CREDIT FACILITIES -Detailed Project Report (DPR)/Business Plan, Pre & Post Sanction compliance and Annual Renewal (CMA)


 Financial Projections
Revenues Projections 
For most companies revenues are a fundamental driver of economic performance. A well designed and logical revenue model reflecting accurately the type and amounts of revenue flows is extremely important. There are as many ways to design a revenue schedule as there are businesses. Some common types include:
  • Sales Growth: Sales growth assumption in each period defines the change from the previous period. This is simple and commonly used method, but offers no insights into the components or dynamics of growth.
  • Inflationary and Volume/ Mix effects: Instead of a simple growth assumption, a price inflation factor and a volume factor are used. This useful approach allows modeling of fixed and variable costs in multi product companies and takes into account price vs volume movements.
  • Unit Volume, Change in Volume, Average Price and Change in Price: This method is appropriate for businesses which have simple product mix; it permits analysis of the impact of several key variables.
  • Dollar Market Size and Growth: Market Share and Change in Share – Useful for cases where information is available on market dynamics and where these assumptions are likely to be fundamental to a decision. For Example: Telecom industry
  • Unit Market Size and Growth: This is more detailed than the preceding case and is useful when pricing in the market is a key variable. (For a company with a price-discounting strategy, for example, or a best of breed premium priced niche player) e.g. Luxury car market
  • Volume Capacity, Capacity Utilization and Average Price: These assumptions can be important for businesses where production capacity is important to the decision. (In the purchase of additional capacity, for example, or to determine whether expansion would require new investments.)
  • Product Availability and Pricing
  • Revenue driven by investment in capital, marketing or R&D
  • Revenue based on installed base (continuing sales of parts, disposables, service and add-ons etc). Examples include classic razor-blade businesses and businesses like computers where sales of service, software and upgrades are important. Modeling the installed base is key (new additions to the base, attrition in the base, continuing revenues per customer etc).
  • Employee based: For example, revenues of professional services firms or sales-based firms such as brokers. Modeling should focus on net staffing, revenue per employee (often based on billable hours). More detailed models will include seniority and other factors affecting pricing.
  • Store, facility or Square footage based: Retail companies are often modeled based on the basis of stores (old stores plus new stores in each year) and revenue per store.
  • Occupancy-factor based: This approach is applicable to airlines, hotels, movie theatres and other businesses with low marginal costs.
Cost Projections
  • Percentage of Revenues: Simple but offers no insight into any leverage (economy of scale or fixed cost burden
  • Costs other than depreciation as a percent of revenues and depreciation from a separate schedule: This approach is really the minimum acceptable in most cases, and permits only partial analysis of operating leverage.
  • Variable costs based on revenue or volume, fixed costs based on historical trends and depreciation from a separate schedule: This approach is the minimum necessary for sensitivity analysis of profitability based on multiple revenue scenarios

What is a business Plan?
A business plan is a written representation of a company's dreams and of how and when they are going to be realized. The plan not only outlines the goals of a company but also details the strategies designed to achieve the goals. These strategies have to be made for all aspects of a business, i.e managerial, operational, organizational, financial, marketing, tackling competition, risk management, research and development, expansion, reviews etc. A business plan thus shows both the results desired and the steps being taken to achieve the desired result.
Why is it needed?
The first and foremost reason why a business plan is written is to attract investment. For an investor and especially a venture capitalist to invest in the project, the company needs to communicate to the potential investor, to get its message across, and to motivate a potential investor to actually invest in its business. It aids in the valuation of a business, especially in the case of startups, which have no past results to go by. It can serve as a management tool, a guideline for the course of action to be taken for achieving desired objectives and also to measure actual performance with the projections in the business plan. It is perhaps the only document which puts the past, the present and the future on a single frame which aids analysis of past results, guides future course of action, and implementation, and give the time-frame for achieving goals. It serves as the navigating tool, the route to follow to reach one's destination in the business.
How do you make it achieve its purpose?
1.It should be realistic:The business plan in order to achieve its purpose, should be realistic and should not aiming for achieving the impossible. A certain amount of hyping may be necessary in order to generate interest among investors but over hype could lead to disastrous results. The higher the expectation level, the greater will be the chance of dissatisfaction when the targeted results are not reached. It is better to adopt the conservative approach and take realistic estimates which are possible to meet. If the projections are exceeded it will make everyone involved happy.

2.Clarity of vision :
The vision of the company for the future must be clear enough to be translated into writing. This would make it easier to execute the vision. The business plan must be drafted in such a way that it communicates the message of the company to the potential investors and to all the people for whom it is made. The plan must convey the message of an efficient, competent and vibrant organization capable of achieving its goals. This can be communicated only when the vision as well as the route to be taken, is clear in the mind of the entrepreneur.

3.Clear expression of ideas and thoughts :Many an entrepreneur could not execute his vision since he could not translate his vision into text, because he could not express himself. Good communication skills are an essential requirement for success, specially in the virtual world, which has very little tangible assets to show. It is here that we professionals enter the scene. Since we possess the requisite commercial knowledge, an understanding of the client's requirements and the capability to draft, we can help the client in preparing a business plan, more capable of achieving its objectives
What are the steps involved in writing a business Plan?

1.Obviously the first step is to identify the objectives of the business.

2.The next step is to collect historical financial information, to conduct study of the market and see where our particular business stands.

3.Identify and analyse the target market and its characteristics to see how our product would be able to meet market requirements. Alos estimate what percentage of the market our product would be able to capture and the marketing strategy needed to capture the market.


4.Identify risk factors which may come in the way of achieving the goals and the strategy required to manage those risks.

5.Identify competitors and form a strategy to deal with competition to retain market share.

6.Plan the expansion process, and the research and development required in order to keep your product ahead of the rest and also to produce ancillary to produce ancillary products and capture ancillary markets.

7.Make a SWOT analysis of your business and identify the chances of success of your project.

8.Finally make an estimate of the funds required to implement the formulated business plant and make the projections of profitability.
What should the contents of a business plan be?
The contents of the business plan can be derived from the introduction to a business plan.
a) Goals of the business: The business plan identifies the objectives of the business and the products and services for which the business has been set up. A detailed description of the products or services to be produced/offered by the company should be given and also the edge they  have over similar products/services.
b)Market analysis : The plan should contain the comparative figures for the relevant industry and its characteristics and trends. It should also contain details about target markets and the level of penetration of the business in the market and its share of the market.
c) Marketing strategies and strategies to combat competition
d) Operational plan to achieve the result as stated above and the strategy to penetrate the market and achieve market share
e) SWOT analysis of the project
f) Organisational plan
g) Expansion plans
h) Financial projections.

It is not necessary to follow the same order as detailed below in the contents. The order can be decided based on the client’s preference and the emphasis which the client would want to give to the various aspects of the plan. However, it should not be in a very haphazard fashion either. After all, the foundation has to be laid first and one cannot start building from the first floor!
The Business Plan should be divided into various sections dealing separately with various aspects.
a. Table of contents
The First section appearing in the business plan is the table to contents. This will contain the list and order in which various sections appear in the plan. This is to facilitate the user of the business plan to know exactly where to look for a particular section without skimming through the whole plan.
bExecutive summary
The table of Contents should be followed by the Executive Summary. The Summary states in brief what the rest of the plan details. It encapsulates the essence of the entire plan. It should be long enough to convey to the user an understanding of the entire business but should not be so long as to put off the user from reading the Executive Summary itself. It should be capable of arousing the interest of the user in the project and induce him to go through the detailed part of the plan. Since the business plan is mainly prepared in order to attract investors and investors are not only a difficult lot to please but are also very busy people, it is crucial that the executive summary is well drafted. Since investors go through many business plans in a single day and the busier ones go through several plans in an hour, they first go through the Executive Summary only. Many plans my be put down at this state itself and the investor may not go beyound reading the Executive Summary. Hence utmost care hs to be taken while drafting the Executive Summary. This section, even though appearing in the beginning of the plan, should be drafted only after the rest of the business plan is completed as as to present succinctly the essence of the plan.
c. Company details
This section should contain a description of the Company, its main activities, its earlier performance, if any, its main products, target use, scale and area of activity, objectives, beliefs and motto of the Company etc., The objectives of the company containing its plan for future expansion like going public, mergers and acquisition plans etc. are the aspects on the basis of which the user i.e. the investor assesses the company. The products or services can be dedicated to the product details since the heart of the business lies in its products or services.
dProducts
A Company is set up to pursue certain objects. The main objects of a company are invariably the production of an article or provision of a service. In the products lies the main attraction for the investors. Only if the products or services are interesting enough to an investor will he be even bothered to read how the company plans to achieve its objectives. All products and services may have their own USP-Unique Sales Proposal, which has to be communicated clearly and effectively so as to attract the investors’ interest. It it is a product, appropriate physical attributes can be described. In case of a service, the full details of the services being offered along with the unique features, functional effectiveness etc., has to be detailed. When unique products are being developed and promoted, it is important to detail the market readiness for the product so as to allow assessment of the venture’s viability. Also, the states of development must be shown, i.e how the product or service came to be visualized, developed and how it is going to evolve in future. However, in addition to an appropriate description of the product, it is advisable to have a prototype, or a sample or a computer presentation accompany the business plan. Once the product details are conveyed, it is necessary to know how the product is to be launched in the market, the target market for the product or service, what portion of the market is expected to be captured etc., This is the next section of the business plan.
e. Marketing Plan
Plainly speaking, the foremost objective of any business is money-making and the products and services are just the means towards this end. How to make the means achieve the end is what the marketing plan is all about. A business must be capable of manipulating the market and reacting to changes in the market to achieve its sales targets. The business must be capable of exploiting favourable market conditions, must be able to tide over difficult ones, convert indifferent conditions to your favour etc., its is all a matter of adaptation to the market and
Charles Darwin’s theory of ‘survival of the fittest’ works here to too, perhaps more surely than anywhere else! the marketing strategy should cover many aspects like, a market introduction, market penetration, market widening, distribution strategy, media publicity, market response gathering, sales strategies etc., Let us examine these aspects one by one. Fist is the introduction of the product into the market. This strategy is crucial to the business since a need has to be created in order to induce the customer to buy. This is more so in case of an innovative product or service. The next part is to work on the need created and penetrate the target market. Once the product or service has carved its niche market, the company should look for growth prospects and look for market widening. This could be both horizontal i.e. widening of market base, and vertical i.e. providing different product to samer users and also at different levels of the distribution network. When the strategy to expand one’s market base is made, the distribution networks should be in place and functioning. This creates the need for a distribution strategy. This market expansion strategy also includes advertising of the product or service and an advertising strategy has be drawn which includes promotion via the press and TV media, printed material like brochures, catalogues etc., it is also necessary to formulate a market research programme in the sales strategy where the total sales force, their training, compensation package etc. are to be detailed. Now we know the company, we know its products, and we know how this product is expected to fare in the market. The way the company will go about all this forms the operational plan.

fOperational Plan
Organising and work out arrangements for all the above i.e. the production and marketing of the products and services, forms the part of the operational plan. The operational plan should correspond to the rest of the plan and also with the financial projections. This section of the business plan details procedures for various activities viz. Identification of suppliers for raw materials, techniques for getting competitive advantage and economics of scale, delivery procedures, dealing with shortages, cost reduction or cost effectiveness procedures etc. The operational plan should cover all the key areas of a company’s activities but should not be too technical or complicated as to putofftheuser. It should also not include operational details of mundane everyday activities or routine administrative matters.



understand how to prepare CMA data and techniques in preparing it, understanding and analysing financial statements, ratios and CMA data. 

Normally the fee for CMA data preparation by professionals in India is not less than 10k- 20k  and no upper limit.Time that may need to spend is around 2 working days.


 CMA DATA MEANING:

Full form of CMA data is Credit Monitoring Arrangement data. It is the report to be presented to bank to show your past financial history, current financial position and future financial planning.It covers 7 statements related to finance.

WHY DOES BANK REQUIRE CMA REPORT?

We all know that banks are require to follow RBI guidelines to run finance business. RBI suggests not to only rely on CMA data for granting loan. Still almost all banks are asking for CMA data. Even for small loans like 4 lakhs to 6 Lakhs submitting CMA report is required. The reason is that by analyzing it, banks can understand the flow of funds ( Past and proposed) of borrower and viability of projects.

WHAT REPORTS ARE COVERED ?

It covers following statements:

Details of existing and proposed fund limit: In this report, details about your current financial condition, borrowed fund and proposed fund are covered.If business is new, proposed data is required to be given.Operating statement: You are required to show past 2 years and future 3 years ( Proposed) operationg statements. There may be some changes as per loan needed and business nature.The profit and loss account should be presented here.Analysis of balance sheet: Details about your balance sheets of past years are required to show. It is also required to show proposed balance sheet data to show picture of your future business plan. Details about current assets, fixed assets, current and long term liabilities are presented in this statement.Comparative statements of current assets and liabilities: This statement describes the viability of your working capital cycle.Calculation of MPBF: Calculation of maximum permissible bank finance. This statement shows the capicity of borrower to borrow money. It depends on two methods which are dependent on working capital.Fund flow statements: This statement shows the fund flow statements for current and future years. It shows the fund utilisation and sources of funds.The statement is important because it highlights the utilization of fund. To make sure the bank that you are using the fund for the purpose you have borrowed.Ratio analysis: This is also one of the long and important statement of CMA data.It covers key ratios. Some ratios are current ratio, MPBF, Net worth ratio, quick ratios, turnover ratios, debt equity ratios, DSCR etc.

NO SAME REPORT FOR ALL BUSINESSES:

There are different business types and according to their business nature and size, cma report is prepared. It is not similar for all businesses. Similarly, CMA report is prepared as per nature of borrowed fund. The data is different for working capital loan or for CC or for CMA data for bank guarantee.

WHAT IS THE BENEFIT OF SUBMITTING CMA REPORT?

By submitting CMA data report with right ratios and proper presentation of usage of funds, your chances of getting loan has been increased. Provided you follow other procedures and requirements of banks.



Detailed Project Report (DPR) for Loan Proposal
DETAILED PROJECT REPORT

Proposal for Term loan of Rs…… lakh and Working Capital Limit of Rs…….lakh
for setting up a new project for manufacture of ………..
                                                           
I.          INTRODUCTORY, PROMOTERS AND MANAGEMENT

1.         Particulars of the Enterprise:

1.1
Name of the Enterprise

1.2
Constitution (Proprietorship/ Partnership/ Pvt. Ltd. Company/ Public Limited Company/ Limited Liability Partnership/ Cooperative Society

1.3
MSME Status

1.4
MSME Registration No./
Date of Registration

1.5
Date of incorporation / commencement of business

1.6
ROC Number, if applicable

1.7


Address
Registered Office:

Administrative Office

Factory
(Whether backward area)


1.8 Industry Status

Industry
Products
Installed Capacity
No of days / Shifts
End uses
Export orientation







2.         Promoters:

2.1.      Brief bio-data of the promoters:  

            Brief background of promoters may be furnished as under. Write up on other companies, if any, promoted by them with which they are associated.

Name of the promoter



Father’s/ Husband’s name



Age (years)



Residential Address



Educational Qualification



Passport No., valid till, place of issue



Permanent Account Number



Relationship with the chief promoter



Experience in what capacity/ industry/ years




Networth as on………………….



Income Tax / Wealth Tax Status



Other concerns interest / in which capacity / financial stake




Detailed biodata may be furnished as per APPENDIX I and networth statement of promoters and guarantors may be furnished as per APPENDIX II.

2.2       Brief financial position / working results of each associate concern

            Brief financial position/ working results of the associate concern(s) for the past …. years is furnished below:
(Rs. lakh)
Name of the Concern/ Location/ Established in
Product
Year/ Period
Sales
Net Profit
Net
worth














Details of associate concern(s) may be given as per APPENDIX III.

2.3       Brief history
            Brief history of the unit may be given.

3.         Management and Proposed shareholding pattern:

3.1       Management:
            Brief comments on the management be given.

3.2       Proposed Shareholding Pattern:

The authorised share capital of the company is Rs….. lakh. The shareholding pattern of the company is given below:

S.No
Name of the Directors
(S/Shri)
No. of shares
Shareholding
Rs. lakh
%
1




2




3




4




Total



100

OR

The unit is a partnership firm. The profit/loss of the firm shall be shared by the partners in the following proportion:

S.No
Name of the Partners
(S/Shri)
Percentage (%) in case of profit / loss
1


2


3


Total
100.00

II.         TECHNICAL ASPECTS

4.1       Scope of the project:

            Briefly mention scope of the project i.e. what the project is supposed to accomplish to deliver a product or service with the specified features and functions.

4.2       Location-availability of infrastructural facilities:

Locational advantages of premises with reference to absence of civic restrictions, proximity to the source of raw materials, market for the product, availability of power, water, labour and transport may be mentioned. Whether backward area benefits, if any, available.

4.3       Technology:

            Selection of technology, comments on alternative production process, comments on technology (latest/ appropriate/ proven). Discuss the impact of possible changes in technology in future. Indicate technical process whether it is a continuous process. In case of technical collaboration, please furnish a brief write-up on the period of collaboration agreement, the name of the collaborator company, indicating the activities, size, turnover, particulars of the existing plants, and other projects in India and abroad set up with same collaboration. Brief manufacturing process involved may also be given.

4.4       Raw materials/components:

            Details of raw material required and their sources may be indicated.

4.5       Utilities

4.5.1    Power:
Requirement of power depending upon plant and machinery and its availability from State Electricity Board may be mentioned. Back-up arrangement of power by way of DG Set may also be furnished.

4.5.2    Water:

Requirement of water for process/ human consumptions and its availability from Municipality/ bore well may be mentioned.


4.5.3    Fuel:

Details of fuels required depending upon production process and its arrangement of supply may be mentioned.

4.5.4    Others like steam/compressed air etc:

Details of steam/ compressed air required depending upon production process and its arrangement in the project may be mentioned. Capacity of boiler/ compressor may be furnished.

4.6       Effluent disposal:

            Mention about whether the unit falls under green, orange, red categories as per guidelines of State Pollution Control Department. Type of pollutants generated under the process and pollution control measures being taken in the project may be mentioned. Whether the unit has applied/ will apply to State Pollution Control Department for getting consent to establish.

4.7       Manpower:

The requirement of proposed manpower in various cadres viz. executives, technical persons, supervisors,  administrative staff, skilled and unskilled labours and their arrangements being made to be commented upon keeping in view the location of the unit, industry etc.

4.8       Implementation schedule:

Based on the progress already made and other arrangements made by the unit, the implementation schedule for following may be mentioned.

Particulars
Date of Commencement
Expected Date of Completion
Acquisition of Land


Development of Land


Civil Works for
- Factory building
- Machinery foundation
- Administrative Building


Plant & Machinery
- Imported
- Indigenous


Arrangement for power


Arrangement for water


Erection of equipment


Commissioning


Initial Procurement of Raw Material


Trial Runs


Commercial Production




III.        PROJECT COST AND MEANS OF FINANCE

5.         The broad break-up of cost of project is as under:
                         (Rs. lakh)
S.No.
Particulars
Already incurred
To be incurred
Total Cost
Firm
Non-firm
1
Land and Site Development




2
Buildings




3

Plant & Machinery – Imported




Plant & Machinery – Indigenous




4
Miscellaneous Fixed Assets




5
Preliminary expenses




6
Preoperative expenses 




7
Contingencies




8
Margin money for working capital





Total





5.1       Land and site development:

Location, area, purchase price, adequacy, availability for future expansion, comment if land acquired is in proportion to requirement, whether Non-agricultural (NA) permission obtained, freehold or leasehold, if leasehold, who owns, period of lease, whether lease deed registered, whether mortgage of leasehold rights possible, period of lease and adequacy thereof, price and reasonableness thereof, when acquired, land in the name of whom, if not steps taken for transfer to the company, break-up of site development cost viz. leveling & filling, internal roads, barbed wire compound etc. and reasonableness thereof.

Details of site development required and cost may be given in following table. It may be supported by the estimate from the architect.

S. No.
Description of Building
Cost
 (Rs. lakh)
(a)
Cost of leveling & development of ………..acres/ sq.mts. of land @ Rs……per acre/ sq. mt.


Cost of laying roads

(b)
(i) Approach road connecting the factory site to main road ……. running meters @ Rs……per rm.

(ii) Internal roads for the factory ……. running meters @ Rs……per rm.

(c)
Cost of fencing/ compound wall ……. running meters @ Rs……per rm.

(d)
Cost of ….. Gates





Total Cost of Site Development



5.2       Buildings:

Details may be furnished in following table:
(Rs. lakh)
S. No.
Description of Building
Type of Construc-tion
Estimated Cost
(Rs. lakh)
Area
(sq. mts. or sq. fts.)
Cost. per sq. mt. or sq. ft.
(Rs.)
(a)
Factory building for the main plant & equipment




(b)
Factory building for auxiliary services like steam supply, water supply, laboratory, workshop etc.




(c)
Administrative building




(d)
Godowns, warehouses and open yard facilities.




(e)
Misc. non-factory buildings like canteen, guest house, time office, excise house etc.




(f)
Quarters for essential staff




(g)
Silos, tanks, wells, chest, basin, cisterns, hoopers bins and other structures which are necessary for installation of plant and equipment and which may be constructed in RCC and such other structural civil engineering materials




(h)
Garages




(i)
Cost of Sewers drainage




(j)
Civil Engineering works not included above




(k)
Architects’ fees











Total Cost of Building





            Please furnish the particulars of Architect viz. name and address of the architect firm, scope of work, rates quoted and detailed estimate of expenses, fee payable and manner in which payable, time schedule, penalties, past experience of the architect in similar work.
           
5.3       Plant and machinery – imported & indigenous :

            The details of plant and machinery (imported & indigenous) proposed to be acquired may be furnished in following table:

            IMPORTED
 (Rs. lakh)  
S. No.
Name of Machinery and Specification
Quantity
Supplier
Unit Cost in Foreign Currency (CIF)
Foreign Currency
Exchange Rate
Total Cost (Rs. lakh)
Import Duty (%)
Import Duty (Amount)
1









2









3









4









5









6









7




















Total Cost of Imported Machinery












INDIGENOUS
(Rs. lakh)  
S. No.
Name of Machinery and Specification
Quantity
Supplier
Unit Cost in Rupees (Incl. taxes)
Total Cost (Rs. lakh)
1





2





3





4





5





6





7












Total Cost of Indigenous Machinery






Basis of selection of the suppliers whether based on recent competitive quotations or otherwise, reputation of suppliers and guarantees regarding performance may be mentioned. In case of fabricated equipment, cost should be reasonable and justifiable. In case of imported machinery, details of customs duty may also be given. If second hand machinery, please enclose valuation report regarding age, performance and value from an approved chartered engineer. Also indicate reasons for going in for second hand machinery. Separate mention may be made about towards transportation/ erection/ installation of plant and machinery. In case of imported machinery, details of customs duty may also be given. Separate mention may be made about towards transportation/ erection/ installation of plant and machinery.

If any consultant is engaged, following details may be furnished:
(a) Name and address of the consultants
(b) Fees payable and the manner in which payable
(c) Scope of work assigned to them
(d) Brief particulars of consultants including organisational set-up, bio data of senior personnel, names of directors/ partners, particulars of work done in the past and work on hand.


5.4       Misc. fixed assets:

The details of miscellaneous fixed assets proposed to be acquired may be furnished in following table.
(Rs. lakh)  
S. No.
Name of MFA and Specification
Quantity
Supplier
Unit Cost in Rupees (Incl. taxes)
Total Cost (Rs. lakh)
1





2





3





4





5





6





7












Total Cost of MFAs






Basis of selection of the suppliers whether based on recent competitive quotations or otherwise, reputation of suppliers and guarantees regarding performance may be mentioned.

5.5       Preliminary expenses:

            Expenses before incorporation of the company may be furnished in following table.

S. No.
Nature of expenses
Rs. lakh
(a)
Brokerage & commission on capital

(b)
Other capital issue expenses (legal, advertisement, printing stationary etc.)

(c)
Other preliminary expenses (company flotation & other initial expenses)





Total Preliminary Expenses




5.6       Pre-operative expenses:

            Pre-operative expenses may be furnished in following table.

S. No.
Nature of expenses
Rs. lakh
(a)
Establishment

(b)
Rent, rate & taxes

(c)
Traveling expenses

(d)
Misc. expenses

(e)
Interest during construction period

(f)
Insurance during construction including erection insurance

(g)
Mortgage expenses (stamp duty, registration charges and other legal expenses) (….% on loan of Rs. …. lakh)

(h)
Upfront fee for sanction of term loan

(i)
Security Deposit with Electricity Board and charges for power connection





Total Pre-operative Expenses


5.7       Contingencies:

            Contingencies may be related to non-firm cost on building, plant & machinery and Misc. fixed assets.

5.8       Margin money for working capital:

Margin money for working capital for first full year of projections either based on Nayak Committee Method (upto working capital limit of Rs.5 crore in respect of SSI units) or Second Method of Lending may be mentioned.

6.         Means of finance:

            The proposed means of finance is as under:
                                                                                                                         (Rs. lakh)                  
Sl No
Particulars
Amount already raised
Amount proposed to be raised
Total Amount
1
Share capital/ Partner’s Capital/ Proprietor’s capital



2
Subsidy- Central/ State Government



3
Interest free unsecured loans



4
Term loan from Bank




Total





IV.        ARRANGEMENTS MADE/PROPOSED TO BE MADE FOR WORKING CAPITAL

7.         Proposed arrangement for sanction of working capital limit from Bank or own sources may be mentioned.

V.         INDUSTRY/ MARKET AND SELLING ARRANGEMENTS

8.1       Industry Overview and Future Outlook:

Prospects of the industry may be mentioned here. Government Policies and   Regulations WTO related issues, Demand Supply Scenario, Competitor Analysis etc. may be covered.

8.2       Marketing & Selling Arrangements:

Details regarding main markets (locations), competitors, how does the unit propose to meet the competition, how does the unit's product compare with those of its competitors, any USP or specific market strength, whether product has multiple applications, distribution channels (e.g. direct sales, retail network, distribution network), Marketing team details, if any, firm tie up, orders on hand, details of marketing study done, if any, may be mentioned here.

VI.        FINANCIAL VIABILITY

Detailed profitability assumptions may be given as per APPENDIX IV. Detailed profitability estimates, projected cash flow statements, projected balance sheet, break even analysis, working capital computation, Debt Service Coverage Ratio and Internal Rate of Return calculations may be prepared as per Excel file (Profitability_Projections) and be attached as ANNEXURES I to XIV. Indicate the critical assumptions and give meaningful comments on projected capacity utilisation, selling prices assumed for finished products/ raw materials, gross profit percentage compared to industry average, indicate the critical factors on which viability depends.

VII.       STRENGTH/ WEAKNESS

Such as market standing, product/ service differentiation, technical expertise, infrastructure facilities etc.


VIII.      FINANCIAL ASSISTANCE SOUGHT FROM BANK

Amount of term loan and/ or working capital limit sought from the Bank may be mentioned. Repayment period in respect of term loan sought from the Bank, including repayment holiday may be mentioned.

IX.        DETAILS OF SECURITIES OFFERED TO THE BANK

(a) Primary (working capital and term loan securities to be indicated separately)
(b) Collateral (full details)
(c) Details of personal and corporate guarantees, if any




Signature of the Borrower
Date:
Place:



List of Enclosures

APPENDIX I
Bio-Data of the Promoter
APPENDIX II
Net worth Statement of the Promoter
APPENDIX III
Details of the associate concern (if applicable)

APPENDIX IV
Assumptions underlying profitability estimates

ANNEXURE I
Cost of Project and Means of Finance
ANNEXURE II
Projections of Performance & Profitability
ANNEXURE III
Projected Cash Flow Statement
ANNEXURE IV
Projected Balance Sheet
ANNEXURE V
Calculation of Margin Money for WC & Assessment of WC
ANNEXURE VI
Calculation of Depreciation
ANNEXURE VII
Calculation of Interest on Term Loan from Bank
ANNEXURE VIII
Break Even Point
ANNEXURE IX
DSCR
ANNEXURE X
Calculation of IRR & NPV
ANNEXURE XI
Cost of Capital
ANNEXURE XII
Return on Capital Employed
ANNEXURE XIII
Tax Provision

Other Documents

1
Audited Financial statements for the last three years of all the associate concerns of the applicant unit (if applicable)
2
Certified copy of Memorandum and Articles of Association/ Certificate of Incorporation/ Certificate of Commencement of business/ Partnership Deed/ Trust Deed/ Bye-laws/ Registration Certificate from Registrar of firms/ Societies, as the case may be.
3
IT/ Wealth Tax assessment orders/ returns/ certificates for the last 3 years in the respect of the promoters.
4
Photocopy of PAN card of all the promoters/ directors/ guarantors
5
Know Your Customer (KYC)* Documents of all the promoters/ directors/ guarantors.
6
Photograph of all the promoters/ directors/ guarantors with signatures duly certified by their bankers/ as per extant guidelines







Model Sanction Letter for Credit Facilities.

With reference to your application dated 09.06.2014 and subsequent correspondence, we have pleasure in advising you that the competent authority of the bank has sanctioned the following credit facilities on 20.10.2014 as per the terms and conditions detailed in Annexure–I.
                                                                                                (Rs. in Crores)
Facility
Limit

Existing
Proposed
1. Cash Credit (Hyp)
2.00
2.90
2. Term Loan
---
0.87
Total Fund Based Limits
2.00
3.77
4. Letter of Credit
4.00
4.50
5. Bank Guarantee
4.00
6.00
Total Non Fund Based Limits
8.00
10.50
T O T A L (FB + NFB)
10.00
14.27
                                                                                   
The sanctioning authority has approved the following:

·         Two-way interchangeability between BG and LC limits to the extent of Rs. 1.00 crore
·         Continuation of Margin on BG and LC @20% as against the stipulated margin of 25%
·         Enhancement In the tenor of LC from the existing level of 90 days to 120 days

While Sanctioning, the Competent Authority has made the following observation:
·         Enhanced limits will be released only after the receipt of ABS 2014 and verifying that the difference between audited and provisional sales and profits are not more than 10% and 5% respectively and there is no deterioration in CRA rating.
 ·         Before availing the enhanced limits, an affidavit should be submitted by the owner of the property countersigned by the Company that no agricultural activity is being carried out, supplemented by a certificate from the Revenue Authorities that no agricultural activity was happening on the land for  the last 3 years
·         The advance payment received against BGs should be factored accordingly while submitting stock statement.
·         External rating should be completed by 31.12.2014 failing which penal interest will be charged as per extant guidelines.
·         Second valuation and legal opinion will be obtained for the properties offered as  security.

The credit facilities sanctioned to the company are to be utilized for its genuine working capital requirements only with no diversion of short term funds for long term uses.

Please return the duplicate copy of this letter and annexure duly signed by the authorized signatories of the company and the guarantors in token of having accepted the terms and conditions of sanction. Please also arrange to pass suitable Board Resolution in this regard and arrange to call on us for executing the necessary documents along with certified copy of the resolution for our record.

Yours faithfully,

 
Asst. General Manager 
Encl. (as above)

ACCEPTED TERMS AND CONDITIONS

 




BORROWER                                                                                    GUARANTORS

ANNEXURE I

TERMS AND CONDITIONS
State Bank of Hyderabad, Sanathnagar, Hyderabad (20076)
Company: M/s New Energy Pvt. Ltd.

Limits:
Cash Credit   - Rs. 2.90 Crores
Term Loan  -  Rs. 0.87 crores
BG              - Rs. 6.00 Crore
LC               - Rs. 4.50 Crores
A) Security Details:
a. Primary Security:

For Working Capital limits
 First charge on all current assets of the Company  (Existing and future)

b. Collateral Security
I) Equitable Mortgage of the following Immovable Properties:
Sl No
Particulars of Property
1


All the securities available as first charge for working capital limits are extended to cover the existing and proposed term loans and all the securities available as first charge for Term Loans are extended to cover Working Capital limits.


c. Guarantees: Personal Guarantee of the following:
Sl No
Name
1

2

3

4

5

6

7

8

9


ECGC Cover:  Not applicable

C.   MARGINS: (FOR EACH FACILITY AS APPLICABLE):

Cash Credit:
Existing
Proposed
RM:      Domestic
--
--
RM:     Imported
--
--
SIP
--
--
FG
--
--
Receivables (Maximum cover period 90days)
--
50%
Letter of Credit
--
20%
BG
--
20%
TL (Margin)
33.59%
D. RATE OF INTEREST: (with details of fixed/ floating/ reset in spread intervals).

Facility
CRA
(As per ABS as on  31.03.2013)
Pricing
(w.e.f. Date of sanction)
Comments if pricing differs from CRA
Cash Credit
SB – 7
BR + 3.55%
--
Term Loan
SB – 7
BR + 4.05%
--

The Rate of Interest will be renegotiated whenever there is trigger for renegotiation, as stated below.
When there is a change in the CRA rating of the borrower.
When the interest rate scenario in the market changes, even if there is no change in the Credit rating and / or no change in the Base Rate.


E. REPAYMENT SCHEDULE      : (Uniform/ balloon / step up/ starting from / No. of installments / Qtly- Half-yly to be furnished)

Facility
Repayment
Cash Credit
Repayable on demand and will be reviewed / renewed every 12 months.
Term Loan
60 monthly Installments of Rs.1.45 lacs each commencing from 3 months after the first disbursement (i.e. after moratorium period of 3 months, Interest to be paid as and when debited.

F. PROCESSING FEE / UPFRONT FEE            : 
           
Processing Fee (for Working Capital limits)   : 0.30% of the limit
Upfront Fee                                                              :  1.25% of Loan  Amount
Mortgage Charges                                                 : As applicable
Documentation Charges                                      :  Rs. 20,000.00

G. COMMITMENT CHARGES      : 
1.  More than 75% - Nil
2. Between 50-75% - 0.25% to be recovered on the entire unutilized portion on a quarterly basis
3.  less than 50% -  0.50% p.a. on entire unutilized portion on a quarterly basis

H. DISBURSEMENT (TL):  Directly to the supplier

Term Loan:
l. Repayment Schedule: 60 monthly Installments of Rs.1.45 lacs each commencing from 3 months after the first disbursement (i.e. after moratorium period of 3 months, Interest to be paid as and when debited.

m. Basis of Valuation: 
§  Raw Material, stores and spares at cost price or market price or Government controlled rate, invoice rate whichever is lower.  In case of imported goods, the cost price will be inclusive of import duty paid.
§  Stock-in- process at cost of production.
§  Finished goods at cost price, invoice, or market price/export price whichever is lower.
§  Old and obsolete stocks should be shown separately in stock statement.


n. Periodicity of Statements:
Particulars
Interval / Periodicity
Stock Statements
Quarterly by 10th of every quarter or earlier whenever there is significant change in the level of stocks and receivables affecting the available drawing power.
Select Operational Data (SOD)
Monthly Intervals
FFR-I
Quarterly, to be submitted within six weeks from the close of a quarter.
FFR-II
Half yearly. To be submitted within 8 weeks from the close of a half year.
Submission of renewal data
At least two months before the date of expiry of limits.



o. Penal Rate of Interest:
Particulars
Rate of interest to be charged
Delayed submission of Stock Statements
1% on the entire outstanding if not submitted within 10 days. Interest to be charged from beginning of the month.
FFR-I & FFR-II
1% on the entire outstanding if not submitted as per the periodicity mentioned above
Delay in submission of renewal data
1% on the entire outstanding.
Irregular drawings
1% on the irregular portion of drawing on first two occasions not exceeding 60 days in a calendar year and 2% in the subsequent occasion or if the irregularity is persistent i.e. Continuing beyond 60 days.
Non-compliance with covenants of sanction
1% on the entire outstanding.


g. Terms & Conditions for financing against Receivables:

A
Limit (sub-limit)
--
B
Margin
50%
C
Tenor
90 days
D
Other Covenants
- Only book debts, which represent genuine transactions, evidenced by way of invoices, bills wherever applicable etc., shall be taken into account for financing.
- The statement of book debts, with age-wise classification and with clear bifurcation of receivables of Group companies and other companies shall be submitted monthly alongwith the stock statements.
- All book debts should be realized within the cover period stipulated above in normal manner.  Book debts remaining outstanding beyond this period will be removed from the cover and drawing power recalculated.  Any drawings in excess of this should be repaid immediately.
- The company should ensure that proper system of control over book debts is in vogue and Bank should be apprised of the position periodically.
- Bills discounted under LCs should not be included in the Book Debts statement.
- Quarterly certification from Chartered Accountant with regard to the quality, age and genuineness of book debts.
- Company should submit at regular quarterly intervals that it had not opened any account with any bank other than the financing bank and also undertake not to open any account with other banks without the written consent of the financing bank.





t. Letter of Credit (Inland / Foreign) (DA/DP):
A
Limit
Rs.4.50 crores
B
Tenor
120 days
C
Purpose
For procurement of Raw Material and other spares related to normal business activity of the company.
D
Margin
20%
E
Security
Application – cum – Indemnity from the borrower in respect of every LC.
Charge over current assets to cover the LC limits also.
Collateral security available for fund based limit would extend to cover the LC limit also.
F
Commission
As per Bank standard rates.
G
Period of Sanction
As applicable to CC limits.
H
Interchangeability
No

I
Other Stipulations
Foreign LCs shall be opened as per the provisions of UCPDC / FEMA / RBI guidelines / UCP.
In case of import LCs, an undertaking to be furnished by the company that they will bear the exchange fluctuation risks and will arrange for forward cover whenever called upon to do so by the Bank.
In respect of Usance LCs, the goods received under the unpaid LC should be excluded from the value of stocks for arriving at Drawing Power.
The borrower to ensure payment of LC bills on due date and the bank may insist for funding of future payments through a separate account prior to the due date.  Company has to submit an undertaking that they will retire the documents received under the LC from their own sources on the due dates without approaching the bank for additional funds.  In case of Sight LC, the company to retire the documents promptly on first presentation.
All bills under Usance LC must be paid promptly on due date.
The bank reserves the specific right not to deliver documents even under a Usance LC in case there are earlier devolvements and the entire risk for demurrage or any other charge shall be the sole responsibility of the borrower.
The bank reserves the right not to open fresh LCs or to raise the cash margin even within the sanctioned limits, if the accounts are irregular or bills under LCs devolved upon the bank earlier.
The LC will be opened only for the purpose of purchasing raw materials, stores and spares required by the company in normal course of their business. They will not be opened for the purpose of procuring capital goods under the limit.
While establishing LCs it will be ensured that the company is able to retire the relative documents within the sanctioned Cash Credit limit, without rendering the account irregular under the Cash Credit arrangement.





The goods covered by the LC will be fully insured against all transit risks.
LCs in favour of associate concerns will not be permitted.
Commitment charges @ 0.25% on the un-utilized portion of the limits, if the average utilization is 60% or less.








U. Bank Guarantee (Inland):
A
Limit
Rs.6.00 crores
B
Purpose
EMD / Security Deposit / Performance / Advance Retention Money / Provisional Excise Duty, Customs Duty / Export Obligation
C
Margin
20%; 100% for disputed BGs.
D
Security
Counter Indemnity of the company
Charge over current assets to cover the BG limits.
All collaterals to cover BG facility also.
E
Commission
As per Bank standard rates.
F
Period of BGs
Maximum 18 months.
G
Interchangeability
No.
H
Period of Sanction
As applicable to CC limits.
I
General
Guarantees required in the normal course of the company’s business will be executed under the limit.
The guarantees executed will be specific in regard to the amount and the period of validity and will contain our usual limitation and enforcement clauses.
The Bank Guarantees will be issued in the format acceptable to the Bank.
While executing the guarantees, it will be ensured that these do not contain any clauses prejudicial to the Bank’s interest.
The Bank shall be entitled at any time during the currency of the guarantee to demand and recover any margin upto the full extent of 100% on the guarantee and in case of default by the company in payment of the margin so demanded, the Bank reserves the right to recover such margin by debit to the accounts of the company and such debit shall be recoverable from the company as their dues.
In the case of invocation of the Bank Guarantees, the company should make sufficient funds available in the Cash Credit Account to meet the BG liability; otherwise the Bank reserves the right to charge penal interest as applicable in case of over drawings.


Calling up of the Loan:
The bank will be at liberty to call up the loan, or such portion thereof as may remain outstanding on the happening of any of the following or other events considered likely to jeo-paradise the bank’s interest.
a)
Any instance of the principal money being unpaid on the due date for payment thereof
b)
The company committing any breach of default in the performance or observance of the covenants in the mortgage deed executed by them.
c)
The company entering into any arrangement or compromise with its creditors or committing any act of insolvency.
d)
Any interest remaining unpaid and in arrears for a space of three months after the same shall have become due.
e)
Execution or distress being enforced or levied against the whole or any part of the company’s property.
f)
The company into liquidation (except for the purpose of amalgamation or reconstruction approved by the bank).
g)
Any of the directors of the company being adjudicated insolvent or taking advantage of any law for the relief of insolvent debtors.
h)
A receiver being appointed in respect of the whole or any part of the property of the company.
i)
The company ceasing or threatening to cease to carry on business.
j)
The occurrences of any circumstance which is prejudicial to or impairs, imperils or depreciate the security given to the bank.
k)
The occurrences of any event or circumstance, which would or is likely to prejudicially or adversely, affect in any manner the capacity of the company to repay the loan.
l)
If default is made in due and effective payment of legal expenses, commitment charges, cost, charges or any other monies payable by the company.

Negative Lien:
1
The company should not create, without prior consent of the bank, charges on any or all of their properties and assets during the currency of our loan.
2
Every year three copies of audited/printed balance sheet and profit and loss account statements of the company immediately on these being published/ signed by the auditors are furnished to the bank.
3
Half yearly profit and loss account statements within two months from the end of half-year should be furnished to the bank.
4
The communication of sanction of facilities should not be constructed as giving rise to any binding obligation on the part of SBH unless the company communicates to SBH within 15 days from the date of receipt of the sanction letter that the terms and conditions set out are acceptable to it and unless the loan agreement and other documents relating to the facilities are executed by the company in such form as required by SBH within the stipulated time or where no period is stipulated within six months from the date of sanction or such further time as may be allowed by SBH in its absolute discretion.
5
The bank reserves the right to change/revise/update any of the given conditions from time to time as per the guidelines of the bank/RBI/GOI/concerned authorities.
6
Bank reserves the right to cancel/withdraw the credit facilities without assigning any reason.


Security Documents
The company should execute such security documents including mortgage and other deeds as may be required by the bank.
Legal Expenses
All legal expenses like solicitor and lawyer's fees, stamp duty, registration charge and other incidental expenses incurred in connection with this loan arising there from to be borne by the company.
Inspection/site Visits
The company shall comply with the following conditions to the Bank’s satisfaction.
1
Appoint key technical, financial, marketing   and   administrative personnel with professional background and experience.
2
The company shall permit the authorized representatives of the bank to carry out any technical financial and or legal inspection(s) at the cost of the company whenever required.
3
During such inspections all related books of accounts, registers etc., shall be made available for verification/examination to the bank by the company.
4
The bank may at its sole discretion disclose such information to other Institutions, government bodies, in connection with the facility/ies granted to the company.




General Covenants
1
The Bank will have the right to examine at all times, the Company's  books  of  accounts  and  to  have  the   company/ factory(ies) inspected from to time by officer(s) of the Bank and/or  qualified  Auditors and/or technical  experts  and/or management  consultants  of the Bank's choice. Cost of such inspection shall be borne by the company.
2
During the currency of the Bank's facilities, the company will not without the permission of the consortium in writing:
a)
effect any change in the capital structure;
b)
formulate any scheme of amalgamation or reconstruction;
c)
implement   any  scheme  of  expansion  or   acquire   fixed  assets;
d)
invest  by  way of share capital in or lend  or  advance  funds  to place deposits with any other concerns  except  in  normal course of business or as advances to employees;
e)
enter in to borrowing arrangements either secured or   unsecured with any other bank or financial institutions,     company or otherwise;
f)
undertake guarantee obligations on behalf of any other  company;
g)
declare dividends for any year except out of profits   relating to that year after making all due and necessary provisions   and  provided  further  that  no  default   had occurred  in any repayment obligations.
3
The company will place with the Bank all its banking business including foreign exchange, if any, and deposits.
4
The company should not make any drastic changes in its management set up without the Bank's permission.
5
The company will maintain its net working capital position above the levels furnished in its projections for working capital finance. In the event of difference of opinion arising as to what constitute current assets and current liabilities, the consortium/Banks' decision will be final and binding on the company.


6
The company will keep the Bank informed of the happening of any event likely to have substantial effect on their profit   or   business, if, for   instance, the    monthly production / sales are substantially less than what had been indicated to the Bank, the company will inform the consortium accordingly with explanations and the remedial steps proposed to be taken.
7
The company will keep the Bank advised of any circumstances adversely affecting the financial position of their subsidiaries including any action taken by any creditor against the subsidiaries.
9
Any other terms and conditions which are not specifically covered herein but stipulated should be strictly complied with.
10
The Bank will be free to suitably modify the terms and conditions detailed above whichever considered necessary, this will of course, be done in consultation with the Company.
11
Processing charges shall be levied at applicable.
12
Our charges should be registered with Registrar of companies within 30 days of the date of documents and the certificate of charge should be submitted within 90 days.
13
The company should ensure that the current ratio is above the indicative level of 1.33.
14
Raw material which is old and slow moving should be excluded while computing the Drawing Power.  It will be necessary for the company to append appropriate certificate to this effect in their stock statement.
15
Bank’s name board must be exhibited in the premises of the factory of the company as financiers.
16
The limits as noted above are sanctioned for a period of one year unless renewed/extended. It may be understood by the company that unless renewed, the account will attract penal interest varying from 1 to 2.5 % or more, as such the Company is advised in your own interest to submit necessary financial statements/ CMA as required at least 2 months before the date of renewal.  Further any ad-hoc extension / continuation will attract fresh processing charges/additional interest.
17
As per RBI directives, sanction permission for issuance of Commercial  Paper would effectively reduce the  limit  to that  extent and any reinstatement would be considered  as  a fresh  limit, subject to the usual appraisal  and  processing charge including submission of fresh CMA/other data as may be required.
18
All the above facilities have been sanctioned for the purpose of your normal working capital requirements. If the facilities are used for any other purpose or the Bank apprehends that the facilities are likely to be used for such other purpose by you, the Bank may immediately withdraw the facilities and recall the amounts due from you.
19
 A declaration from the directors of the company to be obtained as under:
"I/ We hereby  agree as a pre-condition of  the  loan/advances given to me/us by the bank that in case i/we commit default in the  repayment  of the loan/advances or in  the repayment  of interest  thereon or any of the agreed installment of the  loan  on due date(s), the bank and/or the Reserve Bank of India will have  an unqualified right to disclose or publish my/our  name or the name of our company /company/ unit and its directors/partners/proprietors/ guarantors as defaulters in such  manner  and  through  such medium as the bank or Reserve Bank of India  in  their absolute discretion may think fit”.
20
The Bank will be free to suitably modify the terms and conditions detailed above whichever considered necessary, this will of course, be done in consultation with the Company.
21
A declaration from the borrower and the guarantor to be obtained as per circular No.ADV/2002-03/63 dt.16.12.2002 in respect of reporting to CIBIL.
22
The Bank reserves the absolute right to cancel the limits (either fully or partially) unconditionally without prior notice, in case of (a) the limits/ part of the limits are not utilized by you, and/or (b) deterioration in the loan accounts in any manner whatsoever (c) non-compliance of terms and conditions of sanction.
23
“The Company/Directors/Guarantors hereby agree  as a precondition of the credit facility sanctioned to it that in case it commits default in compliance of the terms and conditions and repayment of the Term Loan/ Cash Credit and/or other pecuniary obligations to the Bank/other lenders, the Bank/lenders and or Reserve Bank of India will have an unqualified right to disclose or publish name(s) of the Firm and its directors as defaulters including my/our photos in such manner and through such medium as the Bank/lenders or Reserve Bank of India in their absolute discretion may think fit.”
24
The borrower shall pay penal interest at 1% p.a. on the total outstanding in the event of any one or more of the following defaults/deviations during the currency of the loan for the relevant period as mentioned below:
Any adverse deviation by more than 20% from the levels stipulated in respect of TOL/TNW
Default in payment of interest or installments to the bank, for the period of default.
Default in payment of interest and / or installments to any other lender for the period of such default.
25
Unconditionally cancelable clause (HO cir No. IRMD 2008-09/11 dated 06.11.2008)
“The Bank reserves the absolute right to cancel the limits (either fully or
partially)  unconditionally without prior notice”
(a) in case the limits/ part of the limits are not utilized by you, and/or
(b) in case of deterioration in the loan accounts in any manner whatsoever, and/or
(c) in case of non-compliance of terms and conditions of sanction”.



RENEWAL OF CREDIT LIMITS FOR WORKING CAPITAL