should not be more than 25 % of the turnover in the previous year subject to a maximum of Rs.5 crores.
6 Margin : 25%
7 Rate of Interest : As per credit rating. A concession of 0.50% may be offered for units with at least 75% collateral coverage
8 Security:- Primary
- Collateral
:Hypothecation of stocks and receivables
Collateral security of at least 50% is to prescribed out of which at least 33% of the limit should be by mortgage of immovable property. The stipulation regarding im-movable property can be reduced to 25% in exceptional cases with the administrative approval of CCC-II.
9 Processing fees As applicable to C&I units
10 Repayment On demand
11 Documentation : As per extant instructions
12 Special features : In case the proposal does not fit into this turnover based model of credit assessment, the traditional method of projected balance sheet method may be adopted.
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Bank Guarantee
Quantum of Finance
o Sole Proprietorship : upto Rs 1 croreo Partnership : upto Rs 2 croreo Corporate : upto Rs 15 crore
OR¾ of the Tangible Net Worth of the Company whichever is lower
Purpose:
o Towards meeting the capital adequacy requirements and margin requirements as prescribed by BSE/NSE for the trades under the compulsory rolling system in the equity segment.
Margin:
o 50% as per RBI directives of which minimum 25% will be cash margin and other 25% in form of other Security
o Acceptable Securities: Second charge of deposits maintained with stock exchange Pledge of Shares Immovable Property Charge on assets of broking entity
&Personal Guarantee of Partner/Promoter/Director
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FINANCING STOCK BROKERS
We primarily focused on marketing of various products of the bank (especially bank guarantee) to stock brokers.
We observed that the potential customers would be the Ahmedabad based brokers as other brokers take decisions from their head offices which are not in Ahmedabad.
We found out that as the stock markets are booming the broking industry is in an expansion and growth phase. Also with the starting and development of commodity exchanges like MCX and NCDEX the commodity markets are also seeing great increase in volumes, thus the scope for brokers is very good. All this augurs well for a bank like SBI which can tap this opportunity with the right efforts.
We also found out that the private banks like HDFC and ICICI have been very aggressive and have captured a large part of the market. However they have extinguished or nearly extinguished their exposure limits to brokers. This has thrown up tremendous opportunities for SBI.
We approached various Ahmedabad based brokers and were able to bring proposals for Bank Guarantee worth Rs. 48 crores which are as under:
o Monarch Project & Finmart : Rs 10 crores
o Goldmine Stocks Pvt. Ltd. : Rs 3 crores
o Anagram Securities Ltd. : Rs 10 crores
o Khandwala Capt. Serv Ltd. : Rs 15 crores
o Kunvarji Finstock Pvt. Ltd. : Rs 10 crores
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Suggestions:
From market observations we found out that the facilities provided by bank under SME POWER GAIN (QAB of Rs. 1,00,000) and SME POWER PACK (QAB of Rs. 5,00,000) are provided by other banks at much lower QAB (BOB provides POWER PACK facilities for a QAB of Rs. 3,00,000). Also other banks do not charge any amount as collection charges where as SBI charges Rs. 0.5/1000 on cheques of other banks.
In case of bank guarantees the bank should have a variable charge structure, the charges depending upon the credit rating of the brokers. The charges have to be competitive with those of the private banks as they are very aggressive in this sector. The normal rate charged by other banks is between 1 to 1.5 percent.
The bank should accept F.D. for the entire margin amount as brokers are not comfortable with providing other securities.
The bank should promote opening of brokers, sub-brokers and clients accounts together in order to facilitate quick transfer of funds through e-transfer.
Generally current brokers would not like to change their clearing and settlement bank the opportunity in this area is limited however the bank can target new brokers for the same.
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Evaluation of Loan Proposals of Medium Enterprises
Organizational Structure:
At SBI, the evaluation of the loan proposals of medium enterprises until recently were done at branch level, but now they have re-engineered their evaluation processes and now it is done centrally by Relationship Managers (Medium Enterprises) under AGM (Sales Hub).
Evaluation Criteria:
In evaluating a proposal, the bank studies following details regarding the firm:
Company Profile Credit Limits – Existing and Proposed Performance & Financial Indicator (Actual & Projected) Brief Background of Company, Group Promoters and Management Performance and Financials (Whether overall financial condition is
considered satisfactory including trends in sales, profitability, tangible net worth, TOL/TNW and current ratio.)
Industry Scenario Fund Flow Analysis and Comments. Working Capital Assessment Other Details such as Rating by other banks, Market price of securities
(if listed), Comments on associate concern and other details as may be required by the bank.
A proposal of Citizen Industries Ltd. On which we had worked upon has been attached to give a comprehensive idea of all the above mentioned aspects.
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COMPANY: M/S CITIZEN INDUSTRIES [CI]
Circle : Ahmedabad Branch : Naroda Ind Estate [1045]Segment : SSI Industries : Engineering
Sanction for
(i) FBWC limits of Rs 50.00 lacs.
(ii) NFBWC limits of Rs.100.00 lacs.
(iii) Open Term Loan of Rs. 150.00 lacs
Approval for
(a) Full interchangeability between LC and BG.
(b) Improved pricing at SBAR as against applicable pricing SB-1/SBTL-1 for working capital/OTL.
CREDIT LIMITS (EXISTING & PROPOSED)(Rs. in Lacs)
Existing Proposed ChangeLimits SBI % Cons SBI % Cons SBI ConsFUND BASEDDCC (STOCKS & Book Debts)
-- Nil 50.00 Nil +50.00 Nil
DCC (BOOK DEBTS) -- Nil (15.00) +(15.00)OPEN TERM LOAN -- Nil 150.00 Nil +150.00 NilTOTAL FBWC -- Nil 200.00 Nil +200.00 NilNON FUND BASED Nil Nil NilLETTER OF CREDIT -- Nil 100.00 Nil +100.00 Nil
BANK GUARANTEE -- Nil (100.00) Nil +(100.00)
Nil
TOTAL NON FUND BASED
-- Nil 100.00 Nil +100.00 Nil
FB+NFB -- Nil 300.00 Nil +300.00 Nil* 100% interchangeability between LC / BG
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The proposal falls within the powers of Zonal Office Credit Committee, as the FB/NFB/Total Indebtness is Rs. 200/100/300 lacs, TL Component is Rs 150.00 lacs and unit is a credit rated as SB-1. The unit is proprietorship firm.
1. Company profile:
1.1Address of the Regd. / Corporate Office:
Office: IIIrd Floor, 301, Sarthak Complex, Navrangpura,
Behind Urja House, Near Swastik Char Rasta,Ahmedabad – 380009.
Factory Address: Plot no.57, Phase-II, GIDC, Naroda, Ahmedabad-382
330.
Telephone: Office : 079 – 26445155
Factory : 079-26431869 : 079-26445642
1.2Constitution : Proprietorship
Activity fume hoods & lab equipments, lab animal care equipment, Low Leakage dampers etc.
Group/ Promoters
Not known group
1. Shri Kamlesh R Mehta
Date of Incorporation
1988
Banking with us since/ New connection*
New connection (One of its associates M/s Citizen Industries Ltd is Banking with us since 1997.)
Group Exposure : (Rs In Lacs)Existing Proposed
Fund Based 350.00 550.00Non Fund Based 65.00 165.00
415.00 715.00
Date of last renewal
New connection
Mfg. units/locations at: Plot no.57, Phase-II, GIDC, Naroda, Ahmedabad-382 330.
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1.3CRA(WC/TL)/Pricing: Based on Audited Balance Sheet dated 31.03.2006 for DCC & Open Term Loan
WORKING CAPITAL TERM LOAN (OTL)Existing Proposed Existing Proposed
CRA : -- SB - 1 NA SBTL-1PRICING : -- SBAR NA SBAR
1.4IRAC status: Not applicable, new connection.
1.5A Additional Information on Term Loans:
Nature
of T. L.
Tenor
inclusive of
moratorium
Residual Tenor
as on date
Avg. Gross
DSCR
Min.
Gross
DSCR
Security Margin
Min. in
year
2007-08
Avg.
OTL 48 months 48months 8.41 7.88 48% 66%
2.1Financial Arrangement: Sole Banking
2.2If consortium/MBA: Not applicable
2.3Indebtedness/Exposure (Rs in Lacs)
Indebtedness Existing Proposed
Fund Based -- 200.00Non fund Based -- 100.00Total (Indebtedness) -- 300.00
2.4Position regarding prudential exposure limits of RBI (If applicable): NA
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3.1 Performance & Financial Indicators[Rs in lacs]
As on 31.03.2003 Actuals2004-05
Actuals2005-06
Esti.2006-07
Proj.2007-08
Net Sales 1085.66 1447.61 1565.00 1814.00(Exports) 0.00 0.00 0.00 0.00Op:Profits 307.23 502.46 589.60 703.80PBT 313.90 508.20 595.60 710.80
PBT/N Sales ( % ) 28.91 35.11 38.06 39.18
PAT 310.26 405.20 399.60 471.80
Cash Accruals 336.58 426.96 418.60 504.80
PBDIT 343.58 531.10 616.10 750.30
PUC 497.77 725.80 1,125.40 1,612.20
TNW 497.77 725.80 1,125.40 1,612.20
Adj. TNW 497.77 725.80 1125.40 1612.20TOL/TNW 0.26 0.15 0.09 0.20
TOL/Adj. TNW 0.26 0.15 0.09 0.20Current ratio 4.28 5.82 6.95 4.88
CR excl TL inst 4.28 5.82 6.95 4.88
3.1 Movement in TNW (Past Three years)
31.03.04 31.03.05 31.03.06Opening TNW 120.65 246.17 497.77Add PAT 92.05 310.26 405.20Add. Increase in Equity/premium 33.47Add./ Subtract change in intangible assetsAdjust prior year expensesDeduct Dividend PaymentWithdrawal 58.66 177.17Closing TNW 246.17 497.77 725.80
4. Brief Background (Company/Group Promoters/Management):
CI, a proprietorship firm, established in the year 1988 and is engaged in the manufacturing of Fume Hoods and laboratory furniture, individual ventilated Animal caging System.
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Company has Shri Kamlesh R Mehta as the proprietor of the firm, he is also associated with Citizen Industries Ltd. as one of the director, which is engaged in manufacturing air handling plant and has been banking with our Naroda I.E. branch since 1997.The promoter, Shri Kamlesh R Mehta is qualified Mechanical Engineers, in the present line of activity for more than 15 years and has adequate experience to run the business profitably. Over a period of time, they have built up good reputation in the market and are known for the quality of their products. Due to the same, they have been getting repeated orders from reputed corporates like RPG Lifesciences, Glenmark Reaseach Center, Ranbaxy Research Laboratories, sun Pharmaceuticals Dr. Reddy's Laboratories, Zydus Research Centre, CIPLA, Nocholas Piramal etc.
A pre sanction visit was carried out on 23.04.07, the activity was going on and we met Shri Shreekumar Iyer, Production as the promoter was outside Ahmedabad on business trip. He explained the products manufactured by the unit and their main customers. The unit has been doing well and their products are well accepted.
MANAGEMENT
Shri Kamlesh R Mehta, proprietor, a mechanical engineer, looks after the design and development of products, marketing and overall management of the day to day affairs of the Unit.
Previously, he worked in planning department of M/S SM Maneklal for one year as management trainee. He has also worked with Utility Engineers (I) Ltd as project - in - charge for a period of five years. He was a member of Ahmedabad Engineers Association. He is also a member of Indian Society of Heating, refrigerating and Air Conditioning Engineers. He has toured extensively for business promotion.
The unit has employed skilled people in all departments of production, marketing and product development.
Considering the track record, the management available to the unit, can be considered satisfactory.
The raw materials are available locally as well as imported, about 40-45% component are imported mainly from Holland, USA. The products of the unit namely Fume Hoods and Laboratory furniture, individually ventilated animal caging system, which find application of Pharmaceutical industries R& centers.
The unit has a near monopoly as such the unit does not finds it difficult to sell its products, which can be evidenced from its rising sales also.
The unit has, therefore, few competitors in the line of the manufacture.
b) The unit, on account of its reputation in the market, enjoys good credit on purchases, which is resorted to in times of need.
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c) The unit sticks strictly to quality norms and timely delivery schedules.
d) Established marketing channels and well established contacts.
e) The promoter has been able to keep pace with the changing economic environments, as also the technical know how.
f) As the company deals directly with the buyers all over the country, the prices quoted are competitive.
5. Performance and Financials (Whether overall financial condition is considered satisfactory including trends in sales, profitability, tangible net worth, TOL/TNW and current ratio. No descriptive remarks to be attempted).
NET SALES:
The unit registered net sales of Rs. 1085.66 lacs and Rs. 1447.61 lacs during the FY 2004-05 and 2005-06 registering a rise of 33%. The sales for the year 2006-07 has been estimated at Rs.1565.00 lacs and for the year 2007-08 has been estimated at 1814.00 lacs, which is reasonable.
PROFIT / CASH ACCRUALS:
The company recorded net profit of Rs.310.26 lacs, Rs.405.20 lacs for the year 2004-05 and 2005-06 respectively as per audited balance sheet. The profit has been estimated at Rs.399.60 lacs and 471.80 lacs, which is reasonable considering the at the same level of profitability.
PAID UP CAPITAL / TANGIBLE NET WORTH
The capital stood at Rs.725.80 lacs as on 31.03.06, with the retention of profit in the business also the profitability has been excellent during the past years which has helped the unit in strengthening the TNW. The position is expected to remain comfortable during the coming years.
TOL / TNW
TOL/TNW of the unit at 0.15 as on 31.03.06 is at a very comfortable level, with no credit facility and debt free unit the ratio has been very comfortable. The gearing ratio is expected to remain comfortable during the coming years also.
CURRENT RATIO
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The current ratio of the company at 4.28 as on 31.03.2005 and 5.82 as on 31.03.2006 indicates satisfactory liquidity position of the company and is expected to remain comfortable.
The overall financial position can, therefore, be considered satisfactory.
6. Industry:
6.1Industry Scenario : (including contemporary issues such as WTO impact/prospects of the company- Brief comments no exceeding 5-6 lines)
The unit is engaged in the manufacture of R&D equipments for the Pharmaceuticals Industries. CI has clientele base of big corporates all over the country mainly the pharmaceuticals and the overall outlook for the user industries is encouraging. CI’s products, therefore, have good growth prospects over the long term as evidenced from the trends established for the past three years.
6.2 Inter company comparison : Not available
6.3Industry average/benchmark (wherever available) : Not available
PBT/Net Sales
Net Sales/Total tangible assets
Bank finance/Current assets
Inventory plus receivables/Net Sales
7 Fund Flow Analysis:
[Rs in lacs]Particulars Actual
31.03.06Estimates 31.03.07
Estimates 31.03.08
Long Term Sources 653.33 818.20 1141.60Long term uses 529.75 741.05 1107.71Long term Surplus / deficit
123.58 77.15 33.89
7.1 Comments on fund flow (In brief)
Fund flow statement of the company shows a fairly satisfactory position.
8. Term Loan/DPG : The proposed Open Term Loan facilities are considered acceptable in terms of the detailed appraisal as per Annexure I.
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9. Working Capital Assessment : The proposed working capital facilities are considered acceptable in terms of the detailed appraisal as per Annexure II.
10. Other details :
10.1 Pricing by other banks/justification for the proposed pricing :
(a) CRA and pricing and comments on changes, if any:
The credit Risk Assessment (CRA) reviewed based on audited financials of the unit as on 31.03.2006 is SB – 1 and SBTL-1 based on project balance sheet as on 31.03.08. We propose to charge interest as applicable at SBAR in view of long standing banking relations & being an SSI unit.
One of its associates M/s Citizen Industries Ltd. has been financed at SBAR.
(b) Pricing by other major banks/Fis: Not applicable
10.2 Capital Market perception (price): High/Low (52 weeks)
Not applicable
10.3 Value of account : Not Applicable
10.4 Details of Retail Banking/ any other business generated through the account :
CI deposits all Government chalans in Branch only.
10.5 Comments on associate concerns :
CI has one associate concern i.e. M/s Citizen Industries Ltd. Shri Kamlesh R Mehta is one of the Director of the unit. The company is having sizeable limit with us to the tune of Rs.3.00 crores. The company is manufacturing air handling equipments. The conduct of the account has been satisfactory.
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Proprietor of the unit. M/s Citizen Industries is having current account with us and conduct of the account is satisfactory.
Particulars Comments
NPAs among associate concerns
Nil
Any other adverse features NilInterlocking of funds Nil
10.6 Use of Provisional/Unaudited data – In case earlier renewal/enhancement was based on provisional/unaudited data whether review with audited data, as specified was carried out and appropriate steps initiated?
The unit is rated as SB 1 on the basis of audited financials as on 31.03.06 and new CRA will be computed on receipt of audited financials as on 31.03.07. The term loan rating has been carried out on the projected balance sheet of 31.03.08.
10.7 Loan Policy Guidelines:
The following quantitative parameters as set out in the loan policy Document have been examined:
Parameters Indicative Min/Max Level
Company’s level as on 31.03.2006
1. Liquidity Min. 1.33 5.822. TOL/TNW Max 3 0.153. Promoters’ contribution to the
project (TL)Not Applicable 15%
4. Average gross DSCR (TL) Not Applicable 8.415. Debt/equity (TTL/TNW) Max 2:1 0.20
* The promoter contribution is 15% as per the scheme for OTL.
10.8 Deviations from Loan Policy
Deviation Major/Minor Mitigating Factors
i) Maturity of TLs Nil Not Applicableii) Exposure norms
(Individual, non-corporate and corporate)
Nil Not Applicable
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iii) Minimum CRA scores Nil Not Applicableiv) Hurdle rates (Other than
industry specific hurdle rates)Nil Not Applicable
v) Industry specific hurdle rates Nil withdrawnvi) Take over norms N A Not Applicablevii) Any other deviations Not Not Applicable
10.09 Whether
a. The name of the Company/ Directors appears in RBI’s list of defaulters/ RBI’s list of willful defaulters/CIBIL list of defaulters. : No.
b. The company's name figures in ECGC’s caution list If so, details and comments: No.
c. Indicate all litigations, which have been initiated by another financier including banks against borrowers/ their partners/ directors etc: Nil
10.10 Status of Auditors’ Remarks which have an impact on credit risk on the unit:
Particulars Date Serious irregularities/Adverse features remaining unattended
Action Plan
Inspection & Audit report (Covering security margin and conduct of account)
N.A. New account
Credit Audit Report (Warning signals)
NA New account
Company’s audited Balance Sheet (Qualifications)
31.03.06 None
10.11 Corporate governance practices followed.Not applicable, proprietorship firm.
10.12 Conduct of account (covering irregularities, non-compliances, LC devolvements, BG invocations, etc.)
Not applicable, new account.
10.13 Details of other borrowing arrangements and defaults, if any (excluding information given under credit limits on page 1).
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Not Applicable
11. Status of compliance with terms and conditions of sanction/observations of COCC/ECCB:
Nil
12. Critical risk factors and their mitigation and SWOT Analysis:
No critical risk factors envisaged.
13. Justifications and recommendations for the proposed facilities:
In view of what is stated herein above, the facts that the associates have been banking with us since 1997, satisfactory track record and the CRA being SB – 1, experienced promoters, collateral coverage being 58%, we consider the proposal a fair banking risk and recommend the followings:
Sanction for
(i) FBWC limits of Rs 50.00 lacs.
(ii) NFBWC limits of Rs.100.00 lacs (100% interchangeability between LC and BG)
(b) Open Term Loan of Rs. 150.00 lacs
Approval for
(1) Improved pricing at SBAR as against applicable pricing SB-1/SBTL-1 for working capital/OTL.
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Annexure I
Company : CITIZEN INDUSTRIES [CI]
Branch : NARODA I.E. AHMEDABAD
Term Loan / DPG:
a) Proposal: Open Term Loan of Rs.150.00 lacs
b) Project / Purpose: To acquire / purchase domestic / imported machineries and extend / renovate the existing factory land & building to enhance the existing capacity.
c) Appraised by: TEV Study not required as per the OTL scheme.
d) Cost of Project & Means of finance: (Rs. in lacs)
Cost Means L & B 175.00 Equity/
Internal Accruals
25.00 P & M
Other assets -- OTL 150.00 WC Margin -- Total 175.00 Total 175.00
e) Remarks on Cost of project & Means of finance (in brief):
The unit proposes to renovate, expand, purchase machineries aggregating to Rs.175.00 lacs during the year 2007-08 in order to enhance their capacity to meet the timely execution of orders on hand. They have requested us for an Open Term Loan to have funds available with them to have a bargaining power as & when needed.
The open term loan of Rs.150.00 lacs is therefore proposed to be disbursed after taking into account 15% promoters contribution as and when it is availed.
f) Project implementation schedule: During 2007-08 calendar year (OTL to be availed by the unit within one year after sanction)
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g) Production factors: Covered under column 4 of the proposal
h) Marketing: Mentioned under column 4 under heading marketing.
i) Commercial viability: (Rs. In lacs)
Capacity utilization %
2008-09 2009-10 2010-11
Sales 1828.00 1828.00 1828.00Net Profit 471.80 471.80 471.80
Depreciation 32.00 32.00 32.00 Interest 15.93 9.56 3.19
TOTAL 519.73 513.36 506.99TL / DPG
repayments 50.00 50.00 50.00
Interest 15.93 9.56 3.19 TOTAL 65.93 59.56 53.19 Gross DSCR 7.88 8.61 9.53 Average Gross DSCR
8.41
Comments on DSCR (in brief): The unit is a profit making concern. The projected profitability has been kept in line with the trend established by the unit in the past. The proposed open term loan is expected to be repaid in three years time as laid down in the scheme. The gross average DSCR of 8.41 has been considered as reasonable and well within the stipulated benchmark of the Bank.
j) Security Margin: (Rs. In lacs)
Particulars 2007-08 2008-09 2009-10 2010-11
WDV of fixed assets 291.85 192.77 160.77 160.77 Agg. TL / DPG outstdg. 150.00 100.00 50.00 -- Security margin available
141.85 92.77 110.77 160.77
% Of margin 48 48 68 100
Comments on security margin, in brief: The unit proposes to avail OTL in phases and expected to take full disbursement during current financial year. The available % of security margin of 48 as on 31.03.08, 48 as on 31.03.09 ‘ 68 as on 31.03.10 has been considered as reasonable and at satisfactory level.
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l) CRA & Pricing:
SB1 based on audited balance sheet dated 31.03.2006 and pricing at SBAR is recommended, considering the SB1 rated advance, long standing banking relation, satisfactory conduct of account.
m) Pricing by other major banks / FIs and justification of the proposed pricing:
Not applicable
OPEN TERM LOAN
Company’s position
1. Target Group : SMEs in manufacturing sector Complied with
2. Eligibility : Existing or new corporate or non – corporate customers in SME – manufacturing sector with credit ratings of SB3/SBTL3 AND ABOVE.
SB-1 as on 31/03/06
3. Purpose : Any genuine commercial purpose such as expansion / modernization substitution of high cost debt of other
banks / FIs Upgradation of technology Energy conservation systems Acquisition of software, hardware,
consumables, tools, jigs, fixtures, etc. ISO and other such certifications Visits abroad for acquiring technology,
finalizing deals, participation in fairs, market promotion, etc.
expansion / modernization
4. Type of facilities : Term Loans Term Loans
5. Quantum of Finance
: Maximum Rs.250lacs Rs.150 lacs
6. Margin : 10% uniformly 15%
7. Rate of Interest : As per the credit rating of the borrower At SBAR
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linked to SBAR on floating rate basis against SBTL-1 as on 31.03.08
8. Security:- Primary
- Collateral
: Hypothecation of the machinery proposed to be purchased out of the Term loan.
Complied with
Extension of charge over current assets, fixed Assets and other existing collateral.
Complied with
Obtention of additional collateral should be explored.
Factory land and building
In all cases, personal guarantees of the promoters of the unit have to be invariably obtained.
N.A. proprietorship concern.
9. Processing fees As applicable to the unit for term loans Concession in processing fee for OTL @25% within discretion of DGM-Module to be sought.
10. Repayment : Generally not to exceed 3 years. May be extended upto 5 years selectively if considered necessary.
Complied with
11. Documentation : Usual Term Loan Agreement for the TL limit to be obtained upfront and supported by exchange of suitable letters at the time of each disbursement
Will be obtained after sanction
All the conditions of OTL Schemes are complied with accept concession in pricing at SBAR against CRA rating of SBTL – 1 and 25% in processing charges for OTL.
Overall viability and acceptability of the proposal:
In view of the above narrated calculations, the proposal for sanction of the Open Term Loan of Rs.150 lacs is considered to be a fair banking risk and according recommended for sanction on terms & conditions stipulated in annexure III of the proposal.
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ANNEXURE II
Assessment of Working Capital facilities
Company : CITIZEN INDUSTRIES LTD [CI]
Branch : NARODA I.E. AHMEDABAD
a. ASSESSMENT OF CASH CREDIT LIMIT WITH ENHANCEMENT
As per Nayak Committee recommendations, the Company with an estimated turnover of Rs 1814.00 lacs for the year 2007-08 is eligible for minimum bank finance of Rs 368.00 lacs. However, the company requested for lower limits of Rs 50.00 lacs keeping in view the other long term sources of funds available to the company.
The assessment is based on the following levels of inventory/receivables / creditors at peak level requirement: -
Item Audited as on 31.03. 05
Audited as on 31.03.06
EstimateEstimates
31.03.07 31.03.08
Raw Materials Indigenous
3.98 2.54 2.56 2.50
Stock In Process
-- -- -- --
Finished Goods
-- -- -- --
Sundry Debtors
1.45 1.38 1.50 1.50
Sundry Creditors
1.17 1.18 1.00 0.99
The inventory levels have been assumed as per the past trend and actual requirements of the company after having a detailed discussions with the promoters and some of the items are also imported as such sufficient stocks has to maintained.
The unit's clients are mainly big corporates and they insist for credit of around 1.50 months which is normal. However it also enjoys about one month’s credit period from
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the supplier. The creditors level is expected to remain around the same in coming years.
b. Assessed Bank Finance: (Rs. in lacs)
Assessed Bank Finance Actuals Audited Estimated ProjectedYear 2004-05 2005-06 2006-07 2007-08
TCA 489.60 602.28 672.76 767.10OCL 96.22 103.15 96.85 107.30WC Gap 393.38 499.13 575.91 659.80NWC 375.18 498.76 575.91 659.80BF 18.20 0.37 00.00 50.00NWC/TCA (%) 76.63 82.81 85.60 79.49BF/TCA (%) 3.72 0.06 0.00 6.52Sundry Creditors to TCA% 12.60 10.76 8.75 8.64OCL/TCA (%) 7.05 6.37 5.65 5.34
c. Assessment of EPC/FBD limits: Not applicable d. Efficiency ratios:
Particulars Actuals Actuals Estimated ProjectedYear 2004-05 2005-06 2006-07 2007-08Net sales to Total Tangible Assets (times)
1.73 1.73 1.27 0.94
PBT to Total Tangible Assets (%) 50.08 60.65 48.39 36.86 Operating cost to Sales (%) 15.74 13.52 13.16 12.72 Bank Finance to Current Assets (%)
3.72 0.06 0.00 6.52
Inventory + Receivables to Net Sales (days)
106 82 85 83
g. Brief comments on the assessment of the above limits:
The proposed limits are justified based on above ABF and efficiency parameters that are in tuned with the past trend established with minor changes and in line with present market practices.
The assessed Bank Finance of Rs 50.00 lacs are to be made available against stocks & Book debts.
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LETTER OF CREDIT
The company requires importing certain components. Though presently the company is importing by making advance payment, it may require importing in bulk and that time it may opt for opening of Import L/C.
Estimated raw material to be purchased on LC Rs. 30.00 lacs/ monthUsance Period : 90 daysLead time required from date : 15 days L/C requirement : Rs. 105.00 lacs only.
Hence the LC limit of Rs. 105.00 lacs is recommended for sanction.
REVIEW OF LETTER OF CREDIT LIMIT
LETTER OF CREDIT [IMPORT & INLAND] Rs. In lacsReview Year 2004-05 2005-06 2006-07 (till date)
Total LCs OpenedNumber Not Applicable Not applicable Not applicableAmountCommission earned
LCs devolvedNumberAmountReasons
BANK GUARANTEE
Guarantees are required to be issued on behalf of the unit for various purposes like advance payments received against orders, tender deposits, and performance guarantees etc. These are generally required for period ranging from 6 months to 18 months. At present the unit is issuing guarantee from Bank of Baroda against 100% margin. The requirements have been assessed as under:
a) Opening BGs : Nil
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b) BGs to be issued during the year. : Rs. 100.00 lacs
Bank Guarantee requirement : Rs 100.00 lacs
REVIEW OF BANK GUARANTEE ACCOUNT:
Rs. In lacsReview Year 2004-05 2005-06 2006-07 (Till Date)
Total BG OPENEDNumber Not applicable Not Applicable Not ApplicableAmountCommission earned
BG InvokedNumberAmountReasons
The unit is proposed to be sanctioned bank guarantee limit of Rs.100.00 lacs, which is proposed to fully interchangeable with LC. The interchangeability would provide leverage to the unit. The unit's request has been assessed as per the norms.
ANNEXURE III
Branch : NARODA I.E. AHMEDABAD
COMPANY : M/S CITIZEN INDUSTRIES
Facility : Working Capital facilities & Open Term Loan
TERMS & CONDITION
Existing securities [Rs in lacs]1 Security First charge over the current assets of the company
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Primary and machineries / assets to be created out of Banks Open Term Loan.
Collateral : i) EM of factory land and building of the unit situated at Plot no.57, GIDC, Naroda, Naroda, Ahmedabad. (Rs 175.00 lacs as per valuation report dated 15.03.07 by bank’s panel valuer).
175.00
Total 175.00
Guarantee : Nil
Total 175.00
2. Documentation : Proposed: As per new SME documentation. 3. Basis of
valuation: As per extent instruction.
4. MarginRaw material : 25% Finished Good : 40%
Book debts(Cover period 90 days)
50%
Open Term Loan
: 15%
Letter of Credit : 25%
Bank Guarantee : 25%
5. Sub – limit/ cover period for FBD limits/Inland LC
For Inland Letter Of Credit – 90 days
6. Interest Rate : At SBAR for both CC and OTL.
7. Rate of commission/ exchange / discount
: 25% concession in processing fee for OTL.
8. Insurance : Comprehensive insurance cover to be obtained for 110% market value of stocks or limit whichever is higher. Similarly, for assets to be created out of banks open term loan are too insured fully to cover all usual risks.
9. Position of security and Bank’s charge
:
The security position is satisfactory.
10.
ECGC Cover : To be obtained.
11.
Period of Sanction
: One year for CC and three years for Open Term Loan
12 Repayment of OTL
: Three Years from date of availing open term loan2008-09 – Rs. 50 lacs (starting April 08.)2009-10 – Rs. 50 lacs2010-11 – Rs. 50 lacs
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Annexure –IV
COMPANY : CITIZEN INDUSTRIES
BRANCH : NARODA I.E., AHMEDABAD
CATEGORY A: EXISTING UNITS WORKING CAPITAL ONLY
CITIZEN INDUSTRIES - NARODA I E BRANCHNEW CRA STRUCTURE: RISK RATING SUMMARY : SET 1 Annexure V
FINANCIAL RISK PARAMETERS Full MarksMarks Obtained
A. STATIC RATIOS Current Ratio 5 5TOL/TNW 5 5PAT/Net Sales (%) 10 10PBDIT/INTT (Times) 5 5ROCE (%) 5 5Inventory/Net Sales+Receivables/Gross Sales (Days) 5 5Trends in Performance 3 2Sub-Total Score(out of 38) 38 37 B. FUTURE PROSPECTS Projected Profitability 3Non-Achievement of Projected Profitability (-3) 0Sub-Total Score(out of 3) 3 3 C.RISK MITIGATION: COLL. SECURITY /FIN.STANDING 6 6Sub-Total Score (out of 6) 6 6Aggregate Fin. Risk Score (Out of 47) 47 46Qualitative Risk Factors (-10) 0 BUSINESS RISK PARAMETERS Technology 4 4Capacity Utilization vs. Break Even Point 2 2Compliance of Environment Regulations 2 2User/Product Profile 2 2Consistency in Quality 4 4Distribution Network 2 2Consistency of Cash Flows 4 4
Aggregate Business Risk Score(Out of 20) 20 2042
INDUSTRY RISK PARAMETERS Competition 2 2Industry Outlook 2 2Regulatory Risk 2 1.5Contemporary Issues like WTO, etc. 2 1.5Aggregate Ind. Risk Score (Out of 8) 8 7.0
MANAGEMENT RISK PARAMETERS Integrity :Sole prop.firm/partnership firm /Pvt Ltd.Companies 0 Or Integrity (for corporates): corporate governance 3 3Track Record 3 3Managerial Competence/ Commitment 3 3Expertise 2 2Structure & Systems 2 1Experience in the Industry 2 2Credibility: Ability to meet Sales Projections 2 2Credibility: Ability to meet Profit (PAT) Projections 2 2Payment Record 2 2Strategic Initiatives 2 2Length of Relationship with the bank 2 2Aggregate Management Risk Score (Out of 25) 25 24 RatingTOTAL SCORE : 100 100 97SB-1
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CATEGORY B: EXISTING UNITS TERM LOAN ONLY (RELATED PROJECT)
CITIZEN INDUSTRIES LIMITED - NARODA I E BRANCH
NEW CRA STRUCTURE: RISK RATING SUMMARY : Annexure 11 (rationalized)
FINANCIAL RISK PARAMETERSFull Marks
Marks Obtained
A. STATIC RATIOS Current Ratio 5 5TOL/TNW 5 5PAT/Net Sales (%) 10 10PBDIT/INTT (Times) 5 5ROCE (%) 5 5Inventory/Net Sales+Receivables/Gross Sales (Days) 5 5Trends in Performance 3 2Sub-Total Score(out of 38) 38 37 B. FUTURE PROSPECTS Projected Profitability 3Non-Achievement of Projected Profitability (-3) 0Sub-Total Score(out of 3) 3 3 C.RISK MITIGATION: COLL. SECURITY /FIN.STANDING 6 6Sub-Total Score (out of 6) 6 6Aggregate Fin. Risk Score (Out of 47) 47 46Qualitative Risk Factors (-10) 0Financial Risk for Term Loan (out of 25 as per Annexure 4 below) 25 20.0Rationalized Financial Score (out of 25) 25 23 BUSINESS RISK PARAMETERS Technology 4 4Capacity Utilization vs. Break Even Point 2 2Compliance of Environment Regulations 2 2User/Product Profile 2 2Consistency in Quality 4 4Distribution Network 2 2Consistency of Cash Flows 4 4Aggregate Business Risk Score (Out of 20) 20 20Rationalized Business Risk Score (Out of 25) 25 25.0
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INDUSTRY RISK PARAMETERS Competition 2 2Industry Outlook 2 2Regulatory Risk 2 1.5Contemporary Issues like WTO, etc. 2 1.5Aggregate Ind. Risk Score (Out of 8) 8 7.0Rationalized Industry Risk Score (Out of 10) 10 8.8 MANAGEMENT RISK PARAMETERS Integrity :Sole prop.firm/partnership firm /Pvt Ltd.Companies 0 Or Integrity (for corporates): corporate governance 3 3Track Record 3 3Managerial Competence/ Commitment 3 3Expertise 2 2Structure & Systems 2 1Experience in the Industry 2 2Credibility: Ability to meet Sales Projections 2 2Credibility: Ability to meet Profit (PAT) Projections 2 2Payment Record 2 2Strategic Initiatives 2 2Length of Relationship with the bank 2 2Aggregate Management Risk Score (Out of 25) 25 24Rationalized Management Risk Score (Out of 40) 40 38.4 RatingTOTAL SCORE : 100 100 95SB-1
We also did analysis and prepared initial proposals of the following companies:
Tejal Paper Mills
Sandeep Fero-Alloys
Vinod High Tech
Kotecha impex Pvt. Ltd.
AM Tele Communications Pvt. Ltd.
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References
www.sbi.co.in
SBI Intranet
STATE BANK OF INDIAZonal Office, Ahmedabad.
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