State bank of india ; pulin & kushal

1. PROJECT REPORT ON
FINANCING MEDIUM ENTERPRISE
AT
STATE BANK OF INDIA
BY
KUSHAL PAREKH (Roll no. 31)
PULIN PATEL (Roll no. 39)
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2. ACKNOWLEDGEMENT
We would like to thank SBI for giving us such a great
learning experience.
We are especially thankful to Mr. T. Chandrasekaran (AGM
Sales Hub) for his guidance and motivation.
We would also like to thank Mr. Anmol (Customer Support
Officer), Mr. Pramod (Relationship Manager, Medium
Enterprise) and Mr. Sushil (CFA, Medium Enterprise) for
their continuous guidance and support.
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3. INDEX
 STATE BANK OF INDIA – ORIGIN…………………………………04
 STATE BANK OF INDIA – TODAY…………………………………06
 SBI – MISSION, VISION & VALUES………………………………..07
 SBI – MODERNIZATION PROGRAMME………………………….,08
 SMALL & MEDIUM ENTERPRISE (SME) – OVERVIEW…………10
 SME – ROLES, POLICIES & ISSUES……………………………....11
 SME – PRODUCTS…………………………………………………….13
 FINANCING STOCK BROKERS……………………………………..19
 EVALUATION OF LOAN PROPOSALS OF
MEDIUM ENTERPRISES……………………………………………..21
 PROPOSAL OF CITIZEN INDUSTRIES…………………………….22
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4. STATE BANK OF INDIA – ORIGIN
The origin of the State Bank of India goes back to the first decade of the
nineteenth century with the establishment of the Bank of Calcutta in Calcutta
on 2 June 1806. Three years later the bank received its charter and was re-designed
as the Bank of Bengal (2 January 1809). A unique institution, it
was the first joint-stock bank of British India sponsored by the Government of
Bengal. The Bank of Bombay (15 April 1840) and the Bank of Madras (1 July
1843) followed the Bank of Bengal. These three banks remained at the apex
of modern banking in India till their amalgamation as the Imperial Bank of
India on 27 January 1921.
Primarily Anglo-Indian creations, the three presidency banks came into
existence either as a result of the compulsions of imperial finance or by the
felt needs of local European commerce and were not imposed from outside
in an arbitrary manner to modernise India's economy. Their evolution was,
however, shaped by ideas culled from similar developments in Europe and
England, and was influenced by changes occurring in the structure of both
the local trading environment and those in the relations of the Indian
economy to the economy of Europe and the global economic framework.
Bank of Bengal H.O.
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5. Establishment
The establishment of the Bank of Bengal marked the advent of limited
liability, joint-stock banking in India. So was the associated innovation in
banking, viz. the decision to allow the Bank of Bengal to issue notes, which
would be accepted for payment of public revenues within a restricted
geographical area. This right of note issue was very valuable not only for the
Bank of Bengal but also its two siblings, the Banks of Bombay and Madras. It
meant an accretion to the capital of the banks, a capital on which the
proprietors did not have to pay any interest. The concept of deposit banking
was also an innovation because the practice of accepting money for
safekeeping (and in some cases, even investment on behalf of the clients)
by the indigenous bankers had not spread as a general habit in most parts of
India. But, for a long time, and especially upto the time that the three
presidency banks had a right of note issue, bank notes and government
balances made up the bulk of the investible resources of the banks.
The three banks were governed by royal charters, which were revised from
time to time. Each charter provided for a share capital, four-fifth of which
were privately subscribed and the rest owned by the provincial government.
The members of the board of directors, which managed the affairs of each
bank, were mostly proprietary directors representing the large European
managing agency houses in India. The rest were government nominees,
invariably civil servants, one of whom was elected as the president of the
board.
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6. STATE BANK OF INDIA – TODAY
State Bank of India is the premier commercial bank of the country, and
among its strengths, the following would merit attention. The largest
commercial bank in the country with branches spread all over India, besides
having presence in all the time zones of the world covering several countries.
As the largest financial institution in India, SBI is well positioned to capture
growth in India’s dynamic banking market and is seen as a macro economic
proxy for the Indian economy.
The bank along with its non-banking subsidiaries has emerged as a financial
services supermarket offering the entire gamut of financial services
including investment banking, housing finance, factoring, project finance,
asset management primary dealership, securities trading, credit card, gold
banking, insurance, etc. The subsidiaries have been built into highly
focused, efficient and tech- savy organisation which works closely with the
customer relationship groups in order to cross-sell products building on
Group synergy.
SBI is an excellent brand name that is synonymous with trust and security.
SBI is the only bank in India to be ranked among the top 100 banks in the
world and also among the top 20 banks in Asia in the annual survey by “The
Banker”.
The bank has long standing relationship with 80% of Indian Bluechip
corporates. Substantial part of the corporate business of the bank is handled
in five Strategic Business Units (SBUs) - Corporate Accounts Group, Leasing
SBU, Project Finance SBU, Mid Corporate Group (MCG) and Stressed
Assets Management Group (SAMG). The Corporate Accounts Group (CAG)
is a dedicated service group catering to about 298 top corporates and offers
our top clients high quality relationship banking a broad product portfolio,
competitive pricing and skilled credit expertise. The bank has developed an
excellent inhouse staff training infrastructure including a College, an
Academy, an Institute for Rural Development and an Institute for Information
Management and Communication Technology. Efforts are continuously
made to improve the motivation and morale of the bank’s employees through
on-going training and on-site initiatives.
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7. MISSION STATEMENT
To retain the bank’s position as the Premier Indian Financial Services Group,
with world class standards and significant global business committed to
excellence in customer, shareholder and employee satisfaction and to play a
leading role in the expanding and diversifying financial services sector while
continuing emphasis on its development banking role.
VISION STATEMENT
1. Premier Indian Financial Services Group with global perspective, world
class standards of efficiency and professionalism and core institutional
values.
2. Retain its position in the country as a pioneer in development banking.
3. Maximise shareholder value through high sustained earnings per share.
4. An institution with a culture of mutual care and commitment, a satisfying
and exciting work environment and continuous learning opportunities.
VALUES
1. Excellence in customer service.
2. Profit orientation.
3. Belonging and commitment to the bank.
4. Fairness in all dealings and relations.
5. Risk-taking and innovation.
6. Team-playing.
7. Learning and renewal.
8. Integrity.
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8. 9. Transparency anddiscipline in policies & systems.
SBI Modernization Programme
SBI’s Information Technology Programme aims at achieving efficiency in
operations, meeting customer and market expectations and facing
competition. Our achievements are summarized below:
FULL BRANCH COMPUTERISATION
All the branches of the Bank are now fully computerised. This strategy has
contributed to improvement in customer Service.
ATM SERVICES
There are 10,200 ATMs on the ATM Network in the State Bank Group
spread across the length and breadth of the country, thereby creating a truly
national network of ATMs with an unparalleled reach. . In January 2006, the
Bank recorded 3.3 crore ATM transactions and withdrawals of around Rs
5,800 crore and the transactions are growing at the rate of 15% month-on-month.
Value added services like ATM locator, payment of fees for college
students, multilingual screens, voice over and drawal of cash advance by
SBI credit card holders have been introduced. The Bank is planning to
extend the BS7799 certification that it received for its data centre in Mumbai
and disaster recovery centre in Chennai to its ATMs. Our customers have
access to the largest reach and convenience of “Anywhere – Anytime”
banking. State Bank ATM cum Debit cards are also acceptable at more than
1,23,000 Points of Sale / Merchant Establishments, which display Maestro
logo.
INTERNET BANKING
This on-line channel enables customers to access their account information
and initiate transactions on a 24x7, boundary less basis. 3308 branches are
extending INB service to their customers. All functionalities other than Cash
and Clearing have been extended to individual retail customers. A separate
Internet Banking Module for Corporate customers has been launched and
available at 1070 branches. Bulk upload of data for Corporate, Inter-branch
funds transfer for Retail customers, Online payment of Customs duty and
Govt. tax, Electronic Bill Payment, SMS Alerts, E-Poll, IIT GATE Fee
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9. Collection, Off-line Customer Registration Process and Railway Ticket
Booking are the new features deployed.
STEPS
Under STEPS, the bank’s electronic funds transfer system, the Products
offered are eTransfer (eT), eRealisation (eR), eDebit (CMP) and ATM
reconciliation. STEPS handles payment messages and reconciliation
simultaneously.
SEFT
SBI has launched the Special Electronic Fund Transfer (SEFT) Scheme of
RBI, to facilitate efficient and expeditious Inter-bank transfer of funds. Many
branches of our Bank in various LHO Centres are participating in the
scheme. Security of message transmission has been enhanced.
CORE BANKING
The Core Banking Solution provides the state-of-the-art anywhere anytime
banking for our customers. The facility is available at 2704 branches of SBI
covering 49% of the Bank’s business at 612 centres and at all the 4715
branches of the Associate Banks covering 100% of their business at 2341
centres.
CREDIT CARD
The SBI Card has 2.3 million card holders at present and it is targeting to
cross 3 million mark by December this year. SBI Card is now available at 85
locations which is expected to go up to 100 by December 2006. SBI Card
has launched three new co-branded credit cards — TATA Card, SBI Railway
Card and SBI Vishal Mega Mart Card — in February 2006 aimed to tap the
niche segments. SBI Card has 19 products targeting various segments of
the society and issues over one lakh cards per month. SBI Card has the
widest distribution network in the country through SBI and its associate
banks with over 13,600 branches.
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10. SMALL & MEDIUM ENTERPRISES (SMEs) –
OVERVIEW
Small Scale Industries (SSI) sector comprises small scale units, tiny
enterprises and small service and business enterprises.
The official (Government of India) definition of SSI is as under:
(a) Small scale industrial units which are engaged in the manufacture,
processing and preservation of grades and whose investment in plant and
machinery does not exceed Rs. 10 crores.
(b) Tiny enterprises where investment in plant and machinery is upto Rs.25
lakhs.
(c) Small scale service and business enterprises with an investment upto Rs.
10 lakhs in fixed assets including land and building.
Over the years, the process of graduation of several SSI units into medium
enterprises has been witnessed. Therefore, the Working Group on Flow of
Credit to SSI Sector, appointed by the Reserve Bank of India,
recommended for the creation of a separate category of Medium Enterprises
(ME). While ME may not qualify for priority sector lending, they must be seen
as contiguous with SSI. As per the recommendation of the Group, Small and
Medium Enterprises (SME) comprising tiny, small and medium enterprises,
are defined as under:
(a) Tiny: Turnover being upto the financial limit of Rs.2 crores.
(b) Small: Turnover being above Rs. 2 crores but less than Rs. 10 crores.
(c) Medium : Turnover being between Rs. 10 crores and Rs. 50 crores.
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11. SMES - ROLE, POLICIES AND ISSUES
SMES – ROLE & IMPORTANCE:
· SMEs contributes to around 56% of manufactured products, 35.8% of
the exports and ranks second in providing employment next only to
agriculture.
· Incentives: reservation of items, concessionary finance, simplification
of procedures, imports under OGL, duty free import of select items,
simplified credit sanctioning system
· Major issues: Inadequate credit, delay in sanction, lack of
transparency, lack coordination among financing agencies.
The relative importance of the SSI in the national economy can be gauged
from the fact that registered SSI units increased from 7.90 lakh units in 1990-
91 to 15.54 lakhs in 2003-04; the level of production achieved was of the
order of Rs. 351427 crores (at current prices) in 2003-04; goods worth of
Rs.86013 crores were exported (in 2002-03) and the level of employment
was 271.36 lakhs in 2003-04 which is next only to agriculture. It contributes
around 56 per cent of the manufactured products and 35.8 per cent of the
exports of the country. The unregistered units have increased from 59.97
lakhs in 1990-91 to 98.41 lakhs in 2003-04. Thus, total units in operation in
2003-04 were 113.95 lakhs.
SMES – POLICIES:
The Government policy provides for special incentives to the SME units, by
way of reservation of items exclusively for the manufacture of SSIs, supply of
raw materials through SIDCs, provision of finance on concessional terms to
micro and tiny units, fiscal reliefs in terms of excise duty, and assistance in
marketing. Recognizing the role of the small scale sector in providing
employment, and increasing production and exports, the government has
streamlined procedures for imports and reduced points of control. In order to
meet the financial requirements of SMEs, banks and Development Financial
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12. Institutions [both National and State level] offer various facilities, incentives
and special schemes.
SMES – ISSUES:
The following are the current issues relating to the SME sector:
Non-availability of bank credit to the SSI sector is a major issue. This relates
to:
(a) Inadequate credit sanction, and
Inadequate sanction takes place due to
(i) lack of understanding of business and requirements of genuine
needs
(ii) lack of transparency on the part of borrowers,
(iii) lack of information made available by borrowers to banks for credit
appraisal
(iv) lack of appreciation on the part of the borrower regarding bank
formalities
(v) diversion of funds by borrowers which prevents bankers from being
liberal in credit sanction
(vi) lack of coordination between banks and financial institutions in
carrying out a joint appraisal
(vii) lack of skills in appraising hi-tech projects
(viii) Inadequate support from controlling office and legal / technical cells
in banks.
(b) Delays in credit sanction.
Similarly, delays in credit sanction include
(i) asking information from borrowers in piecemeal,
(ii) appraisal being done in parts,
(iii) ineffective arrangements of loan consortium,
(iv) inadequate organizational arrangements to carry out speedy
appraisal, and
(v) lack of cooperation on the part of the borrower to comply with
banker's requirements. Along with bank credit, lack of coordination
between SFCs and banks, which has resulted in the lack of flow of
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13. working capital to the SMEs leading to industrial sickness and lack
of finance for marketing, is another major issue.
SMES – PRODUCTS
The following are the key SME products of SBI on which we focused.
OPEN TERM LOAN
1. Target Group : SMEs in manufacturing sector
2. Eligibility : Existing or new corporate or non – corporate customers in
SME – manufacturing sector with credit ratings of SB3/SBTL3
AND ABOVE.
Units with SB4/SBTL4 can be considered selectively with
administrative approval of CGM( Circle)
Non customers also can be considered subject o fulfillment of
take – over norms and after due obtention of opinion reports
from their existing bankers.
3. Purpose : Any genuine commercial purpose such as
 expansion / modernisation
 substitution of high cost debt of other banks / FIs
 Upgradation of technology
 Energy conservation systems
 Acquisition of software, hardware, consumables, tools,
jigs, fixtures, etc.
 ISO and other such certifications
 Visits abroad for acquiring technology, finalizing deals,
participation in fairs, market promotion, etc.
4. Type of facilities : Term Loans
5.
Quantum of Finance
:
Maximum Rs.250lacs
For amounts more than this, prior administrative approval fro
the CGM(Circle) is to be obtained and the sanction would have
to be accorded by CCC - 1
6. Margin : 10% uniformly
7. Rate of Interest : As per the credit rating of the borrower linked to SBAR on
floating rate basis
8. Security:
- Primary
:  Hypothecation of the machinery proposed to be
purchased out of the Term loan
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14. - Collateral  Extension of charge over current assets, fixed
Assets and other existing collateral
 Obtention of additional collateral should be explored
 In all cases, personal guarantees of the promoters of the
unit have to be invariably obtained.
In case of corporate borrowers, pledge of promoters
equity should be explored
9. Processing fees As applicable to the unit for term loans
10. Repayment : Generally not to exceed 3 years. May be extended upto 5 years
selectively if considered necessary.
11. Documentation : Usual Term Loan Agreement for the TL limit to be obtained
upfront and supported by exchange of suitable letters at the
time of each disbursement
12. Special features  This is a unique facility of a pre-sanctioned term loan limit
with the option of multiple disbursements for multiple
purposes to be sanctioned along with the working capital
limits.
 This facility is to be made available at our erstwhile
commercial network branches, industrial estate branches,
SSI branches, which are headed by CMs and such other
branches identified for the purpose by the
CGM(Circle)/GM(Network)
 Other branches may get such loans processed and
sanctioned by SECC/CPCs irrespective of the amount.
 Borrowers can utilize the facility on multiple occasions as
per their needs.
 Each disbursal can be made by the branch manger without
reference to the sanctioning authority
 The repayment for each term loan is to be calculated by
reference to the date of the first drawdown
 Each disbursal should be supported by an exchange of
letters between the borrower and the Bank.
 The sanction is valid for 12 months only and any unutilized
portion will lapse after 12 months.
 Each term loan has to be treated as an individual TL for
accounting purposes.
 The discretionary powers are as applicable to term loans as
usual.
 There is no need to refer these proposals to the
Consultancy cells for techno-economic viability study.
Product Highlights:
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15. This is a unique facility, the first of its kind aimed at our existing units, both our customers,
especially those who are rated high as well as those banking elsewhere to facilitate them to
negotiate for acquisition of assets, etc. with the comfort of a pre-sanctioned term loan limit.
There is no need for routine references to the Consultancy cells for TEV study for this
product.
GENERAL PURPOSE TERM LOAN FOR SSI SECTOR
1. Target Group : Existing SSI borrowers with CRA rating of SB3 and above
2 Eligibility : â Should have earned profits in each of the preceding 3
years
â The unit should not have a history of default
â The unit should be CRA rated unit with a minimum
limit of Rs.25 lacs (as far as possible).
3 Purpose : Any general commercial purpose such as shoring up NWC,
substitution of high cost debt, R&D, quality upgradation for
ISO certification, etc.
4 Type of facilities : Term Loan
5 Quantum of Finance : Maximum of Rs.50lacs
6 Margin : Minimum of 25% for acquisition of assets, i.e., quantum of
loan should be restricted to 75% of project cost.
7 Rate of Interest : As per CRA rating
8 Security:
- Primary
- Collateral
:
Extension of Hypothecation charge over current and fixed
assets
â Extension of charge over existing collateral
â Obtention of additional collateral by way of tangible
security to be explored
â Personal guarantees of proprietor/ partners / promoters
to be invariably obtained
9 Processing fees As applicable to SSI units
10 Repayment In monthly /quarterly instalments normally in 3 years,
extendable upto 5 years in deserving cases.
11 Documentation : Specially designed document on the lines of the Composite
Loan Agreement
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16. 12 Special features : â Term Loan to be disbursed in line with the approved
purpose
â Loans , deposits, from friends and relatives can be
treated as quasi-equity to arrive at TNW subject to
undertaking from them that the amounts will not be
withdrawn during the currency of the loan.
CORPORATE LOAN
1. Target Group : Existing C&I and SSI customers and also non customers.
2 Eligibility : .Existing non-corporate customers in C&I and SSI segments
with SB4 or SBTL4 rating. Non–customers can also be
offered this product after ensuring the creditworthiness and
obtention of opinion report from their bankers.
3 Purpose : Repayment of high cost debt, VRS scheme, acquisition of
trademarks, patents, shoring up of net working capital, etc..
4 Type of facilities : Clean Term Loan
5 Quantum of Finance : Minimum Rs.25lacs
Maximum Rs.10 crores for non corporate borrowers
No cap for corporate borrowers
6 Margin : Not applicable
7 Rate of Interest : Normally one step higher than the applicable rating as per the
CRA rating but sanctioning authority may selectively offer
same price as applicable to CRA rating of the account on
business considerations.
8 Security:
- Primary
- Collateral
:
First charge on assets created from bank finance or extension
of first charge on current assets as the case may be.
1. First charge on fixed assets on pari passu basis with
other term lenders In case this is not possible for valid
reasons, second charge on fixed assets should be
obtained.
2. Personal Guarantee of promoters/partners/ proprietor
should be obtained. In the case of Corporates, pledge of
promoters' equity should be explored.
9 Processing fees As applicable to SSI / C&I
10 Repayment Repayment period generally not to exceed 3 years but may be
extended to 5 years selectively.
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17. 11 Documentation : As applicable to clean term loan in the respective segment
12 Special features : The discretionary powers are those applicable to term loans.
WORKING CAPITAL FINANCE TO T&S SECTOR
1. Target Group : .Retail and wholesale traders in agricultural and industrial
commodities, Dealers in consumer durables, consumer goods,
vehicles, showrooms, etc.
2 Eligibility : Units in C&I segment established with profits at least in the
preceding 3 years with CRA rating of SB4 and above
3 Purpose : Working capital requirements
4 Type of facilities : Cash credit limit with a sub-limit for LCs if required
5 Quantum of Finance : 15% of projected annual turnover which should not be more
than 25 % of the turnover in the previous year subject to a
maximum of Rs.5 crores.
6 Margin : 25%
7 Rate of Interest : As per credit rating. A concession of 0.50% may be offered for
units with at least 75% collateral coverage
8 Security:
- Primary
- Collateral
:
Hypothecation of stocks and receivables
Collateral security of at least 50% is to prescribed out of which
at least 33% of the limit should be by mortgage of immovable
property. The stipulation regarding im-movable property can
be reduced to 25% in exceptional cases with the administrative
approval of CCC-II.
9 Processing fees As applicable to C&I units
10 Repayment On demand
11 Documentation : As per extant instructions
12 Special features : In case the proposal does not fit into this turnover based model
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18. of credit assessment, the traditional method of projected
balance sheet method may be adopted.
Bank Guarantee
 Quantum of Finance
o Sole Proprietorship : upto Rs 1 crore
o Partnership : upto Rs 2 crore
o Corporate : upto Rs 15 crore
OR
¾ of the Tangible Net Worth of the Company
whichever is lower
 Purpose:
o Towards meeting the capital adequacy requirements and margin
requirements as prescribed by BSE/NSE for the trades under the
compulsory rolling system in the equity segment.
 Margin:
o 50% as per RBI directives of which
 minimum 25% will be cash margin and
 other 25% in form of other Security
o Acceptable Securities:
 Second charge of deposits maintained with stock exchange
 Pledge of Shares
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19.  Immovable Property
 Charge on assets of broking entity
&
Personal Guarantee of Partner/Promoter/Director
FINANCING STOCK BROKERS
 We primarily focused on marketing of various products of the bank
(especially bank guarantee) to stock brokers.
 We observed that the potential customers would be the Ahmedabad
based brokers as other brokers take decisions from their head offices
which are not in Ahmedabad.
 We found out that as the stock markets are booming the broking
industry is in an expansion and growth phase. Also with the starting
and development of commodity exchanges like MCX and NCDEX the
commodity markets are also seeing great increase in volumes, thus
the scope for brokers is very good. All this augurs well for a bank like
SBI which can tap this opportunity with the right efforts.
 We also found out that the private banks like HDFC and ICICI have
been very aggressive and have captured a large part of the market.
However they have extinguished or nearly extinguished their exposure
limits to brokers. This has thrown up tremendous opportunities for SBI.
 We approached various Ahmedabad based brokers and were able to
bring proposals for Bank Guarantee worth Rs. 48 crores which are as
under:
o Monarch Project & Finmart : Rs 10 crores
o Goldmine Stocks Pvt. Ltd. : Rs 3 crores
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20. o Anagram Securities Ltd. : Rs 10 crores
o Khandwala Capt. Serv Ltd. : Rs 15 crores
o Kunvarji Finstock Pvt. Ltd. : Rs 10 crores
Suggestions:
 From market observations we found out that the facilities provided by
bank under SME POWER GAIN (QAB of Rs. 1,00,000) and SME
POWER PACK (QAB of Rs. 5,00,000) are provided by other banks at
much lower QAB (BOB provides POWER PACK facilities for a QAB of
Rs. 3,00,000). Also other banks do not charge any amount as
collection charges where as SBI charges Rs. 0.5/1000 on cheques of
other banks.
 In case of bank guarantees the bank should have a variable charge
structure, the charges depending upon the credit rating of the brokers.
The charges have to be competitive with those of the private banks as
they are very aggressive in this sector. The normal rate charged by
other banks is between 1 to 1.5 percent.
 The bank should accept F.D. for the entire margin amount as brokers
are not comfortable with providing other securities.
 The bank should promote opening of brokers, sub-brokers and clients
accounts together in order to facilitate quick transfer of funds through
e-transfer.
 Generally current brokers would not like to change their clearing and
settlement bank the opportunity in this area is limited however the bank
can target new brokers for the same.
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21. Evaluation of Loan Proposals of Medium
Enterprises
Organizational Structure:
At SBI, the evaluation of the loan proposals of medium enterprises until
recently were done at branch level, but now they have re-engineered their
evaluation processes and now it is done centrally by Relationship Managers
(Medium Enterprises) under AGM (Sales Hub).
Evaluation Criteria:
In evaluating a proposal, the bank studies following details regarding the
firm:
Þ Company Profile
Þ Credit Limits – Existing and Proposed
Þ Performance & Financial Indicator (Actual & Projected)
Þ Brief Background of Company, Group Promoters and Management
Þ Performance and Financials (Whether overall financial condition is
considered satisfactory including trends in sales, profitability, tangible
net worth, TOL/TNW and current ratio.)
Þ Industry Scenario
Þ Fund Flow Analysis and Comments.
Þ Working Capital Assessment
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22. Þ Other Details such as Rating by other banks, Market price of securities
(if listed), Comments on associate concern and other details as may be
required by the bank.
A proposal of Citizen Industries Ltd. On which we had worked upon has
been attached to give a comprehensive idea of all the above mentioned
aspects.
COMPANY: M/S CITIZEN INDUSTRIES [CI]
Circle : Ahmedabad Branch : Naroda Ind Estate [1045]
Segment : SSI Industries : Engineering
Sanction for
(i) FBWC limits of Rs 50.00 lacs.
(ii) NFBWC limits of Rs.100.00 lacs.
(iii) Open Term Loan of Rs. 150.00 lacs
Approval for
(a) Full interchangeability between LC and BG.
(b) Improved pricing at SBAR as against applicable pricing SB-1/SBTL-1 for
working capital/OTL.
CREDIT LIMITS (EXISTING & PROPOSED)
(Rs. in Lacs)
Existing Proposed Change
Limits SBI % Cons SBI % Cons SBI Cons
FUND BASED
DCC (STOCKS &
-- Nil 50.00 Nil +50.00 Nil
Book Debts)
DCC (BOOK DEBTS) -- Nil (15.00) +(15.00)
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23. OPEN TERM LOAN -- Nil 150.00 Nil +150.00 Nil
TOTAL FBWC -- Nil 200.00 Nil +200.00 Nil
NON FUND BASED Nil Nil Nil
LETTER OF CREDIT -- Nil 100.00 Nil +100.00 Nil
BANK GUARANTEE -- Nil (100.00) Nil +(100.0
0)
Nil
TOTAL NON FUND
BASED
-- Nil 100.00 Nil +100.00 Nil
FB+NFB -- Nil 300.00 Nil +300.00 Nil
* 100% interchangeability between LC / BG
The proposal falls within the powers of Zonal Office Credit Committee, as the
FB/NFB/Total Indebtness is Rs. 200/100/300 lacs, TL Component is Rs 150.00
lacs and unit is a credit rated as SB-1. The unit is proprietorship firm.
1. Company profile:
1.1Address of the Regd. / Corporate Office:
Office
: IIIrd Floor, 301, Sarthak Complex, Navrangpura,
Behind Urja House, Near Swastik Char Rasta,
Ahmedabad – 380009.
Factory Address
: Plot no.57, Phase-II, GIDC, Naroda, Ahmedabad-382
330.
Telephone
: Office : 079 – 26445155
Factory : 079-26431869
: 079-26445642
1.2Constitution : Proprietorship
Activity fume hoods &
lab equipments,
lab animal care
equipment, Low
Leakage
dampers etc.
Group/
Promoters
Not known group
1. Shri Kamlesh R Mehta
Date of
Incorporation
1988
New connection
(One of its
Group Exposure : (Rs In Lacs)
Existing Proposed
23

24. Banking with us
since/ New
connection*
associates M/s
Citizen Industries
Ltd is Banking
with us since
1997.)
Fund Based 350.00 550.00
Non Fund Based 65.00 165.00
415.00 715.00
Date of last
renewal
New connection
Mfg. units/locations at: Plot no.57, Phase-II, GIDC, Naroda, Ahmedabad-382 330.
1.3CRA(WC/TL)/Pricing: Based on Audited Balance Sheet dated 31.03.2006 for
DCC & Open Term Loan
WORKING CAPITAL TERM LOAN (OTL)
Existing Proposed Existing Proposed
CRA : -- SB - 1 NA SBTL-1
PRICING : -- SBAR NA SBAR
1.4IRAC status: Not applicable, new connection.
1.5A Additional Information on Term Loans:
Nature
of T. L.
Tenor
inclusive of
moratorium
Residual Tenor
as on date
Avg. Gross
DSCR
Min.
Gross
DSCR
Security Margin
Min. in
year
2007-08
Avg.
OTL 48 months 48months 8.41 7.88 48% 66%
2.1Financial Arrangement: Sole Banking
2.2If consortium/MBA: Not applicable
2.3Indebtedness/Exposure (Rs in Lacs)
24

25. Indebtedness Existing Proposed
Fund Based -- 200.00
Non fund Based -- 100.00
Total (Indebtedness) -- 300.00
2.4Position regarding prudential exposure limits of RBI (If applicable): NA
3.1 Performance & Financial Indicators
[Rs in lacs]
As on 31.03.2003 Actuals
2004-05
Actuals
2005-06
Esti.
2006-07
Proj.
2007-08
Net Sales 1085.66 1447.61 1565.00 1814.00
(Exports) 0.00 0.00 0.00 0.00
Op:Profits 307.23 502.46 589.60 703.80
PBT 313.90 508.20 595.60 710.80
PBT/N Sales ( % ) 28.91 35.11 38.06 39.18
PAT 310.26 405.20 399.60 471.80
Cash Accruals 336.58 426.96 418.60 504.80
PBDIT 343.58 531.10 616.10 750.30
PUC 497.77 725.80 1,125.40 1,612.20
TNW 497.77 725.80 1,125.40 1,612.20
Adj. TNW 497.77 725.80 1125.40 1612.20
TOL/TNW 0.26 0.15 0.09 0.20
TOL/Adj. TNW 0.26 0.15 0.09 0.20
Current ratio 4.28 5.82 6.95 4.88
CR excl TL inst 4.28 5.82 6.95 4.88
3.1 Movement in TNW (Past Three years)
31.03.04 31.03.05 31.03.06
Opening TNW 120.65 246.17 497.77
Add PAT 92.05 310.26 405.20
Add. Increase in Equity/premium 33.47
Add./ Subtract change in intangible
assets
Adjust prior year expenses
Deduct Dividend Payment
Withdrawal 58.66 177.17
Closing TNW 246.17 497.77 725.80
25

26. 4. Brief Background (Company/Group Promoters/Management):
CI, a proprietorship firm, established in the year 1988 and is engaged in the
manufacturing of Fume Hoods and laboratory furniture, individual ventilated Animal
caging System.
Company has Shri Kamlesh R Mehta as the proprietor of the firm, he is also associated
with Citizen Industries Ltd. as one of the director, which is engaged in manufacturing air
handling plant and has been banking with our Naroda I.E. branch since 1997.
The promoter, Shri Kamlesh R Mehta is qualified Mechanical Engineers, in the present
line of activity for more than 15 years and has adequate experience to run the business
profitably. Over a period of time, they have built up good reputation in the market and are
known for the quality of their products. Due to the same, they have been getting repeated
orders from reputed corporates like RPG Lifesciences, Glenmark Reaseach Center,
Ranbaxy Research Laboratories, sun Pharmaceuticals Dr. Reddy's Laboratories, Zydus
Research Centre, CIPLA, Nocholas Piramal etc.
A pre sanction visit was carried out on 23.04.07, the activity was going on and we met
Shri Shreekumar Iyer, Production as the promoter was outside Ahmedabad on business
trip. He explained the products manufactured by the unit and their main customers. The
unit has been doing well and their products are well accepted.
MANAGEMENT
Shri Kamlesh R Mehta, proprietor, a mechanical engineer, looks after the design and
development of products, marketing and overall management of the day to day affairs of
the Unit.
Previously, he worked in planning department of M/S SM Maneklal for one year as
management trainee. He has also worked with Utility Engineers (I) Ltd as project - in -
charge for a period of five years. He was a member of Ahmedabad Engineers
Association. He is also a member of Indian Society of Heating, refrigerating and Air
Conditioning Engineers. He has toured extensively for business promotion.
The unit has employed skilled people in all departments of production, marketing and
product development.
Considering the track record, the management available to the unit, can be considered
satisfactory.
The raw materials are available locally as well as imported, about 40-45% component are
imported mainly from Holland, USA. The products of the unit namely Fume Hoods and
Laboratory furniture, individually ventilated animal caging system, which find application
of Pharmaceutical industries R& centers.
The unit has a near monopoly as such the unit does not finds it difficult to sell its products,
which can be evidenced from its rising sales also.
26

27. The unit has, therefore, few competitors in the line of the manufacture.
b) The unit, on account of its reputation in the market, enjoys good credit on
purchases, which is resorted to in times of need.
c) The unit sticks strictly to quality norms and timely delivery schedules.
d) Established marketing channels and well established contacts.
e) The promoter has been able to keep pace with the changing economic
environments, as also the technical know how.
f) As the company deals directly with the buyers all over the country, the prices
quoted are competitive.
5. Performance and Financials (Whether overall financial condition is considered
satisfactory including trends in sales, profitability, tangible net worth, TOL/TNW and
current ratio. No descriptive remarks to be attempted).
NET SALES:
The unit registered net sales of Rs. 1085.66 lacs and Rs. 1447.61 lacs during the FY
2004-05 and 2005-06 registering a rise of 33%. The sales for the year 2006-07 has
been estimated at Rs.1565.00 lacs and for the year 2007-08 has been estimated at
1814.00 lacs, which is reasonable.
PROFIT / CASH ACCRUALS:
The company recorded net profit of Rs.310.26 lacs, Rs.405.20 lacs for the year 2004-
05 and 2005-06 respectively as per audited balance sheet. The profit has been
estimated at Rs.399.60 lacs and 471.80 lacs, which is reasonable considering the at
the same level of profitability.
PAID UP CAPITAL / TANGIBLE NET WORTH
The capital stood at Rs.725.80 lacs as on 31.03.06, with the retention of profit in the
business also the profitability has been excellent during the past years which has
helped the unit in strengthening the TNW. The position is expected to remain
comfortable during the coming years.
TOL / TNW
27

28. TOL/TNW of the unit at 0.15 as on 31.03.06 is at a very comfortable level, with no
credit facility and debt free unit the ratio has been very comfortable. The gearing ratio
is expected to remain comfortable during the coming years also.
CURRENT RATIO
The current ratio of the company at 4.28 as on 31.03.2005 and 5.82 as on 31.03.2006
indicates satisfactory liquidity position of the company and is expected to remain
comfortable.
The overall financial position can, therefore, be considered satisfactory.
6. Industry:
6.1Industry Scenario : (including contemporary issues such as WTO
impact/prospects of the company- Brief comments no exceeding 5-6 lines)
The unit is engaged in the manufacture of R&D equipments for the Pharmaceuticals
Industries. CI has clientele base of big corporates all over the country mainly the
pharmaceuticals and the overall outlook for the user industries is encouraging. CI’s
products, therefore, have good growth prospects over the long term as evidenced
from the trends established for the past three years.
6.2 Inter company comparison : Not available
6.3Industry average/benchmark (wherever available) : Not available
PBT/
Net Sales/
Bank finance/
Inventory plus
Net Sales
Total tangible assets
Current assets
receivables/Net Sales
7 Fund Flow Analysis:
[Rs in lacs]
Particulars Actual
31.03.06
Estimates
31.03.07
Estimates
31.03.08
Long Term Sources 653.33 818.20 1141.60
Long term uses 529.75 741.05 1107.71
Long term Surplus /
123.58 77.15 33.89
deficit
28

29. 7.1 Comments on fund flow (In brief)
Fund flow statement of the company shows a fairly satisfactory position.
8. Term Loan/DPG : The proposed Open Term Loan facilities are
considered acceptable in terms of the detailed appraisal as per Annexure I.
9. Working Capital Assessment : The proposed working capital
facilities are considered acceptable in terms of the detailed appraisal as per
Annexure II.
10. Other details :
10.1 Pricing by other banks/justification for the proposed pricing :
(a) CRA and pricing and comments on changes, if any:
· The credit Risk Assessment (CRA) reviewed based on audited financials of
the unit as on 31.03.2006 is SB – 1 and SBTL-1 based on project balance
sheet as on 31.03.08. We propose to charge interest as applicable at SBAR in
view of long standing banking relations & being an SSI unit.
· One of its associates M/s Citizen Industries Ltd. has been financed at SBAR.
(b) Pricing by other major banks/Fis: Not applicable
10.2 Capital Market perception (price): High/Low (52 weeks)
Not applicable
10.3 Value of account : Not Applicable
10.4 Details of Retail Banking/ any other business generated through the
account :
CI deposits all Government chalans in Branch only.
29

30. 10.5 Comments on associate concerns :
CI has one associate concern i.e. M/s Citizen Industries Ltd. Shri Kamlesh
R Mehta is one of the Director of the unit. The company is having sizeable
limit with us to the tune of Rs.3.00 crores. The company is manufacturing air
handling equipments. The conduct of the account has been satisfactory.
Proprietor of the unit. M/s Citizen Industries is having current account with
us and conduct of the account is satisfactory.
Particulars Comments
NPAs among associate
Nil
concerns
Any other adverse features Nil
Interlocking of funds Nil
10.6 Use of Provisional/Unaudited data – In case earlier renewal/enhancement
was based on provisional/unaudited data whether review with audited data,
as specified was carried out and appropriate steps initiated?
The unit is rated as SB 1 on the basis of audited financials as on 31.03.06
and new CRA will be computed on receipt of audited financials as on
31.03.07. The term loan rating has been carried out on the projected
balance sheet of 31.03.08.
10.7 Loan Policy Guidelines:
The following quantitative parameters as set out in the loan policy
Document have been examined:
Parameters Indicative
Min/Max Level
Company’s level
as on 31.03.2006
1. Liquidity Min. 1.33 5.82
2. TOL/TNW Max 3 0.15
3. Promoters’ contribution to the
project (TL)
Not Applicable 15%
4. Average gross DSCR (TL) Not Applicable 8.41
5. Debt/equity (TTL/TNW) Max 2:1 0.20
* The promoter contribution is 15% as per the scheme for OTL.
10.8 Deviations from Loan Policy
Deviation Major/Minor Mitigating
30

31. Factors
i) Maturity of TLs Nil Not Applicable
ii) Exposure norms
(Individual, non-corporate and
corporate)
Nil Not Applicable
iii) Minimum CRA scores Nil Not Applicable
iv) Hurdle rates (Other than
industry specific hurdle rates)
Nil Not Applicable
v) Industry specific hurdle rates Nil withdrawn
vi) Take over norms N A Not Applicable
vii) Any other deviations Not Not Applicable
10.09 Whether
a. The name of the Company/ Directors appears in RBI’s list of defaulters/ RBI’s
list of willful defaulters/CIBIL list of defaulters. : No.
b. The company's name figures in ECGC’s caution list If so, details and
comments: No.
c. Indicate all litigations, which have been initiated by another financier
including banks against borrowers/ their partners/ directors etc: Nil
10.10 Status of Auditors’ Remarks which have an impact on credit risk on
the unit:
Particulars Date Serious irregularities/
Adverse features
remaining unattended
Action
Plan
Inspection & Audit report
(Covering security margin
and conduct of account)
N.A. New account
Credit Audit Report
(Warning signals)
NA New account
Company’s audited
Balance Sheet
(Qualifications)
31.03.06 None
10.11 Corporate governance practices followed.
Not applicable, proprietorship firm.
10.12 Conduct of account (covering irregularities, non-compliances, LC
devolvements, BG invocations, etc.)
31

32. Not applicable, new account.
10.13 Details of other borrowing arrangements and defaults, if any
(excluding information given under credit limits on page 1).
Not Applicable
11. Status of compliance with terms and conditions of
sanction/observations of COCC/ECCB:
Nil
12. Critical risk factors and their mitigation and SWOT
Analysis:
No critical risk factors envisaged.
13. Justifications and recommendations for the proposed facilities:
In view of what is stated herein above, the facts that the associates have been
banking with us since 1997, satisfactory track record and the CRA being SB – 1,
experienced promoters, collateral coverage being 58%, we consider the proposal a
fair banking risk and recommend the followings:
Sanction for
(i) FBWC limits of Rs 50.00 lacs.
(ii) NFBWC limits of Rs.100.00 lacs (100% interchangeability between LC and
BG)
(b) Open Term Loan of Rs. 150.00 lacs
Approval for
(1) Improved pricing at SBAR as against applicable pricing SB-1/SBTL-1
for working capital/OTL.
32

33. Annexure I
Company : CITIZEN INDUSTRIES [CI]
Branch : NARODA I.E. AHMEDABAD
Term Loan / DPG:
a) Proposal: Open Term Loan of Rs.150.00 lacs
b) Project / Purpose: To acquire / purchase domestic / imported machineries and
extend / renovate the existing factory land & building to enhance the existing
capacity.
c) Appraised by: TEV Study not required as per the OTL scheme.
d) Cost of Project & Means of finance: (Rs. in lacs)
Cost Means
L & B 175.00 Equity/
Internal
Accrual
s
P & M 25.00
Other assets -- OTL 150.00
WC Margin --
Total 175.00 Total 175.00
e) Remarks on Cost of project & Means of finance (in brief):
The unit proposes to renovate, expand, purchase machineries aggregating to Rs.175.00
lacs during the year 2007-08 in order to enhance their capacity to meet the timely
33

34. execution of orders on hand. They have requested us for an Open Term Loan to have
funds available with them to have a bargaining power as & when needed.
The open term loan of Rs.150.00 lacs is therefore proposed to be disbursed after taking
into account 15% promoters contribution as and when it is availed.
f) Project implementation schedule: During 2007-08 calendar year (OTL to be
availed by the unit within one year after sanction)
g) Production factors: Covered under column 4 of the proposal
h) Marketing: Mentioned under column 4 under heading marketing.
i) Commercial viability:
(Rs. In lacs)
Capacity
utilization %
2008-09 2009-10 2010-11
Sales 1828.00 1828.00 1828.00
Net Profit 471.80 471.80 471.80
Depreciation 32.00 32.00 32.00
Interest 15.93 9.56 3.19
TOTAL 519.73 513.36 506.99
TL / DPG
repayments
50.00 50.00 50.00
Interest 15.93 9.56 3.19
TOTAL 65.93 59.56 53.19
Gross DSCR 7.88 8.61 9.53
Average Gross
8.41
DSCR
Comments on DSCR (in brief): The unit is a profit making concern. The projected
profitability has been kept in line with the trend established by the unit in the past. The
proposed open term loan is expected to be repaid in three years time as laid down in
the scheme. The gross average DSCR of 8.41 has been considered as reasonable and
well within the stipulated benchmark of the Bank.
j) Security Margin:
(Rs. In lacs)
Particulars 2007-08 2008-09 2009-10 2010-11
WDV of fixed assets 291.85 192.77 160.77 160.77
Agg. TL / DPG outstdg. 150.00 100.00 50.00 --
Security margin
141.85 92.77 110.77 160.77
available
% Of margin 48 48 68 100
34

35. Comments on security margin, in brief: The unit proposes to avail OTL in
phases and expected to take full disbursement during current financial year. The
available % of security margin of 48 as on 31.03.08, 48 as on 31.03.09 ‘ 68 as on
31.03.10 has been considered as reasonable and at satisfactory level.
l) CRA & Pricing:
SB1 based on audited balance sheet dated 31.03.2006 and pricing at SBAR is
recommended, considering the SB1 rated advance, long standing banking relation,
satisfactory conduct of account.
m) Pricing by other major banks / FIs and justification of the proposed pricing:
Not applicable
OPEN TERM LOAN
Company’s
position
1. Target Group : SMEs in manufacturing sector Complied with
2. Eligibility : Existing or new corporate or non –
corporate customers in SME –
manufacturing sector with credit ratings of
SB3/SBTL3 AND ABOVE.
SB-1 as on
31/03/06
3. Purpose : Any genuine commercial purpose such as
 expansion / modernization
 substitution of high cost debt of other
banks / FIs
 Upgradation of technology
 Energy conservation systems
 Acquisition of software, hardware,
consumables, tools, jigs, fixtures, etc.
 ISO and other such certifications
 Visits abroad for acquiring technology,
finalizing deals, participation in fairs,
market promotion, etc.
expansion /
modernization
4. Type of facilities : Term Loans Term Loans
35

36. 5. Quantum of
Finance
: Maximum Rs.250lacs Rs.150 lacs
6. Margin : 10% uniformly 15%
7. Rate of Interest : As per the credit rating of the borrower
linked to SBAR on floating rate basis
At SBAR
against SBTL-
1 as on
31.03.08
8. Security:
- Primary
- Collateral
:  Hypothecation of the machinery
proposed to be purchased out of the
Term loan.
Complied with
 Extension of charge over current
assets, fixed Assets and other existing
collateral.
Complied with
 Obtention of additional collateral should
be explored.
Factory land
and building
 In all cases, personal guarantees of the
promoters of the unit have to be
invariably obtained.
N.A.
proprietorship
concern.
12. Processing fees As applicable to the unit for term loans Concession in
processing
fee for OTL
@25% within
discretion of
DGM-Module
to be sought.
13. Repayment : Generally not to exceed 3 years. May be
extended upto 5 years selectively if
considered necessary.
Complied with
14. Documentation : Usual Term Loan Agreement for the TL
limit to be obtained upfront and supported
by exchange of suitable letters at the time
of each disbursement
Will be
obtained after
sanction
All the conditions of OTL Schemes are complied with accept concession in pricing at
SBAR against CRA rating of SBTL – 1 and 25% in processing charges for OTL.
Overall viability and acceptability of the proposal:
36

37. In view of the above narrated calculations, the proposal for sanction of the Open Term
Loan of Rs.150 lacs is considered to be a fair banking risk and according
recommended for sanction on terms & conditions stipulated in annexure III of the
proposal.
ANNEXURE II
Assessment of Working Capital facilities
Company : CITIZEN INDUSTRIES LTD [CI]
Branch : NARODA I.E. AHMEDABAD
a. ASSESSMENT OF CASH CREDIT LIMIT WITH ENHANCEMENT
As per Nayak Committee recommendations, the Company with an estimated turnover
of Rs 1814.00 lacs for the year 2007-08 is eligible for minimum bank finance of Rs
368.00 lacs. However, the company requested for lower limits of Rs 50.00 lacs
keeping in view the other long term sources of funds available to the company.
The assessment is based on the following levels of inventory/receivables / creditors at
peak level requirement: -
Item Audited
as on
31.03. 05
Audited as
on
31.03.06
Estimate
Estimates
31.03.07 31.03.08
Raw Materials
Indigenous
3.98 2.54 2.56 2.50
Stock In
Process
-- -- -- --
Finished
Goods
-- -- -- --
Sundry
Debtors
1.45 1.38 1.50 1.50
Sundry
Creditors
1.17 1.18 1.00 0.99
37

38. The inventory levels have been assumed as per the past trend and actual
requirements of the company after having a detailed discussions with the promoters
and some of the items are also imported as such sufficient stocks has to maintained.
The unit's clients are mainly big corporates and they insist for credit of around 1.50
months which is normal. However it also enjoys about one month’s credit period from
the supplier. The creditors level is expected to remain around the same in coming
years.
b. Assessed Bank Finance: (Rs. in lacs)
Assessed Bank Finance Actuals Audited Estimated Projected
Year 2004-
05
2005-06 2006-07 2007-08
TCA 489.60 602.28 672.76 767.10
OCL 96.22 103.15 96.85 107.30
WC Gap 393.38 499.13 575.91 659.80
NWC 375.18 498.76 575.91 659.80
BF 18.20 0.37 00.00 50.00
NWC/TCA (%) 76.63 82.81 85.60 79.49
BF/TCA (%) 3.72 0.06 0.00 6.52
Sundry Creditors to TCA% 12.60 10.76 8.75 8.64
OCL/TCA (%) 7.05 6.37 5.65 5.34
c. Assessment of EPC/FBD limits: Not
applicable
d. Efficiency ratios:
Particulars Actuals Actuals Estimated Projected
Year 2004-05 2005-06 2006-07 2007-08
Net sales to Total Tangible
1.73 1.73 1.27 0.94
Assets (times)
PBT to Total Tangible Assets (%) 50.08 60.65 48.39 36.86
Operating cost to Sales (%) 15.74 13.52 13.16 12.72
Bank Finance to Current Assets
(%)
3.72 0.06 0.00 6.52
Inventory + Receivables to Net
Sales (days)
106 82 85 83
g. Brief comments on the assessment of the above limits:
38

39. The proposed limits are justified based on above ABF and efficiency parameters that are
in tuned with the past trend established with minor changes and in line with present
market practices.
The assessed Bank Finance of Rs 50.00 lacs are to be made available against stocks &
Book debts.
LETTER OF CREDIT
The company requires importing certain components. Though presently the company
is importing by making advance payment, it may require importing in bulk and that
time it may opt for opening of Import L/C.
Estimated raw material to be purchased on LC Rs. 30.00 lacs/ month
Usance Period : 90 days
Lead time required from date : 15 days
L/C requirement : Rs. 105.00 lacs only.
Hence the LC limit of Rs. 105.00 lacs is recommended for sanction.
REVIEW OF LETTER OF CREDIT LIMIT
LETTER OF CREDIT [IMPORT & INLAND] Rs. In lacs
Review Year 2004-05 2005-06 2006-07 (till date)
Total LCs
Opened
Number Not Applicable Not applicable Not applicable
Amount
Commission earned
LCs devolved
Number
Amount
Reasons
BANK GUARANTEE
39

40. Guarantees are required to be issued on behalf of the unit for various purposes
like advance payments received against orders, tender deposits, and performance
guarantees etc. These are generally required for period ranging from 6 months to
18 months. At present the unit is issuing guarantee from Bank of Baroda against
100% margin. The requirements have been assessed as under:
a) Opening BGs : Nil
b) BGs to be issued during the year. : Rs. 100.00 lacs
Bank Guarantee requirement : Rs 100.00 lacs
REVIEW OF BANK GUARANTEE ACCOUNT:
Rs. In lacs
Review Year 2004-05 2005-06 2006-07 (Till Date)
Total BG OPENED
Number Not applicable Not Applicable Not Applicable
Amount
Commission earned
BG Invoked
Number
Amount
Reasons
The unit is proposed to be sanctioned bank guarantee limit of Rs.100.00 lacs, which is
proposed to fully interchangeable with LC. The interchangeability would provide leverage
to the unit. The unit's request has been assessed as per the norms.
ANNEXURE III
Branch : NARODA I.E. AHMEDABAD
COMPANY : M/S CITIZEN INDUSTRIES
40

41. Facility : Working Capital facilities & Open Term Loan
TERMS & CONDITION
Existing securities [Rs in lacs]
1 Security
Primary
First charge over the current assets of the company
and machineries / assets to be created out of Banks
Open Term Loan.
Collateral : i) EM of factory land and building of the unit
situated at Plot no.57, GIDC, Naroda, Naroda,
Ahmedabad. (Rs 175.00 lacs as per valuation report
dated 15.03.07 by bank’s panel valuer).
175.00
Total 175.00
Guarantee : Nil
Total 175.00
41

42. 2. Documentation : Proposed: As per new SME documentation.
3. Basis of
valuation
: As per extent instruction.
4. Margin
Raw material : 25%
Finished Good : 40%
Book debts
(Cover period
90 days)
50%
Open Term
Loan
: 15%
Letter of Credit : 25%
Bank Guarantee : 25%
5. Sub – limit/
cover period for
FBD
limits/Inland LC
For Inland Letter Of Credit – 90 days
6. Interest Rate : At SBAR for both CC and OTL.
7. Rate of
commission/
exchange /
discount
: 25% concession in processing fee for OTL.
8. Insurance : Comprehensive insurance cover to be obtained for
110% market value of stocks or limit whichever is
higher. Similarly, for assets to be created out of banks
open term loan are too insured fully to cover all usual
risks.
9. Position of
security and
Bank’s charge
:
The security position is satisfactory.
10
.
ECGC Cover : To be obtained
.
11
.
Period of
Sanction
: One year for CC and three years for Open Term Loan
12 Repayment of
OTL
: Three Years from date of availing open term loan
2008-09 – Rs. 50 lacs (starting April 08.)
2009-10 – Rs. 50 lacs
2010-11 – Rs. 50 lacs
42

43. 43

44. Annexure –IV
COMPANY : CITIZEN INDUSTRIES
BRANCH : NARODA I.E., AHMEDABAD
CATEGORY A: EXISTING UNITS WORKING CAPITAL ONLY
CITIZEN INDUSTRIES - NARODA I E BRANCH
NEW CRA STRUCTURE: RISK RATING
SUMMARY : SET 1 Annexure V
FINANCIAL RISK PARAMETERS Full Marks
Marks
Obtained
A. STATIC RATIOS
Current Ratio 5 5
TOL/TNW 5 5
PAT/Net Sales (%) 10 10
PBDIT/INTT (Times) 5 5
ROCE (%) 5 5
Inventory/Net Sales+Receivables/Gross Sales
(Days) 5 5
Trends in Performance 3 2
Sub-Total Score(out of 38) 38 37
B. FUTURE PROSPECTS
Projected Profitability 3
Non-Achievement of Projected Profitability (-3) 0
Sub-Total Score(out of 3) 3 3
C.RISK MITIGATION: COLL. SECURITY
/FIN.STANDING 6 6
Sub-Total Score (out of 6) 6 6
Aggregate Fin. Risk Score (Out of 47) 47 46
Qualitative Risk Factors (-10) 0
BUSINESS RISK PARAMETERS
Technology 4 4
Capacity Utilization vs. Break Even Point 2 2
Compliance of Environment Regulations 2 2
User/Product Profile 2 2
Consistency in Quality 4 4
Distribution Network 2 2
Consistency of Cash Flows 4 4
Aggregate Business Risk Score(Out of 20) 20 20
44

45. INDUSTRY RISK PARAMETERS
Competition 2 2
Industry Outlook 2 2
Regulatory Risk 2 1.5
Contemporary Issues like WTO, etc. 2 1.5
Aggregate Ind. Risk Score (Out of 8) 8 7.0
MANAGEMENT RISK PARAMETERS
Integrity :Sole prop.firm/partnership firm /Pvt
Ltd.Companies 0
Or
Integrity (for corporates): corporate governance 3 3
Track Record 3 3
Managerial Competence/ Commitment 3 3
Expertise 2 2
Structure & Systems 2 1
Experience in the Industry 2 2
Credibility: Ability to meet Sales Projections 2 2
Credibility: Ability to meet Profit (PAT) Projections 2 2
Payment Record 2 2
Strategic Initiatives 2 2
Length of Relationship with the bank 2 2
Aggregate Management Risk Score (Out of 25) 25 24
Rating
TOTAL SCORE : 100 100 97SB-1
45

46. CATEGORY B: EXISTING UNITS TERM LOAN ONLY (RELATED
PROJECT)
CITIZEN INDUSTRIES LIMITED - NARODA I E
BRANCH
NEW CRA STRUCTURE: RISK RATING SUMMARY :
Annexure 11
(rationalized)
FINANCIAL RISK PARAMETERS
Full
Marks
Marks
Obtain
ed
A. STATIC RATIOS
Current Ratio 5 5
TOL/TNW 5 5
PAT/Net Sales (%) 10 10
PBDIT/INTT (Times) 5 5
ROCE (%) 5 5
Inventory/Net Sales+Receivables/Gross Sales (Days) 5 5
Trends in Performance 3 2
Sub-Total Score(out of 38) 38 37
B. FUTURE PROSPECTS
Projected Profitability 3
Non-Achievement of Projected Profitability (-3) 0
Sub-Total Score(out of 3) 3 3
C.RISK MITIGATION: COLL. SECURITY
/FIN.STANDING 6 6
Sub-Total Score (out of 6) 6 6
Aggregate Fin. Risk Score (Out of 47) 47 46
Qualitative Risk Factors (-10) 0
Financial Risk for Term Loan (out of 25 as per Annexure
4 below) 25 20.0
Rationalized Financial Score (out of 25) 25 23
BUSINESS RISK PARAMETERS
Technology 4 4
Capacity Utilization vs. Break Even Point 2 2
Compliance of Environment Regulations 2 2
User/Product Profile 2 2
Consistency in Quality 4 4
Distribution Network 2 2
Consistency of Cash Flows 4 4
Aggregate Business Risk Score (Out of 20) 20 20
Rationalized Business Risk Score (Out of 25) 25 25.0
46

47. INDUSTRY RISK PARAMETERS
Competition 2 2
Industry Outlook 2 2
Regulatory Risk 2 1.5
Contemporary Issues like WTO, etc. 2 1.5
Aggregate Ind. Risk Score (Out of 8) 8 7.0
Rationalized Industry Risk Score (Out of 10) 10 8.8
MANAGEMENT RISK PARAMETERS
Integrity :Sole prop.firm/partnership firm /Pvt
Ltd.Companies 0
Or
Integrity (for corporates): corporate governance 3 3
Track Record 3 3
Managerial Competence/ Commitment 3 3
Expertise 2 2
Structure & Systems 2 1
Experience in the Industry 2 2
Credibility: Ability to meet Sales Projections 2 2
Credibility: Ability to meet Profit (PAT) Projections 2 2
Payment Record 2 2
Strategic Initiatives 2 2
Length of Relationship with the bank 2 2
Aggregate Management Risk Score (Out of 25) 25 24
Rationalized Management Risk Score (Out of 40) 40 38.4
Rating
TOTAL SCORE : 100 100 95SB-1
We also did analysis and prepared initial proposals of the
following companies:
 Tejal Paper Mills
 Sandeep Fero-Alloys
 Vinod High Tech
 Kotecha impex Pvt. Ltd.
 AM Tele Communications Pvt. Ltd.
47

48. References
 www.sbi.co.in
 SBI Intranet
STATE BANK OF INDIA
Zonal Office, Ahmedabad.
48