A

PROJECT REPORT

ON

FINANCE

MASTER OF MANAGEMENT STUDIES (MMS)

UNIVERSITY OF MUMBAI

SUBMITTED TO

MARATHA MANDIR’S

BABASAHEB GAWDE INSTITUTE OF

MANAGEMENT STUDIES

MUMBAI CENTRAL

SUBMITTED BY

POONAM BALKRISHANA DHAKOL

MMS – 2009-2011 ROLL NO-15

FINANCE

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DECLARATION

I, POONAM BALKRISHNA DHAKOL of Master of Management Studies (Semester III) of Babasaheb Gawde Institute of Management Studies (BGIMS), hereby declare that I have successfully completed this project on ANALYSIS OF EMERGING LARGE SCALE INDUSTRIES / BUSINESSES & THEIR FINANCIAL REQUIREMENTS as a part of my ‘Summer Internship’. The information incorporated in this project is true and original to the best of my knowledge.

Signature

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ACKNOWLEDEGEMENT

This project bears imprint of all those who have directly or indirectly helped and extended their kind support in completing this express my sincere gratitude to all of them. I take this opportunity to thank both my Industry and Institutional guide for unconditional support and guidance.

I also express my sincere gratitude to Professor ___________________, Professor, Faculty Guide for his sincere help and guidance in preparation of this project.

I am indebted to, my Industry guide for his Valuable help, benevolent Guidance and precious advice throughout the execution of my project.

My sincere thanks also extend to all the managers, staffs of Punjab National Bank for providing a helpful work environment and making my Summer Internship an exciting and memorable experience.

whom it wouldn’t have been possible to complete this research.

I sincerely thank all the people who knowingly or unknowingly helped me in the work.

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Content

Sr.no Topic Page no.

1 Executive summary 6

2 About Punjab national bank 8

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4 Credit risk rating 15

4.1 Factors determining credit risk rating

4.2 Uses of credit risk rating

4.3 Loaning power with credit risk rating

5 Credit audit report 24

5.1 Physical stock of verification

5.2 Financial &operating performance –approach & methdology

of audit

5.3 Executive summary

5.4 Overall observation

Examples

6 Company ABC 28

7 Company XYZ 35

4

8 Conclusion 57

9 Bibliography 58

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CHAPTER -1: Executive summary

Title of the project: ANALYSIS OF EMERGING LARGE SCALE INDUSTRIES / BUSINESSES & THEIR FINANCIAL REQUIREMENTS

Name of the company: PUNJAB NATIONAL BANK

Mentor Name: Mr. SHRIDHAR SATHE

Objectives of Project:

To evaluate the financial requirements involved in large scale industries / businesses.

To analyse how risk and return are related to each other while financing to this

To understand the criteria required for loans are sanctioned.

Describe the process that undertaken by bank to know the level of risk involved in financing that particular proposal ( Credit rating)

Summary of Project:

Punjab National Bank continues to maintain its frontline position in the Indian banking industry. In particular, the bank has retained its NUMBER ONE position among the nationalized banks in terms of number of branches, Deposit, Advances, total Business, operating and net profit in the year 2008-09. It under takes many of the Product and Services are offered by Bank. But to do my summer project I got Circle office of PNB where they go through the proposals of Large Corporate Body and decides whether to sanction the proposal or not, the decision is taken on bases on many factors but the factor is the credit risk rating factor. So I worked on to understand the level of risk undertaken and the mitigation factors. My main aim of the project to find out how risk and return are related to each other while financing to this sector. I had to prepare this project by analyzing some road sectors to understand the risk parameters and the returns from the project.

So this project will give you the brief idea about the FINANCIAL REQUIREMENTS OF LARGE SCALE INDUSTRIES .

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I have discussed following points through my project:

1) I am giving the basic information about the PUNJAB NATIONAL BANK .

2) Then I am discussing about project design i.e. how I sub-divided my whole project Into subparts for convenience part .Then as my subject road infrastructure I have explained the categories or the types of road, their conditions, the type of scheme used in road sector in detail.

3) In the data analysis part, I have explained the methodology undertaken by bank for finalizing the loan.

I have tried my level best to put best efforts to take out maximum data from the given region, and to use that data for the preparation of the project

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CHAPTER – 2: ABOUT PUNJAB NATIONAL BANK

VISION:

"To be a Leading Global Bank with Pan India footprints and become a household brand in the Indo-Gangetic Plains providing entire range of financial products and services under one roof".

MISSION:

"Banking for the unbanked".

HERITAGE:

Established in 1895 at Lahore, undivided India, Punjab National Bank (PNB) has the distinction of being the first Indian bank to have been started solely with Indian capital. The bank was nationalized in July 1969 along with 13 other banks. From its modest beginning, the bank has grown in size and stature to become a front-line banking institution in India at present.

It is a professionally managed bank with a successful track record of over 110 years

Largest branch network in India - 4525 Offices including 432 Extension Counters spread throughout the country.

Strategic business area covers the large Indo-Gangetic belt and the metropolitan centres.

Ranked as 248th biggest bank in the world by Bankers Almanac , London.

Strong correspondent banking relationships with more than 217 international banks of the world.

More than 50 renowned international banks maintain their Rupee Accounts with PNB.

Well equipped dealing rooms; 20 different foreign currency accounts are maintained at major centres all over the globe.

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Rupee drawing arrangements with M/s UAE Exchange Centre, UAE, M/s Al Fardan Exchange Co. Doha, Qatar,M/s Bahrain Exchange Co, Kuwait, M/s Bahrain Finance Co, Bahrain,M/s Thomas Cook Al Rostamani Exchange Co. Dubai,UAE, and M/s Musandam Exchange, Ruwi, Sultanate of Oman.

PROFILE:

With over 56 million satisfied customers and 5002 offices, PNB has continued to retain its leadership position amongst the nationalized banks. The bank enjoys strong fundamentals, large franchise value and good brand image. Besides being ranked as one of India's top service brands, PNB has remained fully committed to its guiding principles of sound and prudent banking. Apart from offering banking products, the bank has also entered the credit card & debit card business; bullion business; life and non-life insurance business; Gold coins and asset management business, etc.

Since its humble beginning in 1895 with the distinction of being the first Indian bank to have been started with Indian capital, PNB has achieved significant growth in business which at the end of March 2010 amounted to Rs 435931 crore. Today, with assets of more than Rs 2,96,633 crore, PNB is ranked as the 3rd largest bank in the country (after SBI and ICICI Bank) and has the 2nd largest network of branches (5002 offices including 5 overseas branches ).During the FY 2009-10, with 40.85% share of CASA deposits, the bank achieved a net profit of Rs 3905 crore. Bank has a strong capital base with capital adequacy ratio of 14.16% as on Mar’10 as per Basel II with Tier I and Tier II capital ratio at 9.15% and 5.01% respectively. As on March’10, the Bank has the Gross and Net NPA ratio of 1.71% and 0.53% respectively. During the FY 2009-10, its’ ratio of Priority Sector Credit to Adjusted Net Bank Credit at 40.5% & Agriculture Credit to Adjusted Net Bank Credit at 19.7% was also higher than the stipulated requirement of 40% to 18%.

The Bank has maintained its stake holder’s interest by posting an improved NIM of 3.57% in Mar’10 (3.52% Mar’09) and a Return on Assets of 1.44% (1.39% Mar’09). The Earning per Share improved to Rs 123.98 (Rs 98.03 Mar’09) while the Book value per share improved to Rs 514.77 (Rs 416.74 Mar’09) Punjab National Bank continues to maintain its frontline position in the Indian banking industry. In particular, the bank has retained its NUMBER ONE position among the nationalized banks in terms of number of branches, Deposit, Advances, total Business, Assets, Operating and Net profit in the year 2009-10. The impressive operational and financial performance has been brought about by Bank’s focus on customer based business with thrust on CASA deposits, Retail, SME & Agri Advances and with more inclusive approach to banking; better asset liability management; improved margin management, thrust on recovery and increased efficiency in core operations of the Bank.

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PNB has always looked at technology as a key facilitator to provide better customer service and ensured that its ‘IT strategy’ follows the ‘Business strategy’ so as to arrive at “Best Fit”. The bank has made rapid strides in this direction. All branches of the Bank are under Core Banking Solution (CBS) since Dec’08, thus covering 100% of its business and providing ‘Anytime Anywhere’ banking facility to all customers including customers of more than 3000 rural & semi urban branches. The bank has also been offering Internet banking services to the customers of CBS branches like booking of tickets, payment of bills of utilities, purchase of airline tickets etc. Towards developing a cost effective alternative channels of delivery, the bank with more than 350 ATMs has the largest ATM network amongst Nationalized Banks.

With the help of advanced technology, the Bank has been a frontrunner in the industry so far as the initiatives for Financial Inclusion is concerned. With its policy of inclusive growth in the Indo-Gangetic belt, the Bank’s mission is “Banking for Unbanked”. The Bank has launched a drive for biometric smart card based technology enabled Financial Inclusion with the help of Business Correspondents/Business Facilitators (BC/BF) so as to reach out to the last mile customer. The Bank has started several innovative initiatives for marginal groups like rickshaw pullers, vegetable vendors, dairy farmers, construction workers, etc. Under Branchless Banking model, the Bank is implementing 40 projects in 16 States. The Bank launched an ambitious ‘Project Namaskar’ under which 1 lakh touch points will be established in unbanked villages by 2013 to extend the Bank’s outreach. Under this, 30 Kiosks have been opened covering 119 Villages reaching 1.32 Lakh beneficiaries.Backed by strong domestic performance, the bank is planning to realize its global aspirations. Bank continues its selective foray in international markets with presence in 9 countries, with branches at Kabul and Dubai, Hong Kong & representative offices at Almaty, Dubai, Shanghai and Oslo, a wholly owned subsidiary in UK, a joint venture with Everest Bank Ltd. Nepal and a JV banking subsidiary “DRUK PNB Bank Ltd.” in Bhutan. Bank is pursuing upgradation of its representative offices in China & Norway and is in the process of setting up a representative office in Sydney, Australia and taking controlling stake in JSC Dana Bank in Kazakhastan.

Bank has been a recipient of many awards and accolades during the year:-

• Gold trophy of SCOPE Meritorious Award for Excellence in Corporate Governance 2009 by Standing Conference of Public Enterprises• As per Financial Express-Ernest & young (FE-EY) India’s Best Banks Survey, PNB is identified as the best bank among the nationalized banks in terms of overall ranking.• As per HT-MaRS Survey on Customer Satisfaction, PNB stood NUMBER ONE in Delhi and Chennai in terms of customer satisfaction.• As per the Forbes Annual list of 2000 global giants, PNB tops the list of nationalized banks with a global ranking of 695, substantial improvement over last year’s placement at 946th position.• The Economic Times has ranked CEO of PNB as the 32nd Most Powerful CEO of 2010.• Skoch Challenge Award 2010 for “Livelihood Linkage” of the milk producers in Bulandshahr

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District, Uttar Pradesh.• IDC Financial Insights Innovation awards 2010 by IDC Financial Insights

PNB is amongst the Top 1000 Banks in the World, ‘The Banker’ listed PNB at 250th place. Further, PNB is at the 1166th position among 48 Indian firms making it to a list of the world’s biggest companies compiled by the US magazine ‘Forbes’.

Financial Performance:

Punjab National Bank continues to maintain its frontline position in the Indian banking industry. In particular, the bank has retained its NUMBER ONE position among the nationalized banks in terms of number of branches, Deposit, Advances, total Business, operating and net profit in the year 2008-09. The impressive operational and financial performance has been brought about by Bank’s focus on customer based business with thrust on SME, Agriculture, more inclusive approach to banking; better asset liability management; improved margin management, thrust on recovery and increased efficiency in core operations of the Bank. The performance highlights of the bank in terms of business and profit are shown below:

Parameters Mar'08 Mar'09 Mar'10 CAGR(%)

Operating Profit 4006 5744 7326 22.29

Net Profit 2049 3091 3905 23.98

Deposit 166457 209760 249330 14.42

Advance 119502 154703 186601 16.01

Total Business 285959 364463 435931 15.09

Rs.Crores)

* Respective figure for the corresponding financial year

ORGANIZATIONAL STRUCTURE:

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Bank has its Corporate Office at New Delhi and supervises 58 Circle Offices under which the branches function. The delegation of powers is decentralised upto the branch level to facilitate quick decision making.

CHAPTER-3:Large scale industries

Large scale industries refers to those industries which require huge infrastructure, man power and a have influx of capital assets. The term ‘large scale industries’ is a generic one including various types of industries in its purview. All the heavy industries of India like the Iron and steel

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Head Office

Circle Offices (58)

Branches (4267)

industry, textile industry, automobile manufacturing industry fall under the large scale industrial arena. However in recent years due to the IT boom and the huge amount of revenue generated by it the IT industry can also be included within the jurisdiction of the large scale industrial sector. Last but not the least the telecoms industry also forms and indispensable component of the large scale industrial sector of India. Indian economy is heavily dependent on these large industries for its economic growth, generation of foreign currency and for providing job opportunities to millions of Indians.

Iron and steel industry forms the indispensable part of the large scale industrial sector of India . The iron and steel industry had played a key role in the industrial development of India from the pre -independence period. India has seven large integrated iron and steel plants, of which six are owned by the public sector Steel Authority of India Limited (SAIL) and one by the private sector, Tata Iron and Steel Company Limited (more popularly known as Tata Steel or TISCO). It tries to trace the myriad so factors which augmented the growth of iron and steel industry in India

Telecom industry is another key player in the large scale industrial sector of India. This Telecom industry has underwent stupendous growth in the recent few years and is now poised to be a stalwart of the Indian industrial arena. A major contributor towards the growth of the Telecom industry in India is the Association of Unified Telecom Service Providers of India (AUSPI). By the help of their performance in India, the AUSPI members are also helping to shape the future of CDMA technology evolution. They advocate that India can and ought to take a leadership role in defining the future evolution of CDMA

Looking for some authentic information on the automobile manufacturing industry of India ? The automobile industry is poised for a huge growth in the next few years and has already shown an impressive 16.82 % growth last year.

IT industry has recently made India proud with its tremendous growth and international standards. Millions of jobs are being generated because of this industry which though a new entrant is a major member of the large scale industrial arena of India. There is also a insightful speculation on the immense growth potential of this industry.

This site throws the spot light on another big league player of the large scale industrial sector of India - the Bio-It or the pharmaceutical industry of India. Scientific advancement in discovery of drugs and advanced researches has propelled forward Indian Bio-IT or pharmaceutical industry

Textile industry is one of the most formidable pillars of the large scale industrial structure of India. Indian textile industry like the iron and steel industry has a huge contribution in the overall

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economic growth of India. Glean information about the pros and cons of the textile industry of India with the help of this site. This site provides you with a detailed minute on the growth and investment potential of the Textile industry of India.

Delve into the large scale industrial sector of Indian with this web page which provides you with ten sites on the various kinds large scale industries in India and their progress through the years.

CHAPTER- 4 : CREDIT RISK RATING

Credit risk rating is a rating assigned to borrowers, based on an analysis of their ability & willingness to repay the debt taken from the bank .this rating is assigned on a scale, which generally has 6 to 8 levels. Companies falling in the same credit risk category have similar

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probability of default .better the rating lower is the probability of default. The probability of default increase in an exponential manner as the credit risk deteriorates.

Definition of credit rating

“Credit rating is the risk of default by borrower due to inability and \ or unwillingness to repay his debt in accordance with the agreed terms and condition “

Factors determining credit risk:

Credit rating of a bank’s portfolio depends both external and internal factors:The external factors can be wide as well as company specific.Some of the economy wide factor are-

state of the economy wide swing in commodity prices Fluctuation in foreign rates & interest rates Economic sanction Government policies

Some company specific factors are:

Management expertise Company policies

The internal factors within the bank, influencing credit rating for a bank is:

deficiencies in loan policies /administration absence of prudential credit concentration limit inadequately defined leading limits for loan officers /credit committees deficiencies in appraisal of borrowers financial position excessive dependence on collateral without ascertaining its quality /reliability absence of loan review mechanism ineffective system of monitoring of accounts

Uses of credit risk rating

Credit risk rating is one of the important tools to decide in the following matters –

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Whether to lend to a borrower or not-

The credit risk rating of a borrower determines the appetite of the ban in determining exposure level. A ban would to lend to highly rates borrowers but would not like exposure to borrowers with the very poor credit risk rating.

Pricing-

The risk premium to be charged to a borrower should be determined by its credit risk rating . Borrowers with the poor credit rating should be priced high. Credit rating, however, is just one amongst several inputs to pricing.

Risk mitigates-

The extent of collateral security required & the need to step up margin requirement are linked to credit risk rating of a borrower. The higher the risk category of a borrower, the greater should be the value of collateral & / or the margins.

Product mix-

There is need to gradually shift from the present form of credit facility by way of cash credit limit to term lending in working capital . In case of, high credit risk category, offering demand loan for shorter durations may be considered keeping in view the risk involved. Conversely, for those borrowers with low credit risk category banks may sanction pre –determined limits for disbursals at short notice.

Level of decision making-

The delegation of loan sanction /approval powers can be linked to the Credit risk rating of borrowers. For low risk borrowers, higher power of approval can be at the branch level to facilitate faster sanctioning of loans thereby ensuring better customer service. For higher risk borrowers, approval from higher level may be considered.

Frequency of renewal & monitoring-

Renewal of facility in case of high rated borrowers can be considered at longer intervals as compared to low rated borrowers. Further, high –risk borrowers should be monitored on a more frequent basis than the low risk ones

The credit rating by the bank is done by evaluating the following four parameters.

Management Evaluation. Business & Industry Evaluation.

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Financial Evaluation. Conduct Evaluation.

The above are the broad parameters that are evaluated while rating the borrower. The weightage given to each parameters varies depending upon the model of credit rating chosen. The model to be chosen for credit rating depends upon the quantum of finance and scale of operations of the borrower.

Within each parameter there are different items to be marked/measured depending upon industry, nature of activity and scale of operations

The ratings models are formulated for:

Existing business and New Business.

Under existing Business, the model that are formulated are based on the criteria of investment and/or turnover. They are as follows:

Model Investment limit Turnover limitSmall 2 Upto 50 lacs -Small 50 lacs to 5 crores and Less than 25 croresMedium Scale 5 crores to 15 crores or More than 25 crores and less

than 100 crores.Large Scale Above 15 crores or More than 100 crores

Under New business, the model are:

Entrepreneur New Business Model where the cost of the project should upto 15 crores and the investment limit should be upto 5 crores.

New Project Model where the cost of the project should be more than 15 crores or the investment limit should be more than 5 crores.

Other than these there is rating model for Non Bank Finance companies (NBFC’s) which is NBFC rating model and one known as Half Yearly Rating Model.

If an existing company is going for expansion and the addition to the gross block is more than 50% of the existing Gross block then, Single Point rating model will be considered or else the applicable Existing business model will be considered.

Under Single Point Rating Model, the average score of applicable models under Existing and New Business will be considered.

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BUSINESS EVALUATION

Operating efficiency evaluation

Category ParameterOperating leverageInventory turnoverNet sales/operating assetRaw material consumed/net salesCredit period allowed

MARKET POSITON EVALUTION

PARAMETER Competitive positionExpected sales growthMarket dominance / market shareTrend in market share

INPUT RELATED RISK

1. Availabilities of raw material /fuel2. Management of price 3. Reliable vender base for 4. Dependence on imports 5. proximate to raw material6. status backsword integration

PRODUCTION RELATED RISK

1. Capacity utilization2. State of technology used3. Flexibility in product4. Manufacturing5. Technology6. Reserve / Deficit expenses

PRODUCT RELATED RISK

1. Product range

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2. Product quality3. Highly customized product4. Thread of substitute / obsolescence

PRICE COMPETITIVENESS

1. Economies of scale2. Brand equity3. Pricing flexibility4. Financing edge over5. Competitors6. Buyers power

MARKETING1. Sailing and distribution

a. After sales and service networkb. Long term contracts \assured of takes c. Geographical diversity of market

2. Advertisement\ other3. Promotional strategy

Other

1. Threat from environmental factor2. Vulnerability to events risks3. Regional rating of states

MANAGEMENT EVALUATION

1. Actual gross sales 2. Targeted sales 3. Actual PBT4. Targeted PBT

Subjective assessment of management

1. Management set up and corporate governance2. Commitment and sincerity3. Track record and sincerity4. Track record in debt repayment 5. Track record in industrial relation

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6. Financial strength \ flexibility \ group support7. Capital market perception

CONDUCT ACCOUNT EVALUATION

1. Preventive monitoring system rating2. Status of account3. Operation in account4. Submission of financial data statement

PNB rating

Score obtained rating Description Above 77.50 up to 80.00 PNB-AAA Minimum risk 72.50 to77.50 PNB-AA+ Marginal risk70.00 up to 72.50 AA- -67.50 up to 70.00 A+ Moderate risk62.50 upto67.50 A -60.00 up to 62.50 A- -57.50 up to 60.00 BB+ Average risk52.50 to 57.50 BB -50.00 up to 52.50 BB- -47.50 to50.00 B+ Marginally accepted risk42.50 to 47.50 B -40.00 to42.50 B- -30.00 to 40.00 C High risk30.00 & below D Caution

Loaning powers with credit risk rating:

The loaning powers have been linked to credit risk rating of the borrower. The officials shall exercise loaning powers linked to risk rating of the borrower / rating of the industry.

Credit Risk Rating of borrower Loaning powers‘AAA’ & ‘AA’ CMs AGMs, DGMs GMs, ED & CMD shall

exercise 125% of their normal loaning power.

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However, no fresh exposure should be taken up to field level for such accounts in case of unfavorable (C & D rated) industries.

‘A’ CMs AGMs, DGMs GMs, ED and CMD shall exercise 110% of their normal loaning power.

‘BB’ Normal loaning powers by officials at all levels to the extent of their vested loaning powers.

‘B’ For other than unfavorable industries – (a) Enhancement/ additional/ adhoc exposure, officials at all levels can exercise their normal loaning powers. (b) For Fresh Exposure, officials other than CMD/ED/GM (HO) shall exercise 75% of vested loaning powers except in case of ‘B-‘ ‘B’ rated borrowers where officials up to the level of Circle Heads shall not exercise loaning powers for taking fresh exposure. However CMD/ED/ GM (HO) shall exercise normal loaning powers for considering enhancement/ additional/adhoc/fresh exposure.

For unfavorable industries – (a) Enhancement/Additional/Adhoc exposure. Cases shall be sanctioned by the next higher authority not be taken up to the level of Circle Heads.(b) NO fresh exposure should be taken up to the level of Circle Heads in case of B (B+, B, B-) rated borrowers. However CMD/ED/Gm (HO) (same as above).

‘C’ & ‘D’ No fresh exposure is to be taken in ‘C’ & ‘D’ rated accounts. However, MC is empowered to consider fresh exposure in case of ‘C’ & ‘D’ rated borrowers. Renewal shall be considered by competent authority if exit is not feasible. Adhoc/additional/enhancement facility is to be sanctioned by the next higher authority not below the level of Circle Heads. However, ED/CMD shall exercise their normal loaning powers.

While exercising higher powers i.e. 125% & 110% of normal loaning powers of CMD/ED, the aggregate commitment power of borrower of Rs. 100crore/Rs. 75 crore should not be exceeded

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by them. Further while exercising higher powers including the adhoc powers, the officials other than CMD/ED should ensure that the total commitment does not exceed the aggregate powers vested with the next higher authority.

Loaning Power Chart for DGMs

(Rs. In lacs)

Sr. No Nature of Facility

DGM GM ED CMD

1 Aggregate Commitment per Borrower (Both Funded & Non-Funded)

2000 3500 7500 10000

2 Within (1) above

A Fund-based 2000 3500 7500 10000Out of this (I) Secured 2000 3500 7500 10000

Unsecured 500 875 3750 5000B Non – Fund

Based2000 3500 7500 10000

Notes:

1) CMD may sanction facilities/limits in excess of the aforesaid levels up to a maximum extent of 10%, but within the overall aggregate commitment of Rs. 100 crore.

2) In case of circle heads in the rank of DGMs/GMs and above, ‘Secured Advances’ may be classified under two heads: (a) Advances covered by primary security (b) Advances covered by Tangible Collateral Security. While exercising loaning powers, cash generating capacity of the activity financed shall continue to remain the [primary concern for the banks and the volume of activity, Risk rating of the borrower shall also be taken into account while determining the loan amount. In any case, the collateral offered should be at least 150% of loan amount in case of IP & securities which are in liquid in nature like Gold ornaments & Govt. securities etc. and for other securities it should be at least 200% of the loan amount/facility. However the above facilities shall be exercised in case immovable properties are owned by the borrower.

3) In case of book debt facility, DGMs & GMs shall exercise 50% of their FB (secured) powers and for advance against foreign usance documentary bills, DGMs and above shall exercise 50% of their FB (secured) powers.

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4) DGMs may exercise only 50% of their non-fund based powers for sanction of Letter of Credit (DA Basis)* limit as well as Letter of Guarantee Limit.

CHAPTER –5 : CREDIT AUDIT REPORT

Branch office mainly observe the following things

1-BO confirm that the stock audit report also observe accounts with other banks.

2-BO to obtained latest search report of ROC to ensure satisfaction of charges of OBC & confirm compliance

3-BO closely monitors the performance of the company

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4-BO to ensure that is no adverse features

Stock audit report

The stock audit report is prepared on the basis of information & explanation given by bank & the accounting statements provided to bank by company representative during bank visit to their go down.

Table of contents

Particulars Introduction General information on the borrower Banking arrangements Location visited Physical verification of stocks Financial& operating performance Approach & methodology of audit Sales & purchase Analysis of receivables Computation of drawing power Executive summary Overall observation

Business activitiesManufacture exporter of dues & dyes intermediates for various applications including textiles, paper,leather,wood stairs & coloring of metals

Physical stock of verification

List of factory \warehouse visited along with their address

Particulars Quantity Value Raw material stocks in factory

- -

Raw material under - -

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clearance goods under processFinished goods(fact) - -Stocks under(transits(bond) - -Bills send for collocation - -

Financial & operating performance-

Approach & methodology of audit

The statements of stocks & book as on submitted by the firm considered as the basis for this audit .

The following aspects were broadly reviewed The system presently followed by the borrower for the accounting & management of

inventory & receivables Adequacy & efficiency of the existing stocks accounting &internal control systems Level of computerization Basis of preparation of monthly stocks statements being submitted to the bank. Stock lying with third parties Availability of storage space \general upkeep of the factory The practices adopted by the borrower for renovation of stocks, the consistency there

of & their acceptability Creditors for purchases Composition, concentration, quality &reliability of receivables Age wise break up of receivables Debtors relating to group concern if any Credit policy of the borrower\recovery management Long outstanding\doubtful debts Availability & adequacy of various insurances, ever for stocks Sales & purchase Methods of valuation

o Raw material costo Semi finished goods at estimated costo Finished goods at cost or market value whichever is lowero Packing material at cost

Stores &spares at costo Fuels at costo Consumable at cost

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Insurance Registration of charges with ROC 19. Submission of stocks, QIS, MSOD statement 20. Verification of debtor Drawing power calculation Operation in bank account-(PNB acc)

Executive summary

Physical verification of stocks as shown in stock statement 100% verification of high value inventory of major inputs Mentioned &basis of valuation of stocks & receivables\comment on actual position vis-

a-vis data submitted to bank\if observed quantification of the same Proper categorization &valuation of stocks Compressive details of quantity & value of chargeable stocks Scrutiny of records for driving Comments on borrowers internal procedure regarding physical verification of inventory Comments on inventory management &control policies followed by the borrowers Comments on arrears of statutory dues& obligation Comments on notes of auditors & any other qualifying remarks contained in the last

balance sheet of the borrowers comment on general condition of storage ,plant condition ,plant layout, quality control etc

Comments on adequacy of insurance for primary as well as collateral security Comments on transaction Comments on system for movements of goods sent for Comments on movement of finished goods to various distributors centers Comment of sales return Specific comment on diversion of funds Any other finding during the course of stocks audit having impacts in the account Net impact of observations on the value of security charged.

Overall observation The account operation is found to be satisfactory The stock\MSOD &QIS statement are promptly submitted by the company There is old \obsolete stock in the company to the extent of rs 9.38 lacs The stocks were in conformity with the stock statement are under issued

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CHAPTER – 6: COMPANY ABC

REQUIREMENT OF FINNCIAL DOCUMENTS ARE FOLLOWING:

Brief history

Company was established as a partnership firm initially the company was engaged in the trading of dyestuff chemicals pharmaceuticals textiles and import of iron and steel .his son shri banwarilal singania are joined the trading business in the year 1953 at the age of 20 years .

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Shri banwarilal singhania is one of the most experienced industrialist and commands good reputation in the dyestuff industry with vast experience and the depth knowledge of the product and market.

During the year 1978n the unit started manufacturing of nephthol dyes at taloja near started manufacturing o f nephyhol dyes at taloja near new Mumbai. The products of the units are mainly required by woolnyln paper and metal industry.

The company was converted into public limit co. in 1997. The company tapped international market in the year 1980 .for the gradually out of the capacity 72% is being exported to various European countries and us. The company has loyal customers obese who are new associated with the past performance and present market Condition Company is hopeful to even better its growth rate exports in the year to come

The company has also local sales which constitutes around 15-20 % of the total turnover.

The requirement of raw materials is met through imports as well as local purchases .imports are mainly from Europe .usa and china .which local purchase are affected from various manufacturing units such as m\a industries and other firms .

Company has further enhanced the investment in fixed assets in the year 2005.to the extent of rs 375 crore to improve technology.

Company has the capacity to prove 8500 mt of dyestuff annually .depending upon local market price, company decides on varying the percentage of trading sales-

Company is enjoying limits under multiple banking arrangements and enjoys facilities with our bank and union bank of India .company has submitted CMA data for renewed of units.

Financial document

1. Note to credit committee

2. Credit rating by bank

3. Rating from external agency

4. PNB’s share %- FB- 71.23%

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Credit risk rating

The credit risk rating of a\c based on ABS for the year ended 31-3-09.has been carried out and the same has been vetted by RMD co. the company has secured CRR of BBB. Which represent average risk. There no limits and the same can be per mites by the competent authority under whose power the proposal falls.

Confirmation

o Compliance of last sanctioned terms o Security documents are valid duly vetted enforceableo Paper charge on securities created o Confirm the company \directors is not under bank\ RBI \ECGC\ CIBIL defaulter|

caution list Confirm that payment of statutory is not in arre ars –except disputed qualities in ABS

as on 31-3-09.o Confirm that no litigation against by the company is geldingo Corporate government practices are being followed as per auditor’s report

Confirm the no deviations are made from usual norms\ policy guidelines. Confirm that exposure is within banks internal ceiling \RBI prudential norms-audit\

inspection\meetings. NFB-76.96%

GIS of the proposal for ADHOC

Sanction of adhoc pc for rs 2.50 crore s for a period of 3 months

Dealing with PNB since 2005 Business activity –product Installed capacity

Manufacture exporter of dyes and dyes intermediates for various application including textiles, paper, leather ,woods paints, and coloring of metals etc.

Facilities sancation –position of accounts as on

7-5-2010.

Nature Limit VS DP Balance Irregulaties

29

Fund based\pobb\FOUBP\FOBNLC\FOBD

250000 699.43 669.43 679.16 Nil

PC\pcfc 1500 1845.73 1500 1137.20 Nil

Ceiling 2500 2169.43 1816.36 NilGDFD 92.50 100 92.50 NilNFB NilILC\FLC(DA) 1000 476.23 NilLG 265 0.25 NilLG buyers (500) 466.49 NilCeiling 1000.00 943.07 Nil

Financial position of company

31-3-07 31-3-08 31-3-09

audited audited Audited

Gross sales 99.88 117.03 105.44%growth 4% 17.17% (9.90%)Other income 4.00 2.12 1.87PBT 5.47 1.28 1.35PAT 3.06 0.75 0.79TNW 42.62 43.03 41.06NWC 21.62 26.47 29.08CA 1.51 1.52 1.52Debt eq.r 0.04 0.08TOL\tnw 1.01 1.21 0.96

Financial and operating performance

Year ended 31-3-2009Operating performance Sales 9648.69Net profit after tax 79.14Depreciation 253.30Cash accounts 332.44NPAT\sales % 0.82

30

B. financial indications 5640.78CA 1521.35Net FA 1217.54Non CA -Long term liab. 1404.14Tangible net worth 4041.33NWC 2738.893.71CR 0.69Parameter CategoryGross sales growth rate (%) Growth rateprofitability OPBDIT/sales (%)

Short term bank borrowings/Net sales (%)

Cash flow- Operating cash flow/Total debt (%)Net Operating cash flow / Total debt (%)

Past financials- Absolute comparisonCategory- ParameterSolvency- Debt equity ratio

TOL/TNWLiquidity- Current rationDebt coverage- Interest coverage ,DSCR

Profit abilities- Retune on Capital employed

Balance sheet

Particulars Current year Previous year1.Source of fundsShare capital 130584800 130584800Reserve and surplus 273548342 288749891Deferred tax liabilities 6515575 10921818Secure of loan 140414209 257688360total 551062927 6879448892.Application of fundsGross blockLess-depreciation 339774019 331480849

31

Net block 218020154 1933422648Capital work in progress 121753865 138138201Investment 13532484 13535484CA ,loan and advances

a. Inventories 267818517 300329557b. Sundry creditors 353551867 48704633c. Cash and bank

balances39806340 6121708

d. Loan and advances 220806340 261211028564078740 672093926

Current liabilities. and provision

411943366 535264127

Net CA(1-2) 551062927 687944889

Profit and loss account

Particulars Current year Previous year1.Income 1073114772 1191403403Sales and other income-increase\decrease in inventories

(570044721) 92297411

2.Cost of production 1016070052 1283700813Material consumed 695008019 995082697Trading purchase 26997426 10630962Labor cost 26567114 22623109Manufacturing expenses 98589773 106815604

847162032 11351523733.Gross profit 168908020 1485484404.Other expenditureSelling and administration expenses

98896169 82713265

Interest 30892089 27769171Depreciation 25530437 25058398Preliminary expenses written off

- 50012

PBT and extra ordinary item(3-4)

155118694 135590847

13789326 12957594Add\less extraordinary itemLess on sale of capital assets 325046 115975Security transaction tax on capital gain

- 965

32

Net profit \loss before tax 13465280 12840654

Limit s enjoyed in PNB

Nature of limits Limit rs in lacs

Outstanding balances as on 31.1.010

RoI\comm Margin

PC\PCFC 1500 1023.47 BPLR 2.50% 10%FOBP\FOOBP\FABC 2500 640.59 BPLR 2.50%FB ceiling 2500Total A 2500 1664.06 10%ILC\FLC 2000 823.46LG (buyers credit ) (500) 161.25 10%LG (150) 0.25NFB ceiling 1000Total B 1000 9849.6Total (A+B) 3500 2649.02

Securities1. Primary-

Hypothecation of stocks few materials, stock in process, finished goods &stores

2. Collateral-Hypothecation of existing \proposed fixed assets with aggregate WDV

Calculation of permissible bank finance

1.Chargable CA 5334.472.otherC A 2638.323.toatl CA 7972.794.other LL 1847.205.WC gap 5125.586.25% of CA 1993.207.NWC 2625.588.5-6 4032.399.5-7 3500.0010. MPBF 3500.00

33

Built up of NWC

Particulars Amt AmtNWC as on 31.03.010 2908.

38Add-cash profit 389.04Sub total 309.04Less repayments of loan 324.30Increase in FA 212.07Increase in NCA 135.46Sub total 671.83NWC as on 31.03.010 671.83

2512.582025.58

Calculation of drawing power

Valuation of summary Amt Raw material 1293.48WIP 1388.85Finished goods 591.58Total 3273.91Less –old stock 9.38Total stock 3264.53Less -creditors 782.84 Les -10% margin on stock 326.45Drawing power 2155.24

CHAPTER-7: COMPANY XYZ

REQUIREMENT OF FINANCIAL DOCUMENTS ARE FOLLOWING

Brief history

General-XYZ pvt ltd is a private company was incorporated in Feb. 1999 .with main objective of undertaking ship breaking activity shri abhishek anandkumar jain shri devi ashokkumar jain have promoted the company the promoters have acquired a plot at sosiya Bhavnagar one of the main ship breaking centers in India

Comment on industry scenario and industry outlook with particular reference to demand and supply

34

The condition in the ship breaking industry have not been very encouraging for the last 2-3 year or so one major factor that has been a cause of concern for the industry has been the rate of the vessel .the rate of the vessel s which were having around us $160\170pmt had increase to us $ 390\400

Pmt during the last 18 months an increase of more than 100% this along with the competition from china and Bangladesh has created a further panic in the market as a result of which the availability of the vessel had reduced .coupled with this the international freight rates firmed up over the last year as a result of to be scrapped were being recycled and the same are being used for voyages .only china and Bangladesh have been procuring the vessels at the present rate of us $ 400. In view of this aspect most of the ship breakers have deferred the purchases. The international freight rates are showing some signs of decisions .once the rates declines and the vessels would once again be available for scrapping purpose.

All the major players in the ride are gearing up for this position .so that vessels could be procured on the best terms.

---Comments on management production and marketing-

The promoters of the company are in business for the last 7 years and established themselves as leading ship breakers .the size of the plot acquired by the company is 30 * 45 sq meters where it can carry out a minimum scrapping of approx. 15000 MTPA

Present proposal

Brief of the proposal

The company has submitted ABS as on 31-03-08. And CMA data for yr 2007-08 and required following limit

Nature Cc(h)trading sub limit for ship breaking F B ceiling ILC \FLC ( DA\DP)Sub limit for trading activity Non fund based ceiling Total commitment

Proposal5.00(2.00)5.0010.00(7.00)10.0010.00

Justification for working capital sanction –

35

The company has planned to continue the scrapping of the large vessels .under the limit for company will be in a position to scrap the large vessels having a tonnage of approx 20000 mts .considering the present rate of the vessels the company is confident of procuring and scrapping vessels having an average tonnage of approx 6500 ms pa-

Taking into consideration the above factor the requirement of the LC limit of rs.1000 wt .of vessel 6500 ml@ us $ 300 us$1950000

Conversion rate @ rs 49\- rs 975 lacs

Say rs 1000 lacs

As per the present costing pattern the cost of the vessel has worked out as below-

Cost of vessel lac

CIF value 926 Customs duty 48Excise duty 160Port beaching charges 16Total 1150The above cost of the vessel is proposed to be financed as below

Means of finance

1. Own funds 1382. Unsecured loans 683. Suppliers credit 9264. Total 1150

Vetting noteCredit risk rating

Under mild corporate model

Rating ABS Date Indicates ScoreCurrent rating PNB B 31-3-09 Marginable

acceptable risk47.33

Previously approved

PNBB+ 31-3-08 - 49.16

AGMThe rating received in the below mentioned account has vetted and the submitted for approval

Name of the a\c M\S ABC pvt ltd Brady house Brady house ,Mumbai

36

Branch office activity Ship breaking an steel trading Facilities sanctioned FBWC&NFB(LC) facilities aggregating

rs .10.00 and rs vide CH sanction dated 27-5-09

Movement of CRR % scored obtained Parameter 31-3-08 31-3-09Financial evaluation 38.98 18.71Business and industry evaluation

56.25 59.38

Management evaluation 60.71 50.00conduct account evaluation NA 100.

Aggregated score 49.16 47.33Final rating of co. PNBB+ PNBB

The score under financial have declined due to losses .education in management evaluation is due to non achievement have declined only marginally due to full scores obtained under conduct of account evaluation , which was NA in previous rating.Branch ratingThe branch rating us PNB B+ with score of 49.57% .variance between branch rating and our rating is marginally.

Major factors identified in the credit rating report which may require attention for the taking any credit decision is as under The CR as at 31/3/09 I below the benchmark ROCE is negative Estimated sales &profits have not been achieved.

Recommendations

Recommended for approval of rating of PNB B with the score of 47.33% indicating

Average risk Approved rating report Credit risk rating report for MID corporate borrowers Name of borrower; Bo\Co \Ho-Bombay brandy House \co

37

Mumbai\co RMD Constitution –private ltd company Industry- trading Activity- shop breaking & steel scrap trading Balance sheet as at -31st 09 Borrower code-022089 Rating iD-373100200968572 Exposure – rs lakh Sanction limit Fund -500 term-0, NFB-1000, tatal-1000 Ceiling-if any Proposed limits- Fund -500, NFB- 1000, toatal-1000-ceiling (if any) Draft no-7

PMS REPORT

It mainly contain the following :Part -1

Name of borrower ABCBranch name Mumbai brady houseActivity Ship[ brakingRelationship manager Shri. Pradeep panickorSanction authority DGM circle Facility FB NFBDate of last sanction 27-3-09Date of document 20-2-09Date of latest reviewBanking arrangement Sole banking

38

PNB’s share 100%Total faun based WC 500.000Total NFB WC 1000.00Total loan & other facility 6.00Total limit \ceiling 00.00Creation \ modification chargesDate of certificate of charged held on 5-11-09If not filing of charges & receipt no Details of credit ratingDater of credit rating Based on balance sheet dated Credit rating

B+

Asset classification code – Standard as on -31-3-09

Part 2-

Last CurrentCommutation period 273 365Aggregated PMS scored 440 440PMS index score 418 418PMS rank 1 1

Part-2(B)

It contains following:

PMS index parameter wise details

Section A - status documentation \security creation \terms of sanction

Section B - status of feed back by the borrower

Section C - irregularities with other banks \F1 & other important adverse development

Part 3

Financial/operational performance

39

Actual operation of last two financial years-

Audited Audited31/3/07 31/3/08 31/3/09 31/9/09

Production In quantity

0.00 0.00 12190.00

Net sales 0.00 0.00 1500.00 1056.00Other income 23.46 13.53 0.00 0.00Operating profit\loss -9.48 -4.39 7.75 0.

00Pbt-\ pbl 13.98 9.14 12.75 5.00Cash p\l 13.98 9.14 13.50 0.00Sundary debt.

0.000 0.00 0.00 0.00

Old debtors 0.00 0.00 0.000 0.00

debtors other

0.00 0.00 0.00 0.00

Sudary creditors 0.47 0.11 700.00 0.00Total curr assets 155.92 130.30 1415.79Total curr liab 6.28 3.43 1016.20CR 24.82 57.98 1.39

Part-4

Details of uncomplied important terms & conditions of the last sanction

Part-5

-status of outstanding serious inspection irregularities

Gist of out standing Serious inspection irregularities

Documents are not held on record

Branch\Ros\ZO’sCommend under this head the progress made towards removal rectification of outstanding serious irregularities Since last report is to be givenParty is not available limit

Part-6

40

The following values of security is based on stocks \book debt statement dated

Name of facility

Amt of limit sanction

Values of securityLatest

Drawing power

Balance outstanding

Irregularity If any

FBWC 5000.00 0.00 0.0 0.00Sub total 500.00 0.000 0.00 0.00

B- Non fund based

Name of facility

Amt of limit sanction

Values of securityLatest

Drawing power

Balance outstanding

Irregularity If any

FLC 1000.00 0.00 1000.00 0.00 0.00Sub total 1000.00 0.00 1000.00 0.00 0.00Total- A+B+ C

Amt .

1500 0.00 1000.00 0.00 0.00Note –the ceiling of limits A B

Part 7- Details of security verification, stock audit, insurance cover held & last consortium meeting held

Section A- details of security verification

Section B- details of insurance, cover held-

Sedation C -status of stock audit

Name of stock auditor Date of appointment of stock auditor Date of physical verification of inventory \ book debts by stock auditor

Section D - In case of consortium, details of last consortium meeting held

date of last consortium meeting held if consortium meeting is not held during the last quarter ,then the reason for not

holding the same In brief-sole banking Action point of consortium meeting

41

Part 8-comments and action plan

Section-General comments on the conduct of account & overall performance of the borrowing company Satisfactory action confirmed by CH for FLC issued for rs 9.8 on 25/05/09Section B -If there is downgrade in PMS rank or if PMS is already in early warning \warning likely NPA\NPA category or there is increase in aggregated PMS score on analysis of reasons (as given part-2)\situation then details of steps \action already taken \proposed to be taken to retrieve the situation be given along with time frame the sameSection C - - outcome \results\progress of steps taken already taken ( if results \progress is not on expectated lines, then reason thereof & further action plan along with time frame be also detailed).Section D- Follow up the exposure contain committee’s recommendation \decision if relevant.

Financial position of the company

31/3/06 31/3/07 31/3/08audited Audited

Gross sales 87.95 0 0Domestic 87.95 0 0Export 0.00 0 0%growth 0.00 0 0Other income 12.51 23.46 13.53Operating profit\loss 9.04 4.44 1.78Pbt 5.07 13.98 9.14Pat 3.47 8.43 5.95Cash profit\loss 5.26 8.43 5.95Paid up capital 100 100 100Res &surplus 15.13 24.02 30.25Misc.expenses 0 0 0Accumulated losses 0 0 0

42

Deferred tax liab. 0 0 0a.Tangibale net worth 115.13 124.02 130.25b. Investment in allied concerns &amt of cross holdings

0.00 0.0 0.00

c.Net owned fund(a-b)

115.13 124.02 130.25

Unsecured loan total borrowing

11.86 38.61 8.36

Secured 0 0.00 00.0Unsecured 11.86 38.61 8.36Investment 0 0.00 0Total assets 155.19 169.91 142.90Out of which net fixed assets

8.96 7.49 6.10

Net WC 146.24 132.50 135.38CR - - -DER 0 0 0Operating profit\sales -veTOL\TNW 0.32 0.07

Long term sources 155.19 163.63 139.48Long term uses 8.96 7.49 6.10Surplus\deficit 146.24 156.14 133.33Short term sources 26.00 6.28 3.43Short term uses 172.23 162.42 136.81

Surplus \deficit 146.23 156.14 133.38

GIST of proposal-sanction of FB WC limit of rs 5 or NFB of rs 10 crore with a total ceiling of rs 10crore

Facilities recommended

Nature Existing Proposed

FB nilCC h trading- (5.00)

43

Sub limit ship breaking (2.00)Fund based ceiling nil 5.00Non fund based nil 10.00ILC\FLC(DA\DP) nil (7.00)Non fund based ceiling nil 10.00Total comment nil 10.00

Bank commitment & maximum permissible exposure norms

a. FBWC limit 5.00 nil 5.0b.NFB 10.00 nil 10.00C .Term loans\s 0.00 nil 0.0d. Investment in shares, debentures etc

0.00 nil 0.00

Total of a,b,c,&d 10.00 nil 10.00Total exposure as %age of bank’s capital fundBanks permissible exposure level in terms of our latest availed balance sheet

Well within permitted norms

Comments on financial indicators (growth, achievement Vis-as vis) estimated-

Sales-

The sales of the company for the year ended 2006 was rs 87.95 lacs from sales of scrap from residues ship breaking of previous yr .the company had no sales during fy 08 .as they have not under taken any ship breaking activity.

1.sources Actual Estimated Projected31.03.08 31.03.09 31.03.010

a. NPAT 5.95 31.53 92.01b. add –depreciation 0.00 0.75 1.00c. increase in capital 0.00 100.00 0.0D .increase in term liab.

0.00 140.78 170.0

E. decrease in

44

1. FA 6.57 0.00 0.02.other non CA 0.00 0.0 0.03.Total 12.52 273.06 263.012. Usesa.Net loss 0.0 0. 0.0B . Decrease in term liab.

30.34 0.0 0.0

C. Increase in FA 0.0 0.35 0.0D. Increase in others 0.0 0.0 0.0

E .Dividend payment

E. Others 5.18 0 0F .Total 35.57 0.35 0.03. Long term surplus(+) 1-2

-23.05 272.71 263.01

4.Increase\decrease in CA

-25.62 1285.44 12074.44

5.Increase\decrease in CL-

-2.85 712.77 744.43

6.Increase\decrease in WC

--22.77 572.72 463.0

7.Inet surplus+\ deficitDiffrenceof 3&6

-0.23 -300.00 -199.99

8.Increase\decrease in bank borrowing

0.0 300.00 200.00

Other income of the company for 07 was rs 23.46 lacs which mainly consist of sundary balances written of interest receipt of rs 13.53 lacs from fixed deposits.

Profit-

The company achieved PBT of rs 5.07 lacs in 06 & rs 13.97 lacs in 2007 & rs 9.14 lacs during FY 08 the same was due to other income earned by the company through interest on fixed deposits

Net worth

TNW increased from rs 115.13 lacs as at 2006 to rs 124.02 lacs as at 31/3/07 rs 130.25 lacs as at 31/3/08 due to retentation of profit

NWC

45

NWC of company which was at 146.24 lacs in 06 reduced to 132.50 lacs due to reduction of unsecured loan from 38.51 net profit of rs8.66 lacs during of the same marginally increase to rs 133.38 lcs in 08.

DE Ratio

The company does not have any long term debts & is s such a debt free company

CER

As there was no activity during the last two years the cr ratio is not applicable

Security

1. Primary

Hypothecation of ship purchased\to be purchased & the scrap materials arising thereof & book debt the company arising from the sales there of &all other current assets of the company

-FLC\ILC (DA\DP) - documents of title to goods received under the FLC\ILC for the imports\purchased from foreign suppliers or from the MSTC\SCI & other agencies

2. Collateral

Hypothecation \mortgage of block assets immovable properties

Property land adm.388 sq as with building of plinth area 2066 sq ft on plot no .3 block qd pitampura residential scheme ,new Delhi -34

Owned by deshraj jain\mrs santosh jain

Market value7.70

Realizable value7.00

Valuation date 19/03/09 ASP

Personal \corporate guarantee

Net means. Immovable properties

Date

guarantors previous present previous present Previous presentMr.Abhishek NA 6.49 NA 1.0 NA 1/1/09

46

anandkumr jainMr. Renal k .jain NA 6.28 NA 1.03 NA 1/1/09Mrs .ushadevi a.jain

NA 2.27 NA 0.33 NA 1/1/09

Total 22.43 NA 2.39

Trading activity

Direct imports

With the condition in the ship breaking activity fluctuating a lot the management has decided to go for the trading business which is a line akin to the ship breaking activity. To being with the company will be trading in the company has made a detailed study of the market & has also contacted a no. of suppliers in the international market during the last 3 years or so

With the contacts that having been developed & having made a study of fit to venture into trading of the iron & steel items in order that the resources available with the company are put in use

The imports are available on 180-240 credit terms however the same should be backed by a LC .company has contacted a few of the major suppliers who have expressed their willingness to in their favor .

At times even for the booking of the materials the company may be required to established a LC much in advance

The company will also open a LC on contact enter into a deal only after a local buyer has been identified & assured of the materials being sold of immediately on the best terms .at times depending upon the materials & the demand & supply position the company may also go in for the imports on cash terms

In the process the company could get a better deal & also will be in position to sell of the materials at the earliest their by reading the carrying cost.

Working capital limits – trading activity

The company will be requiring the following working capital limit to meet its trading activity

1- cash credit CH- 500 lacs2- FLC\ILC –DA\DP-700

Note –o\s under 1 &2 not to exceed rs 100 lacs at any one time

47

LC limit of rs 1000 lacs The lc limit is required to- Imports the material to beer traded I n as mentioned above the goods are available

on sight as well as on usance terms of 180-240 days For the booking of the materials in advance .At time’s supplier does insist for a LC to

book the materials. only after the Lc is established in advance will the supplier under take to supply the good in time

Almost 50 % of the LC limit could be utilized for the booking of the materials Company has planned to import the goods on cash terms also The company will try to import goods on bulk terms to ensure economies scale Each shipment could be staggered such that liability under the LC does not exceed

rs 500 lacs at any one time In support of our requirement data on CMA forms have been enclosed with the

actual for the year ended 31/3/08 & the estimated \projections for the year ended 31/03/09 \31/03/010. for the year ended 31/03/09 not much activity has been considered due to –

The cash credit limit will be required to an extend of rs 500 lacs, as against which the company has a sanctioned limit of rs 100 lacs. Only

Once the credit limit requested for as below are made available to the company then the company will be in a position to participate in the larger bids & the lift the materials within the time frame as specified by the auction houses etc,

Computation of LC limit for trading

Total purchase for the year 3850

Estimated purchase under LC_DA 1344Average monthly purchase 112Average usance period 180 daysAverage lead time 90 daysAverage usance period +av. lead time 270daysLC requirement 1008

Say rs 1000 lacs

Total working capital limits

The overall limits to be availed of by the company for the ship breaking as well as the trading activity will be as below-

48

1. Cash credit (H) : 500 lacs

(Sub –limit foe ship breaking)

2. FLC\ILC-DA\DP : 1000(Sub limit for trading) : ( 700 )

Recommendation

In view of the forging AGMCB recommend for following:

Sanction of Rs crore Nat6ure ProposedCC(H) 5.00Sub limit for ship breaking (2.00)Fund based ceiling 5.00ILC\FLC(DA\DP) 10.00Sub limit for trading activity (7.00)Non fund based ceiling 10.00Total commitments 10.00

Allowing waiver of stock audit remittance facility & decreased LC margin 15%& 25% concession in commitment charge as discussed in “other issues”

Co – recommendation In view of the AGMC (B) recommendation we may consider sanction of:

Sanction of Rs crore Nat6ure ProposedCC(H) 5.00Sub limit for ship breaking (2.00)Fund based ceiling 5.00ILC\FLC(DA\DP) 10.00Sub limit for trading activity (7.00)Non fund based ceiling 10.00Total commitments 10.00

49

Note on maximum permissible bank finance of trading activity

1-

2007-2008 2008-2009 2009-2010estimated Accepted

sales 0 32.00 32.002-Inventory level actual & estimated

particulars 07-08 08-09 09-010 09-010Stock in trade Months sale

0 8.34(5.76)

15.01(5.74)

15.01(5.74)

Receivable Month sales

0 4.38(3.00)

9.75 9.75

Advance to supplier

0 0 0 0

Note on maximum permissible bank fiancé for trading activity1-The achievement in sales & projections of sales for ensuring years are as under

2007-2008 2008-2009 2009-2010estimated Accepted

sales 0 32.00 32.00 2-

Particulars 2007-2008 2008-2009 2009-2010- 2009-2010audited estimated projected accepted

Stock in trade Month sales

0 8.34(5.76)

15.01(5.74)

15.01(5.74

ReceivablesMonth sales

0 4.38(3.00)

09.75(3.00)

9.75(3.00)

Advance to suppliers

0 0 0 0

Advance payment of tax

0 0 0 0

Cash & bank 0 0.02 0.01 0.01

50

balancesOther CA 0 1.44 1.47 1.47total 0 14.18 26.24 26.24

ReceivablesCurrent liabilities

Particulars 07-08- 08-09 09-010 09-010audited estimated projected projected

Sundry creditors

0.01 7.00 14.00 14.00

Advanced from customers

0.00 0.00 0.00 0.00

Statutory liabilities

0.33 0.11 0.50 0.50

Other liabilities

0.00 0.05 0.10 0.10

Total 0.34 7.16 14.60 14.60

Calculation of MPBF

Item 08-091.Chargeable CA 24.772.OCA 1.473.TCA 26.244.OCL 14.605.WC gap 11.646.NWC at 25%of total CA 6.56Pr7.ojected NWC 6.638.5-6 5.089.5-7 5.0110.Permissible bank finance minimum 5.00

Built up of NWC

51

Built up of NWC 31.3.08 31.3.01NWC 12.8Net profit 31.53Depreciation 0.75Increase in capital 100.00Increase interim deposits 140.78Total 273.06

Operating statement

Actual Actual Estimated

Co as a whole

Project trading

Co whole

31.03.07 31.03.08 31.03.09 31.03.09 31.03.10 31.03.10

A-1-Gross income (net of refund )

a. Domestic sales

0.00 0.00 1500.00 1750.00 3200.00 3900.00

b. Less excise duty

0.00 0.00 0.00 0.00 0.00 0.00

c.net sales 0.00 0.00 1500.00 1750.00 3200.00 3900.001- Other

income a. Duty

drawback

0.00 0.00 0.00 0.00 0.00 0.00

b. Cash assistance

c. Commission etc

0.00 0.00 0.00 0.00 0.00 0.00

d.sub total 0.00 0.00 0.00 0.00 0.00 0.003-total 1+2 0.00 0.00 1500.00 1750.00 3200.00 3900.00B-Cost of sales a. Purchases 0.00 0.00 2186 2475 3850.00 4240.00

c. Other trading expenses

0.00 0.00 5 15 5.00 12.00

d. Carriage inwards

0.00 0.00 7 12.50 10.00 10.00

52

commission etc

e. Add- opening stock

0.00 0.00 0 0 732.50 834.17

f. Sub total 0.00 0.00 2197 2502.50 4597.50 5146.67g. Less –

closing stock

0.00 0.00 732 834.17 1532.50 1501.11

h. Subtotal ( cost of sales)

0.00 0.00 465 1668.33 3065.00 3645.56

C-selling general administrative expenses

4.44 1.78 25.00 45.00 68.00 105.00

D. operating profit before interest & depreciation

-4.44 -1.78 10.00 36.67 67.00 14.44

E-interest 5.04 2.61 1.50 1.50 10.00 20.00F-other income 23.46 13.53 5.00 5.00 0.25 3.00Less other expenses

0.00 0.00 0.00 0.00 0.00 0.00

G- PBT 13.98 9.14 12.75 39.42 56.25 131.44Prov .for tax 5.55 3.19 - 7.88 - 39.43H-net profit 8.43 5.95 - 31.53 - 92.01

Analysis of balance sheet formLiabilities

Actual Actual estimated Projected 31.3.07 31.03.08 31.03.09 31.03.010

CL1.short term borrowings from bank inc(BP\BD)a. from applicant bank

0.00 0.00 0.00 0.00

b. From others 0.00 0.00 0.00 0.00c.(of which BP\BD0 0.00 0.00 0.00 0.00Sub total 0.00 0.00 300 500

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2.short term borrowings others

0.00 0.00 0.000 0.00

3.sundary credits 0.47 0.11 700 14004.advanced from customer

0.00 0.00 0.00 0.00

5.provision for tax 3.32 3.32 11.20 50.046.dividevd payable 0.0 0.00 0.00 0.007. Other statutory liab.

0.00 0.00 0.00 0.00

8.TL,DPG dues In yr 0.00 0.00 0.00 0.0009.other CL 2.49 0.00 5 10Sub total 6.28 3.43 716.20 1460

.0410.Total CL 6.28 3.43 1016.20 1990.64Term liabilities11.debentures(not maturing 1 yr)

0.00 0.00 0.00 0.00

12.deferred tax 1.00 0.86 0.00 0.0013.term loan(existence due in 1 yr)

0.00 0.00 0.00 0.00

14.OCG(excl.inst.due in yr)

0.00 0.00 0.00 0.00

15.term deposits 0.00 0.00 0.00 0.0016.other term deposits

38.61 8.36 150 320

17. Total term liab. 39.61 9.22 150 32018. Total outside liab.

39.61 9.22 150 320

Net worth 15.89 12.65 1166.20 2280.6419. capital 100 100 200 0.0020. Gen.kes. 0.00 0.00 0.00 0.0021.revaluation reserve

0.00 0.00 0.00 0.0

22.others 0.00 0.00 0.00 0.0023.surplus+\deficit- 24.02 30.25 61.78 153.7924.net worth 124.02 130.25 261.25 353.7925. total liab. 169.91 142.90 1427.49 2634.43

Computation of maximum permissibleFinanance for working capital

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Actual Actual Estimated

Co as whorled

Projected

Co as whorled

31.03.07 31.03.08 31.03.08 31.03.09 31.03.10 31.03.101.toatal current assets

155.92 130.30 1231.30 1915.79 2452.62 2623.23

2.Current liab.( other than bank narrowing

6.28 3.43 770.00 716.20 1300.00 1460.64

3.WC gap 149.64 126.87 461.50 699.54 1150.62 1062.594.minimum stipulated net WC

38.98 32.58 307.88 353.95 652.62 655.81

5.actual\projected NWC

149.64 126.87 311.50 399.59 640.00 662.54

6.3-4 110.66 44.30 153.63 345.64 500.00 506.787.3-5 0.00 0.00 150.00 300.00 512.62 500.008.maximum permissible bank finance –item 6or 7

0.00 0.00 150.00 500.00 500.00 500.00

9. excess borrowing If any representing shortfall in NWC

0.000. 0.00 0.00 0.00 0.00 0.00

Fund flow statement

1.sources Actual Estimated Projected31.03.08 31.03.09 31.03.010

A .NPAT 5.95 31.53 92.01B. Add –depreciation 0.00 0.75 1.00C. Increase in capital 0.00 100.00 0.0D. Increase in term liab.

0.00 140.78 170.0

E. Decrease in

1.FA 6.57 0.00 0.02.Other non CA 0.00 0.0 0.03.Total 12.52 273.06 263.012. Usesa.Net loss 0.0 0. 0.0b. Decrease in term liab.

30.34 0.0 0.0

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c. Increase in FA 0.0 0.35 0.0d. Increase in others 0.0 0.0 0.0e.Dividend paymentf. .others 5.18 0 0f. total 35.57 0.35 0.03. long term surplus(+) 1-2

-23.05 272.71 263.01

4.Increase\decrease in CA

-25.62 1285.44 12074.44

5.Increase\decrease in CL-

-2.85 712.77 744.43

6.Increase\decrease in WC

--22.77 572.72 463.0

7.Inet surplus+\deficitDiffrenceof 3&6

-0.23 -300.00 -199.99

8.Increase\decrease in bank borrowing

0.0 300.00 200.00

Chapter - 8: CONCLUSION

Large scale sector as a whole is poised to grow. The traffic is growing considerably. As per IRC the traffic is expected to grow @ 7.5% p.a. In the most likely scenario. Due to increase in industrialization, Govt.’s policy to increase the road network to the rural areas also is going to have very vital impact. Unless the connectivity in the rural areas is improved, it is very difficult to have progress of the rural India. With many of the projects, completed and started collecting toll, the initial opposition to the toll collection is likely to be reduced. Setting of too many toll roads may be irritating for the users, but if the project is capable of ensuring the return of toll paid by way of reduction in fuel consumption, saving in time then the people cannot have any objection in paying the toll. The projects are lucrative to the private parties due to long concession period and surety of return of investments with good returns. The projects are lucrative to the lenders for the surety of return of funds with good rate of interest and tax benefits. The projects are good for the government as it lays down the much required infrastructure without costing anything to the exchequer and it is advantageous to the people

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since they get better roads for fast and safe driving, less fatigue, less fuel consumption, less maintenance of vehicles with less wear and tear of tyres and tubes.

In nut shell, it appears that, the large scale industary projects certainly will be beneficial to the banks for financing, provided they are techno-economically viable on the scale of various parameters suggested in the profile.

However considering the time required for financial closure, construction and repayment the project requires commitment for over 10-12 years.

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CHAPTER-9: BIBLIOGRAPHAY

1) india_bnk.pdf

2) www.credit risk rating.com

3) www.punjab national bank.com

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