Kotak WC_ Dakshay

8/18/2019 Kotak WC_ Dakshay

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Chapter 1

Introduction

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1.1 MEANING

Credit appraisal is an investigation/assessment done by the bank prior to providing any loans

& advances. It involves checking the commercial, financial & technical viability of the

project proposed its funding pattern & further checks the primary & collateral security cover

available for recovery of such funds. It involves obtaining the credit information of the client

and critically evaluating it to come to a decision.

The objective is to understand measure and manage the credit risk and aims at ensuring

sustained growth of healthy loan portfolio while dispensing the credit and managing the risk.

Credit isk !anagement, most of the banks "if not all# are found performing several

activities like Industry study, periodic credit calls, periodic plant visits, developing !I$, risk

scoring and annual review of accounts

It is generally carried out by the financial institutions which are involved in providing

financial funding to its customers. The credit managers of the financial institutions are duty

bound to accept or reject a proposal on the basis of its viability or non % viability.

1.2 SCOPE OF THE STUDY:

The Credit appraisal is a holistic eercise which starts from the time a prospective borrower

walks into the branch and culminates in credit delivery and monitoring with the objective of

ensuring and maintaining the 'uality of lending and managing credit risk. The project helps

to understand give an eact view of the evaluation process followed in the bank and thus

helps in reducing the processing time and without any compromise on the risk involved in it.

1.3 OVEVIE! OF THE PO"ECT

This project is a study to understand the concept of credit appraisal process adopted by (otak

!ahindra )ank. The process is analy*ed with the help of secondary data available during the

course of time. The process is understood with the help of case analysis done for financing

the working capital re'uirement of a company. This has been done by evaluating and

analy*ing the documents provided by the company to bank. Internal credit risk rating is also

covered to know the parameters on the basis of which the client is assessed and scored by the

bank in order to accept or reject a particular proposal.

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Chapter 2

Indu#tr$ Pro%i&'

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2.1 INDUSTY POFI(E

The core operating income of a bank is interest income "comprises +%- in the total

income of almost all Indian )anks#. )esides interest income, a bank also generates fee%based

income in the form of commissions and echange, income from treasury operations and other

income from other banking activities. s banks were assigned a special role in the economic

development of the country, )I has stipulated that a portion of bank lending should be for

the development of under%banked and under%privileged sections, which is called the priority

sector. Current rules stipulate that domestic banks should lend 01 and the foreign banks

should lend 23 of their net credit to the priority sector.

4e know that in order to better manage our financial life5 we should have both a checkingand savings account at a minimum. 4e also know their services are similar across the board

for most banks. $ome of these services include6

ccepting deposits

!aking auto, home, and business loans

eporting what you paid and earned

Issuing credit cards

7nline bill payment

8roviding investments

The list can go on and on, but those are basic things most banks will offer. 9owever, what

vary from bank to bank are the terms and conditions. That is why everyone should consider

their uni'ue needs and then select the bank that best meets those needs.

Comparing :our Choices

There are national, regional, and local community banks around the country. These banks are

further categori*ed into the following segments6

Commercial )anks

$avings & ;oans "$&C#

Credit irtual "7nline# )anks

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Co))'rci*& +*n,#

Commercial )anks serve both individuals and businesses. They typically have multiple, well%

located branches throughout a region, and offer broad range of services. ?eposits are =?IC%

insured up to @A11,111 per type of depositorBs account. The only con is that fees at these banks can be the highest.

S*-in# *nd (o*n# +*n,# /S0(

$&; banks tend to have lower fees than commercial banks. In some cases, service can be

better due to the lower number of clients at the especially smaller banks. !ost are =?IC%

insured. The only con would be that they sometimes re'uire you inform them of a withdrawal

you intend to make. They often have fewer branches5 therefore you can rack up lots of T!fees for using non%partner banks.

Cr'dit Union#

Credit irtual )anks are all online, thus there are no branches. In many cases, they donBt even send

paper statements. Clients are emailed their monthly statements to view or print from online.

They are =?IC%insured. They have started to lose some of their appeal as many commercial

banks and even credit unions offer A11 percent online banking. The primary con here is that

there are a limited number of T! machines. Thus, if clients canBt find partner T!s they

can pay lots of money annually in T! fees.

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Chapter 3

Co)*n$ Pro%i&'

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3.1 COMPANY POFI(E

(otak !ahindra )ank is the fourth largest Indian private sector bank by market

capitali*ation, head'uartered in !umbai, !aharashtra. The bankBs registered office

"head'uarters# is located at 3+)(C, )andra (urla Comple, )andra ast, !umbai,

!aharashtra, India.

In =ebruary 3112, (otak !ahindra =inance ;td, the groupDs flagship company was given the

license to carry on banking business by the eserve )ank of India ")I#. (otak !ahindra

=inance ;td. is the first company in the Indian banking history to convert to a bank.

s on $eptember 21, 31A0, (otak !ahindra )ank has over E0A branches and over A,AF

T!s spread across 2E2 locations in the country. The bank, before merger with IGH >ysya

had around 3F,111 employees.

(otak !ahindra group, established in AF- by


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AFF

3nters the funds syndication business

AFF

Commenced joint venture with Holdman $achs Hroup Inc.

Investment )anking division incorporated into a separate company % (otak !ahindra Capital Company

AFF

E

The auto finance business is hived off into a separate company % (otak !ahindra

8rime ;imited "formerly known as (otak !ahindra 8rimus ;imited#.

(otak !ahindra takes a significant stake in =ord Credit (otak !ahindra ;imited,

for financing =ord vehicles.

AFF

-

;aunches mutual fund through (otak !ahindra sset !anagement Company

"(!!C#.

311

1(otak $ecurities launches online broking business "now www.kotaksecurities.com.

311

A

;aunches insurance business, partners 7ld !utual from $outh frica to form (otak

!ahindra 7ld !utual ;ife Insurance ;td.

311

2

(otak !ahindra =inance ;td. "(!=;#, the groupDs flagship company, receives

banking license from the eserve )ank of India ")I#. 4ith this, (!=; becomes

the first non%banking finance company to be converted into a commercial bank %

(otak !ahindra )ank ;td.311

0nters alternate assets business with the launch of a private e'uity fund.

311

(otak !ahindra Hroup realigns joint venture in =ord Credit5 takes A11 ownership

of (otak !ahindra 8rime "formerly known as (otak !ahindra 8rimus ;imited# and

sells its stake in =ord credit !ahindra to =ord.

311

;aunches a real estate fund

311

E

)uys out Holdman $achsD e'uity stake in (otak !ahindra Capital Company and

(otak $ecurities ;td.

311

-;aunched a 8ension =und under IndiaDs Gational 8ension $ystem "G8$#

311

F

(otak !ahindra )ank ;td. opens a representative office in ?ubai

(otak !ahindra )ank ;td. becomes anchor investor in hmedabad Commodities

change "C#

31A IGH >ysya )ank has merged with (otak !ahindra )ank with effect from pril A,

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http://en.wikipedia.org/wiki/Old_Mutualhttp://en.wikipedia.org/wiki/Old_Mutualhttp://en.wikipedia.org/wiki/Kotak_Life_Insurancehttp://en.wikipedia.org/wiki/Kotak_Life_Insurancehttp://en.wikipedia.org/wiki/Kotak_Life_Insurancehttp://en.wikipedia.org/wiki/Goldman_Sachshttp://en.wikipedia.org/wiki/Goldman_Sachshttp://en.wikipedia.org/wiki/ING_Vysya_Bankhttp://en.wikipedia.org/wiki/Kotak_Life_Insurancehttp://en.wikipedia.org/wiki/Kotak_Life_Insurancehttp://en.wikipedia.org/wiki/Goldman_Sachshttp://en.wikipedia.org/wiki/ING_Vysya_Bankhttp://en.wikipedia.org/wiki/Old_Mutual


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31A.

T*&' 3.1: Ti)'&in' o% 4M+(

M'r'r 5it6 ING V$#$* +*n,

In 31A, (otak )ank ac'uired IGH >ysya )ank for a deal valued at ₹A111 crore

"ysya )ank will own + share in (otak !ahindra )ank.

+*c,round

(!); was converted into a commercial )ank from a non‐ banking financial company in 311

2.It is one of IndiaBs leading providers of financial services.

The )ank services its customerBs base through its network of 30F retail branches and over

0F+ T!s across A0 locations in the country. The )ank is also engaged in investment

banking, e'uity broking, securities%based lending, and car finance through its subsidiaries. s

on march 2A, 31A1, (!); had a Tier I capital ade'uacy ratio "C# of A.0 while overall

C of A-.0 while the )anks net worth stood at s. +F.- billons. (!); sold a 0. stake

in the )ank to $!)C in ugust 31A15 this has added s. A2.EE billon to its net worth .(!);

has healthy earnings profile given the different types of business that it operates. The )ankDs

gross spreads are higher than the industry average as it operates primarily in the higher yield

retails and mid‐corporate segments.

It has a high fee income level contributed mainly by its broking and investment banking

business. In the e'uity broking business, (!); is among the top e'uity brokers, with a

market share of 0 with A3-A offices across 02 towns. The )ank established presence

across investment banking segments such as debt and e'uity capital market issuances,

mergers and ac'uisitions, and financial advisory services. Its gross non%performing assets

"G8# stood at 3.3 while net G8s stood at A. as on !arch 31A1.

The )ankDs healthy earnings profile supports its capitali*ation levels which provide ade'uate

cushion on against asset‐side risks

3.3 +USSINESS OF 4OTA4

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http://en.wikipedia.org/wiki/ING_Vysya_Bankhttp://en.wikipedia.org/wiki/Indian_rupeehttp://en.wikipedia.org/wiki/Crorehttp://en.wikipedia.org/wiki/ING_Grouphttp://en.wikipedia.org/wiki/ING_Grouphttp://en.wikipedia.org/wiki/ING_Vysya_Bankhttp://en.wikipedia.org/wiki/Indian_rupeehttp://en.wikipedia.org/wiki/Crorehttp://en.wikipedia.org/wiki/ING_Grouphttp://en.wikipedia.org/wiki/ING_Group


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(otak !ahindra is one of IndiaDs leading banking and financial services group, offering a

wide range of financial services that encompass every sphere of life. It is a one stop shop for

all banking needs. The bank offers personal finance solutions of every kind from savings

accounts to credit cards, distribution of mutual funds to life insurance products. (otak

!ahindra )ank offers transaction banking, operates lending verticals, manages I87s and

provides working capital loans. (otak has one of the largest and most respected 4ealth

!anagement teams in India, providing the widest range of solutions to high net worth

individuals, entrepreneurs, business families and employed professionals.

• Kotak Securities Ltd

• Kotak Mahindra Capital Company (KMCC)

• Kotak Mahindra Prime Ltd (KMPL)

• Kotak International Business

• Kotak Mahindra Asset Management Company Ltd (KMAMC)

• Kotak Priate !"uity #roup (KP!#)

• Kotak $ealty %und

• Kotak Mahindra old mutual li&e Insurance Ltd

3.7 PODUCTS AND SEVICES

1. Account# 0 D'o#it# :8

• $avings ccounts

• Current ccounts

• Term ?eposits

• $afe ?eposit ;ockers

• =inancial Inclusion

2. C*rd# :8

• Credit Cards

• Hlobal ?ebit Cards

•)est Compliments Card

• (otak net card

• (otak !ulti Currency 4orld Travel Card

3. In-'#t)'nt# :8

• !utual =unds

• ?emat

• (otak Hold ternity

• Gew 8ension $ystemInsurance

• $) and insurance

7. (o*n# :8

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http://www.kotak.com/bank/personal-banking/deposits/http://www.kotak.com/bank/personal-banking/deposits/savings-accounts/http://www.kotak.com/bank/small-business/current-accounts/http://www.kotak.com/bank/personal-banking/deposits/term-deposits/term-deposits.htmlhttp://www.kotak.com/bank/personal-banking/deposits/safe-deposit-lockers/safe-deposit-lockers.htmlhttp://www.kotak.com/bank/common/financial-inclusion.htmhttp://www.kotakcards.com/kotak/cclive/index.htmlhttp://www.kotak.com/bank/personal-banking/cards/Global-debit-cards.htmlhttp://www.kotak.com/bank/personal-banking/cards/best-compliments-card.htmlhttp://www.kotak.com/bank/personal-banking/cards/netcard.htmlhttp://www.kotak.com/bank/personal-banking/cards/travel-card.htmlhttp://www.kotak.com/bank/personal-banking/investments/mutual-funds.htmlhttp://www.kotak.com/bank/personal-banking/investments/demat.htmlhttp://www.kotak.com/bank/personal-banking/investments/gold.htmlhttp://www.kotak.com/bank/personal-banking/investments/new-pension-scheme.htmlhttp://www.kotak.com/bank/personal-banking/investments/insurance.htmlhttp://www.kotak.com/bank/personal-banking/investments/asba.htmlhttp://www.kotak.com/bank/personal-banking/deposits/http://www.kotak.com/bank/personal-banking/deposits/savings-accounts/http://www.kotak.com/bank/small-business/current-accounts/http://www.kotak.com/bank/personal-banking/deposits/term-deposits/term-deposits.htmlhttp://www.kotak.com/bank/personal-banking/deposits/safe-deposit-lockers/safe-deposit-lockers.htmlhttp://www.kotak.com/bank/common/financial-inclusion.htmhttp://www.kotakcards.com/kotak/cclive/index.htmlhttp://www.kotak.com/bank/personal-banking/cards/Global-debit-cards.htmlhttp://www.kotak.com/bank/personal-banking/cards/best-compliments-card.htmlhttp://www.kotak.com/bank/personal-banking/cards/netcard.htmlhttp://www.kotak.com/bank/personal-banking/cards/travel-card.htmlhttp://www.kotak.com/bank/personal-banking/investments/mutual-funds.htmlhttp://www.kotak.com/bank/personal-banking/investments/demat.htmlhttp://www.kotak.com/bank/personal-banking/investments/gold.htmlhttp://www.kotak.com/bank/personal-banking/investments/new-pension-scheme.htmlhttp://www.kotak.com/bank/personal-banking/investments/insurance.htmlhttp://www.kotak.com/bank/personal-banking/investments/asba.html


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• 9ome ;oans

• 8ersonal ;oans

• Car ;oans

• ;oan against property

•

9ome Improvement ;oans• 9ome ;oan )alance Transfer

• (otak $tock ce

• Hold ;oan

• ducation ;oan

Con-'ni'nc' +*n,in

nywhere, nytime )anking

In todayDs day and age time is money. :ou work hard and have a busy schedule. ?oing

your bankingshould be easy and convenient and not add to your worries.

4e at (otak !ahindra )ank reali*e this and have specially tailored a wide range of value

addedproducts and services to make your money work for you. These, coupled with the

highest standard of customer care will make your life simpler and easier .

• N't +*n,in

>iew details across ccounts, Term ?eposits, ?emat ccounts % 30+

• I))'di*t' P*$)'nt S'r-ic'

=astest way to send and receive money

• 4ot*, P*$)'nt G*t'5*$

Instant, convenient and secure way of shopping and making payments online .

• Moi&' +*n,in

perience online banking % without a pc or internet connection


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3. !O4ING CAPITA( FINANCE

Conc't o% !or,in C*it*&:8

• =unds ?eployed =or !anaging )usiness 7perations• =irmBs Capital 4hich Is e'uired =or =inancing $hort%Term " Current assets $uch as Cash

, ?ebtors , nd Inventories#

=unds Thus Invested In Current ssets (eep evolving =ast

4orking Capital Is The ;ife%)lood of any business. business re'uires optimal cash flow to

survive on a regular basis. 4orking capital is also re'uired to further sustain a firmBs growth,

improve business operation and stay ahead of competition.

t (otak , 4e assist business financially with different types of working capital finance in

the form of various fund and non fund based products. 4e have nationwide presence through

our branches and enjoy correspondent relationship with a large network of overseas banks.

T$'# o% !or,in C*it*& Fin*nc':8A. =und )ased =inance3. Gon =und )ased =inance

S'cur'd +u#in'## (o*n#

A. Cash Credit =acility3. 7verdraft =acility2. ;oan gainst 8roperty0. )ank Huarantee. ;etter of Credit

E. port 8acking Credit

C*#6 Cr'dit

Cash credit is a running account facility which enables the customer to withdraw amounts

from the current account, up to the etent of the sanctioned limit. Cash credit is provided to

bridge the working capital gap in business. It is etended against hypothecation of stock,

receivables, short term deposits and other current assets which generally hold the li'uidity of

a business.

4e offer cash credit on an annual renewal basis. 7ur cash credit program is highly fleible to

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meet the needs of various business segments.

4'$ F'*tur'#:8

$eamless account features like net banking, international debit card, TH$/G=T, ?? and pay%order etc.

Competitive interest rate

7ne stop shop for all trade services

=ree at par che'ues payable across the country

=oreign transaction made easy through online platform =L live variants

Cu#to)'r Pro%i&':8

!anufacturesetail/wholesale traders importers/eporters

$ervice providers

E&iii&it$:8

• ssessed working capital re'uirement

• Cash profit in the current and previous year

• vailability of real estate collateral business operating since at least 2 years.

Acc't*&' co&&*t'r*:8

Current assets pertaining to business

=ied deposits

esidential/ commercial and industrial property

)onds/ ?ebt =unds/ ;IC surrender >alue

Condition# In c*#6 cr'dit:8

!onthly $tock statement is re'uired.

$tock Insurance Is re'uired.

udit is re'uired

!oney use in only day to day business activities

4orking Capital H8 is e'uired

?8 "?rawing power#M$tock J ?ebtors Creditors M 4orking capital H8

O-'rdr*%t F*ci&it$

credit agreement made with a financial institution that permits an account holder to use or

withdraw more than they have in their account, without eceeding a specified maimum

negative balance. stablishing an overdraft facility with a bank can help

an individual or small business with short term cash flow problems, although the negative

13

http://www.businessdictionary.com/definition/credit.htmlhttp://www.businessdictionary.com/definition/agreement.htmlhttp://www.businessdictionary.com/definition/agreement.htmlhttp://www.businessdictionary.com/definition/financial-institution.htmlhttp://www.businessdictionary.com/definition/financial-institution.htmlhttp://www.businessdictionary.com/definition/permit.htmlhttp://www.businessdictionary.com/definition/permit.htmlhttp://www.businessdictionary.com/definition/account-holder.htmlhttp://www.businessdictionary.com/definition/account.htmlhttp://www.businessdictionary.com/definition/balance.htmlhttp://www.businessdictionary.com/definition/balance.htmlhttp://www.businessdictionary.com/definition/bank.htmlhttp://www.businessdictionary.com/definition/individual.htmlhttp://www.businessdictionary.com/definition/individual.htmlhttp://www.businessdictionary.com/definition/small-business.htmlhttp://www.businessdictionary.com/definition/short-term.htmlhttp://www.businessdictionary.com/definition/cash-flow.htmlhttp://www.businessdictionary.com/definition/cash-flow.htmlhttp://www.businessdictionary.com/definition/problem.htmlhttp://www.businessdictionary.com/definition/credit.htmlhttp://www.businessdictionary.com/definition/agreement.htmlhttp://www.businessdictionary.com/definition/financial-institution.htmlhttp://www.businessdictionary.com/definition/permit.htmlhttp://www.businessdictionary.com/definition/account-holder.htmlhttp://www.businessdictionary.com/definition/account.htmlhttp://www.businessdictionary.com/definition/balance.htmlhttp://www.businessdictionary.com/definition/bank.htmlhttp://www.businessdictionary.com/definition/individual.htmlhttp://www.businessdictionary.com/definition/small-business.htmlhttp://www.businessdictionary.com/definition/short-term.htmlhttp://www.businessdictionary.com/definition/cash-flow.htmlhttp://www.businessdictionary.com/definition/problem.html


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balance typically needs to be repaid within a month.

4'$ F'*tur'#:8

$eamless account features like net banking, international debit card, TH$/G=T, ?? and pay%order etc.

Competitive interest rate

7ne stop shop for all trade services

=ree at par che'ues payable across the country

=oreign transaction made easy through online platform =L live variants

Cu#to)'r Pro%i&':8

!anufactures

etail/wholesale traders importers/eporters

$ervice providers

E&iii&it$:8

• ssessed working capital re'uirement

• Cash profit in the current and previous year

• vailability of real estate collateral business operating since at least 2 years.

Acc't*&' co&&*t'r*:8

Current assets pertaining to business

=ied deposits

esidential/ commercial and industrial property

)onds/ ?ebt =unds/ ;IC surrender >alue

(o*n A*in#t ro'rt$


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esidential / Commercial 8roperty

Industrial 8roperty

M*;i)u) T'nur' o% &o*n:8

• A1 years

+*n, Gu*r*nt''

There are three parties to a contract guarantee.

• 8erson who guarantees the performance of a promise or liability of a third person is called

NguarantorO.

• 8erson on whose behalf the guarantee is given is the Nprincipal debtorO.

• 8erson to whom guarantee is given is the NcreditorO.

Huarantee given by the bank6

• 7n behalf of its client

• To the beneficiary

• Huaranteeing the performance of the applicant against an underlying contract.

• 8erformance could be financial or contractual.

T$'# o% +*n, Gu*r*nt'':8

1. Fin*nci*& Gu*r*nt'':

ll guarantees guaranteeing financial commitments, and in the nature of credit substitute are

classified as financial guarantees.)ank guarantee takes only financial liability. =inancial guarantee are normally issued in lieu

of payment of tender deposits, earnest money deposits, customer duty/ ecise duty/ income

ta and guaranteeing payment of goods purchased on credit.

2. P'r%or)*nc' u*r*nt'':

The customer, on whose behalf the guarantee is given, will perform the contract undertaken.7n his failing to perform the same, the banker shall make good, the loss caused to the

beneficiary, by limiting him financially to a sum not eceeding the amount undertaken in the

guarantee.

Condition# *nd c6*r'#:8

Commission A. to 3.

31 margin is re'uired

Collateral is re'uired

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('tt'r o% cr'dit

This is used for buying raw material / capital goods on credit, both domestic and foreign.

4orking capital ;C is issued for a maimum period of 2 years.

+'n'%it#:8

• $eller 6%

• ssured payment if documents are in order as per ;C terms.

• Hets ready funds by getting the bills under ;C discounted with his banker.

• )uyer 6%

• eceive the goods within a specified time

• Hains credit

4'$ F'*tur'#:8

7ur ;Cs are globally accepted.

;arge network of correspondent banks across the world.

E;ort *c,in cr'dit

8acking credit is an eport credit normally sanctioned for purchasing / procuring, processing

and packing goods meant for eport.4'$ %'*tur'#:

vailable in rupee and foreign currency"attractive rates#

=acility to obtain credit reports for overseas buyers through international rating agencies.

Cu#to)'r Pro%i&':

• port manufacturing entities

E&iii&it$:

• )ased on eport orders in hand & in addition to eisting working capital limits.

.

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Chapter 4

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7.1 O+"ECTIVE OF STUDY

A. The purpose of study is to understand and analy*e the various aspects of financing the

projects of the borrowers which are beyond the powers of the branches and within the

ambit of the (otak !ahindra )ank.

3. This study covers the process followed by (otak !ahindra for assessing the credit

worthiness of its clients and granting funds to meet their day to day operations i.e.

assessment of working capital limit loans.

2. To study the procedure adopted in evaluating credit proposal by using case analysis. nd

also the credit risk rating parameters used in the particular case.

7.1 STATEMENT OF THE PO+(EM:

To evaluate and understand the procedure bank follows in evaluating the loan sanctioning

process bank.

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Chapter 5

Pro


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5.1 PROJECT METHODOLOGY

The data includes some important points noted down from the various client meetings during

the project. $ince the research carried out for this project is purely descriptive and analytical

in nature, the documents provided by the client and the official file would re'uire for

understanding the credit appraisal procedure of the bank.

D*t* T$':

The data used for the study is secondary data to find out

1. Fin*nci*& #t*t')'nt#

• udited 8rofit and loss account of the last 2 years.

• udited )alance $heet of last 2 years

• 8rovisional for the current year and the financial projections in case of term

loans

• Hroup CompanyBs =inancial $tatements

3. ccount Conduct eport

2. Cross Check of month wise sales

0. $anction terms & conditions of eisting banker

. $uppliers / Customers Check

E. 8ast track record from CI)I; / )I

+. >erification of uthentication of ?ata provided by cross checking various sites like

• C check

• 8G Go. check

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.2 TOO(S OF DATA CO((ECTION:

S'cond*r$ #ourc'# o% In%or)*tion:

A. Interaction and discussions with the staff of the credit department to understand the credit

process followed in the bank

3. ;oan 8olicy and Internal Circulars of the bank.

2. 8ast and 8resent =inancial $tatements6

• )alance $heet

• 8rofitability $tatements

0. 8rojected =inancial $tatements

. C! data i.e. Credit !onetary rrangement data which has the following E forms6

• 8articulars of eisting/proposed limits for banking system

• 7perating $tatement

• nalysis of )alance $heet

• Comparative $tatement of current assets and current liabilities

• Computation of !8)=

• =unds =low $tatement

.3 INTODUCTION TO SME#:

The !icro, $mall and !edium nterprise ?evelopment, !$!? ct 311E has now defined

!icro, $mall and !edium enterprises in specific terms.

Classification of nterprises6Micro= S)*&& 0 M'diu) Ent'rri#'# D'-'&o)'nt Act 2>>?

C&*##i%ic*tion M*nu%*cturin S'r-ic'#

!icro nterprise 3 lacs A1 lacs

$mall nterprise P3 to MQ Cr PA1 to MQ 3 Cr

!edium nterprise P Cr to MQ A1 Cr P3 Cr to MQ Cr

!anufacturing 6% !aimum investment in 8lant & !achinery for manufacturing

or production of goods is pertaining to industry

$ervices6 % !aimum investment in e'uipments, for enterprise engaged in

providing or rendering of services.

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T*&' .1: MSME# c&*##i%ic*tion

Chapter 6

An*&$#i#

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?.1 CEDIT APPAISA(

Cr'dit in%or)*tion o% t6' orro5in co)*n$ c*n ' ot*in'd $ t6' %o&&o5in #ourc'#:

A. ?atabase of )anks and =inancial Institution

3. eferences given by )anks

2. eferences given by traders

0. gencies which rate the companies

. 8ublished )ooks6 )asic information about a company may be taken from printed sources

like the $tock change :ear book, Corporate 8ath finderBs data base, etc.

E. Company =inancial eports

+. 8ress eports

@. Charges egistered: Charges created on the assets of a company have to be registered with

the egistrar of Companies.

F. 8ersonal discussion

A1. =actory >isit11. $tudy of =inancial $tatements6 =inancial analysis determines the significant operating and

financial characteristics of a firm from accounting data and financial statements. nalysis can

be done through6

• atio nalysis

Trend analysis6 Trend analysis can be through6

Intra firm comparison that is review of the trend of the ratios over the years within the firm

and Inter firm comparison.

• eading of notes to accounts and other information6 Careful reading and analysis of the

notes on accounts, one can gauge the policies of the management, performance of the

company, and its future planning.

In%or)*tion r'9uir'd to ' #u)itt'd $ t6' Co)*n$ /+orro5'r to t6' +*n, The company should make sure that the following information re'uired for processing credit re'uests

are collected by the company for submitting it to the bank or financial institution in order to obtain the

re'uired credit facility6

23


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A. )asic background information on the company6

3. e'uired facility

2. (ey industry dynamics

0. !anagement

. !anagement information system6 ?etails of the planning, controlling and monitoring

systems which have been put in place have to given.

E. =inancials

+. ?etails of the $ecurity to be pledged

-. 8resent banking relationship6 The bank re'uires full details of the present credit facilities

being enjoyed at the moment.

CEDIT APPAISA( POCESS AT 4OTA4

eceipt of application from applicant

eceipt of documents

"(:C papers, )alance sheet, !7, 7, eg Go., 8roperty ?ocuments etc#

8re%$anction visit by bank officer

Check for )I ?efaulter ;ist, 4illful ?efaulter ;ist

CI)I; ?ata, Caution ;ist

Title Clearance eport of report to be obtained from valuer or engineer

8reparation of financial data

24


25/53

8roposal of preparation

ssessment of proposal

$anction approval 8roposed by appropriate sanctioning authority

?ocumentation, agreement, mortgages

?isbursement of ;oan

Fiur'?.1: Cr'dit Ar*i#*& Proc'##

?.2 PE SANCTION APPAISA(

4hen a credit proposal is presented to a branch by a prospective borrower for sanction by an

appropriate authority, the appropriate authority may either sanction or reject the proposal. The

decision to sanction or reject the proposal has to be based on a careful analysis of various

facts and data presented by the borrower concerning him and the proposal. $uch an objective

and in%depth study of the information and data should convince the sanctioning authority that

the money lent to the borrower for the desired purpose will be safe and it will be repaid with

interest over the desired period ,if the assumptions and terms and conditions on which it is

sanctioned, are fulfilled. $uch an in%depth study is called the pre%sanction credit appraisal. It

provides the sanctioning authority with the reasons and justifications for either sanctioning or

rejecting a credit proposal. It, thus, helps in the decision making process of the sanctioning

authority.

The entire gamut of credit appraisal can be segregated into + sections is under6

A. )orrower ppraisal.

3. Technical ppraisal.2. !anagement ppraisal.

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0. =inancial ppraisal.. conomic ppraisal.E. nvironmental ppraisal.+. !arket ppraisal

+OO!E APPAISA(4NO! YOU CUSTOME /4YC

NOMS:

The borrower is appraised on the following parameters also known as the 2 RCBs of the

borrower i.e. character, capacity and capital.

1. C6*r*ct'r:

Character is the greatest and the most important asset, which any individual can have. ven if

a borrower has the capacity and capital to repay a loan, it is the character of the borrower

which indicates his intention to repay. If the character or integrity of a borrower is known to

be 'uestionable, every banker would avoid him even if backed by sufficient collaterals.

2. C**cit$:

It deals with the ability of the borrower to manage an enterprise or venture successfully with

the resources available to him. 9is educational, technical and professional 'ualifications, his

antecedents, present activity, eperience in the line of business, eperiences of the family,

special skill or knowledge possessed by him, his past record etc. would give a hindsight into

his capacity to manage the show successfully and repay the loan.

3. C*it*&6

It is his ability to meet the loss, if any, sustained in the business or venture from his own

investment or capital without shifting it to his creditor or banker.


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• !onitoring of Transactions

• isk !anagement

TECHNICA( APPAISA(:

The technical appraisal of a credit proposal involves a detailed study of the following aspects6

• vailability of basic infrastructure.

• ;icensing/registration re'uirements.

• $election of technology.

• vailability of suitable technical process, raw material skilled labor etc.

MANAGEMENT APPAISA(:

In case of projects, units or enterprises run by individuals as sole proprietors or partnership

firms, it is usually one or two persons who manage the entire project, unit or the enterprise

whether it be of manufacturing or trading.

9owever, in case of corporate borrowers and also in case of large borrowal accounts, it is

usually a set of professionals who manage the entity each speciali*ed in a specific area of

management i.e. production, finance, marketing, personnel etc.


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The performance of a project is influenced by a variety of other economic, social and cultural

factors. ven if a project is technically feasible and financially viable, it may not satisfy the

economic needs vi*. employment potential, development of industrially backward areas,

environmental pollution etc. =urther as capital is a scarce resource, it is necessary that it must

be allocated in such a way that it yields best possible return to the society in general and the

investor in particular. s such a detailed appraisal of the project in terms of the return it

generates to the investor and the lending institutions is necessary before a decision is taken to

commit resources. 7ne of the most important methods of appraising this is the computation

of the Internal ate of eturn of the project.

Int'rn*& *t' o% 'turn /I:

I is defined as the discount rate at which the present values of all investments made in a

project are e'ual to the present value of all future returns from the project over the assumed

life period of the project.

S'n#iti-it$ An*&$#i#:

The actual results differ from the projected results. If the actual results are plus/ minus A1

of projections, it can be considered that the projections have been made very well. ?ebt%

$ervice coverage ratio, break%even point and many other ratios have to be calculated on the

basis of these financial projections. If the financial projections go wrong and the epected

cash accruals are not available with the unit, the repayment of term loan will face difficulties.

The appraising officers should ascertain the most sensitive areas of the project. If the working

results of the project are highly sensitive to a particular variable, sufficient study should be

done to find out the probability of change in that variable and its impact on the viability of the

project.

MA4ET APPAISA(:4hile appraising a proposal it is not only necessary to find out whether it is technically

feasible and financially viable, but also important to ascertain the marketability of the product

manufactured/sold. If goods produced cannot be sold there would be no point in producing

them. 9ence the marketability or salability of goods is of great importance. istence of a

market for the product provides the rationale for its production. If the product sought to be

manufactured is the only one of its kind for which there are no substitutes, the marketing of

the same may not be a problem ecepting when it can be freely imported and that too at a

lesser cost. 9owever, if there are many competitors, the entrepreneur may find the going

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tough. 9owever a combination of the factors like man behind the show, the 'uality of the

product and the strategy for its sale will result in its successful marketing

?.3 FINANCIA( ATIOS

4hile analy*ing the financial aspects of project, it would be advisable to analy*e the

important financial ratios over a period of time as it may tell us a lot about a unitBs li'uidity

position, managementsB stake in the business, capacity to service the debts etc. The financial

ratios which are considered important are discussed as under6

(IBUIDITY ATIOS

;i'uidity refers to the ability of a firm to meet its short%term "usually up to A year#

obligations. The ratios, which indicate the li'uidity of a company, are Current ratio,

Suick/cid%Test ratio, and Cash ratio.

Sr.

No.

*tio# For)u&* ')*r,#

A. Current ratio current assets /

current liabilities

This ratio compares the current assets

with the current liabilities. It is alsoknown as Rworking capital ratioB or

Rsolvency ratioB. It is epressed in the

form of pure ratio. It defines the ability

of a firm to meet its current liabilities

from its current assets. 9igher the

current ratio, greater is the short term

solvency

3. Suick atio Suick ssets /

Current ;iabilities

4here ,Suick ssets

M Current ssets

Inventories%

?oubtful ?ebtors

Suick ratio is also known as acid test

ratio or li'uid ratio. Suick ratio

compares the 'uick assets with the

'uick liabilities. It is epressed in the

form of pure ratio. It is a measure of the

firmBs ability to convert its assets

'uickly into cash in order to meet its

current liabilities. Henerally, A6A ratio is

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8repaid penses J

dvance Ta

considered satisfactory

2. C$ atio C$ ?eposits M

?emand ?eposits J

$avings )ank

?eposits

C$ atio "# M

C$

?eposits/Total

?eposits

C$ ratio stands for Current

ccount $aving ccount ratio. The

share of current account and saving

account in total deposits of a bank is

termed as C$ ratio. In other words,

it tells the share or portion of current

account and saving account in total

deposits of a bank. )anks have to payless interest on C$ as compared to

other deposits. Therefore, higher C$

atio is preferable.

T*&' ?.2 &i9uidit$ r*tio#

POFITA+I(ITY ATIOS

These ratios help measure the profitability of a firm. firm, which generates a substantial

amount of profits per rupee of sales, can comfortably meet its operating epenses and provide

more returns to its shareholders. The relationship between profit and sales is measured by

profitability ratios. There are different types of profitability ratios.

$r.Go. atios =ormula emarks

A. eturn on

'uity or

eturn on

Get 4orth

"8T/Get

4orth # A11

It is the amount of net income returned as a

percentage of shareholders e'uity. eturn on

e'uity measures a corporationDs profitability by

revealing how much profit a company

generates with the money shareholders have

invested.

3. 7perating "7perating This ratio indicates the profitability of a firm

30

http://www.investmentpaths.com/resources/3877-CASA-definition-significance-advantages.aspxhttp://www.investmentpaths.com/resources/3877-CASA-definition-significance-advantages.aspx


31/53

8rofit

!argin

8rofit / Get

$ales # A11

from its main operating activities. higher

operating profit margin indicates better sales

reali*ation and effective cost control

2. Get 8rofit

atio

"8T / $ales #

A11

Get 8rofit ratio indicates the relationship

between the net profit & the sales it is usually

epressed in the form of a percentage.

T*&' ?.3 ro%it*i&it$ r*tio#

(EVEAGE ATIOS

It shows the relationship between proprietors funds & debts used in financing the assets of

the concern e.g. capital gearing ratios, debt e'uity ratios, & 8roprietary ratios.

$r.Go atios =ormula emarks

A. Interest

Coverage

atio

"8T J Interest# /

Interest

The interest coverage ratio is used to determine

how easily a company can pay interest epenses

on outstanding debt. The lower the ratio, the

more the company is burdened by debt epense.

4hen a companyDs interest coverage ratio is only

A. or lower, its ability to meet interest epenses

may be 'uestionable.

3. ?ebt%

'uity

atio

?ebt "Term

;iabilities#

'uity

(Where, Equity =

Share capital, free

reserves, premium

on shares, , etc.

after adjusting loss

balance)

It indicates what proportion of e'uity and debt

the company is using to finance its assets.

Compares assets provided by creditors to assets

provided by shareholders. There cannot be a

rigid rule to satisfactory debt% e'uity, lower the

ratio higher is the degree of protection

enjoyed by the creditors. These days the debt

e'uity ratio of 36A is considered reasonable. It,

however, is higher i.e. A.6A in respect of capital

intensive projects. )ut it is always desirable that

owners have a substantial stake in the project.

7ther features like 'uality of management

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should be kept in view while agreeing to a less

favorable ratio. In financing highly capital

intensive projects like infrastructure, cement, etc.

the ratio could be considered at a higher level.

2. T7; /

TG4

atio

Tangible Get 4orth

"8aid up Capital J

eserves and

$urplus %

Intangible ssets#

Total outside

;iabilities

Tangible Get 4orth

This ratio gives a view of borrowerBs capital

structure. If the ratio shows a decreasing trend,

it indicates that the borrower is relying more on

his own funds and less on outside funds and vice

versa

0. ?ebt%

$ervice

Coverage

atio

?ebt J

?epreciation J Get

8rofit "fter Taes#

J nnual interest

on long term debt

nnual interest on

long term debt Jepayment of debt

?$C is the ratio of cash available for debt

servicing to interest, principal and lease

payments. It is a popular benchmark used in the

measurement of an entityBs "person or

corporation# ability to produce enough cash to

cover its debt "including lease# payments. The

higher this ratio is, the easier it is to obtain aloan. This ratio of A. to 3 is considered

reasonable. very high ratio may indicate the

need for lower moratorium period/repayment of

loan in a shorter schedule. This ratio provides a

measure of the ability of an enterprise to service

its debts i.e. UinterestB and Uprincipal repaymentB

besides indicating the margin of safety. The ratio

may vary from industry to industry but has to be

viewed with circumspection when it is less than

A..T*&' ?.7 &'-'r*' r*tio#

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ACTIVITY ATIOS

These ratios are used to analy*e how well a company uses its assets and liabilities

internally. It measures how 'uickly certain current assets are converted into cash or how

efficiently the assets are employed by a firm.

$r.Go. atios =ormula emarks

A. =ied sset

Turnover

atio

Get $ales/

Get =ied

ssets

It measures sales per rupee of investment in

fied assets.In other words,how efficiently

fied assets are employed. higher =ied

sset Turnover atio is preferred.

3. Total ssets

Turnover

atio

Get $ales /

Total ssets

It measures how efficiently all types of

assets are employed by the organi*ation.It is

measured in absolute terms.

T*&' ?. *cti-it$ r*tio#

?.7 POST SANCTION AND FO((O! UP OF (OANS

$upervision and =ollow%up of bank credit has assumed considerable significance particularly

after introduction of new norms of assets classification, provisioning and de recognition of

interest income on G8s, affecting profitability. $ystem of supervision and follow up can be

defined as the systematic evaluation of the performance of a borrower account to ensure that

it operates at viable level and, if problems arise, to suggest practical solutions. It helps in

keeping a watch on the conduct and operational/financial performance of the borrowal

accounts. =urther, it also helps in detecting signals/symptoms of sickness and deteriorations,

if any, taking place in the conduct of the account for initiating timely corrective actions to

check slippage of accounts to G8 category.

The goals and objectives of monitoring may be classified into fundamental and

supplementary goals. =undamental goals help a bank to ensure safety of funds lent to an

enterprise while, supplementary goals are directed towards keeping abreast of problems

33


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arising out of changes in both the internal and the eternal environment for initiating timely

corrective actions.

$ome of the important goals of monitoring are listed as under6

A. To keep a watch on the project during implementation stage so that there are no time & cost

overruns.

3. To ensure that the funds released are utili*ed for the purpose for which these have been

provided and there is no diversion of such funds.

2. To evaluate operational and financial results, such as production, sales, profit/loss, flow of

funds, etc. and comparing these with the projections/estimates given by the borrower at the

time of sanction of credit facilities.

0. To ensure that the terms and conditions as stipulated in the sanction have been complied with.

. To monitor operations in the account particularly cash credit facilities which indicate health

of the account.

E. To obtain market report on the borrower, to gather information like reputation/financial

standing etc.

+. To detect signals and symptoms of sickness or deterioration taking place in

conduct/performance of the account.

-. To ensure that the unitDs management and organi*ational set%up is effective.

F. To keep a check on aspects like accumulation of statutory liabilities, creditors, debtors, raw%

material, stocks%in%process, finished goods, etc.

A1. To ensure charging of applicable rate of interest/penal interest/ commitment charges as per

bankDs guidelines.

$ystem of supervision & monitoring of credit as laid down by the )ank needs to be

meticulously followed by the branches/controlling offices which, inter alia, covers the

following6

A. Conveying the sanction

3. !aintenance of ;oan ?ocument =ile

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2. Suarterly eview $heet

0. 8reventive !onitoring $ystem

. Suarterly !onitoring $ystem

E. Inspection and 8hysical >erification of stocks $tock udit

+. Inspection and physical >erification of $ecurities

?. CEDIT IS4

D'%inition6 NCredit iskO is the possibility of loss associated with changes in the credit

'uality of the borrower or counter parties. The counter parties may include an individual,

small & medium enterprise, corporate, bank, financial institution, or a sovereign. In a bankBs

portfolio, losses stem from outright default due to inability or unwillingness of a borrower or

counter party to honor commitments in relation to lending, settlement & other financial

transactions.

Fr*)'5or, 6 The overall framework of credit risk management in the bank would comprise

of following building blocks6

• Credit isk !anagement $tructure

• Credit isk 8olicy & $trategy

• 8rocesses & $ystems

CEDIT IS4 ATING MODE( DEVE(OPED +Y 4OTA4

MAHINDA

Mod'

S.No Cr'dit i#, *tin Mod'& A&ic*i&it$

Tot*& (i)it# S*&'#

A ;arge Corporate bove s.A Crore

"7#

bove s.A11 Crore,

ecept Trading concerns

3 !id Corporate bove s. Cr and

upto s.A Cr

"7#

bove s.3 Cr and upto

s.A11 Cr

ll trading concerns falling in the ;arge

Corporate category shall also be rated under this

35


36/53

model

2 $mall ;oans bove s.1 lakh

& upto s. Cr

"G?#


37/53

Mod' Fin*nci* +u#in'## 0

Indu#tr$

M*n*')'nt Conduct o% Ac

;arge 01 3 3 A1

!edium 01 3 31 A$mall 01 31 31 31

$mall II 2E AE 3- 31T*&' ?.: Ar'*# o% E-*&u*tion

CASE STUDY

9ere is a case of R)hilwara gro uto $ervices 8vt ;tdB for which personal description report

is prepared with the help of documents collected under (:C.

87$8CT G7.6

)774

G! 6

)hilwara gro uto $ervice 8vt

;td

C7GTCT

8$7G 6

>aibhav Vain

87?


38/53

4CT;

P'r#on*& d't*i&: Captioned case is sourced by )hilwara bank branch for funding workingcapital facilities in the form of cash credit and 4CT; by takeover of working capital facility

with Induslnd )ank. The ;adha family roots from )hilwara and having strong business setup.

The family is associated with !ahindra from last 01 years as they were having dealership of

!ahindra Tractor which was taken over by cousins on family division.

$hareholding patterns6%

S No

N*)' o% #6*r'

6o&d'r# '&*tion#6i

Ho&din

A !r. >inod ;adha

?irector%

applicant 2.A+

3 !r. nil ;adha ?irector% son 23.3-

2 !r. !anish ;adha ?irector%son 23.3-

0 !rs. Gidhi ;adha sonDs wife 1.3-

Tot*& 1>>

Tr*n#*ction#: 8resently, applicant is availing working capital facility in the form of CC

limit of $.1 ;acs with sub limit of 4C?; of s.11 ;acs from Induslnd )ank. The limit

is secured against following securities6%

• ! over commercial showroom situated at 2FA/A, Goorbagh, jmer oad,

)hilwara.

• ! over residential property at A, (amla Gagar, jmer oad, )hilwara

• ! over residential plots no A1, AA, A3 and 30, (amla Gagar, )hilwara.

• 8ersonal guarantee of !r. >inod ;adha, !r. nil ;adha, !r. !anish ;adha and

!rs. Heeta ?evi ;adha "w/o >inod ;adha#

• Charge over current assets.

The customer is having sole banking with Induslnd bank from last 2 years but customer is

willing to shift banking facility with us for enhancement and better rate of interest.

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8roposed loan structure recommended as under6%

EISTING POPOSED FACI(ITIES /#. in (*c#

)ank Type of

facility

isting

o/s8ropose

d Credit

Total

posureTenure 8ricing

;imits /

takeove

r

Induslnd

)ank

CC 1 1 Gil Gil A3 !ths A3.3

4C?; "$ub

limit of CC#"11# "11# Gil Gil

21%A-1

days

(!);

CC Gil Gil E11 E11 A3 !ths AA.-

4C?; "$ub

limit of CC# Gil Gil "11# "11#

21%F1

days

7n

drawl basis

4CT; Gil Gil A11 A11 E1 !ths AA.-

Total =und

)ase 1 1 +11 +11

(TV c*&cu&*tion:8

Product#

E;o#ur'

/# in

(*c# (TV

co&&*t'r*&

r'9uir'd

CC limit E11.11 A.11 E11.11

4CT; for E1 mths A11.11 1.E1 AEE.E+

collateral re'uired +11.11 +EE.E+

Co&&*t'r*& *-*i&*&'

Commercial $howroom at raji Go. 2FA/A, Gational

9ighway, jmer oad, )hilwara. "owner )hilwara

gro uto $ervice 8vt ;td# 0E1.FF A.11 0E1.FF

esidential property at 8lot G7 % 3, (amla >ihar,

)hilwara "owner >inod ;adha# 3A+.-F A.11 3A+.-F

esidential property at 8lot G7 % 30, (amla >ihar,

)hilwara "owner >inod ;adha# +2.A- A.11 +2.A-

39


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esidential property 8lot Go.% A, (amla >ihar, raji

Go.% 2+2 to 2++, evenue Hram% Vodhdas, ?istt.%

)hilwara "owner >inod ;adha# F2.F1 A.11 F2.F1

7pen land at 8lot Go.% A1, raji Go.% 2F3, evenue

Hram% Vodhdas, ?istt.% )hilwara "owner >inod

;adha# -2.11 1.01 22.31

Total collateral F3-.FE -+F.AE

;T> +.2

ffective ;T> -+.31

Inco)': ?uring =:31A3%A2, the firm has achieved a turnover of s.FA.2E Cr against

previous year turnover of s.F.AF Cr in =: 31AA%A3 and reflects a growth of 0 over the

corresponding last year. $ignificant growth in turnover was due to launch of new models and

overall growth in auto industry. Turnover achieved in =: 31A0 is appro. --.E2 Cr with

marginal drop of over the previous year. The minor drop in turnover in =: 31A0 was due

to slowdown in automobile industry. The turnover is estimated for =: 31A is s.F.11 Cr.

+'&o5 i# t6' r'*,u o% #*&'# :%

P*rticu&*r FY 2>17 FY 2>13

FY

2>12

FY

2>11

$ales of vehicles &

spares -+.A F1.0 -.02 02.+-

$ervices Charges A.2 1.FE 1.+ 1.+A

Tot*& @@.?3 1.3? .1@ 77.7

Pro%it *nd Pro%it*i&it$: The firm has recorded a 8)?IT margin of 3.01 in =:31A3%A2

as compared to 3.E1 in =: 31AA%A3. 4e have considered income like commission on

insurance and various other discounts under operating income as they are part of

companyBs regular operations. 8T margin of 1.-3 was achieved in =:31A3%A2 which

was increased as compare to previous year. !argins are maintained at same level in the

provisional financials till =eb 31A0.

40


41/53

Int'r'#t co-'r*' *tio: The firm has interest coverage of 3.A+ times for =: 31A2 as

compared to A.-F times in =: 31A3. Interest coverage is seems to be comfortable.

Increase in interest cost in prov. financial 31A0 was due to increase in CC limit from

s.0-1 to s.1 ;acs and availed fresh channel finance limit of s.311 ;acs from is

bank.

Interest cost includes interest paid to relative/directors of s.33.2A ; in =: 31A2 and

s.AE.+0 ;acs in =: 31A3 and same was disclosed under ta audit report.

TN!= ('-'r*'Non8o'r*tin inco)' *nd #u#t*in*i&it$: The firmBs gearing ratio has

been reduced to 3.2+ as on =: 31A2 from A.-0 as on =: 31A3. Increase in e'uity in

=: 31A2 was due to retention of profit and increase in unsecured loan from relatives. It is

estimated to remain at same levels in coming years. The same can be considered

acceptable.

Fi;'d *##'t#: 8 =ied assets include showroom land and building at )hilwara and

ajsamand, furniture, workshop tools, vehicles and misc. fied assets. ddition in = in

=: 31A2 was towards building construction for epansion, vehicles and workshop tools.

C*#6 %&o5&i9uidit$: The current ratio for =: 31A2 was A.AE as compared to A.3-

times in =: 31A3. 7ther loan and advances include advances for capital goods and

suppliers.

Ot6'r &i*i&iti'#: below is the breakup of other liabilities

/# in (*c#

P*rticu&*r

FY 2>17

Pro-. FY 2>13

FY

2>12

$tatutory dues 2F.0F A1.EF 2E.-F

Trade advances 0AA.00 30.EE A0.-2

advance from

customer 0E.A1 A3F.E+ 1.11other liabilities F.E A+.21 AE.11

41


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?eferred ta liability AE.- AE.- A3.F-

Total 32.00 03F.A+ 3AA.+

CC *##'##)'nt:

CC A##'##)'nt /#. in &*,6#

P*rticu&*r#

E&ii&' &i)it

/*#'d on &*#t

?M *-

E&ii&' &i)it

/con#id'rin 2>

ro5t6

verage $ales +3.-0 -+A.1A

verage purchases EF0.+3 -22.E+

verage ?ebtors "vg sales ?rs days/21# AE3.AA AF0.2

verage stock "vg 8urchases Inventoryholding period/21# A1-2.02 A211.AA

Gro## 5or,in c*it*& 127.7 177.?7

vg Creditors "vg purchases Creditors

days/21# 3A.1 3.3E

N't 5or,in c*it*& * 1227.7 17?.3@

;ess6 !argin from 8romoters "3# 21E.A3 2E+.2

;ess6% Inventory =inance against stock 311.11 311.11

;ess 6% verage trade advance 2-3.11 2-3.11

+*&*nc' r'9uir')'nt 22E.2E 31.10

Proo#'d %undin %ro) 4M+( / *# * CC

&i)it ?>>.>> ?>>.>>

DSC c*&cu&*tion:8

DSC Pro-. 82>17 FY 2>13 FY 2>12

8)?IT 33.-3 3AF.1- AA.3isting obligations 2+.F3 2+.F3 2+.F3

Interest on proposed =) facility of s.E11 ; -A.11 -A.11 -A.11

8roposed !I of 4CT; of s. A11 ;acs for

E1 mths 3+.EA 3+.EA 3+.EA

Total obligations A0E.2 A0E.2 A0E.2

DSC 1.3 1.> 1.>3

Str'nt6 o% t6' c*#':

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=ollowing are the strength in the case6%

A. !ahindra being the market leader in the sports utility segment and a better performer,

the firm stands to benefit from the same.

3. Comfortable key financial ratios vi* gearing and li'uidity during =: A2.

2. Go major borrowing ecept proposed funding.

0. )anking habits are healthy.

. ?ecent capital in the firm.

E. ; sourced customer and will get sole baking.

+. Comfortable ?$C.

-. eference check is positive.

D'-i*tion '9uir'd:8

A. Cibil of !r. >inod ;adha showing overdue of s.A3 ;acs in non%fund based facility

of s.A3 ;acs. This is )H limit availed from $))V against A11 =?. 7verdue

reflecting in cibil due to non%renewal at bank end. Clarification letter from $))V

attached for reference.

3. Cibil of !r. >inod ;adha showing overdue of s.0( in ; of s..1 ;acs availed

from $))V. The repayment of account is proper and overdue in cibil is due to updated

till =eb 31A0.

O-'r*&& r*tin %or t6' c*#': o#iti-'

(o*n 5*# #*nction'd

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Chapter7

Findin# 0 Su'#tion#

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.1 FINDINGS

• lectronic database should be designed carrying all the available and important information

related to the proposals accepted. This will help reduce paperwork and loss of information.

•

=inancial nalysis is not the only re'uirement%overall analysis is must.•


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Chapter8

('*rnin

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@.1 (EANING

The study at (otak !ahindra gave a vast learning eperience to me and has helped to

enhance my knowledge. ?uring the study I learnt how the theoretical financial analysis

aspects are used in practice during the working capital finance and term loan assessment. Ihave reali*ed during my project that a credit analyst must own multi%disciplinary talents like

financial, technical as well as legal know%how.

The credit appraisal for business loans has been devised in a systematic way. It is a process of

appraising the credit worthiness of loan applicants. Thus it etremely important for the lender

bank to assess the risk associated with credit5 thereby ensure the security for the funds

deposited by the depositors. There are clear guidelines on how the credit analyst or lending

officer has to analy*e a loan proposal. It includes phase%wise analysis which consists of E

phases6

A. =inancial statement analysis

3. 4orking capital and its assessment techni'ues

2. Techno conomic =easibility nalysis

0. Credit risk assessment

. ?ocumentation

E. ;oan administration

(otak !ahindraBs adoptions of the 8rojected )alance $heet method of assessment

procedures are based on sound principles of lending. This method of assessment has certain

fleibility re'uired to avoid any rigid approach to fiing 'uantum of finance. The 8)$

method have been rationali*ed and simplified to facilitate complete fleibility in decision%

making.

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.1 +I+(IOGAPHY

• ;oans and advances instruction manual

• Internal circulars

• http6//www.kotakmahindra.com/

49

http://www.kotakmahindra.com/http://www.kotakmahindra.com/


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ANNEUE

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