Credit appraisal

Project is based on “Study of Small & Medium Enterprises (SME) Financing Short term
and Long term” which is accomplished during the training Bank of Baroda, SME LOAN
FACTORY .The first phase includes study of SMEs which is accomplished after studying the
whole process of SME Advances in Bank of Baroda

The second phase includes study of credit risk assessment process of SME
financing in BOB.

• The third phase will include finding out the issues & challenges in SME financing which
will be done with the help a questionnaires, for managers & SME Borrowers, which is
designed.

Objective of the project:

• To find out what criterion does bank follow to provide financing to a company.

• To understand SMEs & their role in Economy focusing mainly on Indian

scenario.
• To study & analyze the issues & challenges in SME financing.
• To understand & analyze credit policy for financing SMEs.

• To understand the credit risk assessment process in Bank Of Baroda

Overview of Banking and Financial
Institutions
The banking system in India is significantly different from that of other Asian nations because of
the country’s unique geographic, social, and economic characteristics. India has a large
population and land size, a diverse culture, and extreme disparities in income, which are marked
among its regions. There are high levels of illiteracy among a large percentage of its population
but, at the same time, the country has a large reservoir of managerial and technologically
advanced talents. Between about 30 and 35 percent of the population resides in metro and urban
cities and the rest is spread in several semi-urban and rural centers. The country’s economic
policy framework combines socialistic and capitalistic features with a heavy bias towards public
sector investment. India has followed the path of growth-led exports rather than the “export led
growth” of other Asian economies, with emphasis on self-reliance through import substitution.
These features are reflected in the structure, size, and diversity of the country’s banking and
financial sector. The banking system has had to serve the goals of economic policies enunciated
in successive five year development plans, particularly concerning equitable income distribution,
balanced regional economic growth, and the reduction and elimination of private sector
monopolies in trade and industry. In order for the banking industry to serve as an instrument of
state policy, it was subjected to various nationalization schemes in different phases (1955, 1969,
and 1980). As a result, banking remained internationally isolated (few Indian banks had presence
abroad in international financial centers) because of preoccupations with domestic priorities,
especially massive branch expansion and attracting more people to the system. Moreover, the
sector has been assigned the role of providing support to other economic sectors such as
agriculture, small-scale industries, exports, and banking activities in the developed commercial
centers (i.e., metro, urban, and a limited number of semi-urban centers).

Post-independence Banking

The partition of India bought about a social unrest throughout India in 1947. Riot and chaos
ruled. The most adversely impacted provinces were the Punjab and West Bengal. So did the
economies of both these provinces. As a result, the banking activities had remained paralyzed for
months. Till then the banking sector was wide open and there were almost no regulation. Most of
the promoters were private players. With Independence, things started changing. Rather the
independence marked the end of a regime of the Laissez-faire for the Indian banking. The new
government initiated a process of playing an active role in the economy of the nation. The
Industrial Policy Resolution adopted by the government in 1948 was the first step towards it. The
resolution opted for a mixed economy. This resulted into greater control and involvement of the
state in different segments of the economy, more so, in the sensitive sectors including banking
and finance. The important banking regulatory steps were as follows:

• In 1948, India's central banking authority the Reserve Bank of India got nationalized,
and it became an institution owned by the Government of India.
• With the enactment of the Banking Regulation Act in 1949, the Reserve Bank of
India (RBI) got empowered "to regulate, control, and inspect the banks in India."
• The Banking Regulation Act also provided that no new bank or branch of an existing
bank may be opened without a license from the RBI, and no two banks could have
common directors.

Interestingly, despite these provisions, control and regulations, almost all banks in India except
the State Bank of India, continued to be owned and operated by private persons. However, the
situation changed dramatically with the nationalization of major banks in India on 19th July,
1969.

Nationalization

From Independence, it took some years for the banking sector to mature. By 1960s, the Indian
banking industry did occupy an important position to facilitate the development of the Indian
economy. Moreover, it did employ a quantum volume which could affect national economy. It
resulted in a debate about the possibility to nationalize the banking industry. At that point, during
the annual conference of the All India Congress Meeting, in a paper entitled "Stray thoughts on
Bank Nationalization", Indira Gandhi, the-then Prime Minister of India expressed the intention
of the GOI favoring nationalization. The paper was received with positive enthusiasm.
Thereafter, in a swift and sudden move, the GOI issued an ordinance and nationalized the 14
largest commercial banks with effect from the midnight of July 19, 1969. The decision was even
termed as a "masterstroke of political sagacity" by non other than a leader of the stature of
Jaypraksh Narayan. Then, within the next fortnight of issuing the ordinance, the Parliament
passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill. The bill finally
received the presidential approval on 9th August, 1969.

Nationalized banks (19 banks): In 1969, the Government arranged the nationalization of 14
scheduled commercial banks in order to expand the branch network, followed by six more in
1980. A merger reduced the number from 20 to 19. Nationalized banks are wholly owned by the
Government, although some of them have made public issues. In contrast to the state bank group,
nationalized banks are centrally governed, i.e., by their respective head offices. Thus, there
is only one board for each nationalized bank and meetings are less frequent (generally, once a
month). The state bank group and nationalized banks are together referred to as the public sector
banks (PSBs). Tables 1 and 2 provide details of public issues and post-issue shareholdings of
these PSBs.

Regional Rural Banks (RRBs): In 1975, the state bank group and nationalized banks were
required to sponsor and set up RRBs in partnership with individual states to provide low-cost
financing and credit facilities to the rural masses.

In 1980, there came the second phase of nationalization of 6 more commercial banks. The reason
forwarded for this was to have more control of credit delivery by the government. By the time,
GOI effectively got hold of 91% control of the total banking business of India.

Till 1990s, all nationalised banks grew at a pace of around 4%, similar to the average growth rate
of the Indian economy.

Post-liberalization
In the early 1990s, with the Narsimha Rao government embarking on a policy of liberalization
the situation started changing. Licenses were issued to a small number of private banks, such as
Global Trust Bank (the first of such new generation banks to be set up)which later amalgamated
with Oriental Bank of Commerce, UTI Bank(now re-named as Axis Bank), ICICI Bank and
HDFC Bank. These banks also came to be known as New

Generation tech-savvy banks because of their improved service condition and their extensive use
of IT in the operations.

This move instigated competition, resulting increased efficiency and performance and did a lot of
good to the banking sector. The rapid growth in the economy of India, again as a result of
liberalization, also did help transform the sector to this new look. The new situation shifted
many goal posts. Till then, the widely used method of 4-6-4 (Borrow at 4%; Lend at 6%; Go
home at 4) of functioning by the banks become redundant. Technology, competition, change in
customer behavior, macro-economic conditions, government policies, resultant of all together
ushered a new modern, efficient and innovating banking environment in India. People started
receiving more from the banks and also constantly started demanding more. Retail banking boom
can be attributed to this phenomenon.

With the second phase of economic reforms, the next stage for the Indian banking has been setup
with the proposed relaxation in the norms for Foreign Direct Investment, where all Foreign
Investors in banks may be given voting rights which could exceed the present cap of 10%. It’s
notable that FDI permissible limit, at present, has gone up to 49% with some restrictions.

Current situation

Today, the banking sector in India is fairly mature in terms of supply, product range and reach.
As far as private sector and foreign banks are concerned, the reach in rural India still remains a
challenge. In terms of quality of assets and capital adequacy, Indian banks are considered to have
clean, strong and transparent balance sheets relative to other banks in comparable economies in
its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the
government. The stated policy of the Bank on the Indian Rupee is to manage volatility but
without any fixed exchange rate. Till now, there is hardly any deviation seen from this stated
goal which is again very encouraging.
With passing time, Indian economy is further expected to grow and be strong for quite some
time-especially in its services sector. The demand for banking services, especially retail banking,
mortgages and investment services are expected to grow stronger. Therefore, it is not hard to
forecast few M&As, takeovers, and asset sales in the sector. Consolidation is going to be another
order of the day.

The significant change in the policy and attitude that is currently being seen is encouraging for
the banking sector growth. In March 2006, the Reserve Bank of India allowed Warburg Pincus, a
private foreign investor, to increase its stake in Kotak Mahindra Bank to 10%. Notably, this is
the first time that a foreign individual investor has been allowed to hold more than 5% in a
private sector bank since 2000. Earlier, The RBI in 2005 announced that any stake exceeding 5%
by foreign individual investors in the private sector banks would need to be vetted by them.

“Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is
with the Government of India holding a stake), 29 private banks (these do not have government
stake; they may be publicly listed and traded on stock exchanges) and 31 foreign banks. They
have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by
ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the
banking industry, with the private and foreign bank holding 18.2%and 6.5% respectively”

Company background

Bank of Baroda is an international level banking products and

services provider of India. It is ranked #1477 in 2008 Forbes Global
2000 list. It is among few Indian banks that has a global presence.

Bank of Baroda operates in 25 countries. Bank of Baroda aims at being a

leading bank that performs at par with international standards. It also
looks to increase value of stakeholders to maximum possible level.

Brief history
Bank of Baroda was incorporated in 1908 by Maharaj Sayajirao Gaekwad
III. It launched its first branch in 1910 in Ahmedabad. In 1953, its first
branches in Kampala and Mombasa became operational. Its overseas
branch in Nairobi was opened in 1954.
Products and services
Bank of Baroda provides it banking products and services in several
categories like personal, international, business, treasury, corporate and
rural. In personal banking section Bank of Baroda offers products like
deposits, debit cards, Gen-Next, personal banking services, loans, lockers
and credit cards.

In business banking sector, Bank of Baroda offers products and services

such as deposits, business banking services, loans and advances and
lockers. In corporate banking section, Bank of Baroda offers products and
services like wholesale banking, loans and advances, deposits and
corporate banking services.

Financials
Sales of Bank of Baroda amounted to $2.48 billion and it earned profits
worth $0.26 billion. Assets held by Bank of Baroda were worth $32.80
billion and its market value stood at $4.72 billion.

Awards and recognition

Bank of Baroda won three awards at Association of Business
Communicators of India awards. It won in categories like Business
Communication, Bilingual Internal Magazine and Corporate Film and
Quarterly Economic Review.

As per October 21, 2007 edition of Business Today Survey, Bank of

Baroda was conferred with honor of being one amongst top ten marketers
in India. It was only bank to have received that honor in that particular
survey.

Bank of Baroda won two awards at Outlook Money NDTV Profit Awards
2007 held on October 26, 2007. It won in two categories – Best Bank
Award in Public Sector and Best Bank in Home Loan. On March 22, 2007
Bank of Baroda received AMITY Leadership Award for Sectoral Excellence
in Banking.
Concept of SMEs
Small & medium enterprises (SME) sector is the future of India. In order to sustain the economic
growth and development of the country, it is essential that the SME sectors play their role
without which the growth story of India will be dampened.
With the advent of planned economy from 1951 and the subsequent industrial policy
followed by Government of India, both planners and Government earmarked a
special role for small-scale industries and medium scale industries in the Indian
economy. Due protection was accorded to both sectors, and particularly for small-scale
industries from 1951 to 1991, till the nation adopted a policy of liberalization
and globalization. Certain products were reserved for small-scale units for a long
time, though this list of products is decreasing due to change in industrial policies
and climate.
SMEs always represented the model of socio-economic policies of Government of
India which emphasized judicious use of foreign exchange for import of capital goods
and inputs; labour intensive mode of production; employment generation; nonconcentration of
diffusion of economic power in the hands of few (as in the case of
big houses); discouraging monopolistic practices of production and marketing; and
finally effective contribution to foreign exchange earning of the nation with low
import-intensive operations. It was also coupled with the policy of de-concentration of
industrial activities in few geographical centers.
However, one of the biggest hurdles to the growth in the SME sector is lack of access to
appropriate form of capital or funding. Traditionally, projects were funded for entrepreneurs in
the SME sector by essentially some bank borrowings apart from the promoters contributions,
however the modern concepts and thinking has undergone a sea change. There are various
alternative avenues to attracting the appropriate for of capital for good projects and credible
entrepreneurs. These could be innovative products that the new age banks have started, or even
funding through structures that NBFC may offer. Further, in most countries, venture capital and
private equity funds have played a big role in the growth of the economy. They become partners
in growth and back the project and the entrepreneurs, not only by providing funds, but also by
playing a supportive role in formation of business strategies.
However, to even be in the radar for growth there are certain "must dos" for the entrepreneurs in
the SME sector and that is compliances, transparency and corporate governance. These are the
essential tools for accelerating growth. In order to provide our members in SME sector a first
hand view from the best names and brains on the subject, MSME subcommittee of CII(ER) is
organizing a seminar on "Alternative Avenues to SME Financing" for fueling growth.
This programme, with participation of senior representatives of the Government of West Bengal,
Financial Institutions and SME Industry is expected to bring focus on the need of improving
Corporate Governance for meeting the growth related funding needs of the Industry.
This will promote a better understanding of the needs of both the financial institutions as well as
the industry and thereby benefit both.
While the opportunity to listen to so many experts under one roof is itself rare, in order to make
the seminar additionally beneficial for the participants we would be requesting the participants to
submit their company's short profile to us which would be handed over to the speakers whom the
participant may feel would have a role to play in the growth of his/her business.

Current Buzzword in Banking Industry is "SME Financing". The micro, small and medium
enterprises (MSME) sector accounts for about 39% of the manufacturing output, 45% of India’s
industrial employment and around 33% of the total export of the country. Further, in recent
years the SME sector has consistently registered higher growth rate compared to the overall
industrial sector. The major advantage of the sector is its employment potential at low capital
cost. As per available statistics, this sector employs an estimated 31 million persons spread over
12.8 million enterprises and the labour intensity in the SME sector is estimated to be almost 4
times higher than the large enterprises.

SME Financing is the funding of small and medium sized enterprises and represents a major
function of the general business finance market – in which capital for firms of types is supplied,
acquired, and priced. Capital is supplied through the business finance market in the form of bank
loans and overdrafts; leasing and hire-purchase arrangements; equity/corporate bond issues;
venture capital or private equity; and asset-based finance such as factoring and invoice
discounting.
Government of India has realized the importance of this sector and has announced a policy for
doubling of outstanding credit to SME Sector by the year 2009-10. Government of India has
taken various initiatives to step up credit flow to SMEs through bringing out a new legislation
named Micro, Small and Medium Enterprise Development (MSMED) Act 2006. Unlike large
industries, which have access to various domestic and international sources of finance, SMEs are
dependent largely on Bank Credit. The banks are trying to outweigh each other through
aggressive promotional strategies to create a niche segment in SME financing.

It can be observed that SMEs in India met the expectations of the Government in this respect.
SMEs developed in a manner, which made it possible for them to achieve the following
objectives:
 High
 contribution to domestic production
Significant
 export earnings
Low  investment requirements
Operational
 flexibility
Location  wise mobility
Low  intensive imports
Capacities  to develop appropriate indigenous technology
Import  substitution
Contribution  towards defense production
Technology  – oriented industries
Competitiveness  in domestic and export markets
At the same time one has to understand the Limitations of SMEs, which are:
Low  Capital base
Concentration  of functions in one / two persons
Inadequate  exposure to international environment
Inability  to face impact of WTO regime
Inadequate  contribution towards R & D
Lack  of professionalism
In spite of these limitations, the SMEs have made significant contribution towards
technological development and exports.

SMEs have been established in almost all-major sectors in the Indian industry such
as:
Food
 Processing
Agricultural
 Inputs
Chemicals
 & Pharmaceuticals
Engineering;
 Electricals; Electronics
Electro-medical
 equipment
Textiles  and Garments
Leather  and leather goods
Meat  products
• Bio-engineering
• Sports goods
• Plastics products
• Computer Software, etc.

As a result of globalization and liberalization, coupled with WTO regime, Indian

SMEs have been passing through a transitional period. With slowing down of
economy in India and abroad, particularly USA and European Union and enhanced
competition from China and a few low cost centers of production from abroad many
units have been facing a tough time.
Those SMEs who have strong technological base, international business outlook,
competitive spirit and willingness to restructure themselves shall withstand the
present challenges and come out with shining colours to make their own contribution
to the Indian economy.

SME Business In BOB

In India, the SME (small & medium enterprises) sector is the biggest provider of employment
next to Agriculture.The official statistics shows that SMEs constitute 95.0% of total industrial
units and contribute 40.0% to total industrial output. They manufacture more than 8,000 products
in various sectors like pharmaceuticals, garments, textiles, auto ancillary, jewellery and software.
The contribution of services sector within the SME segment is quite significant; especially IT
enabled services, hospitality services, tourism, couriering,transportation, etc. SMEs are playing a
vital role in the job creation process.

The Bank has always been a forerunner in the development of small-scale enterprises and has
formulated liberal and comprehensive SME Loan Policy for its SME customers. Furthermore, to
give a focused attention to emerging SMEs in India, the Bank has been considering other
commercial units also with a turnover up to Rs 100 crore at par with the SMEs.

To promote the growth of SME Sector, the Bank has launched a special and novel delivery
model, viz. SME Loan Factory,which is presently functioning in 34 centres of the Bank and is
well accepted in the market. The SME Loan Factory is an innovative model for streamlining
processes and for timely sanctions of SME loan proposals. The model comprises of the Central
Processing Cell for speedy appraisal and sanctioning of proposals within the stipulated deadline.
A team of Relationship Managers stationed at different branches of the Bank spread over micro
segments of the city reaches out to customers to facilitate completion of pre-sanction formalities
in a hassle free manner. The Relationship Managers would also be marketing, not only various
SME products of the Bank, but also other products and services including the Third Party
products like Life Insurance, Mutual Funds, Equity Trading etc. The above model operates on an
assembly-line principle with simplified processes using latest technology and in-house, skilled
and trained man-power.

Out of 34 SME Loan Factories as on 31.3.2009, seven SME Loan Factories have been
established during the year.The Bank has SME Loan Factories at all major business centres
across the country, viz. Agra, Ahmedabad, Bangalore, Baroda, Bhilwara, Bhubhaneshwar,
Bulsar, Chennai, Coimbatore, Dehradun, two factories in Delhi, Hyderabad, Indore, Jaipur,
Jamshedpur, Jamnagar, Jodhpur, Kanpur, Kolhapur, Kolkata, Lucknow, Ludhaina, three
factories in Mumbai, Nagpur, Nashik, Noida, Pune, Rajkot, Raipur, Surat, Vishakhapatnam.

These SME Loan Factories sanctioned loans aggregating Rs 8,508 crore during the year ended
March, 2009 as against Rs 5,956 crore in the previous year.

The Bank has planned to establish six more SME Loan Factories during the year 2009-10.

SME Credit Growth

Total outstanding in SME Sector works out to Rs 14,662 crore as on 31.3.2009 as per the
regulatory definition. Growth in the Bank’s lending to the SME sector during the last three years
is as follows.

Financial Year % Growth

2006-07 31.40%
2007-08 31.11%
2008-09 24.18%

New Initiatives in the SME Business in 2008-09

• The Bank entered into MOU with some of the vehicle manufacturers for financing their
dealers/road transport operators desirous of purchasing their vehicles.

• It entered into MOU with CGTMSE for extending collateral free loans up to Rs 100 lacs
under Risk Sharing Facility scheme launched by CGTMSE.

• It also entered into MOU with Ministry of MSME for financing under the scheme, viz.
Trade Related Entrepreneurship Assistance and Development (TREAD) for economic
empowerment of women.

• It introduced seven new customer centric area specific products to suit the local cluster
needs.

• It organized awareness programmes for SME borrowers to enlighten them about various
products, services and precautionary steps to be taken in view of global financial crisis.
 • It took proactive steps by announcing various measures to assist the borrowers under
stress due to global recession.

• It organised Management Development Programme with Institute of Business

Management of repute for familiarizing the SME customers with current trends in
business areas.

• The Bank took up sponsoring of SME Page in all editions of Economic Times, which is
expected to give popularity to various products designed for SME Sector and boost our
SME business.

BANK’S POLICY IN RESPECT OF LENDING TO SME SECTOR

1. PREAMBLE
In India, SME is the biggest provider of employment next only to Agriculture. The SMEs
constitute 95% of total industrial units and constitute 40% of total industrial output.
Formerly, both Government and RBI credit policy placed emphasis on manufacturing
units from the Small Scale Sector. However, in order to make the size of the unit and the
technology employed by firms to be globally competitive, the definition of “Small Scale
Sector” was revisited. Keeping in view the same and the global practices, it was decided to
broaden the concept of SSI Sector by inclusion of services within its ambit as also including
the “Medium Enterprises” in a composite sector of “Small & Medium Enterprises”.
Subsequently, MSMED Act was operationalized with effect from 2 October 2006, which
nd

defines an “enterprise” instead of an “industry” to give recognition to service sector and also
defines a “medium enterprise” to facilitate technology upgradation and graduation.
In order to address the issues of SME sector and ensure growth of credit to this sector ,
Hon’ble Union Finance Minister unveiled package for SME Sector in August, 2005 and RBI,
vide its circular No.RPCD.PLNFS.BC.No.31/06.02.31/2005-06 dated 19.08.2005, advised
the Banks action points for implementation of package.
Banks were interalia advised to formulate comprehensive and more liberal policies than
the existing policies in respect of loans to SME Sector.
Accordingly, Bank formulated comprehensive SME Policy for financing SME Sector in
November, 2005 which was subsequently reviewed in 2007.
The current review of Policy is undertaken to update the bank’s guidelines on financing
SME Sector.

2. OBJECTIVES
The SME Loan Policy is framed with the following objectives:
To improve flow of credit to SME Sector.
To formulate norms of lending to SME sector, to ensure availability of adequate and
timely credit to the sector.
To provide guidelines to the branches to dispense credit to SME Sector.
 To devise an organizational structure at all levels for handling SME credit portfolio in a
more focused manner.
To comply with terms of Policy package announced by Hon’ble Union Finance Minister
on 10.08.2005 and further guidelines received from
Reserve Bank of India from time to time for improving flow of credit to SME
Sector.

SMALL & MEDIUM ENTERPRISES SECTOR

The SME segment is broadly classified as under:

Particulars Investment Investment

in Plant & in Equipment
Machineries in case of
in case of Service
Manufacturin Sector
g Enterprises
Enterprises

Micro Upto Rs. 25/- Upto Rs.10/- lacs

Enterprises lacs

Small Above Rs. 25/- Above Rs.10/-

Enterprises lacs and lacs and
upto Rs.500/- upto Rs.200/-
lacs lacs

Medium Above Rs.500/- Above Rs.200/-

Enterprises lacs and lacs and up
upto Rs.1000/- to Rs.500/- lacs
lacs

5. COMPOSITION OF SME SECTOR

The SME Sector includes Micro Enterprises, Small Enterprises, Artisans & Village
Industries, Medium Enterprises, Service Sector units & individual sub-sector units.
a. Micro Enterprises
Micro Enterprises are those engaged in manufacturing, processing, preservation of goods,
mining, quarrying, servicing & repairing of specified type of machinery & equipment, agro
service units whose investment in Plant and Machineries does not exceed Rs. 25.00 lacs
irrespective of location of the unit in respect of manufacturing units and investment in
equipments not exceeding Rs 10.00 lacs in respect of Service Sector units.
b. Small Enterprises:
A Small Enterprise industrial undertaking / unit is one which is engaged in the manufacture,
processing or preservation of goods or is a Servicing and repair workshop undertaking
repairs of machinery used for production, mining or quarrying or custom service unit (except
water service units), having investment in Plant and Machineries (original cost) above Rs
25.00 lacs but not exceeding Rs. 5.00 cores in respect of manufacturing unit and above Ra
10.00 lacs but not exceeding Rs 2.00 cores in respect of Service Sector unit.

c. Medium Enterprises
A Unit which is engaged in the manufacture, processing or preservation of goods or is a
servicing and repair workshop undertaking repairs of machinery used for production, mining
or quarrying or custom service unit (except water service units), with investment in Plant &
Machinery in excess of Rs 5.00 crores and upto Rs.10.00 crores in respect of
manufacturing units and investment in equipments in excess of Rs 2.00 crores and upto Rs
5.00 crores in respect of Service Sector units will be treated as Medium Enterprises (MEs).

d. Khadi and Village Industries Sector (KVI)

All advances granted to units in the KVI sector, irrespective of their size of operations,
location and amount of original investment in Plant and Machinery.

BANK OF BARODA’S APPROACH TO SME SECTOR OUR BANK’S

APPROACH TO SME SECTOR
SMEs are growth engines for development of Economy.
Our bank has therefore for internal purposes given focused attention to finance all
Commercial enterprises i.e. enterprises which may be outside the purview of regulatory
definition of SME but having turnover upto Rs 150.00 crores and new infrastructure
and real estate projects where the project cost is upto Rs. 50/- crores by
treating them as part of SME segment.
SME Banking business will thus include the following across the
bank:
o Micro, Small and Medium Enterprises – as per regulatory definition irrespective
geographical location, i.e. rural, semiurban, urban, metro areas.
o All other entities with their annual sales turnover of Rs. 1/- crore to Rs. 150/- crores and
new infrastructure and real estate projects, where the project cost is upto Rs. 50/- crores.
o SMEs which are Associate/sister concerns of Wholesale Banking customers.
o Clubs, Trusts, etc. o Financing under various Government schemes launched for
MSME Sector.
However, such units, which are outside the purview of regulatory definition will not form
part of Priority Sector lending.

7. ESTABLISHMENT OF SME LOAN FACTORIES

Business Model which operates on assembly line principle is adopted by the bank for
hassle free and faster dispensing of credit to SME segment. This model titled SME Loan
factory has separate Hub for Centralized Processing of SME proposals. As of March, 2009,
34 SME Loan Factories have been operationalized across the country.

COMPUTATION OF VALUE OF INVESTMENT IN PLANT AND

MACHINERY

For computing the value of the investment in Plant and

Machinery,cost of the following items should be included:
1. Original cost of Plant and Machinery (price paid by the owner / hirer / lessor).
2. Cost of control panels, starters, Electric Motors, other electrical accessories mounted on
individual machines.
3. Cost of only those testing and quality control equipments, which are, used for/in process
testing.

TARGETS FOR PRIORITY SECTOR / SME SECTOR LENDING

As regards lending to SME Sector, Banks are advised to fix their own target in order to
achieve a minimum 20% YOY growth in credit to SME as per statutory guidelines so as to
double flow of credit to SME sector by the year 2009-10. There is no sub-target fixed for
lending to small enterprises sector. However in order to ensure that credit is available to
all segments of the Small Enterprises sector, banks are advised to ensure that 60% of the
total advances to small enterprises sector should go to Micro Enterprises as under:
o 40% to Micro (manufacturing) enterprises with investment in plant and machinery upto
Rs.5 lacs and Micro(service) enterprises having investment in equipment upto Rs.2 lacs
o 20% to Micro (manufacturing) enterprises with investment in plant and machinery above
Rs.5 lacs and upto Rs.25 lacs and Micro(service) enterprises having investment in
equipment above Rs.2 lacs and upto Rs.10 lacs.

FINANCIAL RATIOS FOR CREDIT APPRAISAL

(Not applicable in case of takeover of accounts)
Following ratios can be accepted for granting credit facilities to SME units falling as per
regulatory guidelines or SMEs as per expanded coverage.

NORMS
Sr. RATIOS Micro & Small Medium Units covered
No. Enterprises Enterprises under SME
under under Sector as per
manufacturing manufacturing expanded
sector and sector and definition and
Service Service Sector outside the
Sector falling under purview of
falling under regulatory regulatory
regulatory guidelines definition
guidelines

1 Current 1.17& above 1.20 & above 1.33 & above

. Ratio

2 Debt 3:1 3:1 3:1

Equity
Ratio
(Total
Term
Liability
/Tangible
Net Worth)

3 FACR Not below Not below Not below

(Net 1.25 1.25 1.25
FA/Term
Debts)

4 Average 1.75 with a 1.75 with a 1.75 with a

DSCR for condition that in condition that in condition that in
Term Loan any one year it any one year it any one year it
should not be should not be should not be
below 1.00 below 1.25 below 1.25
instead
of 1.25 as per
extant
guidelines
GUIDELINES FOR TAKEOVER OF ADVANCE
There are two types of compliances:

Non-Financial norms to be complied

of SME accounts as per regulatory
per expanded coverage:

Sr.No. Norms Deviation Zonal Head can

allowed permit deviations in
respect of accounts
with exposure upto
a. Profit-making (i.e. net Rs 3.00 crores in
profit before aggregate.
tax) concerns only as per GM (SME & WM) for
last the proposals falling
audited Balance Sheet. upto the powers of
DGM (other than
b. Accounts be rated as per Zonal Heads).
the new ED for proposals
credit rating model falling up to GM
(BOBRAM) powers (Zonal Head
subject to ‘minimum’ BOB or Corporate GM)
6.
CMD in all other
Accounts, which are not
cases.
covered
under BOBRAM Credit
Rating
System, may be
considered under
permitted deviation as per
extant
guidelines issued from
time to
time.
c. There should not have
been any
reschedulement /
restructuring in
the account during last
two years.

d. Satisfactory report from Deviation can be

the allowed by the ED /
existing bank/FI and/or CMD in respect of d
satisfactory conduct of
account as
per latest statement of
accounts.

F All other existing norms, e&f

guidelines as applicable to
borrowal accounts are to be
scrupulously followed.

Financial norms in case of takeover of SME accounts as

per regulatory guidelines or SME accounts as per
expanded coverage:
NORMS Authority
who can allow
deviation
RATIO 1 2 3 Proposed

Micro &
Small Medium Units
Industries Enterpris outside
under es under the
manufactu manufact purview
ring sector uring of
and sector regulatory
service and definition
Sector service but
as per Sector covered
regulatory as per under
guidelines regulatory SME
guidelines Sector as
per
expanded
definition.

Current Ratio Minimum Minimum Minimum Deviations as

1.17 & 1.20 & 1.33 & under can be
above above above allowed by
Zonal Head
provided
exposure does
not
exceed Rs.3/-
crores in
aggregate and
by Corporate
General
Manager if the
exposure does
not exceed
Rs.5/- crore in
aggregate.
 (A) up to 1.15 in
case of
SME accounts
as per
regulatory
definition &
(B) Up to 1.25 in
case of
SME accounts
falling
outside the
purview
of regulatory
guidelines
provided
exposure does
not
exceed Rs. 3.00
crores in
aggregate
In all other
cases, ED /
CMD can permit
deviation.

Debt Maximum Maximum Maximum Deviations as

Equity 4:1 3:1 3:1 under can be
Ratio allowed by
(TTL / Zonal Head
TNW) provided
exposure does
not
exceed Rs.3/-
crores in
aggregate and
by Corporate
General
Manager if the
exposure does
not exceed
Rs.5/- crore in
aggregate.
(A) up to 4.5:1 in
case of
accounts of
 Micro & Small
Enterprises as
per regulatory
definition &
(B)Up to 3.5:1 in
case of
accounts of
Medium
Enterprises as
per regulatory
definition and
SME accounts
falling outside
the purview of
regulatory
definition.
In all other
cases, ED /
CMD
can permit
deviation.

Total Maximum Maximum Maximum Zonal Head

outside 4.5:1 4.5:1 4.5:1 can permit
liability/ deviation upto
TNW 5:1 in all cases
i.e. Micro, Small
& Medium
Enterprises as
per regulatory
definition and
SME accounts
falling outside
the purview of
regulatory
definition.
In all other
cases, ED /
 CMD
can permit
deviation.

Average Minimum Minimum Minimum Deviations can

1.75 with a 1.75 with a 1.75 with a be allowed
DSCR condition condition condition by Zonal Head
for that in any that in any that in any provided
Term one year it one year it one year it exposure does
Loan should not should not should not not exceed
be below be below be below Rs.3/- crores in
1.25 1.25 1.25 aggregate
and by
Corporate
General
Manager if the
exposure
does not exceed
Rs.5/-
crore in
aggregate.
In all other
cases ED / CMD
is authorized to
allo

SME PRODUCTS
The following products are launched for SME sector across the country:

Baroda SME Gold Card providing additional 10% facility over the assessed MPBF
for meeting emergent business requirements.
Baroda SME Loan Pack providing single line of credit for meeting SME borrowers’
working capital as well as long term requirements within the overall limit approved by the
bank as per the eligibility, i.e. 4 times of borrower’s tangible net worth as per last audited
Balance Sheet, or Rs. 2/- crores, whichever is lower.
Baroda Overdraft against Land & Building is a unique product for financing
working capital requirements, long term margin requirements of SME borrowers against the
security of unencumbered land and building belonging to the unit, or, promoters of the unit,
upto a maximum limit of Rs. 2/- crores depending on the location, viz. rural and semi-urban,
urban and metro.
Baroda Vidyasthali Loan providing finance to Educational Institutional upto a limit
of Rs. 5/- crores on liberalized terms. This scheme is implemented at select branches of the
Bank depending on the business potential.
Baroda Arogyadham Loan for providing finance for setting up new Nursing
Homes, Hospitals including Pathological Laboratories, renovation of existing Nursing
Homes/Hospitals, purchase of medical diagnostic equipments as also office equipments
etc. and to meet working capital requirement upto a maximum limit of Rs.5/- crores,
depending on the location, on liberalized terms. This scheme is also implemented at select
branches of the bank.
Scheme for financing existing SME customers/Current
Account holders for purchase of new vehicles upto a limit of Rs. 50/- lacs with
10% margin.

BRANCHES TO BE DESIGNATED AS SME BRANCHES

At present 64 branches are designated as Specialized SME branches. These branches
are expected to have 60% of their lending to SME sector.
Based on ASCROM data, all branches having more than 60% of their lending to SME
Sector will be identified and the branches having 60% of their loan portfolio to SME Sector
for 2 consecutive quarters will be designated as SME branches.
Designated SME branches will focus on SME lending. These branches will be
authorized to collect taxes etc.

FINANCING GUIDELINES
S. Parameters Guidelines
N
o

1. Purpose For substitution of Commercial

papers, Inter
 Corporate Deposits (ICDs),
General
Corporate purpose etc. and for
other
genuine short term funds
requirement.

2 Primary Eligibility Private Sector:

All existing corporate customers
with their
credit rating –
1) Minimum “BOB-6” (moderate
safety, as
per the BOBRAM credit rating
model)
2) A-1/P-1 by the external credit
rating
agency.
Note:
A-1 (Standard & Poor’s rating)
means that
obligor’s capacity to meet its
financial
commitment on the obligation is
strong.
P-1 (Moody’s short term
rating) are
opinions of the ability of
issuers to
honor short term financial
obligations.
In case rating model under
BOBRAM
model is not available, it
should be dealt
with on case to case basis.
Public Sector:
Reputed Public Sector
Undertakings of
Central as well as State
Government

3. Other Eligibility Criteria 1) Should have generated Net

profits
consecutively for last three years.
 2) Should not be in
caution/defaulters’ list
of Reserve Bank of India/ECGC
etc.
3) Should have been sanctioned
fund
based working capital limits
equivalent
to MPBF of or above Rs.50.00
crore
from the banking system.
4) Should not currently be in
default of
dues to any financial institution/
bank/or
in default of statutory dues.
Chairman & Managing Director
and the
Executive Director are
empowered to
consider relaxation in respect of
stipulation
of profitability of PSUs depending
on
outlook and other relevant factors.
The
relaxation can also be in respect
of profitability of Private Sector
Corporates in
case the loss in the previous three
years
was due to exceptional
circumstances and
the corporate is likely to generate
profit in future

4. Credit Facility Demand Loan/Term Loan/Cash

Credit.
Short term loan

5. Size of the advance Minimum quantum of the loan

shall be
Rs.1.00 crore irrespective of
tenor.
6. Period/tenor of the advance Up to 1 year – (Category-I) *
Above 1 year – (Category-II) *
* Note: Category-I &
Category-II
Categorised as per period/tenure
of the
advance.
The rate of interest for the
specified
period/tenor of advance should be
either
fixed or linked with BPLR with re-
set clause.

7. Pre-payment The facility is to be availed of for a

minimum
of 3 days and thereafter
prepayment may
be considered.
Penalty:
1% on the outstanding liability on
the date
of payment/amount prepaid for
the balance
tenor.
Power to waive the
prepayment penalty
Chairman & Managing Director,
Executive
Director, are empowered to waive
penalty
either partly or to the full extent.

8. Interest Rate Category – I (Linked to

credit rating and
tenor of loan)
Up to and including 1 year –
Competitive
rates considering available funds
and
alternative deployment avenues
like Inter
Ban, Reverse Repo, CP rate etc.
 Category – II (Linked to
credit rating and
tenor of loan)
Above 1 year – 400-500 bps
below BPLR *.
* As per the powers delegated
to various
functionaries as mentioned
under Poin no.11 of the
annexure.

9. Nature of advance The loan may be sanctioned for

normal
working capital, for long term
working
capital purpose, Demand
loan/Short Term
loans for a specific purpose,
medium/long
term loans.
Secured by way of
continuance/creation of
the charge on current assets as
available/required for regular
Working
Capital limits.
Note:
Unsecured advance may be
considered for
reputed Corporates in Pvt/ Public
Sector.
Sanctioning of clean advance at
sub-BPLR
rate should be within the cap fixed
for
unsecured advances.
In case Sub-BPLR Advance from
our Bank
is against the unutilized regular
sanctioned working capital limits
from other banks, then:

Either our Bank’s charge on

current assets
 of the borrower be suitably
created/modified for the amount of
Sub-
BPLR Advance sanctioned by our
Bank;
OR
A suitable letter of
comfort/earmarking from
the concerned bank(s) in our
bank’s favour
be available.

10 Documents As per extant guidelines.

11 Competent authority to The functionaries in the rank of

sanction the advance General
Manager at Corporate level,
Executive
Director and Chairman &
Managing
Director may sanction the credit
facilities at
sub-BPLR, as given below:-
Tenor up to 1 year:
Functionaries Min. Rate
of
Interest (up
to)

200 bps
GMs at below
Corporate BPLR
level

Executive Competitive
Director rates
considering
available
funds and
alternative
deployment
avenues
 like Inter
Bank,
Reverse
Repo, CP
rate etc.

Chairman &
Managing
Director

Tenor above 1 year:

Functionaries Rate of
Interest

GMs at 100 bps below

Corporate BPLR
level

Executive 400 bps below

Director BPLR

Chairman & 500 bps below

Managing BPLR
Director

Note: Rates should be

negotiated to
improve wherever feasible.
— Rating in the account shall be
taken into
account while fixing the interest
rate by the
competent authority.
— For PSUs, Executive Director,
Chairman
& Managing Director may reduce
applicable interest rate by further
100 bps
on merits.
In respect of
consortium/syndicated
loan where our Bank is a
 member, and
also in case of Multiple
finance, the
authorities in the rank of -
i) General Managers at Corporate
Level
and above are empowered to
approve
the rate of interest finalized by the
consortium in respect of their own
sanctions and sanctions accorded
by
GMs heading the zones as well as
all
lower level sanctioning authorities.

12 Exemptions (from exposure Export credit

ceilings) i) Other loans with credit limits up
to and
inclusive of Rs.2 lacs.
ii) Loans falling under Retail
Lending
Scheme.
iii) Loans to staff members
iv) Other categories of credit
facility
where RBI has permitted the
banks to
stipulate rate of interest freely
without
reference to BPLR of the Bank.

13 Relaxation and other terms In respect of eligibility and rate of

interest,
the Management Committee of
Board
(MCB) may further relax the
guidelines
subject to reporting to Board.
At the time of taking lending
decision/disbursement, the Zonal
Head
shall take into account any
significant
 development, seriously impairing
our
bank’s interests and/or
deteriorating quality
of the credit, and if need be, shall
consult
the competent authorities in
Central Office
for proceeding further.
Renewal of the facility, pricing and
other
terms and conditions at the end of
the
period, for which the credit was
provided
under the above said products,
shall be at
the sole discretion of the bank.
The other existing
guidelines will
continue.

13 Reporting Zones are required to submit note

Reporting mentioning justification for quoting
Sub-
BPLR rates.
The following will be the reporting
system in respect of sanctions
made under Sub -
BPLR lending policy.
Sanctionin Reporting
g Authority
authority

GMs at Executive
Corporate Director
level

Executive Management
Director, Committee of
Chairman & Board (MCB)
Managing
Director
 Management Board of
Committee of Directors
Board (MCB)

THIS PAGE NOT TO BE INCLUDED

PG 202TO 210

PUGALIA CASE EXAMPLE OF TAKEOVER A/C

 HOW THE SME MODEL WORKS

SME LOAN FACTORY

HEAD-SMELF

SALES HUB CREDIT HUB

HEAD-SH HEAD-CH

CREDIT OFFICERS

1. Receipt of proposal from SH

RELATIONSHIP
2. Checking completeness of proposal
MANAGERS/BRANCHES
3. Data Entry for credit rating and financial ratio’s
1. Lead Generation
4. Customer meeting & pre-sanction inspection
2. Proposal Generation
report’s incorporation
3. Additional
5. In-principle decision on the proposal
Information required
by CH 6. Arranging for NEC/TEV or other reports
4. Follow up visits 7. Appraisal of the proposal
&periodical contacts
with the borrower 8. Sanction and Advice

9. Documentation process

10. Execution of documents at branch

11. Vetting of documents

12. Disbursement at Branch

 CASE STUDY -1
EXAMPLE OF TAKE OVER
ACCOUNT

NOTE FOR CHIEF MANAGER, SME LOAN FACTORY, KOLKATA

Name of the Account : M/s SINGH AUTOMOBILES

Branch : Brabrone Road

Region : Kolkata Metro Region

Zone : Eastern Zone

SECTION I: DETAILS OF THE PROPOSAL

Lead is generated by Our Brabourne Road Branch

1.0) Gist of the Proposal:

1.1) Takeover of the existing Working Capital Limit with Central Bank of India,
Brabourne Road Branch on sanction of Cash Credit and Bank Guarantee
facilities with increase for a period of 12 months. (The proposal envisages for sanction of
Cash Credit Limit of Rs.200/- lacs and Bank Guarantee limit of Rs.15.00 lacs and take over of existing Cash
Credit and Bank Guarantee facilities from Central Bank of India, Brabourne Road Branch)
 a) Last Review carried on: New Connection

b) Reason for Short Review: New Connection

1.2) Increase / Decrease in Fund Based and Non Fund based Limits.

(Rs. in lacs)

Particulars Existing Proposed Increase

Fund Based Limits Nil 200.00 (+) 200.00

Non-Fund Based Limits Nil 15.00 (+) 15.00

Total Nil 215.00 (+) 215.00

Presently the firm is enjoying a Cash Credit Limit of Rs.45.00 lacs & BG Limit of Rs.5.00 lacs
from Central Bank of India, which is proposed to be taken over by us with the increase limit.

1.3) Sanction / Ratification

a) Modifications in Terms & Condition: To Continue the Current account with

Standard Chartered Bank.

b) Concessions: N.A. Fresh

c) Confirmation of Action: N.A. Fresh

d) Deviations: To consider creation of the under mentioned charges after initial disbursement
for takeover of the existing outstanding balance of the working capital facility with Central
Bank of India, Brabourne Road, Kolkata – Equitable mortgage of residential flat owned by –
Smt. Sughila Devi, Smt Kanshi Devi and Sr. N.K.Singh, at - Flat No. – 10F, 10 th Floor, in
the building named ‘Camac Garden ’ at 234, Camac Street (Satish Nath Sarani), PO- Park
Street , PS-Shakespeare Sarani, Kolkata –09, valued at Rs. 88.63 lacs by our empanelled
valuer M/s D.k. Ghosh & Co. vide their report dtd. 14/11/09.

e) Reference of existing sanction:

• Date: N.A, It is a Fresh Proposal.
• Authority: N.A, It is a Fresh Proposal.
• Due date of Review: N.A, It is a Fresh Proposal.
 CRISIL RAM

SECURITY COVERAGE SCORE

Rating Year 2009: CRISIL rating based on the audited balance sheet dated 31/03/2009.

Facility Net security % Effective Facility Borrower Rating Combined Rating

value LGD Score Rating

Cash Credit 324.00 35.09 FR3 BOB5 CR4

High Safety Investment Grade Reasonable

Moderate Safety expected Loss

Bank 42.75 26.27 FR2 BOB5 CR4

Guarantee
Higher Investment Grade Reasonable
Safety Moderate Safety expected Loss

2.0 Basic Data:

Asset Classification N.A.

Bank’s Credit Rating (CRISIL RAM) Present: As Mentioned above.

Previous: NA, It is a takeover case.

External Credit Rating N.A.

Constitution Proprietorship firm

Date of Establishment 1977

Location: Office 19, Park Street, 4th Floor, Kolkata– 700001

Ph: 22359521, 22359429, Fax: 22359521

Email: [email protected]

Pump 36-B Bosepukur Road, Kolkata– 700002

Ph: 456784 / 8907,

Fax: 89760

Godown 85, Bosepukur road, Kolkata – 700002

Group No major group.

Industry & Nature of Activity Petrol Pump of IOC & Stockist of ‘Servo’ Brand
Lubricants of IOC
Exposure to Industry
a) Sectoral Cap for Industry
b) Bank’s Exposure
c) Zone’s Exposure Data Not available with SMELF
d) NPA (Bank)
e) NPA (Zone)
Collaboration/ Joint Venture, if any N.A.

Dealing with the Bank since New A/c

Method of lending 2nd method of lending

Our Bank’s Share (Proposed) 100%

Rate of Interest:

a) Working Capital a) @ 1.50 % Over BPLR, i.e. 13.50% p.a. with

monthly rests. (Present BPLR is 12%)
Security Available As per Annexure – ‘D’ of the instant proposal
enclosed.

Avg. Drawings during the Yr Existing Proposed

a) Working Capital Nil Rs.200.00 lacs

b) Term Loan
Yield in the account N.A, it is new A/c

N.A, It is fresh/Takeover proposal

Major Inspection irregularities
Concurrent Audit N.A, It is fresh/Takeover proposal

Internal Audit N.A, It is fresh/Takeover proposal

RBI Inspection N.A, It is fresh/Takeover proposal

Statutory Audit N.A, It is fresh/Takeover proposal

Auditors of the firm Mr. AMIT BANERJEE, M. No. 23456

M/s AMIT BANERJEE & Co

58-D,BC.Road, Room No.34,

6th floor, Kolkata-700001

Qualification remark of the auditor No Such remark given by the CA.

Pollution Clearance NA, It is basically a trading concern. Pollution

clearance not required as reported by the firm.

Whether statutory dues have been paid Yes (No default is reported in the audit report)

VAT Registration No. 2345678904 dtd. 01.04.05, issued by Asst.

 Commissioner, Sales Tax/Radha Bazar Charge.

WBST No. 4567432, dtd. 03.02.05

CST No. 16547899 dtd. 08.07.08

The KMC Trade License No. No. 456789 for Petrol pumps.

No 098765 for Lubricating oil.

No. 654367 for Automobiles

License under West Bengal Lubricating CG/Loil/II/Cossi/ 2004/2785 dtd. 31.12.04 valid
Oil order, 1967 upto31.12.09 (Retail of Servo products)

CG/LOIL/Hare street/50/2004/7654 dtd.

22.01.04, for distributorship., valid Upto
31.12.09.

License Under WB motor spirit and No. 90876 issued by Directorate of Consumer
speed Diesel, 2000 goods, valid Upto 31.12.09

Whether the names of the firm / No

Associates or Directors appear in RBI
defaulters’ list and / or caution list

Whether the firm/ promoters and their N.A.

Associates are on ECGC caution list/
special approvals list

Compliance of Earlier terms and N.A.

conditions including creation of charge.

2.01) Banking arrangement:

(Rs. in lacs)

Name of Bank Fund Based Non-fund Based

% Share Amount % Share Amount

Existing Proposed Existing Proposed Existing Proposed Existing Proposed

Bank of Baroda Nil 100% Nil 200.00 Nil 100% Nil 15.00
Brabourne Rd Br
Central Bank of 100% Nil 45.00 Nil 100% Nil 5.00 Nil
India
The Compliance status of Norms for Take-over of Borrowal Accounts from other
Bank as laid down in Loan Policy 2007 is as below -

Sl. Non-Financials Norms Compliance Status

1 Accounts of Profit making (i.e. Net Profit 1. Net Profit as per Audited Balance Sheet
Before Tax) concern only as per last as at 31.03.2009 is Rs.14.07 lacs.
Audited Balance Sheet.

2 Accounts with existing lender should be 2. As per the Confidential Credit Report
under Standard Asset category. received from the existing bankers of
the company, the account has been
classified as “Standard Asset”.
3 Satisfactory report from the existing 3. Conduct of the account is satisfactory as
bank / FI and / or satisfactory conduct per confidential credit report received
of account as per latest statement of from the existing Banker of the
company.
accounts.

4 Minimum Credit rating to be BOB6, for 4. Credit Rating as per Audited Balance
borrower as per CRSIL RAM. Sheet as at 31.03.2009 is “BOB5” under
CRISIL RAM
5. Take-over accounts (retails) are to be 5. NA
rated as per the applicable scoring
model subject to minimum grade as per
the scoring model.

6. There should not have been any 6. No. The company does not enjoy any
reschedulement / restructuring in the Term Loan facility.
account during last two years.

Financials Norms Compliance Status

1 Current Ratio 1.33:1 (Min) 1. Current Ratio is 1.72 as per ABS as on

31.03.2009.
2 Debt Equity Ratio: 2. TOL/TNW Ratio 1.69:1.00 as on
31/03/2009.
TOL/Equity Ratio 4.5:1

3 Debt Equity Ratio: 3. TTL/TNW Ratio is 0.22:1.00 as on

31.03.09.
TTL/Equity Ratio 3.00:1

Securities offered with Central Bank of India, Brabourne Road Branch,

Kolkata- 700001
Primary Security Nature of Securities

For CC Limit a) Hypothecation of stocking petrol, HSD, lubricants.

For LG b) Counter Guarantee of the Borrower

Collateral Securities a) Equitable mortgage of property located at -234, Camac Street

standing in the name of Mrs. Sushila Devi.
(For both the facilities)

b) Personal Guarantee of all Mrs. Sushila Devi.

Securities now offered to Bank of Baroda

Nature of Securities

Primary Security a) D.P. Note

(For Cash Credit) b) Letter of Continuing Security

c) Hypothecation of stocks & Book debts

d) Irrevocable Power of Attorney for collection of Book Debts

f) General Undertaking

(For Bank Guarantee) Counter indemnity and undertaking

Collateral Securities a) Equitable mortgage of residential flat owned by – Smt. Sushila Devi,
Smt Kanshi Devi and Sr. N.K.Singh, at - Flat No. – 10F, 10th Floor, in
(For both the facilities) the building named ‘Camac Gardent’ at 234, Camac Street (Satish
Nath Sarani), PO-Park Street , PS-Shakespeare Sarani, Kolkata – 16,
valued at Rs.88.63 lacs by our empanelled valuer M/s D.K.Ghosh &
Co. vide their report dt. 14/09/09. *

b) Assignment of LIPs in the name of Sri Manish Singh and Smt. Shweta
Singh, having premium paid Rs.2.33 lacs.*

c) Lien on FDRs in the name of Manish Singh/ Shweta Singh

d) Extension of charge over current assets to cover the Bank Guarantee

 e) Personal guarantee of the undermentioned persons:

1. Mr. Manish Singh

2. Mrs. Sushila Devi,
3. Smt. Kanhi Devi
4. Mr. N.K. Singh
5. Mrs. Shweta Singh
6. (Joint net worth of being Rs.74.71 lacs as on 31/03/09, as per personal balance
sheet of the guarantors submitted).

* Details of LIPs to be assigned:

Sl No. Name Policy No Sum Assured Dated Prem. paid

1 Shweta Singh 2345678 500000.00 31.03.06 101096.00

2 Shweta Singh 2345679 500000.00 31.03.06 100800.00

3 Manish Singh 23456780 50000.00 28.08.99 31110.00

Total 1050000.00 233006.00

2.02) LOANS FROM FINANCIAL INSTITUTIONS/ BANKS:

(Rs. in lacs)

Name of the Institution Limit Outstanding Excess/ Overdue Security

ABN Amro (Clean Loan) 15.00 13.54 Clean

NIL
Kotak Mahindra bank A/c closed as reported by party. NOC from Bank received.

*Comments, if any –

• The company has availed a clean business loan from ABN AMRO to bridge the gap,
created due to closure of a working capital limit (under channel finance system) with
AXIS bank for Rs.160.00 lacs in June’09. The Cash Credit through channel financing
scheme was withdrawn by AXIS Bank as per the corporate decision taken at top level
by the Higher Management of Indian Oil Corporation.

• The firm has to manage the business either from their own sources or from market
borrowings. Due to urgent requirement of funds, the firm has availed a Demand
Loan (Unsecured) for working capital requirement. Repayment of this loan is up-to-
date. As informed by the firm, they will repay entire loan with ABN AMRO after
disbursement of this CC limit.
2.03) Security/ W.D.V. of security to be mentioned: – As stated above

2.04) Any reschedulement agreed (in last –3- years): N.A.

2.05) Name of Proprietor:

Sl. Name of the Net worth as on PAN card No. Tel No

No Proprietor 31/03/09

1 Bimal Singh 27.48 Awyo456789 12245678

2.06) Key persons:

Sl. No Name of the Persons Designation

1 Bimal Singh Sole Proprietor

2 Manish Singh , S/o, Sri B.Singh Manager

2.07) Names of Guarantors:

(Rs in lacs)
Sl. No Names Net worth as PAN No.
on
31/03/09

1 Mrs. Sushila Devi 19.81 AEYPP4195H

2 Smt. Kanhi Devi 12.77 AFKPP8927L

3 Mr. N.K. Singh 7.70 AFKPP8908B

4 Mr. Manish Singh 23.75 AKJPP4282E

5 Mrs. Shweta Singh 10.68 AQGPS1394B

TOTAL 74.71
2.08) Business experience of Proprietor:

Mr. Bimal Singh is looking after the day-to-day activities of petrol pump (Indian Oil
Corporation) established by him since its inception, i.e. from 1977. He started his career
as dealer of Kerosene Oil. After successful achievement of target, the IOC awarded him
the dealership of Petrol / Diesel pump.

He started the business of Servo brand lubricants and became the sole distributor for
North Kolkata, in 2003. Since then He is running the business successfully with the help of
his only son Mr. Manish Singh and dedicated staff members of the firm.

• QUALIFICATION: B.COM GRADUATE

• EXPERIENCE: 35 YRS.
• ROLE: TO LOOK AFTER THE DAY-TO-DAY ACTIVITIES of Petrol pump and
Wholesaling of Servo Lubricants.

2.09) Share Holding Pattern of the Company as on 31/03/09:

Particulars No of Share Amount (Rs) (in %)

N.A, It is a Proprietorship Firm

2.10) List of Major Shareholder:

Sl. No. Name of the Shareholders No. of Paid up Percentage holding

Shares value (Rs) to total paid up
Capital

N.A, It is a proprietorship firm

3.0) ISSUE FOR CONSIDERATION:

To consider Takeover of the existing facilities with increase from Central Bank of India,
Brabourne Road Branch, Kolkata by sanction of fresh Limits as under to M/s Singh
Automobiles for a period of 12 months on the terms and conditions mentioned in Annexure
– ‘D’ of the proposal

(Rs in lacs)

Nature of facilities Existing Proposed Present Excess/

Limit with Limit with Outstanding Overdues,
CBI BOB

Fund Based

Term Finance: T/L – Nil Nil

Working Capital: Nil

Cash Credit – 45.00 200.00 N.A.

TOTAL FUND BASED 45.00 N.A. Nil

200.00
Non-Fund Based:

Inland L/C –

Bank Guarantee (Financials) 5.00 15.00 N.A.

5.00 15.00 N.A. Nil

TOTAL NON FUND BASED

50.00 215.00 N.A. Nil

TOTAL EXPOSURE
NOTE: - Presently the firm is enjoying a C/C limit of Rs.45.00 lacs & BG limit of Rs.5.00 lacs
from Central Bank of India, which will be taken over by us with the increase in limit.

Break –up of Overdues is as under: (Rs. in lacs)

Particulars Date Amount

Interest on credit facilities (WC/ TL)

Devolvement of Bills under Letter of Credits

Packing Credit overdue N.A.

Bill Purchased / Foreign Bill Purchase not realised

Adhoc Limit not adjusted

Total

1. Excess due to non-availability of Drawing Power, if any to be mentioned with M.V –

A.V.

2. If the limits have been assessed and full exposure is not recommended by the
branch, the reasons of the same should be indicated. If the amount in the application
is increased / decreased, reasons thereof to be stated – N.A.

3. A brief comment on the conduct of the account like devolvement of LC, return of
cheque etc may be submitted – N.A.

3.2) Modification in Terms & Conditions: To continue the Existing Current account with
Standard Chartered Bank, Kolkata Main Branch.

3.3) Concessions: N.A.

3.4) Confirmations: N.A.

3.5) Deviations: To consider creation of the under mentioned charges after initial
disbursement for takeover of the existing outstanding balance of the Working Capital
facility with Central Bank of India, Brabourne Road, Kolkata –

 Equitable mortgage of residential flat owned by – Smt. Sushila Devi, Smt

Kanshi Devi and Sr. N.K.Singh , at - Flat No. – 10F, 10th Floor, in the building
named ‘CamacGarden ’ at 234, Camac Street (Satish Nath Sarani), PO-Park
Street , PS-Shakespeare Sarani, Kolkata – 16, valued at Rs.88.63 lacs by our
empanelled valuer M/s D.K.Ghosh & Co. vide their report dt. 14/09/09.

4.0) BACKGROUND OF THE FIRM:

The petrol service station was established in the year 1977. They are also one of the leading
distributors of “Servo” a leading brand of lubricant. The firm became authorized stockiest of
“Servo” in the year 2003 for entire North Eastern Part of Greater Kolkata.
Under the dynamic leadership of Mr.Singh, both the sales & profit of the firm has increased
steadily during the years. Till recently the firm was enjoying CC limit of Rs.45.00 lacs with
CBI and OD limit (under channel finance scheme) from Axis Bank for Rs.160.00 lacs. The
firm has since liquidated the entire outstanding in OD A/c with Axis Bank in accordance with
corporate decision taken by IOC for discontinuing the ‘Channel Financing’ facility for its
dealers due to high interest rate and also cash deposit charges, which they were charging
for deposit of cash.

Now the company is selling Petrol/diesel to retail customers/transporters etc from its outlet
at 36-B, ipore Road, Kol-2.

Other details of the firm

SERVO LUBRICANTS ARE SOLD DIRECTLY TO VARIOUS PETROL PUMP’S, BAZAAR SHOP,
OEM, GARAGES AND TRANSPORTERS AND SOME PORTION TO INDUSTRIES. CURRENTLY
THEY ARE HAVING 4 NOS OF SALES MAN WHO ARE LOOKING AFTER THE TARGETTED
CUSTOMERS.

The firm has 3 deliver vans utilized for delivery of Lubricants and provided 5 motorcycles to
its salesmen for quick service and collection of dues.

The private cars are being used by proprietor and his son, usually for business purpose

Details of Vehicles owned by Pugalia Automobiles

Sl.No Vehicle No Make Purpose

WB-25B-
1 7820 TATA 407 Delivery VAN

WB-03B-
2 8409 TATA ACE Delivery VAN

WB-03X-
3 0318 BAJAJ AUTO Delivery VAN

WB-01X-
4 4310 BAJAJ BIKE Sales Man
 WB-01X-
5 4311 BAJAJ BIKE Sales Man

WB-01X-
6 4309 BAJAJ BIKE Sales Man

WB-01X-
7 4172 BAJAJ BIKE Sales Man

WB-01W-
8 2246 BAJAJ BIKE Sales Man

WB-06A-
9 0443 MARUTI A STAR Private Car

WB-02U-
10 7452 MARUTI BALENO Private Car

There is no Hypothecation on any of the vehicle mentioned.

Calculation of Profitability for the Year 2009-10

(On approximation basis as per information submitted by the firm)

As reported by the firm, out of total sales,

• The sales of Petrol / Diesel is appx. 25% and

• Sales of Servo Lubricant is appx. 75%.

During the year 2008-09, out of the total sales of Rs.1646.75 lacs

• The Sales of Petrol/Diesel was Rs.476.93 lacs and

• Sales of Servo Lubricants were Rs.1169.82 lacs as per VAT return.
In the current year also they have achieved the sales of Rs.381.29 lacs, out of which

• Rs.108.12 lacs is for Petrol/Diesel and

• Sales for Lubricants is Rs.273.17 lacs.

Accordingly we have assumed that in the current year the sales of Petrol/Diesel will be 25%
and servo lubricants will around 75% of the total estimated sales:

Profitability from Diesel/Petrol (2009-10):

The present rates and profitability of the Product:

Name of the Rates Profit Sales Sales per Profit

product per per per day day (Rs.) Per day
Ltr. Lts. (Lts) (Rs.)

High Speed 35.03 0.60 2000.00 70000.00 1200.00

Diesel

Extramile Diesel 37.38 0.65 800.00 30000.00 520.00

Unleaded Petrol 48.05 1.00 750.00 36000.00 750.00

Extra Premium 51.75 1.10 250.00 13000.00 280.00

149000.00 2750.00

Sales Per year from Petrol/Diesel:

Rs. 149000.00 X 300 days = Rs.4,47,00,000.00 per Year.

Income per Year from Petrol/Diesel:

Rs. 2750.00 X 300 days = Rs.8,25,000.00

Expenses for the Year (2009-10)

 Expenditure Head Amount in
(Rs.)

Staff Expenses 25000.00

Electric 50000.00

Misc. 180000.00

Stock Loss 22000.00

Unforeseen expenses 100000.00

Total Expenditure 377000.00

Net Profit from Sales of petrol/Diesel in 2009-10

Particulars Amount in Rs.

Total Income 8,25,000.00

Total Expenditure 3,77,000.00

Net Profit 4,48,000.00

Profitability from Servo Lubricant (2009-10)

• As reported by Firm the expected sales of lubricant in the next year: 1100 Kilo
Litres.

• Average Rate per litre: Rs. 150.00

• Total expected sales of lubricants: 1100000 Lts. X Rs. 150.00= Rs. 16,50,00,000.00

Income from Sales of Lubricants

• The firm is earning commission @ 6% on the sales, i.e. Rs.99,00,000.00 lacs.

 Expenses related to servo lubricants

Expenditure Head Amt. In Lacs

Selling and general expenses 21.00

Interest to be paid 22.00

Other expenditure 13.00

Discount allowed on cash sales (2% on 10.00 20.00

crores)

Other promotional expenses 7.00

Total expenditure 83.00

Profits from Sales of Lubricants

Particulars Amount in
lacs

Total Income 99.00

Total Expenditure 83.00

Net Profit 16.00

Total expected Sales for the year 2009-10

Particulars Amt. In Lacs.

Sales of Petrol/Diesel 447.00

Sales of Lubricants 1650.00

TOTAL expected sales in 2009-10 2097.00

Total expected Net Profit of the firm in 2009-10

 Particulars Amt. In Lacs.

Profits from sales of Petrol/Diesel 4.47

Profits from sales of Lubricants 16.00

TOTAL Net Profits in 2009-10 20.47

Name of few Major customers

• DEWARS GARAGE LTD (MARUTI DEALER)

• MATADOR SERVICES (HYUNDAI DEALER)
• HARI OM AUTOMOBILES (BAZAAR)
• CHOPRA MOTOR AGENCY (BAZAAR)
• SALTLAKE SERVICE STATION (R.O.DEALER)
• GOURIPUR SERVICE STATION (R.O.DEALER)
• EFC LOGISTICS (TRANSPORTER)

List of items dealt by firm and stock available as on 08.09.09 as per information
furnished by the firm

(As on Date of inspection)

STOCK in RATE Per

ITEM DESCRIPTION PCS Unit VALUE in Rs

HYUNDAI CRDI PREMIUM ENG 210 Ltr 8 27741.00 221928.00

HYUNDAI PRE. ENG. OIL- 4 x 4 Ltr 51 459.26 23422.26

HYUNDAI SERVO BRAKE FLUID 20 x 1/4 Ltr 20 62.96 1259.20

HYUNDAI SERVO BRAKE FLUID 40 x 1/2 Ltr 80 97.04 7763.20

HYUNDAI SERVO BRAKE OIL 20 x 1/2 Ltr 120 97.04 11644.80

HYUNDAI SERVO COOLANT - 20 x 1 Ltr 140 166.67 23333.80

HYUNDAI SERVO PREM. ENG. 20 x 1 Ltr 790 137.04 108261.60

HYUNDAI SERVO PREMIUM 210 Ltr 1 29400.00 29400.00

IBP GREASE AP3 - 10 X 2 Kg 80 213.02 17041.60

IBP GREASE AP3 - 20 X 1 Kg 140 113.32 15864.80

MOBIL 1 5W50 - 4 LTR 9 685.00 6165.00

SERVO 2T SUPREME - 20 x 1 Ltr 50 134.92 6746.00

SERVO 2T SUPREME - 200 x 60 Ml 2583 8.15 21051.45

SERVO 2T SUPREME - 300 x 40 Ml 10752 5.56 59781.12

SERVO 2T SUPREME - 40 x 1/2 Ltr 205 68.44 14030.20

SERVO 2T SUPREME - 40 x 1/4 Ltr 356 35.40 12602.40

SERVO 4T - 20 x 1 Ltr 1108 138.20 153125.60

SERVO 4T - 20 x 900 ML 102 126.39 12891.78

SERVO 4T ZOOM - 20 X 900 Ml 100 108.72 10872.00

SERVO ADON D - 20 ML 146 12.44 1816.24

SERVO ADON D - 40 ML 21 22.91 481.11

SERVO ADON P - 5 ML 104 4.58 476.32

SERVO AUTORIKSHAW OIL - 4 x 2.5 Ltr 68 315.78 21473.04

SERVO B/F SUPER HD - 40 x 1/2 Ltr 15 92.60 1389.00

SERVO BRAKE FLUID - 20 X 1/2 Ltr 39 49.63 1935.57

SERVO BRAKE FLUID - 20X 1/4 Ltr 442 92.60 40929.20

SERVO CHHAKADA ENG. OIL 20 x 1.2 Ltr 325 49.63 16129.75

SERVO CUT 'S'- 20 LTR 8 141.91 1135.28

SERVO EICHER ENGINE OIL 210 Ltr 40 309.18 12367.20

SERVO ELGI RECIP AIR LUB 20 x 1 Ltr 12 110.53 1326.36

SERVO GABRIEL FRONT FORK 20 x 350 Ml 20 48.90 978.00

SERVO GEAR ALFA 80W90 - 4 x 2.5 Ltr 70 396.58 27760.60

SERVO GEAR ALT 90 - 20 X 1 Ltr 94 112.84 10606.96

SERVO GEAR ALT 90 - 7.5 3 897.77 2693.31

SERVO GEAR HP 140 - 20 L 7 2481.81 17372.67

SERVO GEAR HP 140 - 20 x 1 Ltr 213 132.94 28316.22

SERVO GEAR HP 140 - 4 x 5 Ltr 13 634.92 8253.96

SERVO GEAR HP 90 - 20 LT 12 2383.48 28601.76

SERVO GEAR HP 90 - 20 x 1 Ltr 121 125.08 15134.68

SERVO GEAR HP 90 - 4 x 5 Ltr 35 605.71 21199.85

SERVO GEM 2 - 20 KG 5 2587.46 12937.30

SERVO GEM EP 2 - 20 KG 10 2623.92 26239.20

SERVO GEM RR3 - 10 x 1 Kg 18 155.35 2796.30

SERVO GEM RR3 - 20 x 1/2 Kg 230 80.16 18436.80

SERVO GEM RR3 - 20 KG 6 2876.76 17260.56

SERVO GEM RR3 - 4 x 3 Kg 48 446.84 21448.32

SERVO GEM RR3 - 6 x 2 KG 44 302.70 13318.80

SERVO GLOBAL 4T - 20 X 9 20 100.69 2013.80

SERVO GREASE MP - 10 x 1 Kg 9 144.94 1304.46

SERVO GREASE MP - 20 KG 1 2626.27 2626.27

SERVO GREASE MP - 20 x 1 43 76.08 3271.44

SERVO GREASE MP - 4 X 3 Kg 1 316.32 316.32

SERVO GREASE MP - 6 x 2 Kg 1 224.22 224.22

SERVO GREASE MP3 - 5 KG 58 692.69 40176.02

SERVO GREASE MP3 - 20 KG 37 2715.16 100460.92

SERVO GREASE MP3 - 4 x 3 Kg 12 416.92 5003.04

SERVO GREASE MP3 - 6 X 2 Kg 38 1710.51 64999.38

SERVO GREASE MP3- 20 X 1 Kg 71 76.08 5401.68

SERVO HYDREX TH 46 - 20 Ltr 31 2189.30 67868.30

SERVO KOOL PLUS - 10 X 1 Ltr 226 159.26 35992.76

SERVO KOOL PLUS - 20 X 1 Ltr 540 90.37 48799.80

SERVO KOOL READY -4 X 3 Ltr 12 270.37 3244.44

SERVO L&T CASE AXL OIL - 25 Ltr 43 2936.52 126270.36

SERVO M.G.20/40 - 20 LTR 290 2432.75 705497.50

SERVO M.G.20/40 - 20 x 1 Ltr 1342 128.89 172970.38

SERVO M.G.20/40 - 4 x 5 Ltr 465 626.09 291131.85

SERVO M.G.20/40 - 40 x 1/2 Ltr 338 66.67 22534.46

SERVO M.G.20W40 - 10 LTR 114 1231.96 140443.44

SERVO M.G.20W40 - 20x1 Ltr Liner 1227 125.93 154516.11

SERVO M.G.20W40 - 7.5 Ltr 68 927.54 63072.72

SERVO M.G.20W40 Liner- 20 x 1/2 Ltr 2549.5 65.18 166176.41

SERVO MARUTI GENUINE GEAR OIL 210 Ltr 3 30030.44 90091.32

SERVO MARUTI GENUINE OIL 20 x 1 Ltr 283 136.29 38570.07

SERVO MARUTI GENUINE OIL 210 Ltr 34 22491.47 764709.98

SERVO MARUTI GENUINE OIL 4 x 3 Ltr 859 374.30 321523.70

SERVO P.S.O. - 4 x 3.5 Ltr 354 377.00 133458.00

SERVO POWER BRAKE ALT - 20 x 1/2 Ltr 40 84.44 3377.60

SERVO PREMIUM ALT 15W40 15 Ltr 46 2058.47 94689.62

SERVO PREMIUM CF4 15W40 20 Ltr 65 2682.26 174346.90

SERVO PREMIUM CF4 15W40 10 Ltr 44 1364.52 60038.88

SERVO PREMIUM CF4 15W40 20 x 1 Ltr 113 142.69 16123.97

SERVO PREMIUM CF4 15W40 4 x 5 Ltr 167 693.96 115891.32

SERVO PREMIUM CF415W40- 4 x 4 Ltr 29 556.73 16145.17

SERVO PRIDE 30 - 20 Ltr 4 2502.92 10011.68

SERVO PRIDE 40 - 10 Ltr 81 1278.76 103579.56

SERVO PRIDE 40 - 20 LTR 74 2502.92 185216.08

SERVO PRIDE 40 - 20 x 1 Ltr 630 133.33 83997.90

SERVO PRIDE 40 - 20x1 Ltr Liner 425 131.78 56006.50

SERVO PRIDE 40 - 4 x 5 Ltr 200 643.27 128654.00

SERVO PRIDE 40 - 40 x 1/2 Ltr 26 37.20 967.20

SERVO PRIDE ALT - 10 LTR 1 1426.90 1426.90

SERVO PRIDE ALT 15W40 - 15 Ltr 7 2113.05 14791.35

SERVO PRIDE TC 15W40 - 20 x 1 Ltr 180 140.02 25203.60

SERVO PRIDE TC 15W40 - 4 x 2.5 Ltr 112 1375.85 154095.20

SERVO PRIDE TC15W40 - 15 Ltr 112 1942.97 217612.64

SERVO PRIDE TC15W40 - 20 Ltr 2 2603.17 5206.34

SERVO PRIDE TC15W40 - 7.5 Ltr 79 995.09 78612.11

SERVO PRIDE XL 15W40 - 210 Ltr 3 27510.00 82530.00

SERVO ROCK 4T PLUS - 20 x 1 Ltr 20 101.70 2034.00

SERVO SUPERIOR XEE 10W30 210 Ltr 1 28140.00 28140.00

SERVO SUPERIOR XEE 5W30 210 Ltr 1 36540.00 36540.00

SERVO SYSTEM 68 - 20 LTR 146 2115.23 308823.58

SERVO SYSTEM 68 - 210 Ltr 1 20790.00 20790.00

SERVO TAXI OIL 20W50 - 20 x 1 Ltr 390 119.05 46429.50

SERVO TAXI OIL 20W50 - 4 x 5 Ltr 781 563.49 440085.69

SERVO TRACTOR OIL MG20W4 7.5 Ltr 10 908.55 9085.50

SERVO TRANSFLUID 'A' - 4 x 5 Ltr 22 626.09 13773.98

TVS DOT 4 - 20 X 1/4 LTR 40 906.60 36264.00

TOTAL STOCK OF LUBRICANTS 7273159.09

STOCK OF PETROL / DIESEL

U.L.P.(BHARAT STAGE-II) 10661 48.25 514393.25

XTRA MILE SUPER DIESEL 9447.56 36.78 347481.25

 XTRA PREMIUM PETROL 6447 51.75 333632.25

H.S.D. (BHARAT STAGE III) 11092 35.03 388552.76

TOTAL STOCK OF PETROL / DIESEL 1584059.51

NET STOCK Rs. 8857218.60

Future Prospect
The growth in demand of Petrol and petroleum products directly proportional to Auto sector.
The auto sector is likely to increase by 15% in the current and next year, as per reports
available. Demand for the product is increasing day by day. Suitable alternative for
Petrol/diesel is not available till now.

5.0) COLLATERAL SECURITY COVERAGE:

The company has offered the under mentioned security for the proposed exposure -

Banks Exposure (Proposed) Amount

Cash Credit Rs 200.00 Lacs

Bank Guarantee (Net of Margin) Rs 11.25 Lacs

Total Bank Exposure Rs 211.25 Lacs

Particulars of Collateral Securities

Value of equitable mortgage of flat owned by – Smt. Sushila Devi, Rs. 88.63 Lacs
Smt Kanshi Devi and Sr. N.K.Singh, at - Flat No. – 10F, 10th Floor,
in the building named ‘Camac Garden’ at 234, Camac Street
(Kolkata – 16, valued at Rs.88.63 lacs by our empanelled valuer
M/s D..K.Ghosh & Co. vide their report dt. 14/09/09.

Assignment of LIPs in the name of Sri Manish Singh and Smt. 2.33
Shweta Singh, having premium paid Rs.2.33 lacs.

Lien of FDRs in the name of Manish Pugalia/Shweta Pugalia 1.00

Total Colatteral Securities Rs 91.96 Lacs

Collateral Security Coverage (No. of times) 0.44

Collateral Percentage 43.53%

Comments on security coverage -

 Scope for further collateral securities was explored and discussion with the
Proprietor on the issue of increase of the collateral security was made. It was informed by
the firm that they have already proposed to place securities worth Rs.91.96 lacs and they
do not have further collaterals to offer at present, since they have invested the sizeable
amount of cash in business from own sources, after liquidation of their Channel Financing
limit of Rs.160.00 lacs.

 The Collateral security (flat) being offered is now being occupied by the Proprietor
and his family members for residential purpose and fresh valuation done by our empanelled
valuer is reasonable (value reduced from Rs.131.00 lacs to Rs.88.63 lacs).

 Further stocks / book debts will be available as primary security and monitoring
control will be better, as monthly stocks / book debts statements to be submitted by the
company.

6.0) OTHER INFORMATION:

• Dealing and conduct of the account: - N.A. It is a new connection.

 However, The dealings of the firm with the existing bankers is reported to be
satisfactory. We have gone through the statement of the Existing Cash Credit
account with CBI and the Closed Channel financing facility with AXIS bank from
01.04.08 onwards. The conduct of the accounts with both the bank is satisfactory.
The transactions are routed through the CC account and transactions in the accounts
are almost commensurate with the sales.

 We have also received the statements of current accounts maintained by firm with
SBI, J L Nehru branch and Standard Chartered bank, M G Road branch. The conduct
of both the account is satisfactory and there are no instances of cheque return in the
account.
  We have received the satisfactory confidential credit report from CBI and Standard
chartered bank. Whereas CC with Axis bank and CA with SBI is now since been
closed.

• VAT Tax Return of the company for 2008-09 has been verified by us. As per the
copy of VAT Return, sales figures as reported to the tax authorities is Rs.1646.75 lacs,
which is almost identical with the figures of ABS of 2008-09(Rs.1642.37 lacs).

• Documentation (including creation/ extension of equitable mortgage): -

− Date of documents: NA
− Date of last LAD obtained: NA
− Whether verified by Legal Department: NA
− Whether in order / enforceable: NA

(Documentation/creation of EM etc. will be done at branch level after sanction and

completion of formalities/compliance of terms and conditions)

• Whether proposed limits are within Bank’s prudential Single Borrower/ Group
exposure norms: Yes

• Pro-rata non-fund based business: N.A.

• Comments regarding utilisation of the limits: New A/c

• Unit Inspection was carried out on 08.09.09 by SMELF officials (Copy of the inspection
Report enclosed). No adverse features were noticed.

• The company is desirous of changing the existing banker due to the following
reasons –

)a The rate of interest was higher with the Axis Bank in comparison with our
bank. Since they have already repaid the CC limit with Axis bank from their own
sources, they have to arrange for funds from any other banker. In the process
they have heard about our quality of service and hassle free banking with modern
technology.

)b The company is not happy with present operative assistance of the existing
banker (CBI).
 )c Our Bank’s broader perspective and focus attention to SME sector.
)d Close proximity of our Brabourne Road Branch from their registered office.

• KYC norms is carried out as under –

 The unit/godown have been inspected as per details submitted by the company
(Copy of the inspection report is enclosed)
 The name, address and Membership Nos. of the Chartered Accounts Firm and its
Proprietor / Partners as mentioned in the copy of the Audited Balance Sheets of the
Firm has been verified and found to be correct as viewed from the Website of the
Institute of Chartered Accountants of India – http://icai.org (Copy of the printout is
enclosed)
 Details of PAN of the Proprietor / Guarantor has been verified from the website of
the Income Tax Department – http://incometaxindiaefiling.gov.in and is found to
be correct (Copies of the printouts is enclosed).
 The name of the firm or their partners is not appearing in the RBI Defaulters List or
the Wilful Defaulter List. (Available record as on 31.03.2007).
 However, KYC norms are a continuous process and the same is to be verified /
carried out by the Branch before/ after disbursement of the facilities

• Comments regarding credit rating: Credit rating is being done on the basis of
audited balance sheet as on 31/03/09, details of which is as under –

Facility Net security % Effective Facility Borrower Combined

value LGD Score Rating Rating Rating

Cash Credit 324.00 35.09 FR3 BOB5 CR4

Bank Guarantee 42.75 26.27 FR2 BOB5 CR4

 The borrower rating is BOB5, whereas bank has accepted the rating Upto BOB6 for takeover of
fresh proposal as per Takeover norms laid down in Domestic Loan Policy Guidelines 2007.

• Justification for the proposed rate of interest: ROI is as per CRISIL Rating based
on ABS as on 31.03.2009 and Guidelines as per BCC: BR: 99:325 dtd. 29.10.2007 for a
trading unit which is 1.50% over BPLR [email protected]%p.a. With monthly rests for a CR4
rated account. (Present BPLR is 12%)

• Facilities enjoyed by Associate/ Sister Concerns: Health Code/ Asset

Classification/ Credit Rating/ Reference of last sanction: N.A. since no sister concern as
reported by the firm

• Whether listed firm - present market quotation - 52 weeks high/ low: N.A.
• Our Bank’s investment in the Company/ firm: Nil

• Our exposure to the captioned firm: proposed.

(Rs. in lacs)

C&I Advance Priority Sector/SSI International Div. Investments TOTAL

Existing – Nil Nil Nil Nil Existing – Nil

Proposed - 200.00 Proposed - 200.00

• Contingent liabilities: NIL as per ABS of 2008-09

8.0 JUSTIFICATIONS for Takeover of CC and BG limit with enhancement

1. Take over norms as per Domestic Loan Policy Guidelines 2007 have been complied with.

2. The existing facilities with Central Bank of India has been classified as “Standard Asset”
as per the Credit Report Obtained. Also as per the Bank Statement submitted, the
transaction and conduct of the account appears to be satisfactory.

3. The key person of the company Sri Bimal Singh is a well educated and having sound
knowledge and experience over this trade and as a owner of the company he can always
better bet for marketing of the product. Mr Singh is having almost 35 years of experience
in the trade, which gives lot of marketing canvas for the company.

4. Past performance of the company is satisfactory and the Performance during the
current financial year till date is also satisfactory.

5. The firm is a Trading unit with turnover below Rs.100/- crores, which is falling under
expanded SME Sector as per our bank’s guidelines.

6. Collateral Security coverage percentage is 43.53 %.

7. The company has been engaged in Petrol / Diesel / lubricants industry, which is a
booming activity internationally.
8. Credit rating of the account is BOB5 and Bank has accepted BOB6 as the cut-off point for
the acceptance of an obligor.

9. The other financial aspects of the company are also quite satisfactory and favourable.
DEVIATION

To consider creation of the under mentioned charges after initial disbursement for
takeover of the existing outstanding balance of various facilities with Central bank
of India, Brabourne Road Branch, Kolkata –

Equitable mortgage of flat owned by – Smt. Sushila Devi, Smt Kanshi Devi and Sr.
N.K.Singh, at - Flat No. – 10F, 10th Floor, in the building named ‘CamacGarden’ at 234,
Camac Street Kolkata – 16, valued at Rs. 88.63 lacs by our empanelled valuer M/s
D.K.Ghosh & Co. vide their report dt. 14/09/09.

 Justification: We recommend considering creation of charges of the above mentioned

securities after disbursement of the facilities as it is a take over proposal and the above-
mentioned security is at present mortgaged with Central Bank of India, Brabourne Road,
Kolkata

MODIFICATION

To continue the Current account with Standard Chartered Bank

 Justification: At present Standard Chartered Bank is providing the facility of lifting

the cash directly from Petrol Pump, though their agents. This saves the time and labour
of the firm and minimise the risk factor. The firm has proposed that the balance will be
transferred to the CC account with us, on regular basis, after keeping the minimum
balance in the CA with Standard Chartered Bank. We may consider the request of the
firm since; it will solve the problem of accumulation of cash with our branches.

Details of the assessment of working capital and bank guarantee limits are as per
Section – II of the Appraisal Note.

Bank of Baroda

SME Loan Factory

 Kolkata – 700 001

Name of the Account Singh Automobiles

Branch Brabourne Road Branch

Region Kolkata Metro Region

Zone Eastern Zone

SECTION II- FINANCIAL PARAMETERS AND ASSESSMENT

1.0 FINANCIAL PERFORMANCE:

The actual for last –3- years and estimates / Projections for next –2- years

a) Snap Short of Balance Sheet for

b) Operational Data. (Rs in lacs)

2006-07 2007-08 2008-09 2009-10 2010-11

a) Balance Sheet Data

Proprietor’s Capital 38.66 37.29 41.50 99.54 102.02

Addition during the Year 3.70 29.05 88.21

General reserve

Accumulated Surplus /Withdrawals -5.07 -24.84 -30.18 2.48 5.82

Tangible Net worth 37.29 41.50 99.54 102.02 107.84

Term Liabilities 18.98 21.56 21.83 13.30 10.30

Capital Employed 56.27 63.06 121.37 115.32 118.14

Net Block 13.20 14.85 16.06 16.24 14.21

Funds Invested outside Business 0.76 0.76 0.14 0.14 0.14

Current Assets 265.23 310.66 251.90 304.90 360.57

Current Liabilities 222.92 263.21 146.73 205.96 256.78

Net Current Assets 42.31 47.45 105.17 98.94 103.79

Capital Deployed 56.27 63.06 121.37 115.32 118.14

b) Operational Data

Sales 1189.36 1416.10 1642.37 1970.85 2266.48

Other operating income 40.67 59.61 65.02 78.03 89.73

Total Income 1230.03 1475.71 1707.40 2048.87 2356.21

Other Net Non-Income 0.00 0.44 2.43 2.50 3.00

Manufacturing exp. 1185.96 1427.39 1652.10 1984.85 2282.13

Adm, Selling Exp 16.49 17.70 18.47 21.72 23.73

Interest 15.10 19.89 22.26 22.00 27.50

Depreciation 4.63 3.69 2.92 2.32 2.03

Preliminary Exp

Net Profit before Tax 7.86 7.49 14.07 20.48 23.82

Net Profit After Tax 7.86 7.49 14.07 20.48 23.82

c) Profitability Ratio

Net Profit / Net Sales (%) 0.64 0.51 0.82 1.00 1.01

PAT / TNW (%) 21.07% 18.04% 14.14% 20.08% 22.09%

Operating Profit Margin (%) 2.24 2.07 2.16 2.06 2.14

Return on Capital Employed (%) 14.14 11.30 9.59 15.61 17.64

Stock Turnover ratio (Days) 29 21 15 18 18

Debtor Turnover ratio (Days) 44 48 33 30 30

Creditors Payment Period (Days) 0.00 0 3 1 1

Current Ratio 1.19 1.18 1.72 1.48 1.40

Current Ratio (without considering 1.19 1.18 1.72 1.48 1.40

installment liabilities current liability)
Debt Equity Ratio (TOL/TNW)(If 6.49 6.86 1.69 2.15 2.48
unsecured loan not considered as
quasi capital)
Debt Equity Ratio (considering 6.00 5.82 1.53 1.97 2.28
unsecured loan as quasi capital)
Debt equity Ratio (TTL/TNW) 0.51 0.52 0.22 0.13 0.09

1. Manufacturing expenses includes raw materials, power & fuel, Other manufacturing expenses.
2. Adm. & Selling expenses includes Sales promotion & publicity, Salaries & Wages and other
administrative expenses.
  Details of Funds Invested Outside business / Loans and advances / inter
corporate deposits (valuation of investments): Nil

 Performance of subsidiaries / Group Company if investment is

more than 10% of Networth: N.A.

Whether Fund Flow Statement Submitted: Yes

(Rs. in lacs)

2007-08 2008-09 2009-10 2010-11

Summary:

Long Term Sources 11.60 61.85 4.80 7.85

Less: Long Term Uses 6.47 4.13 11.08 3.00

Surplus (+) / Short Fall (-) 5.13 57.72 -6.22 4.85

Short Term Sources 66.90 58.76 151.71 50.82

Less: Short Term Uses 72.03 116.48 145.50 55.67

Surplus (+) / Short Fall (-) -5.13 -57.72 6.21 -4.85

 Comments on Funds Flow: From the above summary table of Fund flow chart is
very obvious that there is no diversion of short-term sources for Long-term uses,
and part of the long-term funds have also been utilised for short-term purposes
except in the year 2009-10. It is because, the firm is to repay the Working Capital
Demand Loan (Unsecured Loan) which was availed from ABN AMRO Bank on closure
of the ‘Channel Financing facility from Axis Bank pafter sanction of the proposed
Cash Credit facility,

2.0 COMMENTS ON PERFORMANCE:

Sales:

The firm is an authorized dealer of Indian Oil Corporation Ltd having their service station
located at - 36B, Bosipore Road, Kolkata – 700002, one of the premier locations for such
unit. They are also stockist of ‘Servo’ Brand of Mobil of IOC for the entire North Kolkata
jurisdiction. The firm has achieved a sale of Rs.1642.37 lacs in the last FY 2008-09 as
against sales of Rs.1416.10 lacs during FY 2007-08, which is a growth of 15.98%. During
the 1st quarter of the current FY 2009-10, the firm has already achieved sales of about
Rs.381.29 lacs. On the basis of above the firm has estimated and projected a net sale of Rs
1970.85 lacs & Rs 2266.48 lacs during the current & next FY i.e. 2009-10 & 2010-11
respectively. Considering past trend of increase in sales, present performance and the
increasing demand of the product in the area, the estimated and projected level of sales of
the firm appears to be reasonable and achievable under normal business circumstances.

Net Profit:

The firm has earned a net profit of Rs.14.07 lacs during last FY i.e. 2008-09 as against
Rs.7.49 lacs achieved during 2007-08, which is an increase of 87.85%. With the increase in
the volume of sales the firm has estimated & projected a net profit of Rs.20.48 lacs & Rs
23.82 lacs during current & next FY respectively. The operating profit margin is above 2%
and return on capital employed is also above 15% in current and next year, which is quite
satisfactory.

Net Worth:

Tangible Net Worth position of the firm is gradually improving due to retention of profits as
well as on account of introduction of fresh capital into the business. Net worth of the firm
during the last financial year was at a level of Rs.99.54 lacs as against Rs.41.50 lacs as on
31/03/2008. The firm has estimated retention of Net Profit of Rs.2.48 lacs during the
current FY 2009-10, which would further improve the net worth position of the company.
The net worth position of the firm is projected to improve further in the next financial year
due to retention of profits in the business.

The movement table of net worth is given below:

(Rs in lacs)

Particulars 31.03.07 31.03.08 31.03.09 31.03.10 31.03.11

Opening TNW 38.66 37.29 41.50 99.54 102.02

Add: Profit after tax/loss 7.86 7.49 14.07 20.48 23.82

Add: Increase in equity / share

premium 3.70 29.05 88.21

Less Dividends including tax 12.93 32.32 44.25 18.00 18.00

Closing TNW 37.29 41.50 99.54 102.02 107.84

The net worth position of the firm is improving Y-O-Y and comfortable since the DE ratio is
well below the benchmark level.

Current Ratio:

The current ratio of the firm at the end of last financial year i.e. 2008-09 was 1.72, which is
above the acceptable level of 1.33, as against 1.18 as on 31/03/2008. The ratio improved
due to sudden drop in short term borrowings. With the proposed increase in working capital
Limit (Cash Credit) Current ratio has been estimated at 1.48 at the end of the current
financial year and projected as 1.40 as on 31.03.2011, which is well above the benchmark
level of 1.33 and is acceptable.

Debt Equity Ratio:

TOL/TNW of the firm as on 31/03/2009 was 1.69, which is at the acceptable level as against
6.86 as on 31/03/2008. The ratio improved due to induction of fresh capital of Rs.88.21
lacs. Again TOL/TNW is estimated to slightly increase to 2.15 and 2.48 in 2009-10 and
2010-11 due to increase in Working Capital Bank finance.

Other ratios’ are at reasonable level

Comparison with last year/ with last accepted estimates/ % increase/ decrease.
Reasons for deviation from the Projections

1. Figure of last year accepted estimated / projections to be given

separately: As above

2. Comparison with last year / with last accepted estimates / %

increase / decrease. Reasons for deviation from the Projections: As above

3. Reasons for accepting projected sales: As mentioned above

4. Comments on Net Profit. If operating loss, then reasons / comments to

be given: As mentioned above
5. Comments on Net Worth any increase/decrease in Capital/ Source: As
mentioned above

6. Comments on ratios: As above

7. Comments on other income, if there is any abnormal income: As per ABS

as on 31.03.2009, other income of Rs.2.43 lacs constitutes the undermentioned
components –
• Rate difference – Rs.2.15 lacs
• Transportation charges – Rs.0.28 lacs
• Total – Rs.2.43 lacs

8. Comments on funds invested outside business; details, if there is any

increase during the year and whether any permission was obtained: Nil

9. Investment in Associates/ Sister Concerns. Key financial indicators of

these company’s and their probable impact on our borrower: Nil

10. Investments in Shares / Securities - Present market value of these

securities: Nil

11. Inter-corporate Deposits / Loans and advances: Nil

12. Investment for modernisation/ expansion of Associates: Nil

13. Inter Companies transactions: None

14. Whether any investment in Associate Concern is doubtful of recovery: No

15. Comments on Balance Sheet:

-- Notes to the account - Nil

-- Provisions not made - Nil

-- Disputed liabilities - Nil

-- Bad & Doubtful debts – Nil

-- Export Import Business – The firm exports papers and chemicals to

Bangladesh.

-- Old inventory – Nil

 -- Whether statutory payments like PF/ Dues to SSI are made - Yes

-- Any qualifying remarks of the auditors - Nil

3.0) ASSESSMENT OF WORKING CAPITAL:

• Last assessment on what sales and for which year proposed: N.A. Fresh
Proposal.

• Whether company has achieved last accepted sales, if not, reasons: N.A.
Fresh Proposal.

• Net Sales / Export achieved upto the date of assessment / Half Yearly /
Quarterly Sales: The company has recorded sales turnover of Rs.381.29 lacs during
the first quarter ending on 30/06/2009

• Method of lending: 2nd Method of Lending

• Working Capital term loan (if any): Nil

• Justification for Working Capital: As per guidelines, WC limit has been worked
out on the basis of 2nd Method of Lending as per table given here under:

Workings Capital Assessment -

(Rs in lacs)

2nd Method of Lending 2008-09 2009-10 2010-11

Amount Amount Amount
1. CURRENT ASSETS

Raw Material

Stock in Process
67.63 100.27 114.11
Finished Goods / Trading Goods
156.45 170.74 196.35
Receivables Domestic
Advance to supplier 11.91 13.93 15.85
15.90 19.96 34.26
Other current assets
251.89 304.90 360.57
TOTAL CURRENT ASSETS
2. CURRENT LIABILITIES
11.34 5.57 6.34
Creditors for purchase

Advance from Customer

Statutory Liabilities
87.10 0.39 0.44
Other current liabilities
98.44 5.96 6.78
TOTAL CURRENT LIABILITIES (Other than Bank Borrowing)

3. Working Capital Gap (WCG) (1-2) 153.44 298.94 353.79

4. Min. stipulated NWC i.e. 25% of Total Current Assets. 62.97 76.22 90.14

5. Actual / Projected NWC 105.15 98.94 103.79

6. Item 3 minus item 4 90.47 222.72 263.65

7. Item 3 item minus 5 48.29 200.00 250.00

8. Maximum permissible bank finance (item 6 or 7) whichever is 48.29 200.00 250.00

lower

The company requested for sanction of fresh Cash Credit Limit of Rs.200.00 lacs and
takeover of the existing credit facilities from Central Bank of India, which is justified under
the 2nd Method of MPBF as assessed above and is proposed for sanction.

Comments on inventory holding / creditors/ debtors level / reasons for accepting

large variance in inventory / creditors / debtors level

(Rs. in lacs)

Holding Period in Day's 31.03.07 31.03.08 31.03.09 31.03.10 31.03.11

Inventory / Net sales (Days) 29 21 15 18 18

Receivables / Net sales (Days) 44 48 33 30 30

Creditors / Purchase (Days) 0 0 3 1 1

Inventory Holding Level:

The level of stock holding is in the line with the other petrol pumps & on the basis of
capacity of under ground tankers and other lubricants kept in godown. For petrol/Diesel the
firm has to keep the average stock required for 7 days, but for lubricants, it has to keep
stock required for 30 days. On an average Inventory holding level of the firm has been
worked out at 15 days during last financial year. The firm has estimated and projected their
holding level of trading stock at 18 days for current & next FY to increase the level of sales,
which is acceptable.

Debtors Holding Level:

The firm has to provide the credit of around one month to its retailer. The debtors holding
level of the firm has been worked out at 30 days each for current & next financial year as
against 33 days during last financial year, which is acceptable.

Creditors Holding Level:

Not Applicable, since firm pays in advance for the entire stock.

3.1 JUSTIFICATION FOR TERM LOAN LIMIT:

N.A

3.2 ASSESSMENT OF NON FUND BASED LIMITS:

• Letter of Credit Limit – Nil

• Bank Guarantee: The firm is already availing the Bank Guarantee limit of Rs.5.00
lacs with 25% cash margin from their existing bankers, issued in favour of Indian Oil
 Corporation in lieu of Security deposit. Now they require increase in BG limit of
Rs.15.00 lacs, for the same purpose. This increase in BG limit has been assessed by
IOC on their own depending on our volume of business and prevailing market price
from time to time. We may therefore consider sanction of additional Performance Bank
Guarantee Limit of Rs.15.00 lacs with 25% cash margin in form of FDR including take
over of the existing Bank Guarantee outstanding with Central Bank of India. Accordingly
Bank Guarantee limit of Rs.15.00 lacs as requested by the firm is proposed for sanction
as per the Terms & Conditions mentioned in Annexure – ‘D’ of the proposal.

3.3 Any other matter which in the opinion of Branch / Zone is important to
decide the proposal: Nil

SECTION III- INDUSTRY PERCEPTION

1.0. INDUSTRIAL BUSINESS SCENARIO PERCEPTION:

The overall economic scenario is improving all round the world. The prices of crude oil are
also stable since last 3-4 months. The supply of Petroleum products is unlikely to disturb in
near future.

The growth in demand of Petrol and petroleum products is directly proportional to the Auto
sector. The auto sector is likely to increase by 15% in the current and next year, as per
reports available.

Demand for the product is increasing day by day. Suitable alternative / substitute for
Petrol/diesel is not available till now.

2.0. STRENGTH, WEAKNESS, OPPORTUNITY & THREATS:

Strength:

1. It is an authorized petrol pump of IOC established over a period of 30 years and

stockist of Servo Lubricant since 2003.
2. Located in a strategic area (Get-way of Durgapur Express Road, Delhi Road &
Bombay Road)
3. Both sales & profit are increasing steadily during the years.
 4. Oil companies are generally not transferring the distributorship to any other
individual / corporate bodies.

Weakness:

1. The prices are regulated by Govt of India, so there is little scope for individual units
to increase the profit margin.
2. It is a proprietorship concern.

 Mitigation: The only Son of Mr. B.Singh is gradually taking over the entire day
to day activities of the business. He is young (30 yrs) and has considerable
involvement in the business.

Opportunity:

1. With liberalization of economy and stress given on surface transport the demand of
petroleum products has increased considerably.
2. The growth in demand of Petrol and petroleum products directly proportional to
Auto sector. The auto sector is likely to increase by 15% in the current and next
year.

Threat:

1. Competition from other oil companies.

 Mitigation: The firm is regularly going for promotional schemes to maintain /

retain the customers.

ANNEXURE - D

TERMS AND CONDITIONS

Fund Based Limit

A 1 Nature of Facility – Cash Credit

2 Limit – Rs.200.00 lacs (Fresh)

3 Margin – 25% on Stock and Book Debts

4 Period – 12 months

5 Rate of Interest – 1.50% over BPLR, [email protected]%p.a. With monthly rests.

(Present BPLR is 12%)

 6 Purpose – To meet working capital limit requirement

7 Primary Security – a) D.P. Note

b) Letter of Continuing Security
c) Hypothecation of stocks & book debts
d) Irrevocable Power of Attorney (To be notarised) duly
registered with major Debtor parties for collection of
book debts.
e) General Undertaking.

Non-Fund Based Limit

B 1 Nature of Facility – Bank Guarantee

2 Limit – Rs 15.00 lacs (Fresh)

3 Margin – 25% in the form of FDR

4 Period – 12 months

5 Rate of – As per Extent guidelines of the Bank from time to time.

commission

6 Purpose – In favour of IOC in lieu of Security money.

7 Primary Security – a) Counter indemnity

b) Undertaking

COLLATERAL SECURITIES

1. Equitable mortgage of flat owned by – Smt. Sughila Devi, Smt Kanshi Devi and Sr.
N.KSingh, at - Flat No. – 10F, 10th Floor, in the building named ‘Camac Gardet’ at
234, Camac Street Kolkata – 16, valued at Rs.88.63 lacs by our empanelled valuer
M/s D.K Ghosh & Co. vide their report dt. 14/09/2009.

2. Assignment of LIPs in the name of Sri Manish Singh and Smt. Shweta Singh, having
premium paid Rs. 2.33 lacs.

3. Lien of FDRs in the name of Manish Singh/Shweta Singh of Rs. 1.00 lacs.
4. Extension of charge on stock & book-debts to cover the Term Loan facility.

2 The above facilities are to be further secured by the personal guarantees of the
undermentioned persons -
(Rs in lacs)

Sl. Names Net worth as on

No 31/03/2009

1 Mrs. Sushila Devi 19.81

2 Smt. Kanhi Davi 12.77

3 Mr. N.K. Singh 7.70

4 Mr. Manish Singh 23.75

5 Mrs. Shweta Singh 10.68

TOTAL 74.71

RATING OF PUGULIA
CASE STUDY -II
EXAMPLE OF REVIEW WITH
ENHANCEMENT ACCOUNT

BANK OF BARODA
S.M.E. LOAN FACTORY, KOLKATA

NOTE TO THE SENIOR MANAGER, S.M.E. LOAN FACTORY, KOLKATA

Name of the Account M/s. BHATT UDYOG LIMITED

Branch India Exchange

Region Kolkata Metro Region

Zone Eastern Zone

SECTION I: DETAILS OF THE PROPOSAL

1.0. GIST OF THE PROPOSAL:

1.1) a) Review-cum-enhancement of existing facilities for a period of 12 months as per Annexure-D.

b) Last Review carried on: 25.06.2009.

c) Reason for Short Review: Not applicable

1.2) Increase / Decrease in Fund Based & Non Fund Based Limits:
 (Rs. in lacs )

Facility Existing Proposed Increase (+) /

Limit Limit Decrease (-)
Fund Based limits 20.00 40.00 + 20.00

Non-Fund Based Limits 2.00 30.00 + 28.00

One Time Specific BG limit 13.27 - -

(Against 100% Cash Margin)

Total 22.00 70.00 + 48.00

1.3) Sanction / Ratification:

• Modifications: NIL

• Concessions: NIL

• Confirmation: NIL

• Reference of existing sanction:

o Date: 25.06.2009
o Authority: Assistant General Manager, India Exchange Branch.
o Due date of Review: 25.06.2010.

NEW CRISIL RATING

SECURITY COVERAGE SCORE

Based on ABS as on 31.03.2009

Facility Borrower Rating Combined Rating • The credit rating has been
conducted by us based on
Cash Credit BOB4 CR4 Guidelines as per Circular No -
BCC:BR:101:194 dtd. 13.07.09.
Investment Grade adequate Reasonable Expected Loss • Marks obtained-62 out of 93, i.e.
safety 68%.
• The rating as per circular is
BG (Performance) BOB4 CR4 CR4/MSMEBOB4.

Investment Grade Adequate Reasonable Expected Loss

Safety

2.0) BASIC DATA:

Asset Classification STANDARD

Bank’s Credit Rating • FOR 2008:

For Bank Guarantee BOB 5 / CR 4 based on
ABS dated 31.03.08

For Cash Credit BOB 6 / CR 4 based on ABS

dated 31.03.08

• FOR 2009:CR4/MSMEBOB4
External Credit Rating N.A.

Constitution PUBLIC LIMITED COMPANY (NOT LISTED)

No. 12-908765

CIN NO. –S435678MP1987PRT76585

Date of Incorporation 16.09.1988

Registered Office At-BORING GROWTH CENTRE

TEHSIL – SAUSAR DIST–CHHINDWARA–

480106 (M.P.)

07165-76548/87652-90774, fax-443443

(As informed by the Company)

At-V -18, Rajendera nagar Raipur.

(As per search conducted by Mr. M.S.

Sharda(Adv).

report, submitted by the company).

Corporate Address:

2, PARK STREET

TODI CHAMBERS, 5TH FLOOR

KOLKATA – 700 071

22388884/22176530/2233244

FAX-22388888

[email protected]

Factory: BORING GROWTH CENTRE

TEHSIL – SAUSAR DIST–CHHINDWARA–

480106 (M.P.)

07165-226568/93292-80664

fax-226443

Group N.A.

Industry and Nature of Activity Manufacturing/Trading of INDUSTRIAL GASES

VIZ. LIQUID OXYGEN & NITROGEN ETC.

It is a manufacturing unit registered as Industrial

unit Vide No. DER/UTR/0986, issued by Dept. of
Industrial Development, dtd. 10.08.1989.
 Now Small Enterprises as redefined as per
Circular No BCC: BR: 99/145 dated 04.05.2007.

Exposure to Industry
a) Sectoral Cap for Industry: As per
ASCROM cell.
b) Bank’s Exposure
c) Zone’s Exposure
d) NPA (Bank) Data Not available
e) NPA (Zone)
Collaboration / Joint Venture, if any N.A.

Dealing with the Bank since 1991

Method of Lending 1st Method of Lending / Turnover Method

Consortium Leader N.A.

Banking Arrangement SOLE

MPBF Rs.40.00 lacs (Proposed)

Our Bank’s Share 100%

Rate of Interest 0.50% below BPLR i.e. 11.50% p.a. with monthly
rests.

(Presently the BPLR is 12.00% p.a.)

(ROI is as per circular No. BCC: BR: 100:347 dated

16.12.08)

Security Available a) Primary Security

For Cash Credit – Hypothecation entire Raw

materials/Semi-finished and Finished Stock &
Book Debts, stores, spares and consumables.

For Bank Guarantee: - Counter indemnity.

Collateral for both the facilities –

a. Exclusive 1st Charge on Entire Fixed asset of

the company, having W.D.V of Rs.69.41 lacs as
on 31.03.2009.

b. Extension of Charge over stock and book

debts, to cover the Bank guarantee facility.

c. Personal Guarantee of both the Directors,

having worth Rs. 52.91 lacs.

Average Drawings during the Year(2008-09) Rs. 2.00 lacs (average for entire FY 2008-09, as
 reported by the branch)

Debit Rs. 6.76 lacs for account remaining in Dr.

balance for 56 days.

Credit Rs. 2.58 lacs for account remaining in credit

balance for 308 days.

Yield in the account 22.50% i.e. Rs.0.45 lacs for the period 2008-09

Major Inspection irregularities: AS PER ANNEXURE “L”, attached below -

Concurrent Audit -

Internal Audit -

RBI Inspection -

Statutory Audit -

Auditors of the company M/S, O.P.SINHA & CO.

CHARTERED ACCOUNTANTS

RAIPUR –789067(C.G.)

Qualification remarks of the auditors Nil

Pollution Clearance The Unit is under Green Category of Pollution

control norms, which implies Zero waste/Hazard
generating units.

As informed by the company, the company has

paid the fees for renewal of certificate from PCB
for the period 1.10.09 TO 30.09.10.

Whether statutory dues have been paid YES

Trade License No. 0008765 dtd. 18.12.09 issued by KMC

Factory Licesne No. Fees deposited for renewal, on 21.11.08

PAN No. SSSSE9876IU

TIN NO. 3456789654

Whether the names of the Company / Associates NO

or Directors appear in RBI defaulters’ list and /
or caution list

Whether the Company / firm / promoters and NO

their Associates are on ECGC caution list. /
Special Approvals List.

Compliance of earlier terms and conditions YES

including creation of charge.

Major Inspection irregularities: ZIC INSPECTION REPORT DATED 02.05.2007

Annexure – L

SL. (Observations) Comments of the branch Our comment

1 Accumulated loss Accumulated loss of Rs 413.01 lacs as At present the situation has
Rs.413.01 lacs and Net on 31.03.2006 has been primarily due to improved and accumulated
Worth (-) Rs.177.83 accumulated depreciation of Rs 590.63 losses have come down to
lacs as on 31.03.2006. lacs. It is a capital intensive industry and 361.69 lacs as on 31.03.09. As
no revaluation has been done by the per projections accepted by
company since inception. Such situation BIFR in rehabilitation package,
has contributed to this quantum of the Net worth position is likely
accumulated loss. Such accumulated to be positive by 2013-14.
loss due to depreciation factor as
mentioned, has in turn directly affected
the net worth position of the company.

2 Sale during 2005-06 The sale performance of 2004-05 to the Now the situation has improved
decreased to Rs.851.14 extent of Rs 1128.34 lacs was an Sales of the company have
lacs from Rs.1128.34 unusual, due to availment of opportunity increased from Rs.725.86 lacs
lacs of 2004-05 and business. As the same market condition during 2007-08 to Rs.1318.52
Company incurred loss did not prevail during the period 2005- lacs for the year 2008-09. In the
Rs.14.35 lacs from 06. But the sales performance of Rs current year, the company has
profit of Rs.54.84 lacs. 851.14 lacs for the year 2005-06 also far achieved a sales figure of Rs.
exceeded the sales figure of 2003-04 1230.68 lacs in the first half
which was Rs 607.09 lacs. year.

3 Disputed Tax Liability The Disputed tax liability increased to Disputed Tax Liability as on
as on 31.03.2006 Rs.157.93 lacs for the year ended 31.03.2009 has come down to
Rs.74.55 lacs. 31.03.2008 against Rs.54.18 lacs as on Rs. 76.58 lacs.
 31.03.2007. The company expects The company expects further
further reduction during the current year reduction during the current
as few more pending cases/appeals are year as few more pending
likely to be disposed off favorably. cases/appeals are likely to be
disposed off favorably.

4 DER is in increasing The DE ratio works out to 5.87 as on Since Net worth is negative.
trend increased from 31.03.2008 and 4.63 and 4.28 as on The DER is also negative.
3.07 as of 31.03.2005 31.03.2009 and 31.03.2010 respectively,
to 3.70 as on as against 3.39 as on 2006-07.
31.03.2006.

5 Adhoc BG Rs.20.40 Existing charge with ROC on We have proposed for

lacs sanctioned on Hypothecation documents has been of enhancement in BG limit from
03.08.2006 up to the order of Rs.41.81 lacs. This charge 2.00 lacs to Rs. 30.00 lacs,
30.09.2007 in C rated was registered with ROC on 21.03.2006, keeping in view the long term
account, no record the copy of the said form no. 8 has requirement of the company.
sending for PSR, already been submitted to the branch.
Hypothecation Said Adhoc limit of Rs.20.40 lacs The charge will be registred
document not obtained sanctioned by branch on 03.08.2006 with ROC accordingly.
and charges with ROC was well within the overall limit charged
not created. with ROC. The said Bank Guarantee of
Rs.20.40 lacs have been returned to the
branch on 25.09.2007 i.e. before the due
date.

6 A/c. Statement for Bank Statement of account maintained As commented by branch.

account maintained with State Bank of India obtained for
with SBI not obtained verification as per terms of sanction.
verification while as per
terms of sanction it is to
be submitted on
monthly basis.

7 Credit Rating not yet Not Applicable as limit was Rs 22.00 Credit rating for 2009 has been
updated after lacs. As per present guidelines. We conducted by us.
31.03.2004. have carried out a credit rating and the
rating for Bank Guarantee is BOB 5 /
CR 4, and for Cash Credit is BOB 6 /
CR 4 based on ABS dated 31.03.08

8 No of inspection during We have advised our Dharampeth We have stipulated a term in

last 2 years though Branch to carry out the inspection. the present appraisal/Sanction
credit rating of the Present rating has improved to BOB-4 for the branch to conduct the
account is C since inspection of factory before
2004. disbursement of enhanced
 facilities.

9 Copy of renewed stock Since on record. Branch to take care of

insurance policy not Insurance of primary and
record. collateral securities.

10 No record of ROC ROC searching documents submitted Search conducted and report
searching. obtain in Oct,09

11 Quarterly audited B/D Quarterly audited B/D statements since As commented by branch.
Statement not obtained.
submitted.

12 Creation of 1st Charge On receipt of the title deed, etc. from Branch to take care and
on fixed asset of the IDBI which is still awaited, the company arrange for modification of
Company not done as assures to do the necessary formalities charge.
per terms of sanction as to creation of first charge.
after liquidation of dues
with IDBI.

2.01) Banking arrangement:

(Rs. in lacs)

Name of Bank Fund Based Non-fund Based

% Share Amount % Share Amount

Existi Propos Existing Propose Existing Propos Existing Propos

ng ed d ed ed

Bank of Baroda 100% 100% 20.00 40.00 100% 100% 2.00 30.00

a) Any limit granted outside consortium with authority and justification: N.A.
b) In case any consortium member is reducing its share, reasons thereof and comments of
the Banks: N.A.
c) Date of last Consortium Meeting: N.A.
d) Key Issues discussed in the consortium meetings: N.A.
2.02) Loans from Financial Institutions: NIL

2.03) Security/ W.D.V. of security (for above said loans from financial institutions / Banks be
advised): N.A

2.04) Any re-schedulement agreed (in last 3 years): NIL

Name of Partners:

(Rs in lacs)

Name of Directors ADDRESS Net worth as on

31.03.09

MR. PREM BHATT (CMD) 40A, Raja Bazar Rs.31.63

Road, Kolkata-27
Ph.34567 8

MR. PANKAJ BHATT(ED) 40A,RajaBazar Road Rs.21.28

, Kolkata-27

MR. J.K. BENGANI (ED) 700, Sudhir Dey Professional Director, no

Road, Kolkata-8 stake in the Co.

MR. S.K. DALMIA (DIRECTOR) 1, Ram Dey Street, Professional Director, no

Kolkata-6 stake in the Co.

2.4) Key persons:

Key persons

MR. PREM CHAND BHATT

 (FATHER)

MR. PANKAJ BHATT (SON)

2.5) Names of Guarantors:

3. Rs in lacs
Name of Directors Net worth as on 31.03.09

MR. PREM CHAND BhattI (CMD), Ph.345678 Rs.31.63

MR. PANKAJ Bhatt (ED), Ph.9765432 Rs.21.28

Total Rs.52.91

2.06) Business experience of Directors:

Mr Prem Chand Bhatt is in this business for the last 35 years and Mr. Pankaj Bhatt is having
experience of 21 years. Thus the key promoters are having rich experience in their line of activity.

Shri Pankaj Bhatt, Director, looks after production planning. Shri P. C. Bhatt, Managing Director,
oversees the day-to-day operations of the Company

Share holding pattern of the company as on 31.03.2009

(Rs in lacs)

Particulars No. Of Amount (%)

Shares

A Promoters’ Holding

1. a. Indian Promoters 980 0.10 0.08%

b. Foreign Promoters

2. Personal acting in concert

Sub Total
B Financial
Institutions/Banks/Mutual
 Funds

C Public

D Bodies Corporate 1149020 114.90 99.02%

Others

Sub Total

Grand Total 1150000 115.00 110.00

3.4) Business experience of Directors:

Mr Prem Chand Bhatt is in this business for the last 35 years and Mr. Pankaj Bhatt is having
experience of 21 years. Thus the key promoters are having rich experience in their line of activity.

Shri Pankaj Bhatt, Director, looks after production planning. Shri P. C Bhatt, Managing Director,
oversees the day-to-day operations of the Company.

2.09 Share holding pattern of the company as on 31.03.2009

(Rs in lacs)

Particulars No. Of Shares Amount (%)

A Promoters’ Holding

1. a. Indian Promoters 980 0.10 0.08%

b. Foreign Promoters

2. Personal acting in concert

Sub Total
B Financial Institutions/Banks/Mutual
Funds

C Public

D Bodies Corporate 1149020 114.90 99.02%

Others

Sub Total

Grand Total 1150000 115.00 110.00

2.10) Top Share Holders with percentage of Holding as on 31.03.09(As informed by the company:

(Rs in lacs)

% Of
Sl No Name of the Shareholders No of Shares Value of Share Shareholding

1 Adyashree Holdings (P) Ltd. 281010 28.10 24.43

2 Adinath Vinimay Pvt. Ltd. 175000 17.50 15.22

3 Drapers (India) Ltd. 200510 20.05 17.44

4 Greenwich Holdings (p) Ltd. 287000 28.70 24.96

5 MPAVN Ltd (MPSIDC Ltd) 115000 11.50 10.00

6 Pamela Towers Pvt. Ltd. 90500 9.05 7.87

7 Prem Chand Todi 920 0.09 0.08

8 Others 60 0.01 -

Total 1150000 115.00 100.0

10% CCPS:

9 Greenwich holdings P Ltd. 64000 64.00 100.0

3.0.) ISSUES FOR CONSIDERATION:

3.1) To consider ENHANCEMENT-CUM-REVIEW of following credit facilities for a period of 12 months as

per the terms and conditions mentioned in Annexure ‘D’.
(in Rs. lacs)

Nature of facilities Existing Proposed Outstanding Excess/

Limit Limit Overdues,
Balance as on
26.11.2009 if any

Working Capital Cash Credit 20.00 40.00 Cr. 10.08 NIL

(Hyp. of Stock and Book debts)
Total Fund Based 20.00 40.00 Cr. 10.08 NIL

Non Fund Based:

2.00 30.00 NIL
Bank Guarantee 2.00

One time BG (100% cash margin)

13.27 13.27 NIL
15.27 30.00 15.27 NIL

Total Non Fund Based

35.27 70.00 NIL

Total Exposure

If the limits have been assessed and the Branch does not recommend full exposure, then reasons
of the same should be indicated. If the amount in the application is increased / decreased,
reasons thereof to be stated. : N.A.

1. A brief comment on the conduct of the account like devolvement of LC, return of cheque etc.:
Conduct of the account is satisfactory. There has been no incidence of invocation of BG or return of
cheques.

3.2) Modification in Terms & Conditions: NIL

3.3) Concessions: NIL

3.4) Confirmations: NA

4.0) BACKGROUND OF THE COMPANY:

The company was incorporated in the year of 1989 with a purpose of manufacturing of industrial gasses
like, liquid Oxygen and Nitrogen. The company set its project at Chindwara, M.P. The project was jointly
financed by IDBI, ICICI and IIBI. Cost of the project was Rs.580.00 lacs, which was funded by IDBI &
ICICI Bank. The unit registered profit from the first year of its operation. However, the unit started
incurring losses from the year 1996 onwards due to the following reasons:

2. Irregular power supply from MPSEB hindered the production

 3. Substantial increase in power tariff by MPSEB.
4. Recession in the market
5. Decline in the demand of the products owing to recession in the steel industry.
6. Increase in transportation cost.

Consequently, complete erosion of net worth took place in the year 1998 and a reference was made to
BIFR under SICA – 1985 on 03.11.1999. BIFR declared it as a sick company on 26.04.2000. Meanwhile
the company settled the term loan taken from ICICI in 2000. BIFR heard the case on 26.02.2004 and
ordered the company to finalise the OTS with IDBI. OTS proposal had also been sanctioned by IDBI for
Rs.105.00 lacs and the amount was paid in installments by the company as per terms of the
settlement/sanction.

The account was regular with us upto June, 2001. Ad-hoc Cash Credit limit for Rs.11.50 lacs was
sanctioned on 21.01.2002 for payment of electricity bill which the company could not adjust in time. The
account became NPA on 31.03.2002. By cut back arrangement, the ad-hoc facility of Rs.11.50 lacs was
adjusted in July, 2004.

BIFR had appointed IDBI as operating agency for the rehabilitation of the company in 2000. Subsequently
the company has settled the dues of the bank as well as those of ICICI bank and IIBI bank, as a result of
which Bank of Baroda is now the 1st charge holder of the fixed assets of the company and has been
designated as the monitoring agency. The revised salient features of the package in respect of relief and
concession are given below:

 From MPSEB: The representative of MPSEB stated that their dues are being paid regularly by
the company. The representative also requested for two months time to take a decision on the
reliefs stipulated in the DRS.

 From Govt. of MP: The Govt. of MP is directed to take a decision within 60 days regarding the
reliefs and concessions sought under the scheme circulated by the Board vide its order dated
15.12. 2008 and inform the OA (IDBI) of the Board. He shall also depute a representative of the
Government to the joint meeting to be convened by IDBI (OA). The next hearing will be held on
14.07.09.

 From Bank: To sanction need base working capital on merits.

 Promoters: Funding of margin on working capital

The BIFR has given notice to the commercial Tax Department M.P. to expedite their concurrence as all
the other agencies have given their consent / approval and only for the commercial Tax department’s
delay in giving approval the implementation of DRS is being withheld.
As per decision made by BIFR vide case No. 987/99 dtd. 22.09.2009, the company has got certain
relief as a part of rehabilitation package. A major relief awarded to the company are:

1. MPSEB to provide un-interrupted power supply of good quality.

2. Arrears of MPSEB shall be allowed to be paid in maximum 36 monthly installments.
3. Waiver of Penal charges and surcharge of Rs. 86.59 lacs levied on account of delayed payment
of electricity bill.
4. To adjust the current electricity bills against the security deposit of Rs. 31.10 lacs lying with
MPPKVVC and demand security deposit only after rehabilitation period.
5. To waive minimum demand charges of Rs. 6.68 lacs levied by MPPKVVC for closure period of
the unit.
6. Arrears of commercial tax upto cut-off date, i.e., 31.03.2007, to be deposited in 36 monthly
instalments and waiver of interest/penalty etc.
7. Exemption under various sections of IT Act during the period of rehabilitation.

OTHER MAJOR TERMS AND CONDITIONS:

1. Bank of Baroda, is designated as monitoring agency (MA).

2. The company shall constitute a management Committee consisting of the MD of the company,
Representative of MA(BOB) and BIFR Special Director, to closely monitor the implementation of
the rehabilitation scheme.
3. The company shall appoint a reputed firm of CA with approval of MA as concurrent auditors, who
would be directly reporting to the MA under copy to the MD of the company.
4. The company shall not declare any dividend to its equity holders without prior approval of BIFR
during the rehabilitation period.
5. The company shall not undertake any new project or expansion or make investment or obtain any
asset on lease/hire without the prior approval of BIFR during the currency of the scheme.

8.0 PRODUCTION FACILITIES.

8.1 LOCATION

The factory is located in the Chhindwara district of Madhya Pradesh. The district is well connected
by the State highway as well as by rail. The location of the plant falls within Category “A” Backward
area. The plant does not require any raw material. The company gets its power supply from the
MPSEB (now MPPKVVC).

8.2 LAND & BUILDING

The factory is situated on a land measuring 8 acres. A detail of the factory building is given below:

Sl Item Total Floor Type of Present Capital Expenditure

No. Area(Sq.ft) Construction Condition Required, if any

1 Administrative 2700 RCC Good Nil

 Office

2 Factory Building 6400 Asbestos Shed Good Nil

3 Utilities and 4000 RCC Average Nil

Service area

4 Securities Office 30 RCC Good Nil

5 Staff Quarter 4000 RCC Good Nil

8.4 PLANT AND MACHINERY

A comprehensive list of the plant and machinery installed at the plant is given below:

Sl. Description Year of Installation Capacity

1 Inox make air compressor 1991 The installed capacity of

the plant is as follows:
2 Inox made cold Box -do-

3 LOX Pump -do-

• Oxygen (liquid and
4 Inox made Expansion Engine -do-
gaseous including
5 Air Chilling Unit -do- medical): 2.80
CuM million
6 Oxygen Compressor Didwania -do- • Nitrogen (Liquid
and gaseous):
7 Crompton Greaves make 1250 -do- 2.00 CuM million.
KVA transformer These capacities are
interchangeable.
8 Volt amp 600 KVA transformer -do-

9 Cooling Tower -do-

10 Storage Tank -do-

8.5 POWER AND CAPTIVE GENERATION

The company’s power requirement is supplied by MPSEB (now MPPKVVC). The supply voltage is
33000 volts. The company has installed 2 transformers –one of 1250 KVA capacity (33000/6600 V)
and the other of 600 KVA (33000/440 V). The company has no DG set. The company’s maximum
demand of power is 1000 KVA but the contract demand is 1176 KVA.

8.6 WATER

The company gets its water supply from MP AKVN Ltd. and a bore well, which meet the requirement
of water of 3 lacs litres per month. NUL has a ground water tank with a capacity of 7 lacs litres.

8.7 HUMAN RESOURCE

Both skilled and unskilled labour is available from the surrounding areas.

List of Major Customers:

1. BHILAI STEEL PLANT (Consumes around 95% production of the company).

2. BHOPAL DUGDH SANGH
3. LUPIN LTD.
4. INDO- GULF fertilizer
5. Durga Gases
6. Indian Cryogenic & allied Gases

The company has supply order from Bhilai Steel Plant, dtd. 20.08.09 of Rs. 3.51 crores for supply of
Liquid Oxygen within 3-6 months.

The plant does not require any raw material.

SECURITY COVERAGE:
The company has offered the under mentioned security for the proposed exposure -

(Rs. In lacs)
 Proposed Credit Facilities with Bank Amount

i. Cash Credit 40.00

ii. Bank guarantee (Net of Cash Margin) 27.00

Total Net Bank Exposure 67.00

Particulars of Tangible Collateral Securities offered

1. 1st Charge on entire Fixed Assets of the company 69.41

Written down Value as on 31.03.2009 as per ABS of 2008-09

Total value of Tangible Collateral securities 69.41

Collateral Security coverage Percentage 103.60 %

Comments on security coverage -

 Scope for further collateral securities was explored and discussion with the Directors on the
issue of increase of the collateral security was made. It was informed by the company, they have already
repaid the various term loans with other FIs and Banks. Now the entire fixed assets can be charged in
favour of Bank of Baroda, as collateral security, which is more then sufficient to cover the exposure.

 At present they are undergoing with the process of rehabilitation. The exposure is also not very
big, in comparison to the fixed assets available as collateral coverage. They are not in a position to
provide any other collateral.

 The security being offered is reasonable.

 Further stocks / book debts will be available as primary security and monitoring control will be
better, as monthly stocks / book debts statements to be submitted by the company.

6.0 OTHER INFORMATION:

• Dealing and conduct of the account: Conduct of the Cash credit account is Satisfactory as per
information received from branch. More then 80% of turn over is routed through the Cash Credit
Account.
• Utilisation of limits is very Low. Most of the time the CC account remains with credit balance. No
incidence of cheque return in the account is observed. Sometimes the Company is availing
excess over the sanctioned limit, for their genuine business requirement and within the available
drawing power. The details of business figure is reported below -
(Rs in lacs)

CC A/c (Hyp. Of Stock and BD) 00290576584025 31.03.09 31.09.09

(6 months)

• Sanctioned Limit 20.00 20.00

• Credit Turnover 1031.12 722.90

• Max Dr. Balance 19.82 18.40

• Account remain in Debit 56 days 54

• Minimum Dr. Balance (Credit Balance) 70.77 184.36

• Avg. Debit balance 6.67 7.35

• Avg. Credit Balance 2.58 4.75

• No. Of days (A/c remain in credit balance) 308 days 128

• Interest earned 0.21 lacs 0.03

• O/s as on 31.03.09 Cr.0.42 8.19 Cr.

• Documentation - whether verified by Legal Deptt & whether in order/enforceable (whether

documentation irregularities if any pointed out by legal cell has been rectified/steps taken etc.
shall be mentioned):

Yes, The documents are in the order as reported by the branch.

Last LAD obtained on 31.05.2007.

• Whether proposed limits are within Bank’s prudential Single Borrower / Group exposure
norms: Yes

• Pro-rata non-fund based business: N.A., We are the sole bankers of the company.

• Whether charge created and registered with ROC: Yes for Rs. 41.81 lacs, as per last
modification done on 21.03.06, as per search report furnished by M/s Suresh Kumar Singh & Co.
 • Comments regarding utilization of the limits: Utilization of limits is very Low. Most of the time
the CC account remains with credit balance.

• Comments regarding credit rating - when last done: Rating has been done based on ABS as
on 31.03.2009, summary of which is as under -

Facility Borrower Rating Combined Rating • The credit rating has been
conducted by us based on Guidelines
Cash Credit BOB4 CR4 as per Circular No - BCC:BR:101:194
dtd. 13.07.09.
Investment Grade adequate Reasonable Expected Loss • Marks obtained-62 out of 93, i.e.
safety 68%.
• The rating as per circular is
BG BOB4 CR4 CR4/MSMEBOB4.

Investment Grade Adequate Reasonable Expected Loss

Safety

 The obligor rating is BOB4, which is acceptable. Our bank has stipulated a minimum of BOB6
rating for obligor, for considering enhancement of limits for existing customers.

• Justification for the proposed rate of interest: Based on ABS as on 31.03.2009 we have
carried out New CRISIL Risk Rating of the company and rating of the company is CR-4. As per
Circular No. BCC:BR:100/347 dated 16.12.2008 applicable interest rate for small enterprises is
0.50% below BPLR i.e. 11.50% p.a. with monthly rest.

Inspection of the Unit: The unit is located at Chhindwara(C.G.)

• Facilities enjoyed by Associate/ Sister Concerns – Asset Classification / Credit Rating /

Reference of last sanction: NIL

• Details of Associate / Group Concerns and their Banking arrangement: No

• Whether listed company: No

• Market quotation: 52 weeks: N.A

• Bank’s investment in the company: NIL

• Our existing and proposed total exposure (FB + NFB) to the captioned company.
 (Rs. in lacs)

C&I Advance Priority International Investment Total

Sector Div. s

Existing: 35.27 - - - 35.27

Proposed: - - -

a) Regular 70.00 Regular: 70.00

b) One Time: N.A (100% One Time: N.A

cash margin)

• Contingent liabilities not provided for (as per Balance sheet as on 31.03.2009):

Sl. Details Amount

1 BG issued by BOB in f/o Collector of customs 1.77

2 BG issued by BOB in f/o SAIL, Bhilai 15.69

3 Dividend on 64000, 10% CCPS 108.82

4 Penalty by MPAKVN Ltd 1.80

5 Disputed demand of PF 1.08

6 Sales Tax, for 95-96, 99-00, 00-01, 01-02, 03-04 46.72

7 Income Tax demand for 2005-06 30.04

TOTAL 205.92

• Comments on the possibilities of Crystallization:

a. The company has to pay the tax liabilities if the decision case pending with appellate
authority, goes against the company.
b. Chances of invocation of BG is very remote, looking into the background of the promoters
and company.
c. The dividend will be paid after the completion of rehabilitation package, as per directives
of BIFR.

• KYC norms is carried out as under –

 The name, address and Membership Nos of the Chartered Accounts Firm and its Partners as
mentioned in the copy of the Audited Balance Sheets has been verified from the Website of
the Institute of Chartered Accountants of India – http://icai.org
  Details of PAN of the Directors has been verified from the website of the Income Tax
Department – http://incometaxindiaefiling.gov.in and is found to be correct (Copies of the
printouts is enclosed).
 The name of the firm or its Director is not appearing in the RBI Defaulters List or the Wilful
Defaulter List.
 Details of the company has been verified from the website of Ministry of Company Affairs –
http://mca.gov.in (Copy of the printout is enclosed)
 Details of the charges as informed by the company has been verified from the website of
Ministry of Company Affairs – http://mca.gov.in (Copy of the printout is enclosed).
 However, KYC norms are a continuous process and the same is to be verified / carried out by
the Branch before / after disbursement of the facilities

7.0 JUSTIFICATIONS:

Cash Credit:

1. The unit is an existing Borrower of our Bank and is dealing with us since 1991.
2. The company was established in the year 1988.
3. The promoters are well versed in the field having experience of over 20 years and also have good
knowledge of the manufacturing and market conditions.
4. The unit falls under the Manufacturing Sector and is classified as a Small Enterprise as per
MSMED Act 2006, which is a priority sector.
5. Performance of the company during the past few years is satisfactory despite the global
recession.
6. Demand for the product is encouraging. The company has good relationship with Bhilai Steel
plant, for regular supply of its products.
7. Yield from the account is 22.50% i.e. Rs.0.45 lacs for the FY 2008-09.
8. Credit Rating of the account is BOB4 and Bank has accepted BOB6 as the cut-off point for the
acceptance of an obligor.
9. Increase in exposure will entail enhancement in SSI portfolio / priority sector lending of the bank,
which is a corporate objective.
10. We are the Sole bankers of the company. As per decision of BIFR Case No. 987/99 as
advised by BIFR vide letter dated 22.09.09, Bank of Baroda, has been designated as the
monitoring agency and to sanction the need based working capital as part of rehabilitation
package.
11. The Net Sales and Net Profit of the company is proposed to increase on account of greater
demand of the product.

After making continuous losses for the last two years, the company was able to post a profit of Rs. 11.52
lacs for the year ended 31.03.2008 & Rs 64.62 for the year ended on 31.03.2009 . Sales of the company
have also increased from Rs.725.86 lacs during 2007-08 to Rs.1318.52 lacs for the year 2008-09.In the
current year, the company has achieved a sales figure of Rs. 1230.37 lacs in the 1 st half year. The
company has estimated / projected Sales of Rs.1610.00 lacs and Rs.1790.00 lacs for the year ended
31.03.2010 and 31.03.2011 respectively which appears to be achievable, based on past and current
year’s performance.

The MPBF of the company works out at Rs.40.00 for the years as per 1 st method of lending ending
31.03.10 and 31.03.11 and which is also justified as per turnover method.

Therefore we propose to enhance the Cash Credit facility of the company from the existing level of
Rs.20.00 lacs to Rs. 40.00 lacs.

Bank Guarantee:

The company is enjoying Bank Guarantee limit of Rs.2.00 lacs since 1991, for a specific purpose of
disputed customs duty liability, which is still subjudice at Mumbai High Court. As the guarantee is to be
continued till the court gives the judgment in the case.

However, the facility of one time guarantee limit of Rs.13.27 lacs(100% cash margin), which has been
given to the company for execution of specific order from Bhilai Steel Plant.

The overall performance B.G limit has been proposed of Rs 30.00 lacs, at a cash margin of 10% as per
request of the company. Which is required for procurement of supply orders/Tenders.

Detailed assessment of working capital is as per Section II of the Appraisal Note

SECTION II- FINANCIAL PARAMETERS AND ASSESSMENT

a. FINANCIAL PERFORMANCE:
b. Snap Short of Balance Sheet for the last –3- years and estimates / Projections for next –2- years
c. Operational Data
Rs. in Lacs
Financial Parameters and Assessment: Audited Audited Audited Estimate Projection

Particulars: 31.03.07 31.03.08 31.03.09 31.03.10 31.03.11

Paid up Capital

a) Paid up Share Capital 179.00 179.00 179 179.00 179.00

Res. & Surplus (excl. Rev. Reserve & Int.

assets): state Investment subsidy 15.00 15.00 15.00 15.00 15.00

Accumulated Loss -437.88 -426.36 -361.73 -290.38 -215.38

Tangible Net Worth -243.88 -232.36 -167.73 -96.38 -21.38

Unsecured loans 301.19 305.05 168.92 172.00 175.00

TNW+ Unsecured Loans 57.31 72.69 1.19 75.62 153.62

Term Liabilities 213.08 228.14 238.88 250.00 265.00

Capital Employed 270.39 300.83 240.07 325.62 418.62

1. Net Block 70.66 79.18 69.41 60.86 52.86

2. Funds Invested Outside Business 190.68 187.49 153.65 118.36 81.36

3. Other non current assets - - -

Current Assets 153.21 166.89 205.52 314.90 458.40

Current Liabilities 144.16 132.73 188.51 168.50 174.00

4. Net Current Assets * 9.05 34.16 17.01 146.40 284.40

Capital Deployed 270.39 300.83 240.07 325.62 418.62

b) Operational Data:

Gross Sales 651.31 725.86 1318.52 1610.00 1790.00

Less: Excise / Sales Tax 33.36 34.99 34.62 38.00 45.00

Net Sales 617.95 690.87 1283.90 1572.00 1745.00

(Of which exports) - - -

Other Income 13.39 14.01 6.78 8.00 9.00

Manufacturing/Trading Expenses * 494.74 556.66 1036.31 1297.51 1444.00

Admn. & Selling Expenses ** 133.31 92.30 121.31 138.00 160.00

Depreciation 10.29 8.89 9.77 8.55 8.00

Interest 29.78 32.07 24.55 29.00 30.00

Net Profit Before Tax (-) 36.77 14.96 98.74 106.94 112.00
Provision for Tax 11.90 3.44 34.12 35.59 37.00

Net Profit After Tax (-) 24.87 11.52 64.62 71.35 75.00

Drawings - - - -

c) Profitability Ratios:

Operating profit margin -1.63 6.07 9.84 8.68 8.08

Net Profit / Net Sales (%) (-) 7.88 1.67 5.03 4.54 4.30

Net Profit / Capital Employed (%) -9.19 10.16 74.78 49.90 37.75

Stock Turnover Ratio (in days) 53 53 15 23 31

Debtors Turnover Ratio (in days) 41 38 36 38 44

Creditors holding period (in days) 174 145 61 46 43

PAT / TNW (%) 10.19 -2.74 -20.10 -25.57 -17.22

Current Ratio 1.06 1.26 1.09 1.86 2.63

Debt Equity Ratio (Total Outside Liab. / TNW) -2.70 -2.87 -3.56 -6.13 -28.72

Debt Equity Ratio (TOL / TNW + Unsecured

loans considered as quasi capital) 11.49 9.16 501.10 7.81 4.00

 Details of Funds Invested Outside business / Loans and advances / inter corporate
deposits (valuation of investments): NIL

Break-up of Investments made in group companies as on 31.03.2009:-

S. No. Name of the company No. of Shares Amount (in Rs.)
NIL

 Performance of subsidiaries / Group Company if investment is more than 10% of Net

worth: NIL

Whether Fund Flow Statement Submitted: YES, as details below:

(Rs in lacs)

Summary 2008 2009 2010 2011

Long Term Sources 42.52 118.97 129.39 138.00

Long Term Uses 17.41 136.13 0 0

Surplus (+) Shortfall (-) 25.11 -17.16 129.39 138.00

Short Term Sources 0.41 72.95 4.75 5.50

 Short Term Uses 25.52 55.80 134.14 143.50

Surplus (+) Shortfall (-) -25.11 17.15 -129.39 -138.00

 As seen from the table above, during the last FY, there was a shortage of Long-Term sources
and Rs.17.15 lacs were diverted from short-term sources for long-term uses. This is due to the
fact that unsecured loans were repaid by the company amounting to Rs.132.00 lacs, for which the
company was required to borrow short-term funds from the bank.
 However, in the coming years, Long-term sources are surplus enough to contribute towards the
short-term uses. There will be no diversion of short-term fund for long-term purposes in the
coming years.

2.0 COMMENTS ON PERFORMANCE:

Sales:

Sales of the company have increased from Rs.725.86 lacs during 2007-08 to Rs.1318.52 lacs for the year
2008-09. In the current FY 2009-10, the company has already achieved a sales figure of Rs.1230.68 lacs
during the 1st half. The company has estimated / projected Sales of Rs.1610.00 lacs and Rs.1790.00 lacs
for the year ended 31.03.2010 and 31.03.2011 respectively which appears to be achievable, based on
past performance of the company and also the current year’s performance.

Profitability:
The company has posted Net Profit of Rs.11.52 lacs during 2007-08 against Net Loss of Rs.24.87 lacs
during 2006-07. The net profit figure has then substantially increased to Rs.64.62 lacs for the year 2008-
09. The company has now estimated / projected net profit of Rs.71.35 lacs and Rs.75.00 lacs for the year
2009-10 and 2010-11 respectively.

The operating profit margin was 9.84% and 5.03% during the last year 2008-09 and is estimated /
projected at around 8-9% and 4-5% for the future years. Considering the sales performance of the
company and better sales realization, the assumptions made by the company appears to be attainable.

Tangible Net Worth:

The Net Worth of the Company is negative since 1999 and as on 31.03.07. The accumulated loss was
Rs.437.8 lacs as on 31.03.2007, which has improved to (-) Rs.361.73 lacs as on 31.03.2009 due to
retention of net profits during 20007-08 and 2008-09. The Tangible net worth position as on 31.03.09 was
(-) Rs.167.73 lacs. The Net worth position is likely to be positive by 2011-12 because the company has
estimated reduction in accumulated losses in the coming years and it is estimated / projected that the
entire loss will be wiped out in the year 2013-14 by way of plough back of Net Profits into the business.
Considering the fact that the performance of the company is improving and sales realization is also better,
the assumptions made by the company appear to be reasonable.
Movement of TNW is as per table given below -

Rs in Lacs

Particulars 31.03.08 31.03.09 31.03.10 31.03.11

Opening TNW -243.88 -232.36 -167.73 -96.38

Add: Profit after tax/loss 11.52 64.62 71.35 75.00

Add: Increase in Share capital - - - -

Add: Change in intangible Assets

Adjust previous year expenses

Increase / Decrease in General Reserve

Less Deferred Provision for Taxation

Less Dividends including tax

Closing TNW -232.36 -167.73 -96.38 -21.38

• The company has raised unsecured loans of Rs.168.93 lacs and retained the Deferred payment
credit (Sales Tax)* for Rs.238.88 lacs to run the factory.

The Position of Net worth and Funds deployed by the company was as under:

(Rs in lacs)

Particulars 31.03.07 31.03.08 31.03.09 31.03.10 31.03.11

a) Paid up Share Capital 179.00 179.00 179.00 179.00 179.00

State Investment subsidy 15.00 15.00 15.00 15.00 15.00

Accumulated Loss -437.88 -426.36 -361.73 -290.38 -215.38

Tangible Net Worth -243.88 -232.36 -167.73 -96.38 -21.38

Unsecured loans 301.19 305.05 168.92 172.00 175.00

TNW+ Unsecured loans 57.31 72.69 1.19 75.62 153.62

Term Liabilities: Deferred payment credit

(Sales Tax) 213.08 228.14 238.88 250.00 265.00

Capital Employed 270.39 300.83 240.07 325.62 418.62

*It is a scheme of State Govt. (for SME units established in backward areas) under which the sales tax
amount has already been received by the company on its sales, the company can retain it for certain
years and can utilize this fund into their business, and to deposit this fund after a certain period.

Current Ratio:

The Current Ratio of the company was at 1.26 as on 31.03.2008. The current ratio has dropped to 1.09,
as on 31.03.2009.The reason for low current ratio is high bank borrowing on the last day of the month.
However, the company has estimated current ratio as 1.86 and 2.63 for the year 2009-210 and 2010-
2011,which shows an upward movement in the trend, which is acceptable.

Estimated / Projected level of current ratio is above the benchmark level of 1.17 as per bank’s
guidelines.

Debt Equity Ratio:

The DE ratio of the company is (-) ve as the net worth of the company is negative due to accumulated
losses. The estimated / proposed net worth of the company is assumed to be improving. The company
has been awarded a package of relief’s and concessions by BIFR. The Net worth position will be positive
by 2011-12. The company has raised unsecured loans of Rs.168.93 lacs and retained the Deferred
payment credit (Sales Tax) for Rs.238.88 lacs to run the factory.

Other ratios’ are at reasonable level.

Some key figures as per Audited balance sheet as at 31.03.2009:

Capacity/production of the plant:

Class of goods Capacity in CuM Production in CUM

Air Separation Licensed Installed

Unit Gases
5000000 4800000 3140132(2008-09)

3104460(2007-08)

Sales
Class of goods Sales

Qty Rs.

Air Separation Unit (2008-09) 7645083 92352577.00

Gases
(2007-08) 5809878 64330490.00

Sugar in MT (2008-09) 1242 28764720.00

Besides manufacturing of Liquid Oxygen and Nitrogen, the company is engaged in Trading of
Gases and Sugar. During last FY the performance was as under:

Item Activity Amount in Rs.

Gases Manufactured 30301326.54

Gases Traded 62051250.52

Sugar Traded 28764720.00

Others Traded 101735320.65

128392256.71

The Figure shows that the Trading activity consist 75 % of the total business.

1. Comparison with last year/ with last accepted estimates/ % increase/ decrease. Reasons for
deviation from the Projections: Sales increased by 85.81% and profit increased to Rs. 64.62 lacs
during 2008-09 compared to profit of Rs. 11.52 lacs during 2007-08.

2. Reasons for accepting projected sales: As above

3. Projected sales are in tune with the present activity of the firm.

4. Comments on Net Profit. If operating loss, then reasons/ comments to be given : already given.

5. Comments on Net Worth any increase/decrease in Capital/ Source : As above.

6. Comments on ratios: Commented earlier.

 7. Comments on other income, if there is any abnormal income. : Other income of Rs. 6.78 lacs
consist of interest on FDRs Rs. 2.22 and Msic. Income Rs. 4.56 lacs.

8. Comments on funds invested outside business; details, if there is any increase during the year
and whether any permission was obtained: NIL

9. Investment in Associates/ Sister Concerns. Key financial indicators of these companies and their
probable impact on our borrower: NIL

10. Investments in Shares/ Securities - Present market value of these securities: NIL

10. Inter-corporate Deposits /Loans and advances: NIL

11. Investment for modernisation/ expansion of Associates: NIL

Sl Name of the Creditors Amt( in lacs.) ROI

12. Inter Companies
1 Adyashree Holdings (P) Ltd. 0.33 9% transactions : NIL

2 Adinath Vinimay Pvt. Ltd. 10.13 9%

3 Drapers (India) Ltd. 19.44 9% 13. Whether any

investment in Associate
4 Greenwich Holdings (p) Ltd. 15.11 9%
Concern is doubtful of
5 Airy appt. Pvt. Ltd. 5.03 9%
recovery: NIL
6 Pamela Towers Pvt. Ltd. 12.49 9%
14. Unsecured
7 Prem Chand Todi 5.45 9% loans: The company
has raised the
8 Pankaj Todi 9.03 9%
unsecured loans of Rs.
9 Rose Garden Estate (p) ltd. 4.91 9% 154.44 lacs from its
directors and various
10 Darshan Barter (p) Ltd. 15.00 9% concerns managed by
their family members,
11 Gloomi Vinicom(p) Ltd. 5.00 9%
but they are not
12 Hallmark Commerce (p) Ltd. 15.00 9% reported as the
associate/Group
13 Ipeca Merchants (p) Ltd. 10.00 9% concerns:

14 Jhunjhnu Commerce (p) Ltd. 70.00 9%

15 Jay Shree Ram Vyapar (p) Ltd. 10.00 9%

16 Jeevandarshi Marketing (p) Ltd. 5.00 9%

17 Nobel Consultancy pvt. Ltd. 5.00 9%

18 Torrent Mercandise(p) Ltd. 10.00 9%

19 Zevlin Agencies (p) Ltd. 5.00 9%

14.Comments on Balance Sheet: (details shall be incorporated here)

-- Notes to the account :

-- Provisions not made : For deferred tax as mentioned below

-- Disputed liabilities : Disputed liabilities of the company as on

31.03.09 is as under

Name of the Statute Nature of Dues Amount in Forum where dispute is

lacs pending

M.P. Sales Tax Act Penalty (1995-96) 5.20 Writ pending before Hon’ble
High Court at Bilaspur

M.P. Sales Tax Act & Sales Tax & Entry tax (1999- 3.74 Revision Pending with DCCT,
Central Sales Tax Act. 00) Raipur
M.P. Sales Tax Act & Sales Tax & Entry tax (2000- 1.50 Revision Pending with DCCT,
Central Sales Tax Act. 01) (01.04.00 to 31.10.00) Raipur

M.P. Sales Tax Act & Sales Tax & Entry tax (2000- 5.19 Mercy petition pending before
Central Sales Tax Act. 01) (01.11.00 to 31.03.01) Govt. of M.P

M.P. Sales Tax Act & Sales Tax & Entry tax (2001- 28.75 Writ petition filed with Hona’ble
Central Sales Tax Act. 02) High Court, Jabalpur Bench.

M.P. Sales Tax Act & Sales Tax & Entry tax (2003- 1.08 Revision pending before
Central Sales Tax Act. 04) ACT,CHW

P.F Act, 1952 P.F. demand for the year 1.08 Matter Pending with Appellate
from 1994 to 1999 Authority, Delhi

Income Tax Act, 1961 Income tax demand for the 30.04 Appeal filed with CIT(A),
A.Y. 2005-06 Jabalpur

TOTAL 76.58

-- Bad & Doubtful debts : NIL

-- Export Import Business : NIL

-- Old inventory : NIL

-- Whether statutory payments like PF/ Dues to SSI are made: Yes

-- Any qualifying remarks of the auditors: NIL

3.0 ASSESSMENT OF WORKING CAPITAL:

• Last assessment on what sales and for which year proposed: 2008-09

• Whether company has achieved last accepted sales, if not, reasons: Yes, the company has
achieved the estimated sales Rs.1283.90 lacs.

• Net Sales / Export achieved Upto the date of assessment/Half Yearly/ Quarterly Sales:
Rs.1235.68 during 1st half year of this FY.

Assessment of Working Capital is done under the 1st Method of Lending is as under:
Rs. in Lacs
1st METHOD OF LENDING Actual Estimated Projection

(31.03.09) (31.03.10) (31.03.11)

Total Current Assets 205.52 314.90 458.40

Less: Current liabilities

(Other than Bank Borrowings) 123.75 128.50 134.00

Working Capital Gap 81.77 186.40 324.40

Actual / Projected Net working capital 17.01 146.40 284.40

Minimum stipulated NWC i.e. 25% Working Capital Gap 20.44 46.6 81.1

MPBF 61.33 40.00 40.00

Excess Borrowing, if any 3.43 - -

Current Ratio 1.09 1.86 2.63

Rs. in Lacs

Turnover method 31.03.2009 31.03.2010 31.03.2011

Actual Estimated Projected

Sales 1318.52 1610.00 1790.00

A: Working capital Requirement (25% of sales) 329.63 402.50 447.50

B: Margin Money require (5% of Sales) 89.50 80.50 89.50

C: Actual NWC 17.01 146.40 284.40

Percentage of Sales (NWC% of sales) 1.32 9.31 16.29

A-B or C whichever is higher 240.13 256.00 163.10

PBF 240.13 256.00 163.10

Based on the estimated Sales of Rs.1610.00 lacs for 20009–10, MPBF has been assessed at
Rs.40.00 lacs as per the 1st Method of Lending, which is also justified under turnover method. The
company has requested for enhanced of cash Credit facility from Rs.20.00 lacs to Rs.40.00 lacs, and
the same has been recommended by the branch, which we endorse for a period of 12-months and is
proposed for sanction.
Comments on inventory holding/ creditors/ debtors’ level/ reasons for accepting large variance in
inventory/ creditors/ debtors level.

(Figures in days)

Particulars 31.03.2008 31.03.2009 31.03.2010 31.03.11

(Audited) (Unaudited) (Estimated) (Projected)

Inventory Holding Level 54 14 22 30

Debtors Holding Level 38 36 38 44

Creditors Holding Level 145 61 46 42

Stock Turnover Ratio:

The company’s stock turnover level is within 1 month, which is quite reasonable.

Debtors Turnover Ratio:

Debtor Turnover Ratio of the company is 30-45 days. A low debtor’s recovery cycle indicates that the
company is able to realize its debts relatively quickly compared to other industries. This empowers the
company with more liquidity and less dependence on working capital fund from the banks.

Creditors Turnover level:

The company is enjoying the credit for 1-2 months from the market, which reduce there dependence on
banks/Fis, for working capital funds. That is the main reason for credit balance in CC account most of the
time.

3.2 ASSESMENT OF NON FUND BASED LIMITS:

Performance Bank Guarantee Limit

The company is enjoying Bank Guarantee limit of Rs.2.00 lacs since 1991. The company has availed
Bank Guarantees for Rs.1.77 lacs against sanctioned BG limit of Rs.2.00 lacs. The guarantee is furnished
in favour of The President of India, Collector of Customs for the company’s disputed customs duty liability
since 1990. The case is still pending in Mumbai High Court and the company has requested for
continuation of Bank Guarantee till the finalization of the case, as the guarantee is to be continued till the
court gives the judgment in the case.
However, the facility of one time guarantee limit of Rs.13.27 lacs (against 100% cash margin), which has
been given to the company for execution of specific order from Bhilai Steel Plant.

The company has also availed a performance bank guarantee of Rs.17.56 lacs in favour of SAIL / BSP,
against 100% earmarking of Cash credit limit.

Looking into the genuine requirement of the company, the overall performance B.G limit has been
proposed at Rs.30.00 lacs, at a cash margin of 10% as per request of the company. Which is required for
procurement of supply orders/Tenders.

Justification for reduction of margin:

1. The Company is banking with us since last 20 years and present performance of the company is
quite satisfactory.

2. The BG limit was last sanctioned in 1991, for Rs.2.00 lacs against Cash Margin of 25% cash
margin. In the present context, that is immaterial while assessment of BG limit in present
scenario.

3. We are the Sole bankers of the company. As per decision of BIFR No. 987/99 dtd. 22.09.09,
Bank of Baroda, has been designated as the monitoring agency and to sanction the need based
working capital as part of rehabilitation package.

4. The security coverage is 103.60%

Based on the above facts we propose for sanction of BG limit, with 10% cash margin in the form of FDR.

3.3 Any other matter which in the opinion of Branch / Zone is important to decide the
proposal: NIL

SECTION III- INDUSTRY PERCEPTION

1.0. INDUSTRIAL BUSINESS SCENARIO PERCEPTION:

The consumption of gases is increasing. The Liquid Oxygen is mainly used by steel plants and other
refractories as a part of the fuel for combustion.

In the manufacturing sector, the entrepreneur has to be very keen on technology. Plants with old
technology won't be viable. Only units with modern technology, in which power consumption is less,
sufficient finance, and managerial acumen can survive.

The future of the industry is quite bright, since the overall industrial activities are developing throughout
the world and as per reports published in the financial newspapers, the period of recession is over.

2.0. STRENGTH, WEAKNESS, OPPORTUNITY & THREATS ANALYSIS:

Strength:

The company has taken up aggressive marketing strategy to increase its turnover. It has entered into
strategic tie up with Steel Authority of India Ltd for supply of finished products for long term basis. Stock
turnover period and Debtors Collection period of the company is considered better as compared to other
industries. The company does not envisage any sudden shortage in working capital despite of increased
sales. Directors are having long experience in the related field and have the ability to steer the company
through difficult situations.

Weakness:

The company’s past losses have been continuously eroding its Net worth. However with the company
posting a profit of Rs.11.52 lacs for the year-ended 31.03.2008, this trend seems to be reversing.

 Mitigation: The Company is now making the net profits and net worth position of the
company is improving.

Opportunity:

The activity of the company is not very common and there are few major players in the related field.
Strategic tie up with major companies for long-term assured off take keeps the company ahead of others.
The company enjoys a competitive edge over others in terms of use of modern imported machineries.

Threats:

New major players are entering into the related field are posing stiff competition to the company.
However, the company is continuously changing their strategy / plans in order to maintain their
supremacy in the market.
  Mitigation: The company is to reap the benefits of its past contacts and experience of its
directors to overcome the threat due to competition.

ANNEXURE – D

TERMS AND CONDITIONS

A 1 Nature of Facility – Cash Credit

2 Limit – Rs 40.00 lacs (Enhanced from 20.00 lacs)

3 Margin – 25% on Stock and Book Debts

4 Period – 12 months

5 Rate of Interest – @ 0.50 % below BPLR (Present BPLR is 12.0%)=11.50%

6 Purpose – Working capital.

7 Primary Security – a) D.P. Note

b) Letter of Continuing Security
c) Hypn of stocks & book debts
d) Irrevocable Power of Attorney for collection of book debts duly
notarized.
e) Declaration cum undertaking cum Authority.

B 1 Nature of Facility – Bank Guarantee (Performance)

2 Limit – Rs 30.00 lacs (Enhanced from Rs.2.00 lacs)

3 Margin – 10% cash margin in the form of FDR

(However, 100% Cash Margin on the existing BG already

issued for Rs.13.27 lacs and ther BGs issued under 25%
cash margin is to continue till its expiry)

4 Period – 12 months

5 Rate of commission – As per Bank’s Guidelines / Service charges from time to time

6 Purpose – For procuring supply orders.

 7 Primary Security – a) Counter indemnity and undertaking

Collateral Security

All the above credit facilities are collaterally secured by:

• 1st Charge on Fixed Assets including land and Building in the name of the company having wdv of
Rs.69.41 lacs as per ABS as on 31.03.2009
• Extension of Charge over stock and book debts, to cover the Bank guarantee facility.

 The above securities are further secured by the Personal Guarantee of the Directors as under
-

(Rs in lacs)

Name of Directors / Guarantors Net worth as on

31.03.2009

MR. PREM CHAND BHATT (CMD) 31.63

MR. PANKAJ BHATT (ED) 21.28

 MANUAL RATING
Name of the Account: NIKET UDYOG LTD
Branch : INDIA EXCHANGE BRANCH

Year : 2009

REVISED CREDIT RATING SYSTEM FOR ADVANCES A/Cs from Rs.2 Lacs (FB+
NFB) up to Rs. 200 Lacs (FB + NFB) – PARAMETERS AND RATIONALE

Max. Marks
Marks
Allotted

I BUSINESS PERFORMANCE 20 15

1. Achievement of projected Sales 10

Turnover:

A If achieved 100% of target 10 10

B Variance within 10% below accepted level 8

C Variance above 10% but below 20% 5

D Variance above 20% 0

2. Achievement of projected PAT in terms 5

of percentage to Net Sales

A Achievement as projected 5

B Achievement upto 10% negative variance 3

C Achievement beyond 10% negative variance 0 0

3. Increase in Tangible Net Worth 5

 A a If PAT ploughed back 100% 5 5 5

B b 50% to 99% 3 3

C c 25% to 49% 1 1

D d Plough back below 25% 0 0

E e No increase/reduction (-) 5

II FINANCIAL PARAMETERS 10 3

1 Current Ratio (Variable as per Bank’s 5

Loan Policy)

1.17 and above for Micro & Small Enterprises 5

1.20 & above for Medium Enterprises

1.33 and above for large / others units

1.00 and above for Micro & Small Enterprises 3 3

1.10 & above for Medium Enterprises

1.17 and above for large / others units

Below 1.00 for Micro & Small Enterprises 0

Below 1.10 for Medium Enterprises

Below 1.17 for large / others units

2 D. E. Ratio (Variable as per Bank’s Loan 5

Policy)

A 3.00 and below 5

B > 3.00 up to 4.00 3

C > 4.00 up to 5.00 2

D > 5.00 up to 6.00 1

E > 6.00 0 0
 3 DSCR in case of term loan 5 NA

A 1.75 and above 5

B 1.50 and above up to 1.75 3

C 1.25 and above up to 1.50 2

D < 1.25 0

II CONDUCT OF THE ACCOUNT 26 11

I

1 Repayment obligations Timely 15

repayment

A Repayment within 7 days 15 10

B Repayment within 15 days 10

C Repayment within 1 Month 5

D Repayment within 2 Months 0

E Delayed payment beyond 2 Months (-) 5

2 Operations in the Account – Routing of 5

sale proceeds

through A/c with us in case of sole

Banking. In case of

consortium / multiple banking

proportionate share is to be considered

A Entire sale proceeds routed through A/c 5

B Sale proceeds partially routed (Equal or above 3 3

75%)

C Sale proceeds partially routed (below 75%) 0

3 Discipline in operating the Account 6 4

 No Yes

A Whether cheques are returned for financial 2 2 0

reasons

B Adhoc excess/excess drawings on more than 2 0 0

four

occasions in a year

C BP/BD returns (exceeding 5% of total no. of 2 N 0

bills purchased / discounted) A

D Devolvement of LCs – non-retirement of bills 2 NA

under LCs

beyond 10 days

E Invocation of BGs 2 2

I COMPLIANCE OF TERMS AND 10 10

V CONDITIONS OF

SANCTION

(Including creation of mortgages, 2nd charge

etc.)

1 Full compliance as per sanction terms at the 10 10

time of

availing the limits

2 Partial compliance 5

3 Non-compliance (-) 5

V SUBMISSION OF CONTROL STATEMENTS 15 5

1 Submission of Stock / Book Debts 10 10

Statements

A Regular submission throughout the year 10 10

B Delayed submission on two occasions 5

 C Delayed submission on more than two 0
occasions

D Non-submission for 2 months and above (-) 5

2 Submission of renewal Data / financials 5 (-)5

A Upto one month before due date of review 5

B Less than one month before due date of 3

review

C Upto one month after due date of review 0

D Late submission beyond one month of due (-) 5 (-)5

date of review

V ADEQUACY OF TANGIBLE COLLATERAL 10 10

I SECURITY

(if stipulated in sanction): Refer Note 1

Below.

If coverage is 100% and above 10 10

50% and above but < 100% 7

25% and above but < 50% 5

< 25% 0

TOTAL 91 60

BONUS MARKS 10 2

For consistent growth in sales at average 15% 2

during past

3 years

For increase in Tangible Net Worth 2

continuously for the

past 3 years to the full extent of PAT of each

year
For export sales being 50% or more of total 2
sales

For outstanding achievement/recognition at 2

national/international level like export

performance award,

best managed company etc.

Satisfactorily conducted “Standard Asset” 2

account banking

with us for 10 years and above

Introduction of new technology or 2

technological

upgradation resulting in significant increase in

sales

turnover (say 100% or more) / value

addition/import

substitution.

For creation of more employment within the 2

unit through

increased investment in plant &

machinery/expansion/

diversification.

Units promoted and managed by existing 2

well-established

business groups/or by entrepreneurs with

technical background/ qualification.

Units engaged in activities which are eco- 2

friendly

Units financed for machineries which are 2

adaptable for

multi-products/ purpose instead of single

product/purpose
 Units having tie-up Sales arrangement for 2 2
entire or major

part of production

Project Completed in time without cost 2

overrun

Company’s Product/s have obtained ISO 2

compliance and

Certification

Please note that Bonus Marks in

aggregate, should notexceed 10 marks

NEGATIVE MARKING 5

Please note that Negative Marks, in

aggregate should

not exceed 5 marks.

The indicative board factors/ activities/ aspects could be as follows:-

(I) Units dependent on a single customer for sale of its products.

(II) Units prone to pollution/environmental restrictions, without prescribed

safeguards.

(III) Area-specific high default-prone activities.

(IV) Activities primarily dependent on sole-proprietor’s personal/technical skills

RATING PATTERN

Aggregate Marks Rating/ Equivalent Rate of Interest

Obligor rating Applicable

As decided by the

Above 90 CR 1 / MSMEBOB 1 Management from time

to
Above 80 up to 90 CR 2 / MSMEBOB 2
time.
Above 70 up to 80 CR 3 / MSMEBOB 3

Above 60 up to 70 CR 4 / MSMEBOB 4 62/93=68%

Above 55 up to 60 CR 5 / MSMEBOB 5

Above 50 up to 55 CR 6 / MSMEBOB6

50 and below CR 7 / MSMEBOB 7

& Below

** For considering exposure to borrowers with rating of CR 7 and below, the account
is to be referred to next higher authority for sanction as per the extant practice.
CASE STUDY -III
EXAMPLE OF FRESH ACCOUNT

NOTE TO THE ASSTT. GEN. MANAGER (KMR), KOLKATA

Name of the Account M/s Ram Company

Branch Netaji Road Branch, Kolkata

Region Kolkata Metro Region

Zone Eastern Zone

SECTION I: DETAILS OF THE PROPOSAL

1.0. Gist of the Proposal

1.1) a) To consider sanction of following fresh Credit facilities for a period of 12 months
as per the terms and conditions as detailed in Annexure D of the Proposal
b) Last Review carried on: N.A. – Fresh Proposal

c) Reason for Short Review: N.A

1.2) Increase / Decrease in Fund Based and Non Fund based Limits.

(Rs. In lacs)

Existing Proposed Increase / Decrease

Fund Based limits NIL 317.50 +317.50

Non-Fund Based Limits NIL Nil

Total NIL 317.50 +317.50

Sanction / Ratification:

a) Concessions: Nil

b) Waivers:

c) Approvals: Nil

d) Confirmations: N.A.

e) Reference of existing sanction:

• Date: N.A. Fresh Proposal
• Authority: N.A.
• Due date of Review: N.A.

2.0 Basic Data:

Asset Classification N.A. Fresh Proposal

Bank’s Credit Rating BOB-6, (Investment Grade – Moderate Safety)

T/Loan- FR5, CR-6,

C/C – FR3, CR-5.

External Credit Rating N.A.

Constitution Registered Partnership firm

Date of Establishment 11.11.08

Registered Office: 3A, Park Street, Kolkata – 700016

Factory Site: P.O.Jatin Das Road :Holongapara,
Vill:Gohaingaon, P.S: Teok, Dist: Jorhat, Assam.

Group Not a recognised group.

Industry and Nature of Activity Tea manufacturing.

Exposure to Industry
f) Sectoral Cap for Industry
g) Bank’s Exposure
h) Zone’s Exposure
i) NPA (Bank)
j) NPA (Zone)
Collaboration / Joint Venture, if any N.A.

Dealing with the Bank since New Account

MPBF Rs 160.00 lacs proposed for the FY 2010-11

Our Bank’s Share 100%

Rate of Interest

• FBP / FBD Limit • % below the BPLR i.e.@ At

present.
• (BPLR at present is 12.00%)

Security Available As per Annexure – ‘D’ of the proposal

Average Drawings during the Year

c) Term Loans N.A. Fresh proposal

d) Cash Credit
Yield in the account N.A. Fresh Proposal

Major Inspection irregularities:

Concurrent Audit N.A

Internal Audit N.A

RBI Inspection N.A

Statutory Audit N.A

Auditors of the company.

NIL
 Qualification remarks of the auditors

Pollution Clearance Yet to be obtained.

Whether statutory dues have been Yes.

paid

Whether the names of the Company / No

Associates or Directors appear in RBI
defaulters’ list and / or caution list

Whether the Company / firm / No.

promoters and their Associates are on
ECGC caution list. / Special Approvals
List.

Compliance of Earlier terms and Not Applicable

conditions including creation of
charge.

2.01) Banking arrangement: Sole Banking

(Rs. in lacs)

Name of Bank Fund Based Non-fund Based

% Share Amount % Share Amount

Existing Proposed Existing Proposed Existing Proposed Existing Proposed

Bank of Baroda
Brab. Rd., NIL 100% NIL 317.50 NIL NIL NIL NIL
Kolkata

2.2) LOANS FROM FINANCIAL INSTITUTIONS:

(Rs. in lacs)

Name of the Institution Date of Amt. Outstand Excess/ Security

Loan ing Overdues
Balance
 Nil
Comments, if any such as overdue /excess, partly / fully disbursed, restructured
etc may be given:

2.3) Security / W.D.V. of security (For above said loans from financial
institutions / Banks be advised): N.A.

2.4) Any re-schedulement agreed (in last –3- years): No

2.5) Name of Partners:

Sr. No Name

1 Mr. Ram Prasad Sharma Partner

2 Mr. Rajesh Sharma Partner

3 Mr. Piyush Sharma Partner

2.6) Key persons: Mr. R.P.Sharma

2.7) Names of Guarantors: Corporate Guarantee of M/s Doorz Plantations &
Industries Ltd. (Net worth as on 31.03.08 is Rs.160.23 lacs)
(Rs. In lacs)

2.08) Background of the Promoters:

Mr. Ram Prasad Sharma aged about 59 years is a commerce graduate. He is the Mg.
Director of Doorz Plantations & Industries Ltd. (DPIL). He is widely experienced in the tea
industry.

Mr. Rajesh Sharma, aged about 36 years is a Graduate in Commerce. He has about 16
years of experience in tea industry. He is a Director of DPIL.

Mr. Piyush Sharma, aged about 29 years is a graduate in commerce. He has about 10
years experience in business.
2.9) Share Holding Pattern of the Company: Not Applicable. It is a partnership
firm with equal sharing ratio.

3.0.ISSUE FOR CONSIDERATION:

(a) To consider sanction of a Term Loan for setting up a bought leaf tea factory at Jorhat,
Assam at a total project cost of Rs.480.50 lacs for a door to door tenure of 5.5 years and
a Cash Credit facility for 12 months as mentioned below under the Terms and Conditions
stipulated in the Proposal/Annexure-D :

(Rs.in lacs)

Nature of facilities Existing Proposed Present Excess/ Over

Limit Limit Outstanding dues,

If any

Fund Based
Term Loan Nil 157.50 N.A. N.A.
Cash Credit Nil 160.00 N.A N.A
TOTAL FUND BASED Nil 317.50 N.A. N.A.

Non Fund Based: Nil Nil Nil N.A

Nil Nil Nil N.A.

TOTAL NON FUND BASED

Nil 317.50 Nil N.A.

TOTAL EXPOSURE

3.1) Modifications: Nil

3.2) Concessions: Nil

3.3) Waivers:

3.4) Approvals: Nil

3.5) Confirmations: N.A.

4.0) BACKGROUND OF THE COMPANY:

M/S Ram Company is a registered partnership Firm formed on 11.11.08. The firm proposes
to set up a tea manufacturing factory at Jorhat in Assam with an annual production capacity
of 700000 kgs. per annum. The firm has already purchased land admeasuring 10 bighas 8
lochas at Holongapara Mouza, Teok at a distance of 10 km from Jorhat town in the names of
the partners for setting up the factory. The land is located in the quality green leaf growing
areas of Assam.

The firm neither own any tea garden nor proposes to acquire any in the near future. The
factory is proposed to be run on bought leaf operation basis, i.e. by buying green leaf from
the nearby tea gardens for processing.

The partners are well experienced in Tea plantation and manufacturing as they are
associated with their sister concerns which have an aggregate production capacity of 1.4 mn
kgs of tea in Doorz area of W.Bengal.

The total project cost for setting up the factory is estimated at Rs.480.50 lacs and the
promoters’ contribution has been proposed at Rs.323 lacs which is about 67% of the project
cost.

Cost of Project:

The firm has estimated a total cost of Rs.480.50 lacs for setting up the factory at Jorhat,
Assam and the details of the project cost are furnished as under:

(Rs. In lacs)

Particulars Amount

1 Land along with development cost 30.00

.

2 Construction of Building and other civil works 170.00

.

3 Plant & Machineries 169.00

.

4 Electrical equipments 25.00

.

5 Miscellaneous items 14.00

.
6 Margin for working capital 62.50
.

7 Contingencies 10.00
.

Total 480.50

The firm has submitted details of construction cost and cost of plant & machineries to be
installed in the proposed factory. The details of cost estimates appear reasonable and may
be accepted.

The firm has already purchased the land required for the project. Bank finance will be
restricted only to the costs estimated under sl. No.2 to 5 under the above cost of project
estimates.

Means of Finance:

Particulars Amount Share of Total Project

Cost

Promoters Contribution 323.00 67.22%

Term Loan from Bank 157.50 32.78%

Total 480.50 100.00

The promoters are agreeable to bring their contribution for the project upfront. An amount
of Rs.30.50 lacs has already been invested by the promoters for acquiring the land and its
development.

Raw materials:

The firm does not have any tea garden of it’s own. However, their associate concern Doorz
Plantations & Industries Ltd. owns a tea garden viz.Patkapara Tea Estate at Alipurduar in
the Jalpaiguri District of West Bengal.

The firm has proposed to source its raw materials, i.e. green tea leaf from the nearby tea
gardens located in the Jorhat district of Assam. The number of tea gardens in the Jorhat
district is plenty. The firm has not entered into any agreement with any of the gardens for
supply of green tea leaf but is confident that the entire requirement of their raw materials
can be procured from the local plantations at prevailing market price.
Present Status of Project:

The firm has already acquired the land required for the project in the name of its partners.
The area of the land is about 9 bighas, 4 cottahs & 18 lochas. Mutation has been completed.
Necessary steps are being taken for conversion of the land for industrial use from its
present status of agricultural land.

Licence for starting the factory has been obtained from the Chief Inspector of Factories,
Assam.

Application has been submitted for Tea Board Licence under Tea (Marketing) Control Order,
2003 and the Licence is expected to be obtained shortly.

The firm has applied for DIC Registration/Enrolment certificate and the same is under
process by the registering authorities.

Tea Board License under Tea (Marketing) Control Order, 2003 is presently under process
and expected to be received shortly. On receipt of the same, the company is scheduled to
start the construction activity at the project site.

5.0 SECURITY COVERAGE:

1. First charge on Fixed Assets;

2. Extension of charge on Patkapara Tea Estate owned by M/s Doorz Plantation

& Industries Ltd. (DPIL) which is already mortgaged with our Brabourne Road
Branch for credit facilities to the aggregate extent of Rs.388.82 lacs enjoyed
by the company with them. The tea estate has been valued at Rs.13.50 crs.
on 15.02.09
(Rs. in lacs)

Sr. Particulars of Fixed / Collateral Security Amount

No.

1. Net Block projected as on 31.03.11 350.30

2. Residual value of Patkapara Tea Estate* 961.00

3. Total Security Value 1311.30

4. Proposed Exposure 317.50

5. Security Cover (times) 4.13

*It may be noted that the lease in respect of Patkapara Tea Estate was in favour of M/s.
Doorz Union Tea Co. Ltd (DUTC) and the lease had expired on 27.07.2000. DUTC applied
for renewal of lease for a further period of 30 years to the DM & Collector, Jalpaiguri Divn,
Govt of W.Bengal on 08.03.2000 which is still pending.
DPIL is an associate of DUTC and was launched for the purpose of taking over the Patkapara
T.E. from DUTC. Both the companies applied for de-merger and the Hon’ble High Court of
Kolkata vide it’s Order dt. 09.01.01 approved the de-merger of Patkapara T.E. and the
garden became the property of DPIL w.e.f.01.04.2000.

The company has stated that as the lease was in favour of DUTC and the same had expired,
the renewal would first be made in the name of DUTC and the lease would be subsequently
transferred to DPIL. A proper legal opinion may be taken by our Brabourne Road Branch in
respect of the validity of the proposed charge to be created for securing the credit facilities
to Ram tea Company

Associate Concerns:

Doorz Plantations & Industries Ltd.:

The company is engaged in manufacturing of tea with an installed capacity of 15 lacs kgs of
tea per year. It owns a captive tea garden in the Jalpaiguri District of W Bengal. The present
annual production is about 10 lacs kgs of manufactured tea. The financial indicators of the
company for the last two years are as follows:

(Rs. in lacs)

Particulars 31.03.07 31.03.08

(Audited (Audited
) )

Sales 585.90 604.15

Net Profit 13.90 5.96

TNW 154.27 160.23

The company is enjoying credit facilities from our Brabourne Road Branch.

Nectar Electro Wires Ltd.:

The company is engaged in dealing and investments in shares and money lending. The
financial indicators for the last two years are as follows:

(Rs. in lacs)

Particulars 31.03.07 31.03.08

 (Audited (Audited
) )

Turnover/Income 5.98 96.28*

Net Profit 1.49 38.71

TNW 4.30 43.01

*Rs. 92.64 lacs derived from profit on sale of office premises.

Barcley Enterprises Ltd.:

The company is engaged in dealing and investment in shares and money lending. The
financial indicators for the last two years are as follows:

(Rs. in lacs)

Particulars 31.03.07 31.03.08

(Audited (Audited
) )

Turnover/Income 1404.20 9.43

Net Profit - 3.26 - 0.09

TNW 12.65 12.55

Floreat Power Project Ltd.:

The company was formed with a purpose to set up a power plant. The company has
purchased land at Jalpaiguri district of W.Bengal to set up the plant. Originally it was
agricultural land but later it has been converted for industrial use by the Siliguri Jalpaiguri
Development Authority.

Company’s power plant project is yet to be finalised.

6.0 OTHER INFORMATION:

• Dealing and conduct of the account: N.A. Fresh Proposal.

• Documentation - whether verified by Legal Department & whether in order /
enforceable: N.A. Fresh Proposal
• Whether proposed limits are within Bank’s prudential Single Borrower/ Group
exposure norms: Yes
• Pro-rata non-fund based business: N.A. Sole Banking
• Comments regarding utilisation of the limits: Not Applicable
• Comments regarding credit rating - when last done: CRISIL RAM Score, based on
projected financials as on 31.03.11 (Ist year of operation) is as under-
BOB-6, T/Loan : FR5, CR6, C/C: FR3, CR5.

• Justification for the proposed rate of interest: Rate of interest is proposed as

applicable as per credit score under Crisil Ram.
• Inspection of the Unit: No inspection has been carried out at the project site
so far as no construction activity has started yet. Sanction will therefore, be
subjected to inspection at the project site and filing of a satisfactory
inspection report. The inspection will however, be carried out by us shortly.

• Facilities enjoyed by Associate/ Sister Concerns - Health Code/ Asset

Classification / Credit Rating / Reference of last sanction: Not Applicable

(Rs in lacs)

Name of Group Address of Name of Bank & Fund Nun-Fund Remarks

Company the Address Based Based
Company Limit Limit

Doorz Plantations 83, Ripon BOB, Brabourne Road 368.82 20.00 Last review
& Industries Ltd. Street, Branch carried out
Kolkata-16 on 25.07.08
by AGM,
Brab. Rd. Br.

• KYC norms is carried out as under –

 It is an associate concern of M/s. DPIL which is enjoying credit facilities from our
Brabourne Road Branch since long.
 The firm is maintaining current account with our Brabourne Road Branch.
 Inspection is to be carried out at the project site before disbursement of the
facilities.
 However, KYC norms are a continuous process and the same is to be verified /
carried out by the Branch before/ after disbursement of the facilities.

• Whether listed firm: No

• Our Bank’s investment in the Company: Nil

• Our exposure to the captioned Company:

(Rs. In lacs)

C&I / ME Priority Sector International Investments TOTAL

Advance Div.

Existing – Nil Existing – Nil

Proposed – 317.50 Proposed – 317.50

• Contingent liabilities: N.A.

1) Details: N.A.
2) Comments on the possibilities of Crystallisation: N.A.

7.0 JUSTIFICATIONS:

Term Loan:

Total project cost for setting up the tea factory with a production capacity of 7 lacs kgs. of
manufactured tea annually has been estimated at Rs.480.50 lacs. The financing
arrangement has been proposed in the manner that promoters will bring in Rs.323 lacs and
the remaining Rs.157.50 lacs will be financed through bank loan denoting a project debt-
equity of 33:67 which is satisfactory.

The promoters are of satisfactory means and have proposed to bring in their contribution
partly through capital and partly through unsecured loans.

The details of project cost have been estimated by the firm in-house. Since the project cost
is only Rs.4.80 crs TEV study for the project has not been insisted upon.

The promoters have already purchased the land required for the project. An amount of
Rs.30.50 lacs is stated to have already been invested by the promoters for buying the land
and its developments. Different approvals required for the project are under process and
expected to be obtained shortly. The Project is estimated to have a very short gestation
period and is likely to be ready for commercial operation in April, 2010. As per the
projections made by the firm, the project will earn net profit from the very first year of its
operation.
The firm has proposed to repay the term loan in 20 quarterly instalments starting from
quarter ending June’10 and interest on the loan to be paid on monthly basis as and when
charged.

Average DSCR for the project based on the firm’s financial projections for the period upto
31.03.15 has been calculated at 2.98 with minimum of 2.42 and maximum of 3.67.

It may however, be noted that the firm neither has nor propose to have any tea garden of
its own. It also does not propose to enter into any firm agreement/commitment with local
gardens for supply of tealeaf to its factory. As such, the prevailing market forces may affect
the supply and price of green leaf and consequently its financial performance. However, the
promoters are experienced and according to them, production of green tea leaf in Jorhat
District is plenty and no problem is expected to be faced by them for procurement of green
tea leaf for its factory.

Considering the foregoing as also the fact that the present firm is an associate of DPIL, a
valued constituent of our Brabourne Road Branch, we recommend for sanction of a Term
Loan of Rs.157.50 lacs for setting up the proposed tea factory, for a door to door tenure of
5.5 years to be repaid in 20 quarterly instalments starting from quarter ending June, 2010
subject to the promoters bringing their entire contribution upfront.

Cash Credit:

The firm has submitted their projected cash budget for the first year of operation i.e. FY
2010-11 in respect of their revenue flows. The projections and the assumptions on the basis
of which the cash budget has been projected appear to be acceptable. The peak deficit of
Rs.222.39 lacs has been estimated during the month of October in FY11. The C/C limit
requirement of the firm for FY11 has been arrived at Rs.160 lacs as per assessment
furnished in Section II of the proposal. Accordingly, we recommend for sanctioning a cash
credit limit to the maximum extent of Rs.160 lacs for a period of 12 months under the terms
and conditions mentioned in the proposal/Annexure D.

Bank of Baroda

SME Loan Factory, Kolkata

Kolkata - 700001
 Name of the Account Ram Tea Company.

Branch Brabourne Road Branch, Kolkata

Region Kolkata Metro Region

Zone Eastern Zone

SECTION II- FINANCIAL PARAMETERS AND ASSESSMENT

(Rs in lacs)

Financial Parameters Projected Projected Projected Projected Projected Projected

31.10.1 31.3.11 31.3.12 31.3.13 31.3.14 31.3.15

0
a) Balance Sheet Data / 6 mths 12 mths 12 mths 12 mths 12 mths 12 mths

Capital Structure

Paid up Capital 172.36 172.36 172.36 172.36 172.36 172.36

a) Share Capital

Share Premium

Share Application Money

Reserves & Surplus 66.83 30.72 87.13 166.17 260.21 358.59

(Excl. Revaluation Reserves and net of

intangible assets)

Tangible Net Worth (TNW) 239.19 203.08 259.49 338.53 432.57 530.95

Term Liabilities 290.26 253.02 221.52 180.02 138.52 110.64

Capital Employed 529.45 456.10 481.01 518.55 571.09 641.59

Net Block 374.34 350.30 302.42 262.54 229.21 201.25

Funds Invested outside Business + - - - - -

Non current asset

Total Current Assets 393.50 258.80 335.09 415.76 503.88 580.72

Less: Total Current Liabilities 228.39 153.00 156.50 159.75 162.00 140.38

Net Working Capital 165.11 105.80 178.59 256.01 341.88 440.34

b) Operational Data
Gross Sales 320.00 650.00 714.00 753.50 793.50 820.10

Less: Excise Duty / Sale Tax 1.87 2.16 2.16 2.16 2.16 2.16

Net Sales 318.13 647.84 711.84 751.34 791.34 817.94

Of which exports - - - - - -

Other Income - - - - - -

Manufacturing expenses/Direct
Expenses*
183.70 500.48 552.92 573.14 600.22 627.10

Adm. & Selling Expenses # 9.80 16.80 18.00 24.00 30.00 32.00

Misc Exp & Preliminary Expenses - - - - -

W/off

Depreciation 33.66 57.70 47.88 39.88 33.33 27.96

Interest 24.14 42.14 36.63 35.28 33.75 32.50

Profit before Tax (PBT) 66.83 30.72 56.41 79.04 94.04 98.38

Profit After Tax (PAT) 66.83 30.72 56.41 79.04 94.04 98.38

Dividend

c) Profitability Ratio

Net Profit / Net Sales (%) 4.74 7.92 10.52 11.88 12.03

Net Profit / Capital Employed (%) 6.73 11.72 15.24 16.47 15.33

Net Profit / TNW (%) 15.13 21.74 23.35 21.74 18.53

Stock Turnover Ratio (Days) 38 47 53 61 60

Debtors Turnover Ratio (Days) 34 41 51 53 53

Creditors Turnover Ratio (Days) - - - - -

Current Ratio 1.68 1.69 2.14 2.60 3.11 4.14

DE Ratio (TTL / TNW) 1.25 0.85 0.53 0.32 0.21

DE Ratio (TOL / TNW) 2.00 1.46 1.00 0.69 0.47

* Manufacturing expenses includes raw materials, power & fuel, Other manufacturing expenses.
# Adm. & Selling expenses include Sales promotion & publicity, Salaries &
Wages and other administrative expenses
  Details of Funds Invested Outside business / Loans and advances / inter
corporate deposits: Nil.

 Performance of subsidiaries / Group Company if investment is more than

10% of Net worth: N.A.

2.0 COMMENTS ON PERFORMANCE:

Sales:

The factory is scheduled for commercial operations from Apr’10. Based on the assumption
that the factory will reach full capacity utilisation even in the first year of operation,
production of manufactured tea has been estimated at 7 lac kgs in FY11. Average selling
price has been estimated at Rs.100 per kg in FY11 and accordingly sales projected at
Rs.650 lacs for FY11.

Net Profit:

As per the projections, the firm will register net profit in the very first year of operation. An
amount of Rs. 30.72 lacs has been estimated as net profit for FY11. The average cost of
green leaf has been estimated at Rs.14.50 per kg during the first year i.e. FY11. Since the
firm does not own any tea garden and will procure its entire requirement of green leaf from
market, the profitability will depend largely on the availability of green leaf at the estimated
prices from the local tea gardens.

Net Worth:

The partners will bring in capital of Rs.172.36 lacs and will also raise unsecured loans to the
extent of Rs.150.64 lacs to meet the promoter’s contribution of Rs.323 lacs to set up the
proposed factory. Promoter’s contribution is about 67% of the total project cost. TNW as on
31.03.11 has been projected at Rs.203.08 lacs without considering the unsecured loans as
part of the capital. TNW is projected to increase gradually in the subsequent years with the
retention of profit in the business.

Current Ratio:

Current ratio of the firm is projected at 1.69 as on 31.03.11 i.e., the first year-end of
operation. Being a tea factory, the production is estimated to run from the month of April to
the month of December and Jan to March during each year is not expected to have any
production. The firm has projected its peak requirement of fund during the month of
October. As per the projected B/Sheet submitted by the firm as on 31.10.10, the current
ratio is calculated at 1.68. The current ratio is projected to improve further in the
subsequent years with generation of profits and their retention in the business.

Debt Equity Ratio:

TOL/TNW ratio is projected at 2.00 as at the end of the first year of operation. If unsecured
loans to be brought in by promoters and their friends and relatives are treated as quasi
capital, the ratio will appear as 0.79 only as at 31.03.11. The ratio is projected to improve
in the subsequent years with repayment of Term Loan as also due to improvement in TNW
as a result of retained profit.

3.0 ASSESSMENT OF WORKING CAPITAL REQUIREMENT:

The firm has submitted their projected cash budget for the first year of operation i.e. FY
2010-11 in respect of their revenue flows only. The projections and the assumptions on the
basis of which the cash budget has been projected appear to be acceptable. The peak deficit
of Rs.222.39 lacs has been estimated during the month of October in FY11. The C/C limit
requirement of the firm for FY11 may be calculated as follows:

Peak deficit projected in cash budget for FY10-11 Rs. 222.39 lacs

Less, Margin for w.cap proposed to be brought in 62.50

by the promoters*

Cash Credit Limit required 159.89

Limit recommended Rs.160.00 lacs

*peak deficit in the cash budget has been arrived at without showing the cash inflows in
respect of the working capital margin to be brought in by the promoters as per the project
details and hence the fund requirement reduced to that extent.

Margin as such, works out to about 28% and applying the same, month wise limit based on
the cash budget submitted by the firm for FY2010-11 may be worked out as follows:
 (Rs. in lacs)

Month Deficit as projected in Margin C/C limit

Cash Budget for FY11 28%

April 43.59 12.20 31.39

May 85.12 23.83 61.29

June 120.83 33.83 87.00

July 155.63 43.58 112.05

Aug 180.66 50.58 130.08

Sep 207.45 58.09 149.36

Oct 222.39 62.39 160.00

Nov 211.83 59.31 152.52

Dec 179.37 50.22 129.15

Jan 140.95 39.47 101.48

Feb 116.28 32.56 83.72

Mar 115.00 32.20 82.80

Accordingly, we recommend for a cash credit limit to the maximum extent of Rs.160 lacs.
Drawings are however, to be regulated as per the monthly limits as mentioned above based
on the cash budget submitted by the company, subject to availability of drawing powers.

Comments on inventory holding / creditors / debtors level / reasons for accepting

large variance in inventory / creditors / debtors level

Inventory Holding:

Raw materials for the production i.e. green tea leaf are processed as soon as they are
procured and as such, only finished goods have been shown in the projections. The firm has
projected inventory holding at 47 days of purchases as on 31.03.11. However, inventory is
supposed to be at a low level since there will be no manufacturing activity during Jan to
March every year.
Debtors’ Holding:

The firm will sell its products partly through auction and partly through private sale. Holding
of Debtors has been projected at 34 days of Sales as on 31.03.11.

Creditors’ Holding:

The firm has not projected any sundry creditors for purchases as it proposes to make all its
purchases on cash basis.

The above mentioned levels of holding appears reasonable and may be accepted. We have
however, based our assessment on the cash flow projections as this is a tea industry
proposal.

3.1 REQUIREMENT OF OTHER FACILITIES:

Assessment of Term Loan:

Total project cost for setting up the tea factory has been estimated at Rs.480.50 lacs. The
financing arrangement has been proposed in the manner that promoters will bring in Rs.323
lacs and the remaining Rs.157.50 lacs will be financed through bank loan denoting a project
debt-equity of 33:67 which is satisfactory.

The details of project cost have been estimated by the firm in-house. Since the project cost
is only Rs.4.80 crs TEV study for the project has not been insisted upon.

The promoters have already purchased the land required for the project. An amount of
Rs.30.50 lacs is stated to have already been invested by the promoters for buying the land
and its developments. Different approvals required for the project are under process and
expected to be obtained shortly. The Project is estimated to have a very short gestation
period and is likely to be ready for commercial operation in April, 2010.

Details of project cost and the requirement of bank finance are mentioned below:

(Rs. Ln lacs)

Particulars Amount
1 Land alongwith development cost 30.00
.

2 Construction of Building and other civil works 170.00

.

3 Plant & Machineries 169.00

.

4 Electrical equipments 25.00

.

5 Miscellaneous items 14.00

.

6 Margin for working capital * 62.50 *

.

7 Contingencies * 10.00 *
.

Total 480.50

Less, Promoters contribution proposed 323.00

Bank finance required 157.50

Term Loan recommended 157.50

*These items are not available for bank finance.

The firm has proposed to repay the term loan in 20 quarterly instalments starting from
quarter ending June’10 and interest on the loan to be paid on monthly basis as and when
charged.

Average DSCR for the project based on the firm’s financial projections for the period upto
31.03.15 has been calculated at 2.98 with minimum of 2.42 and maximum of 3.67.

Considering the above, we recommend for sanction of a Term Loan of Rs.157.50 lacs for a
door to door tenure of 5.5 years to be repaid in 20 quarterly instalments starting from
quarter ending June, 2010 subject to the promoters bringing their contribution upfront.

3.2 ASSESSMENT OF NON FUND BASED LIMITS: Nil

3.3 Any other matter which in the opinion of Branch / Zone is important to decide
the proposal: Nil
 SECTION III - INDUSTRY PERCEPTION

INDUSTRIAL BUSINESS SCENARIO PERCEPTION:

Tea is the most popular non-intoxicating beverage in the world enjoyed by the rich and poor
alike. Tea drinking was quite common in China as early as the 6th century B.C. For many

centuries, tea drinking remained confined to China, Japan and parts of Central Asia and
China was the sole supplier of tea for a long period of time.

Western nations started importing tea from China only in the 17th century. Restrictions on
trade with China, the subsequent opium wars and the competition for trade with China
between

Britain and Holland led to the introduction of tea in other countries as well. The Dutch set up
tea plantations in Indonesia (which was earlier a Dutch Colony).

Teas are classified into Darjeeling tea, Assam tea, Ceylon Tea, Chinese Tea, Kenyan Tea,
etc. based on the area where the plants are grown. Teas are also classified based on the
manufacturing process, into black, green or white depending on the colour of the liquor.
Black teas can be further classified into orthodox or CTC (crush, tear, curl). Tea grades
have a direct relationship with taste, flavour colour and price as per the following details.
The super premium and premium grades are mainly of the orthodox variety and command a
higher price. The medium and popular grades include the CTC variety. CTC teas offer
approximately 550 cups

per kg. of tea compared to 250 cups per kg. in case of orthodox teas, and hence higher CTC
tea production indirectly increases tea availability.

Tea is a traditional / habitual family drink & the consumption is proportional to the drinking
habit. It is also considered as the welcome drink in many Asian countries.

Branding in the tea business is a means to assure product quality, package weight, aroma,
and consistency. Branding also ensures consumer loyalty like any other consumable
product.

Apart from increasing presence of existing products in the export markets, the promotion of
value added products such as iced tea, flavoured teas, green teas and

organic teas etc. could enable producers to increase average realisations. Promoting the use
of tea bags would result in sufficient supply for the domestic as well as export markets
over the medium to long term as tea bags consume 2 gm. of tea compared to 4-5 gm.
under normal route.

As per the report at ET dated 13/09/2008; Duncan Goenka group, is giving a boost to its
tea products with foray into premium segment and green tea category. The company is also
in talks with the postal department to sell its products. The aim of talking to the postal
department was a part of the company's plans to increase its distribution network by 25 per
cent over the next one year. Besides, its retail outlets, Duncans sells its tea products
through HPCL and BPCL

outlets. It also has an agreement with the Railways, which uses Duncan tea for its
passengers. With the company foraying into the green tea segment, it is aiming for a bigger
pie in the premium tea segment. M/s Duncans has currently around four per cent share
(2.74 lakh tonne) of the total Indian domestic tea market.

As per the report at ET dated 23/08/2008; Tata Tea, which has transformed itself from a
plantation to a beverage company, is looking at more strategic acquisitions, which provide
access to key customer segments and geographies. Currently Tata Tea owns 42 brands and
operates in 45 countries and might consider manufacturing juices in future to expand its
portfolio. Tata Tea is all set to build strong beverage brands for sustainability, address new
emerging opportunities arising from changes in lifestyle through innovative products and

increase share of business in value-added high margin products like speciality, fruit and
herbal teas to shore up revenues.

The country`s tea production in 2007 stood at 945 million kgs as compared to 956

million kgs in 2006. The decline in production was due to the delay in rainfall in Assam

and dry conditions in Kerala. In 2008, we estimate total tea production will be around

963 million kgs. We further expect tea production to touch around 989 million kgs in

2009 as the approximately 40,000 hectares undertaken for new plantings of bushes in

1998 would enter their peak productivity period during the year.

Indian tea exports are forecast to decline due to a fall in the exportable surplus – from

218 million kgs in 2006 exports are expected to fall to 156 million kgs in 2007. Lower

production and rupee appreciation were the other factors that resulted in a drop in

exports from India.

Taking into account the ongoing political crises in Kenya and the presence of droughtlike
conditions, Kenya expects its production to decline by 10 per cent to 335 million

kgs in 2008. As a result, traditional Kenyan export destinations like Pakistan and Egypt

are expected to turn to India to bridge their consumption requirements. This would

result in increased demand for Indian tea. With domestic consumption and exports

outstripping production in 2008, inventories will decline. Hence, we expect the tea

prices to increase by 5-7 per cent during the year.

Government policies

The tea industry is highly regulated and every aspect of the industry is influenced by

government policies, right from raw materials up to the end-product stage. The Tea

Act, 1953 governs the industry and regulates its distribution, planting area and prices;

the National Forest Policy and Land Ceiling Act restrict the availability of land for tea

cultivation, thus limiting production growth.

The Tea Board has undertaken various programmes to boost domestic tea

consumption promote exports and improve plantation yield. Indirectly support has also

been provided by levying a 100 per cent duty on imported tea. A Special Purpose Tea

Fund (SPTF) has been announced for the replantation and rejuvenation of old tea

bushes. Under this scheme, the government aims to replant and rejuvenate 14,000

hectares every year for 15 years. Nevertheless, it is reported that the Tea Board

received only a few applications under the scheme covering, as southern planters did

not participate in the scheme.

The Union Budget 2008-09 has also provided a grant of Rs 200 million to upgrade the

Tocklai Experimental Station at Jorhat, which will enable the industry to improve the

quality of tea.

Extent of competition

Based on their activities, domestic tea companies can be classified into planters,

planters-cum-traders and traders. Most large players were initially planters, who later
diversified into trading of tea in value-added form. Some players such as Hindustan

Lever Ltd are primarily traders who purchase tea at auctions and sell it in a valueadded

form. Strong competition exists among the 300 domestic packaged tea players, few of
whom have national presence.

Regional players pose severe price competition to the organised sector during times of

low auction prices, but such players exit when prices firm up. In the export market, the

Indian tea industry faces intense competition from Sri Lanka and Kenya. Further, its

cost-competitiveness is lower than these countries, due to the relatively older tea

bushes and higher social costs associated with plantations.

As per the statement from ASCROM for sectoral deployment of industry wise credit
as on 31.03.2008 the total exposure to Tea-Coffee Industry is Rs.21.44Cr out of
which credit outstanding of Rs.21.37Cr is classified as standard while balance
amount of Rs.0.07Cr is classified as NPA. Thus the ratio of NPAs to the exposure to
that industry (Rs 0.07Cr / Rs.21.44Cr) as on 31.03.2008 for Tea- Coffee Industry
works out at 0.33% at our Bank.

From the above data; it may be noted that our Bank has accumulated substantial
number of doubtful units in Tea sector indicating our experience as non-
satisfactory as regards tea sector finance.

2.0 STRENGTH, WEAKNESS, OPPORTUNITY & THREATS:

STRENGTH
 Promoters are experienced in tea manufacturing activity.
 Proposed Debt Equity ratio for the project is satisfactory.
 Location of the project is in the major tea producing area of Assam.

WEAKNESS
 The firm does not own any tea garden and as such, totally dependent on
nearby gardens for supply of green leaf which may affect its operations and
profitability in a difficult situation.
 Tea is a cyclical industry and is susceptible to vagaries of nature.

OPPORTUNITY

 Tea is a traditional family drink and its consumption is widespread around the
globe.
THREAT
 Indian tea faces stiff competition from Sri Lanka and Kenya where the cost of
production is low.
 Shrinkage of export market may increase the supply in domestic market and
consequently may bring down the selling prices in the domestic market.

ANNEXURE- D

TERMS & CONDITIONS

Nature of facility Term Loan

Limit Rs.157.50 lacs. (Fresh)

Purpose For setting up a tea factory at Jorhat, Assam with an annual
production capacity of 7 lac kgs of manufactured tea, at a total
project cost of Rs.480.50 lacs.

Period 5.5 years, subject to annual review.

Margin 67% of total project cost.

Interest 0.50% above BPLR i.e.@ 12.50% p.a., at present, with monthly
rests.

(BPLR at present is 12.00%.)

Security 1. First charge on Fixed Assets.

2. Extension of charge over Current Assets of the company.

Repayment Loan to be repaid in 20 quarterly instalments of equal amounts

starting from the end of June, 2010 quarter. Interest on loan to be
repaid on monthly basis as and when charged.

Nature of facility Cash Credit (Hyp of stock & Book debts)

Limit Rs.160.00 lacs. (Fresh)
Purpose For meeting the working capital requirement.
Period -12- months
Margin 25% on stock & book debts (Book debts only upto 90 days to be
considered for calculation of drawing power.
Interest Rate BPLR i.e. 12.00% p.a., at present, with monthly rests.

(BPLR at present is 12.00%).

Security 1. Hypothecation of Stock & Book debts (Book debts only upto 90
days to be considered for calculation of drawing power)
 2. Extension of charge over fixed assets.

Collateral Securities:

Both the above facilities to be further collaterally secured by the following:

1. Corporate Guarantee of M/s.Doorz Plantations & Industries Ltd. (Net worth as on 31.03.08
: Rs.160.23 lacs).

2. Extension of mortgage over Patkapara T.E., valued at Rs.13.50 crs. owned by M/s. Doorz
Plantations & Industries Ltd., which is already mortgaged with our Brabourne Road Branch
for credit facilities to the aggregate extent of Rs.388.82 lacs enjoyed by the company with
them.

CRISIL RATING OF RAM COMPANY

 PHASE-2
CREDIT RISK MANAGEMENT
The New (CRISIL) models and their applicability details are as under:
Sr. No. Model Applicable for Rating of

1. Large Corporate 1. Manufacturing units with

Annual Net Sales of over
Rs. 100 Crore and
Investments in Plant &
Machinery
of Rs.10 Crore & above and
for infrastructure projects
which have started cash
generations from the project
operations with part / full
implementation.
2. Service sector units with net
annual sales over Rs.
100 Crore and / or investment
in equipments of oveRs.5
Crore.

2. SME (Manufacturing Manufacturing units with

Sector) incl. Commercial Annual Net Sales of Rs. 100
Enterprises Crore & below and / or
Investments in Plant &
Machinery less than Rs.10
Crore.

3. SME (Services) Service Sector units with

Annual Net Sales of Rs. 100
Crore & below and / or
Investment in Equipment of
Rs 5 Crore & below.

4. Traders Units engaged in trading

activities irrespective of sales
turnover.

Units engaged in trading 5. Banks Organisations

5. activities irrespective of sales engaged in
 turnover.

6. NBFCs Organisations registered with

RBI / NHB for carrying
out non-banking financial
activity / housing finance
activity.

7. Brokers Entities engaged in broking

business in shares /
securities.

8. Infrastructure (Power) Infrastructure-Power Projects

(Generation &
Distribution) – Build stage i.e.
implementation stage
where cash generation from
the project is not yet started.

9. Infrastructure (Roads & Infrastructure-Roads &

Bridges) Bridges Projects – Build stage
i.e. implementation stage
where cash generation from
the project is not yet started.

10 Infrastructure Infrastructure-Telecom
(Telecom) Projects – Build stage i.e.
implementation stage where
cash generation from the
project is yet not started.

11 Infrastructure (Ports) Infrastructure-Ports Projects –

Build stage implementation
stage where cash generation
from the
project is yet not started.

CREDIT RATING METHODOLOGY

The New CRISIL Rating Models for Commercial Advances are based on two
dimensional
 rating methodology specified under Basel -II Accord requirements. The credit risk rating
process as per New CRISIL Rating Models involves three types of ratings for each
credit
facility viz. 1) Obligor ( Borrower) Rating - for credit worthiness indicating the
Probability
of Default (PD), 2) Facility Rating - representing the Loss Given Default
(LGD) and 3)
Composite Rating - which is indicative of the Expected Loss (EL).

The risk rating flow chart under CRISIL NEW rating models is as
under:

Composite rating

Obligor (Borrower) Rating Facility Risk Rating (indicator of

(indicator of Probability of Default Loss Given Default i.e. LGD)
i.e. PD) Evaluation of Riskiness of
Evaluation of Creditworthiness of a Facility
Obligor (Borrower).

Obligor (Borrower) Rating

1. Industry Risk Project Risk Rating
2. Business Risk 1. Project Implementation
3. Financial Risk 2. Post Implementation
4. Management Risk

Post Project
Implementation
Project Implementation
1. Industry Risk
Risk
2. Business Risk
1.Construction Risk
3. Financial Risk
2. Funding Risk
4. Management Risk
 OBLIGOR (BORROWER) RATING
The obligor (Borrower) rating is indicative of creditworthiness of an obligor or the
Probability of Default (PD) and it is based on the assessment of past and projected cash
flows of the company.
For assessment of an obligor, the rating structure consists of evaluation by way of four
modules viz. 1) Industry Risk, 2) Business Risk, 3) Financial Risk and 4) Management
Quality.
Industry Risk: The assessment of this module which is external to the Borrower and
is
done by assessment of Industry related macro economic parameters like demand
supply gap / capacity utilisation level / financial ratios like ROCE / OPM etc. applicable
to the specific Industry and having different risk weights.
Business Risk: The assessment of this module is based on internal working of the
Borrower and relates to parameters such as after sales service, distribution set up,
capacity utilisation etc. The parameters, which are only relevant to a particular industry,
are selected for scoring having different risk weights.
Financial Risk: The assessment of this module is based on Internal working of the
Borrower and relates to parameters such as past (not in case of a green field /
infrastructure company under implementation stage) and projected financials. The CMA
based data input sheet is uploaded into the software and the same allows computation
of financial rating automatically based on the computation of financial ratios like Net
Profit Margin, Current Ratio, DSCR, Interest Coverage etc.
Management Quality: The assessment of this module is based on internal
working of the Borrower’s management and relates to parameters such as past
repayment record, quality of information submitted, group support etc.

Obligor (Borrower) Rating Grades:

Obligor Rating Grades range from BOB-1 to BOB-10. However depending upon the
model used, the rating grades ranging from BOB-1 to BOB-10 or BOB-3 to BOB-10 or
BOB-6 to BOB -10 are generated as follows:

Sr.No Model Obligor (Borrower) Obligor (Borrower)

Rating Grades

Rating Grades
1.a) For Borrowers under Large Corporate (Mfg BOB-1 to BOB-10 /Services),
Banks, NBFCs and Broker categories.

b) For Borrowers under Infrastructure project having operations phase or expansion /

diversification projects categories.

2. a) For Borrowers under SME (Manufacturing) and SME BOB-3 to BOB-10

(Services) categories.
b) For Existing and New Borrowers under Trader Category.
3. Green Field Project Borrowers under Large Corporate (Mfg / services ) - BOB - 6 to
BOB-10 with project.
SME (Mfg./ Services)- with project and
Infrastructure (Power/ Port/ Road/ Telecom)-Build
Phase categories.

FACILITY RATING
Facility Rating involves assessment of the security coverage for a given facility and
indicates the Loss Given Default (LGD) for a particular facility. Facilities proposed/
sanctioned to a company are assessed separately under this dimension of rating.
Facility Rating (FR) Grades:
Facility Rating grades range from FR-1 to FR-8. The definitions for various facility rating
grades have been stated in ANNEXURE – IB.
VII. COMPOSITE RATING
The Composite Rating (CR) – which is the matrix or the combination of PD and LGD;
indicates the Expected Loss in case the facility is defaulted.
The Composite Rating is worked out automatically by the software based on the matrix
of Obligor (Borrower) Grade (BOB Rating) and Facility Rating Grade (FR) as per details
stated in ANNEXURE I.
Composite Rating Grades:
Composite rating grade ranges from CR-1 to CR-10.
VIII. CUT- OFF GRADE FOR ACCEPTANCE
Bank has accepted BOB-6 as the cut-off point for the acceptance of an obligor
(borrower)
based on Obligor (Borrower) rating carried out as per the applicable model.
The rating models have been grouped in three categories for the purpose of specifying
cutoff
point for the acceptance of an obligor (borrower) as per details mentioned hereunder:
A) Borrowers / Obligors eligible for rating under LCM (Manufacturing
/ Services),
Banks, NBFCs, Broker Models, Infrastructure project under
operations phase
(having started cash generation) and expansion / diversification
projects in case
of existing borrowers:
The past financial data for these categories of borrowers is usually available. The
acceptance grade for these borrowers can be any grade from BOB-1 to BOB-6. BOB-6
having the score range of above 4.25 to 5.00 out of total 10.00 for these categories of
borrowers.
B) For Borrowers / Obligors eligible for rating under SME
(Manufacturing) / SME
(Services) and Traders Models in case of existing borrowers:
The past financial data for these categories of borrowers are usually available. The
acceptance grade for these borrowers can be any grade ranging from BOB-3 to BOB-6.
BOB-6 is having the score range of above 5.00 to 5.75 out of total 10.00 for these
categories of borrowers.It may be noted that for these category of borrowers, the
highest creditworthiness grade works out to be BOB -3.

Obligors (Borrowers) with New Projects eligible for rating under

Infrastructure
(Build Phase) / and Green Field Projects (LCM / SME):
The past financial performance data in respect of these categories of borrowers are
NOT available and only future projections are available. These Borrowers are initially
rated under the Project Risk Rating and assigned rating grades from BOBPR -1 to
BOBPR –5 and subsequently converted into common obligor (Borrower) rating grade
from BOB-6 to BOB –10 automatically. Thus, BOBPR –1 is equivalent to BOB-6 and
BOBPR-5 is equivalent toBOB -10. In other words, BOBPR-1 under project rating is the
only investment grade being equivalent to obligor / Borrower rating scale of BOB –6.
Applicable scenario for these categories of Borrowers are as under:

Model From To Highest Grade Common

Score Score Score Scale

LCM (Green Above 5.00 5.00 BOBPR -1 BOB-6

Field) 4.5
LCM (Service
Sector)

SME (Mfg / Above 8.00 8.00 BOBPR -1 BOB-6

Ser)- 7.00
(Green Field)

nfrastructure Above 5.00 5.00 BOBPR -1 BOB-6

(Power 4.5
/ Port / Road /
Telecom) –
Built Phase

PRICING
The composite Rating or the Combined Rating (CR-1 to CR-10) is computed on the
basis of matrix of Obligor Rating for credit worthiness and the Facility Rating
representing the expected loss in case of default. This loss has to be recovered from
the borrower by way of risk premium over the BPLR. For the purpose of fixing of rate of
interest the mapping of existing (AAIPL Models) rating grades with the CRISIL Rating
Models is as under:

Grade Nature of Definition of Rate Of Interest

No Grade Composite / (ROI) for
Combined Grades Borrowers to be
mapped with
Existing Ratings
as under

I CR-1 Minimum (Lowest) AAA

Expected Loss

II CR-2 Lower Expected Loss AA

III CR-3 Low Expected Loss A / BBB

IV CR-4 Reasonable Expected BB

Loss

V CR-5 Adequate Coverable B

Expected Loss

VI CR-6 Moderate Expected C

Loss
VII CR-7 Extra Expected Loss C

VIII CR-8 High Probability of D

Loss

IX CR-9 High Probability of D

Loss

X CR-10 Highest Expected D

Loss

Discretionary Lending Powers for Sanction / Review:

per our Loan Policy 2005, credit rating based Discretionary Lending Powers
been assigned to various authorities for export credit proposals as well as non-
 credit proposals. While continuing all existing stipulations relating to lending powers
sanction / review of the credit facilities, the corresponding Discretionary Lending
under New CRISIL Rating Models will be as under:

i) Latest Credit Rating as per new (CRISIL) 125% of normal

Model lending powers
: BOB -1/ BOB –2/ BOB -

ii) Latest Credit Rating as per new (CRISIL) 100% of normal

Rating Model lending powers
:BOB–4/ BOB–5/ BOB-6.

iii) Latest Credit Rating as per new (CRISIL) 75% of normal

Rating Model lending powers
(Not more than one year old): BOB–7/ BOB-8/
BOB-9/ BOB-10.

Inspection of Securities:
As per our Loan Policy 2005, periodicity of the inspection of securities on the basis of
latest
credit rating has been stipulated. The periodicity of inspection of securities based on
New
(CRISIL) Ratings has been decided as under

a) Prime securities charges for working capital: Periodicity of Inspection

Latest Credit Rating: BOB–1/ BOB–2/ BOB-3 Half-yearly basis.

Latest Credit Rating: BOB –4/ BOB - 5 Quarterly basis.

Latest Credit Rating: BOB – 6 & below Bi-monthly

b) Fixed Assets (Charged against Demand/Term Half-yearly i.e. as of

Loan/DPG) January and July

c) Under consortium arrangement As per periodicity fixed

. by the consortium

Rating based exposure Ceilings:

As per our Loan Policy 2005, credit rating based single borrower exposure limit with
certain
percentage of the total capital funds for different grades have been stipulated.
Accordingly,
the exposure ceilings under the new (CRISIL) rating grades are as under:

Credit Rating of the Maximum single Maximum single

account as borrower exposure borrower exposure
per New (CRISIL) Rating ceiling (other than ceiling for
Model infrastructure projects) infrastructure projects

BOB-1/ BOB-2/ BOB-3/ BOB- 15% of capital fund 20% of capital fund
4

BOB–5/ BOB-6 12.5% of capital fund 17.5% of capital fund

Below BOB-6 10% of capital fund 15% of capital fund

STEPS INVOLVED IN CARRYING OUT THE CREDIT RATING OF

COMMERCIAL
ADVANCES:
Step 1: Selection of Appropriate Model
Based on the criteria narrated in the table at Para 2 above, the applicable model is to be
selected for rating exercise.
Step 2: Data Sheet Preparation (off-line mode)
Having selected one of the applicable models for the rating purpose, only the prescribed
CMA data based input sheet and / or project profitability data input sheet downloaded
from
Bank’s INTRANET or provided through Compact Disc (CD) during the training is to be
used.
This sheet is to be filled in by the credit officers in the off-line mode after due diligence
of
the CMA / Project financials etc by the appropriate authority, for that particular borrower.
Please note that only the prescribed data input sheet has to be used for the purpose of
data
entry and subsequent uploading during the rating process. Any other data input sheet
except the one as stated above is not suitable for uploading during the rating process.
Step 3: Rating Exercise
1. The server is available on INTERNET site with the IP address:
http://61.14.42.65/crisilram.
2. Use the login name and password allotted by the IT Officer / Risk Officer at Regional
Office / Zonal office to enter the rating pages as explained at Para XV –(a).
3. Detailed methodology for the rating process has been released by way of circular
No. BCC/RM/CRC/98/12 dated 01/03/2006. The said circular also contains the
manual for operating instructions (OMRAM06) – a PDF file. A hard copy of the above
stated operating manual, which contains step-by-step instructions for carrying out the
rating process, may be kept at the branch / regional / zonal office as a reference
booklet for the rating process.
4. A credit officer is supposed to have done prior study of company’s operations and
should have analysed rating parameters which are to be rated / scored for that
particular company under different modules. Prior study is essential, as the allotted
score for a particular parameter has to be supported with proper justification at the
space provided for the said purpose on the computer screen.
.
5. Other data input requirements for rating of different modules under obligor rating
is
already made available as under:
_ Rating of Industry Risk Score (except for SME / trading) – The credit rating
officer has to select the relevant industry sub sector at the activity page during
the rating process. Industry Risk score for all applicable parameters are
already uploaded on the server for all –118- industry sub sectors and the
same is automatically filled in for the selected industry sub sector at the
industry risk module during the rating process. The credit risk rating officer or
the validator will not be able to change the industry risk score.
_ Rating of Industry Risk Score (for SME / trading) – The credit Rating officer
has to carry out the rating of all parameters after selecting the dependent
industry and the risk scores under various parameters are not made available
as in the case of other models.
_ Financial Risk Assessment: Data sheet for that particular borrower (refer
step 2 above) is to be uploaded at appropriate prompt (Please refer the
OMRAM06 which is a step-by-step guide for this process). While most of the
parameters are scored automatically, only certain subjective parameters like
comments on Obligor’s (Borrower’s) ability to raise debt / equity etc. are
required to be scored with proper justification.
_ Business Risk / Management Quality Risk assessment: Necessary
information / data input required by way of Industry Profiles/ Updates etc. is
already circulated as well as uploaded on INTRANET at the Risk
Management page. Please note that only the parameters relevant to the
industry of operations of the Obligor (Borrower) are automatically made
available for scoring. The other subjective parameters are required to be
scored by credit officer with proper justification. Please refer the relevant
Model booklet for explanation on all types of parameters under four modules
for scoring).
Step 4: Facility Rating:
After completing the obligor rating as above, facility rating is to be carried out.
For this purpose, the security value is to be appropriated first against the
respective facilities and thereafter the excess security over the outstanding
amount of facility enjoyed is to be worked out. This excess security is
distributed over the remaining facilities in proportion to the availment. This
methodology is explained at with the help of two cases viz. 1.
Review of existing facilities (sole Banking), 2. Review with increase / additional
facilities (sole Banking).
The Limit amount of each of the facilities considered / under consideration and
the amount of securities, existing/ proposed, are to be worked out by above
stated method by allocation of excess security and then filled in at appropriate
pages during the facility rating process as the case may be. After filling up the
data as stated above the facility rating, separate for each facility, is
automatically worked out by the system.
Step 5: Composite Rating (CR Rating):
This rating is automatically worked out, once the obligor rating and the facility
rating are in place.
With the completion of above five steps, the credit risk rating process is over.
Step 6: Submission of the credit rating to the Validator:
The credit rating officer is required to comply with the following steps:
1. Get -2- hard copy print outs of the “Interim Company Report” from the reports
section in the on-line mode. The relevant PDF file for “Interim Company
Report” has also to be saved in the system by the credit rating officer on his
computer for any reference.
2. One copy of the above stated “Interim Company Report” is to be sent to the
appropriate validator (Refer point No.1 of step –7). A credit officer has also to
submit the hard copies of the financial data (audited or provisional) along with
the relevant records, which have been used during the risk rating process to
the validator for further processing. The second copy of the “Interim Company
Report” has to be kept by the credit rating officer for records.
3. Credit risk rating done on software has to be submitted online to the validator
(located at the office of sanctioning authority) for further processing
4. Whenever a proposal for certain credit facilities is submitted to the sanctioning
authority, one hard copy of the latest validated ‘Interim Company Report’
received from the validator is required to be sent to the sanctioning authority.
Step 7: Validation
The validator is required to comply with the following steps:
1. The validator is required to validate the credit risk rating based on the financial
data (audited or provisional) & other relevant records, which have been used
during the credit risk rating process by the rating officer. However, all proposals
falling under the powers of branch Manager are to be validated at Regional Office
Level or the reporting authority level as the case may be.
2. After due validation, the validator is required to take out -3- hard copy print outs of
the ‘Interim Company Report’ and send one copy to the credit rating officer, the
other copy to the sanctioning authority and the third copy may be kept on records.
3. Validator is required to submit the validated credit rating to the appropriate
sanctioning authority through the system.
With the completion of seven steps as described above, the credit risk rating and
validation process stands completed.
Step 8: Submission of Validated Credit Risk Rating Report and other
MIS Reports to
the Sanctioning Authority
The sanctioning authority has no role during the process of credit risk rating as also
during the process of validation.
After the completion of validation process, the concerned credit officer at the office of
sanctioning authority will receive a hard copy of the validated rating from the
validator as also a soft copy through the system. A copy of the validated rating report
is to be attached to the proposal.
The following reports could also be generated through the system.
1. Company Comparison Report
2. Financial Reports (All Labels) viz. CMA financials, Project Financials, Ratios
3. MIS reports like ASCROM Industry wise, Borrower group wise etc. as desired
by the authority.
4. Strengths & Weaknesses Report
The print out of the above reports may be taken if needed.
XVIII. Effective date Of Implementation:
1. The use of –11- no. of New (CRISIL) rating models for the rating of commercial
advances (existing and New) from Rs.25 Lacs and above (FB + NFB) has been
decided to commence with the assessment of credit risk rating based on audited
financials as on 31st March 2006 onwards.
2. The use of existing two models (viz. Smaller and Comprehensive) of M/s AAIPL is
now discontinued. All single party commercial exposures below Rs.25 Lacs will
continue to be rated under Old (Scoring Card) type model as per the existing
guidelines.
3. The credit risk rating of all commercial advance accounts from Rs.25 Lacs and
above (FB + NFB) will have to be carried out annually / bi-annually (for exposures
above Rs.5 Cr) as per the extant guidelines using the New (CRISIL) models.
4. The first of such exercises would be based on the audited balance sheet data as on
31/03/2006.
5. Branches are advised to note that all commercial advance accounts with an
exposure of Rs.5 Crore and above (FB + NFB) are to be rated and validated using
the New (CRISIL) Model (on the basis of financial statements for the FY ended
31.03.2006) before 31/03/2007 and all commercial advance accounts with an
exposure of Rs.25 Lacs and above (FB + NFB) have to be rated and validated
using the New (CRISIL) Model before 30/06/2007 (on the basis of financial
statements for the FY ended 31.03.2006), even if the same account have been rated
and validated by using the AAIPL Models.
Facility Risk Rating is based on the Basel approach for the
calculation of Loss
Given Default (LGD). The final Facility Rating Grade is assigned on
the basis of
the % Effective LGD for each facility.
The facility risk-rating model allows the incorporation of details with respect to the
facility for individual transaction and calculates a score based on the security
assessment.
The details to be incorporated at the relevant screen during facility risk rating are as
follows: -
Case No.1: Review of existing facilities (sole Banking)
Consider that a company is enjoying various credit facilities sanctioned by
appropriate authority with security taken against each facility with a proviso to charge
excess security, if any to secure other facilities as follows:

Sr. Type Of Limit Nature Of Value of

No. Facility Outstanding Security legally
as on the enforceable
date of Security as
assessment per
or the latest
audited valuation
balance report.
sheet as the (Amt Rs. In
case Lacs)
may be
(Amt Rs in
Lacs)

EXISTING
FACILITIES
1 Term Loan – 5000 Land, Building, 7500
Plant &
Machinery

2 CC (Hyp. Of 7500 Raw Materials, 12500

stocks) W.I.P., Finished
goods
Now, after allocation of the security fully for the primary facility, extra securities
available, if any; are to be distributed on balance facilities in proportion of their
sanctioned amounts.
In the above case, the same works out as under: -
1. Security allocation for facility No.1 (Term Loan No.1) = 5000 + Excess
Security from Facility No.2 (CC Hyp Of Stocks) = (12500 – 7500) = 5000
*100%
Total = 5000 + 5000 = 10,000
2. Security allocation for facility No.2 (CC Hyp Of Stocks) = 7500+ Excess
Security from Facility No.1 (7500 – 5000) = 2500*100%= 2500
Total = 7500 + 2500 = 10,000

Case No. 2: Review with increase / additional facilities (sole

Banking)
Consider that a company is enjoying various credit facilities sanctioned by
appropriate authority with security taken against each facility with a proviso to charge
excess security, if any to secure other facilities as follows. The Borrower has now
requested for additional facilities as under:

Facilit Type Of Limit Nature Of Value of

y No. Facility Outstanding Security legally
as enforceable
on the date Security as
of per the
assessment latest
or valuation
audited report. (Amt
balance Rs. In Lacs)
sheet as the
case may be
(Amt Rs in
Lacs)
1 Term Loan – 5000 Land, Building, 7500
1 Plant &
(TL –1) Machinery

2 CC (Hyp. Of 7500 Raw Materials, 12500

stocks) – 1 W.I.P., Finished
(CC –1) goods

3 Term Loan – 10000 Land, Building, 15000

2 Plant &
(TL – 2) Machinery

4 CC (Hyp. Of 15000 Raw Materials, 20000

stocks) – 2 W.I.P., Finished
(CC –2) goods

Now, after allocation of the security fully for the primary facility, extra securities
available, if any; are to be distributed on balance facilities in proportion of their
sanctioned amounts.
In the above case, the same works out as under: -
A) The Security Computation for Facility No.1 (Term Loan -1 / TL -1 = Rs 5000Lacs)
is as follows: -
A. Main Security available = 5000
Excess Security = 7500 – 5000 = 2500
This extra security is for distribution over balance -3- facilities Viz. CC -1, TL-2
and CC-2 as follows:-
1. Extra security available for CC-1: 2500 * (7500 / 7500+ 10000+15000)
=576.93
2. Extra security available for TL-2 : 2500 * (10000 / 7500+ 10000+15000)
=769.23
3. Extra security available for CC- 2: 2500 * (15000 / 7500+ 10000+15000) =
1153.85
B) The Security Computation for Facility No. 2 (CC (Hyp) / CC -1 = Rs 7500Lacs) is
as follows:-
B. Main Security available = 7500
Excess Security = 12500 – 7500 = 5000
This extra security is for distribution over balance -3- facilities Viz. TL -1, TL-2
and CC-2 as follows:-
1. Extra security available for TL-1: 5000 * (5000 / 5000 + 10000+15000) =
833.33
2. Extra security available for TL-2 : 5000 * (10000 /5000 + 10000+15000)
=1666.67
3. Extra security available for CC- 2: 5000 * (15000 /5000 + 10000+15000) =
2500
C) The Security Computation for Facility No. 3 (Term Loan - 2 / TL -2 = Rs
10000Lacs) is as follows:-
C. Main Security available = 10000
Excess Security = 15000 – 10000 = 5000
This extra security is for distribution over balance -3- facilities Viz. TL -1, CC -1
and CC-2 as follows:-
1. Extra security available for TL-1: 5000 * (5000 / 5000 + 7500 +15000) =
909.09
2. Extra security available for CC -1: 5000 * (7500 / 5000 + 7500 +15000) =
1363.63
3. Extra security available for CC- 2: 5000 * (15000 / 5000 + 7500 +15000) =
2727.27
D) The Security Computation for Facility No. 4 (CC (Hyp) -2 / CC -2 = Rs 15000Lacs)
is as follows:-
D. Main Security available = 15000
Excess Security = 20000 –15000 = 5000
This extra security is for distribution over balance -3- facilities Viz. TL -1, CC -1
and TL-2 as follows:-
1. Extra security available for TL -1: 5000 * (5000 / 5000+ 7500+ 10000) =
1111.11
2. Extra security available for CC - 1: 5000 * (7500 / 5000+ 7500+ 10000) =
1666.67
3. Extra security available for TL - 2: 5000 * (10000 / 5000 + 7500+ 10000) =
2222.23
Final Security Coverage for Facility No.1
= Main security coverage + excess allocation from other facilities (No2 / No.3 / No. 4)
= 5000 + 833.33 + 909.09 + 1111.11
= 7853.53 (This amount is to be filled in as security for facility
No.1i.e. TL -1)
Final Security Coverage for Facility No.2
= Main security coverage + excess allocation from other facilities (No1 / No.3 / No. 4)
= 7500 + 576.93 + 1363.63 + 1666.67
= 11107.23 (This amount is to be filled in as security for facility No.2
i.e. CC -1)
Final Security Coverage for Facility No.3
= Main security coverage + excess allocation from other facilities (No1 / No.2 / No. 4)
= 10000 + 769.23 + 1666.67 + 2222.23
= 14658.13 (This amount is to be filled in as security for facility No.3
i.e. TL - 2)
Final Security Coverage for Facility No.4
= Main security coverage + excess allocation from other facilities (No1 / No.2 / No. 3)
= 15000 + 1153.85 + 2500 + 2727.27
= 21381.12 (This amount is to be filled in as security for facility No.
4 i.e. CC -2)
Notes:
1. In case of consortium advances; portion relating to our Bank’s share towards
exposure / security is to be considered.
2. Security common for all facilities is to be distributed on all facilities in
proportion of their sanctioned amounts.

PHASE -3
Under this phase a survey was conducted to find out the requirements of SME’s and what are
their expectations from bank. A survey of around 50 Small and Medium Enterprises was done in
Kolkata. And the result showed that in Kolkata still public banks have an edge over the private
banks. Public banks like Bank Of Baroda are still considered reliable and trustworthy as
compared to the private banks.

The reasons can be public banks offer a lower rate of interest as compared to the private banks
and they have government in support of them so in case of any financial distress there are hardly
any chances of any loses.

The main objective of the survey was to find out what does SME’s prefers Private Banks or
Public Banks. What factors do these companies takes into consideration while asking for a loan.
Who meets their requirement better? Which bank offers a lower rate of interest? Whom these
small companies trust as reliable banks?

Types of Banks followed

Public banks 30

Private banks 7

Financial Institutions 5

Foreign banks 8
Type of business.
This is an important task to know in wnich business a firm in dealing in for example a firm
dealing in plant and machinery business will require a lot of funds as compared to a
manufacturing business and also it is important to kniow whether the firm is privately owned, or
it is a partner ship firm, or it is a sole proprietorship or a H.U.F. according to the survey 20 put of
the 50 companies were sole proprietorship(i.e 40%). The reason for this is there were many tiny
industries which requires small capital for starting up of a business.

Type of business

Private Ltd 6

Partnership business 12

Sole proprietorship 20

Public Ltd 5

H.U.F 7

Out the 50 companies surveyed a majority of them were sole proprietorship firms second to
Partnership firms. Almost 40% of the compapnies were sole proprietorship
Credit facilities provided by the bank
This is one of the most important factor that a company looks for while going for a loan .
However the survey showed that most of the SME’s were goin for the term loan facilities
provided by the bank and along with the cash credit facilities which most of the banks offer. It is
often seen that companies ask for a long term source of finance in form of a term loan.

credit facilities provided by the

bank

overdraft 13

cash credit 15

term loan 19

others 3

Out of the 50 companies surveyed a majority of companies said that they opt for term loan as
compared to any other service provided by the bank. The second preference was given to cash
credit facility provided by the bank.
Export and Import facilities provided by the bank.
Since with the growing up of the economy SME’s are encouraged to do more and more of
exports. Banks are given guidelines by the RBI to promote export of these SME’s, so the export
and import facilities provided by banks to the banks not strict and any company can easily avail
the facilties provided by the banks like letter of credit, bank guarantee, bill discount etc.

Export and Import facilities

provided by the bank

Letter of credit 24

Preshipment finance 3

Postshipment finance 1

Bank guarantee 12

Bill discounted 10

However the survey showed that the letter of credit are the main facility used by banks these
days. A major portion of the companies surveyed uses letter of credit as an effective means of
trade.

Nature of collateral securities provided

The collateral securities provided by the companies in exchange for the loan or the financing
provided by the banks. These collaterals maily includes commercial properties of the person
seeking loan in addition to the commercial properties the banks often go for the residential
properties of the company owner. All the collateral securities are valued by the government
approved valuers and after valuation loans are provided to the customers at 90% of the vales of
the collateral.

Nature of collateral securities provided

Residential 16

Commercial 20

Semi-commercial 10

Term deposits/liquid securities 4

N.A 0
Processing time for the loan
This is another factor which companies consider while taking loans. Comapanies ussually to get
loans as fast as possible but due to the banking services prevalent in India the average processing
period is around 30 days or more than that.

processing time for a loan

7-15 days 0

8-15 days 6

16-21 days 12

21 days or more 32
Our survey showed that the loan processing time stretches over 21 days or more. But after
survey it showed that the average time goes upto 30 days or more than that.

CONCLUSION
RECOMMENDATION
Proposals in BOB SMELF ,Kolkata comes from branch ,and half of the
information is missing and hence it takes lot of time by SMELF officers to gather
information from client and branch office. Information should be provided on time
in order to increase the speed of sanctioning and also proper training on credit
should be given to branch employee’s

In SMELF,Kolkata there is a huge drawback of shortage of labour .There is a

huge gap between number of proposals and manpower .Hence should increase the
manpower.

Among the proposals received by SMELF,Kolkata most of them are of trading

rather than SME,hence more advertisement should be done by SMELF,BOB.

In branch we have 4i post and review where as in SMELF we have 6i

processing,review,sanctioning hence is a lengthy process .Due to overburden
mistakes can be done.Hence the pocess of appraisal should be shortened and
repeatation should be decreased.

Maximum SME are found in rural area and still people in rural area depend on
illegal money lenders for loan and pay a huge amount of interest.Hence awareness
must be created about SMELF in rural area.This would benefit in two way as it
will increase the profit of SMELF, BoB as maximum business will be obtained
from there and will also prevent protect people from greedy money lenders..

ANNEXURE1A,B
 PG 13,14

ANNEXURE PG19
 Questionnaire
(Your response will be used for educational purpose only)
1) Name

2)

3) Sector to which the company belongs-

4) Designation of the respondent-

5) Type of business- (please tick )

Sole proprietorship Private Ltd

 Partnership Public Ltd

H.U.F

6) Year since commencement of business-

Less than 3 Years 3-5 Years

6-10 Years More than 10 Years

7) What is the turnover of your business-

1-3 Crores 4-10 Crores

11-20 Crores 21-30 Crores

7) Who are your Major competitors--

A.

B.

C.

8) Which would you prefer for financing your business activities --

PSU Bank Private Bank

Financial Institution Foreign Bank

9) Principal bank you are banking with--

10) Credit facilities provided by the bank--

Overdraft Cash Credit

Term Loan Others

11) Export/Import facilities provided by the bank--

L.C Pre-shipment finance

Bank Guarantee Post-shipment finance

Bill discounted Other

12) Amount of loan Availed/Required--

Less than 25 Lac 25Lac-1Cr

1Cr-2.6 Cr More than 2.6 Cr

13) Nature of collateral securities provided--

Residential Industrial

Commercial Semi-commercial

Term deposits/liquid securities N.A

14) Margin provided for the loan--

1-25% 25-50%

51-75% 76-100%

N.A

15) Interest charged for the loan (approx)-

16) Processing time for loan-

 1-7 days 8-15 days

16-21 days More than 21 days

17) Who influence your choice of loan-

C.A Syndicate/Brokers

Friends Proprietor/Partner

Other

18) Rank the factors according to your priority from (1-5) which have impact in

availing bank finance- ( 1- Very Important, 2- Somewhat Important,

3- Moderately Important, 4- Not So Important, 5- Least Important)

 Factors Priority

Nearness to business place

Interest rate charged

Processing time for loan

Collateral margin provided for loan

Nature of collateral secirities

SHRI KRISHNA TEA CO EXAMPLE OF FRESH A/C