Description
This report will help researchers improving knowledge about the credit appraisal system and to have practical exposure of the credit appraisal system at AXIS Bank.
RESEARCH METHODOLOGY
? INTRODUCTION:
Credit appraisal means investigation/assessment done by te ban! be"ore providing any
loans and advan#es/pro$e#t "inan#e and also #e#!s te #ommer#ial% "inan#ial &ind'strial
viability o" te pro$e#t proposed its "'nding pattern and "'rter #e#!s te primary &
#ollateral se#'rity #over available "or re#overy o" s'# "'nds(
? PROBLEM STATEMENT:
To st'dy te #redit appraisal system in SME se#tor% at A)*S +an! Amadabad(
? OBJECTIVES:
• To st'dy te #redit appraisal metods(
• To 'nderstand te #ommer#ial% "inan#ial & te#ni#al viability o" te proposal
proposed and it,s "inding pattern(
? RESEARCH DESIGN:
Analyti#al in nat're(
? DATA COLLECTION:
• Primary data:
*n"ormal intervie- -it manager and oter sta"" members at A.is +an!(
• Secodary data:
? +oo!s
? -ebsites
? database at A.is +an!
? library resear#
? BENE!ICIARIES:
• Re"earc#er":
Tis report -ill elp resear#ers improving !no-ledge abo't te #redit appraisal system and
to ave pra#ti#al e.pos're o" te #redit appraisal system at A)*S +an!(
1
• Maa$emet St%det":
Te pro$e#t -ill elp te management st'dent to !no- te patterns o" #redit appraisal in
A.is ban!(
? LIMITATION O! THE STUD&:
• As te #redit appraisal is one o" te #r'#ial areas "or any ban!% some o" te
Te#ni#alities are not revealed(
• Credit appraisal system in#l'des vario's types o" detail st'dies "or di""erent areas o"
analysis% b't d'e to time #onstraint% o'r analysis -as o" limited areas only(
2
CHAPTER '
INTRODUCTION TO BAN(ING SECTOR
A "a)"#ot o* t#e +a,i$ id%"try
Te Reserve +an! o" *ndia /R+*0% as te #entral ban! o" te #o'ntry% #losely monitors
developments in te -ole "inan#ial se#tor(
Te ban!ing se#tor is dominated by S#ed'led Commer#ial +an!s /S+Cs0( As at end Mar#
1221% tere -ere 134 Commer#ial ban!s operating in *ndia( Tis in#l'ded 15 6'bli# Se#tor
+an!s /6S+s0% 78 6rivate% 91
reign and 834 Regional R'ral +an!s( Also% tere -ere 45
s#ed'led #o;operative ban!s #onsisting o" ( *ndian ban!s are "ast reali?ing tat "ee;based
so'r#es o" in#ome ave to be a#tively loo!ed at as a basis "or "'t're gro-t% i" te ind'stry is
to be#ome a global "or#e to re#!on -it(
16
!iacia- Ic-%"io ad E0)a"io o* Ba,i$ Ser2ice"
Transition "rom #lass ban!ing to mass ban!ing and in#reased #'stomer "o#'s is drasti#ally
#anging te lands#ape o" *ndian ban!ing( E.pansion o" retail ban!ing as a lot o" potential
as retail assets are $'st 11= o" te total ban!ing assets and #ontrib'tion o" retail loans to GD6
stands merely at 4= in *ndia vis;M;vis 8
:3 DSCR >
:81STreign e.#ange ris! 82
:87 E.pe#ted val'es o" D/E% i" Operating Cas :lo- >
:3 DSCR >
:81STreign e.#ange ris! 82
:87 E.pe#ted val'es o" D/E% i" Operating Cas :lo- >
:3 DSCR >
:81STreign e.#ange ris! 82
:87 E.pe#ted val'es o" D/E% i" Credit 6eriod Availed 81
+3 Cor!ing Capital Cy#le 84
+82 Ta. in#entives 82
+89 6rod'#t Related Ris!s 81
+8< 6ri#e Related Ris! 81
+19 S'stainability o" Sales 81
TOTAL 822
iii6 D%a-ity o* maa$emet
Sr8 No8 S%+ )arameter"
M4 Too Optimisti# 6ro$e#tions o" Sales and Oter
:inan#ials
84
M> Capability to raise money 8<
M81 Mi. o" 6ro"essional and Traditional
Management
8<
TOTAL 822
74
De*iitio o* Parameter" %"ed i SME too-
!' = Net Sa-e" Gro1t# Rate
Im)ortace o* t#i" idicator
Tis ratio re"ers to te #ompo'nded ann'al gro-t rate o" net sales over a period o" tree
years(
Te #ompany,s gro-t ratio vis;M;vis oter #ompanies in te ind'stry -ill be a good tool to
assess its per"orman#e( *" te gro-t rate is lo- #ompared to oters in te ind'stry% ten it
-ill enable 's to analyse te problems 'niB'e to tis #ompany(
!orm%-a
Te #ompo'nded ann'al gro-t rate over te past 7 years is #al#'lated in per#entage Terms(
CAGR /Compo'nded ann'al gro-t rate0 "or tree years U
VW/Oal'e o" sales in #'rrent year0//Oal'e o" sales in year P70X/8/70 P 8XYS822
T's it is te tird root o" sales in #'rrent year divided by sales tree years ago%
min's 8% e.pressed as per#ent(
Note"
R Aet sales U Gross sales P *ndire#t ta.es
Rr ban!s% A+:Cs% and oter "inan#ial instit'tionsH
o Aet sales U net interest in#ome Z oter in#ome
!. = PBDIT Gro1t# Rate
Im)ortace o* t#i" idicator
Tis ratio re"ers to te #ompo'nded ann'al gro-t rate o" pro"its be"ore depre#iation /non
#as0% "inan#e #osts /interest0 and ta. over a period o" tree years(
A #onsistent gro-t in tis ratio indi#ates an improved per"orman#e o" te #ompany% re"le#ted
in in#reasing pro"itability /#ompared to its sales gro-t0(
!orm%-a
Te #ompo'nded ann'al gro-t rate over te past 7 years is #al#'lated in
per#entage Terms(
CAGR /Compo'nded average gro-t rate0 "or tree years U
75
VW/Oal'e o" 6+D*T in #'rrent year0//Oal'e o" 6+D*T 7 years ba#!0X/8/70 P 8XYS822
T's it is te tird root o" 6+D*T in #'rrent year divided by 6+D*T tree years
ago% min's 8% e.pressed as per#ent(
Note"
R 6+D*T denotes pro"it be"ore depre#iation% interest and ta.(
Rr ban!s% A+:Cs% and oter "inan#ial instit'tions% 'se 6+T instead o" 6+D*T
!3 = PBDITESa-e"
Im)ortace o* t#i" ratio
Tis ratio indi#ates te pro"it be"ore depre#iation% interest and ta. as a per#entage o" net sales(
Te pro"it be"ore interest% depre#iation and ta. is an indi#ator o" te operational e""i#ien#y( *"
tis ratio as a per#entage o" sales is ig% ten it is a positive indi#ation o" te operating
e""i#ien#y in Terms o" ra- material #ons'mption% employee prod'#tivity and po-er
#ons'mption among oter tings( A ig val'e indi#ates greater pro"itability and en#e
betters #apability to repay te debt( Te ratio is a meas're o" te margin available to a
#ompany "rom its operations(
!orm%-a
Tis ratio /in =0 is #omp'ted by dividing te 6+D*T -it Aet Sales(
/6+D*T/Aet Sales0 . 822
R 6+D*T U Operating pro"it be"ore depre#iation% interest and ta.
Rr ban!s% A+:Cs% and oter "inan#ial instit'tionsH
o Aet sales U net interest in#ome Z oter in#ome
o Kse 6+T instead o" 6+D*T
!; = TOLETN<
Im)ortace o* t#i" ratio
Tis ratio gives a olisti# representation o" total o'tside liabilities in relation to tangible net
-ort o" #ompany( *t re"le#ts te #apa#ity o" te b'siness 'nit to ass're te #reditors o" te
se#'rity tey ave "or payment o" bot interest and instalment( *t indi#ates te e.tent to -i#
te #reditors are #overed by asset(
Tis ratio so-s o- m'# o'tside borro-ings are resorted to in #omparison -it o-ners,
"'nds
76
!orm%-a
Te total o'tside liabilities are divided -it te tangible net -ort o" te
#ompany(
Total O'tside Liabilities
Tangible Aet Cort
R TOL U Total liabilities ; TAC
R TAC as de"ined in Debt EB'ity ratio
R Also #al#'late tis ratio "or ban!s% A+:Cs and oter "inan#ial instit'tions% as it -ill
give an indi#ation o" te #apital adeB'a#y o" te #ompany
!F = C%rret Ratio
Im)ortace o* t#i" ratio
C'rrent assets o" #ompany are te assets tat #an be easily liB'idated and #onverted into #as(
Te #'rrent ratio meas'res sort;Term liB'idity o" te #ompany and ability to meet its sort;
Term "inan#ial obligations( A ig ratio is good "rom te point o" vie- o" te ban! b't a very
ig ratio may a""e#t pro"itability tro'g a ig inventory #arrying #ost(
!orm%-a
Te ratio is -or!ed o't by dividing te C'rrent Assets -it C'rrent Liabilities
C'rrent Assets
C'rrent liabilities /in#l'ding instalments d'e d'ring te year0
R To get a meaning"'l #'rrent ratio% -e so'ld a##o'nt "or te v'lnerability o" a #ompany to
sort Term insolven#y( Te #'rrent ratio #o'ld be ig be#a'se o" e.#ess inventory or slo-
realisation o" debtors( Tere"ore% #'rrent assets m'st not in#l'de inventory -i# is older
tan te normal -or!ing #y#le o" #ompany /say 4;> mont0% re#eivables over 4 monts% dies%
spares reB'ired "or more tan 3 monts o" prod'#tion and disp'ted re#eivables( *" s'#
De.#ess assetsE e.ist ten please ma!e ne#essary notes in te remar!s #ol'mn( *n s'# #ases
please indi#ate yo'r assessment o" te val'e o" #'rrent ratio(
R Also #al#'late tis ratio "or ban!s% A+:Cs and oter "inan#ial instit'tions% as it -ill give an
indi#ation o" te d'ration mismat# o" te #ompany,s balan#e seet
77
!G = O)erati$ Ca"# !-o1
Im)ortace o* t#i" idicator
Tis meas're indi#ates te #ompany,s #as in"lo-s and o't"lo-s arising "rom its operations(
*t is di""erent "rom "'nds "lo- o" b'siness(
*t elps 's to eval'ate te #ompany,s ability to generate #as in"lo-s "rom operations to pay
debt% interest and dividends% and to e.plain te di""eren#e bet-een net in#ome and net #as
"lo- "or operating a#tivities( Te operating #as "lo- #an indi#ate te #ompany,s need "or
e.ternal "inan#ing(
Cile "'nds "lo- is good to mat# long Term and sort Term 'se and so'r#e o" "'nds% tis
indi#ator tries to #apt're te #apability o" te "irm to be able to meet its b'siness obligations
(
Ca-c%-atio
Operating #as "lo- / "or te last "inan#ial year0 is #omp'ted in te "ollo-ing manner
Head Amo%t
Aet Sales
Oter in#ome
Total re#eipts
LessH COGS
Gross 6ro"it
LessH SGA/Operating e.penses
6+D*T
; *n#rease / Z de#rease in non #as #'rrent assets
Z *n#rease / ; de#rease in #'rrent liabilities
Operating #as
LessH *n#ome ta. paid
6ost ta. operating #as
LessH *nterest paid on LT & ST
LessH Dividend paid
Cas "rom operations
Repayment d'e o" long Term debt
78
Ho1 to rate
Compare D#as "lo- "rom operationsE to Drepayment d'e o" long Term debtE(
Te rating is done as e.plained in te table belo-(
De"cri)tio Score
Te #ompany is li!ely to de"a'lt on repayment o" its Loans and
*nterest
O
Te #ompany is not in a position to meet its repayment obligations
"rom its o-n reso'r#es and it "a#es di""i#'lties to arrange o'tside
"'nds
8
Te #ompany is in a position to meet its repayment obligation "rom
its o-n reso'r#es and Term "'nds tat are already applied "or /and
e.pe#ted to be san#tioned sortly0
1
Te #ompany is in a position to meet its repayment obligation "rom
its o-n reso'r#es and Term "'nds
7
Te #ompany is in a #om"ortable position to meet its repayment
obligation "rom its o-n reso'r#es /no need "or o'tside "'nds0
9
!H = DSCR 4De+t Ser2ice Co2era$e Ratio6
Im)ortace o* t#i" ratio
Tis ratio meas'res te #apa#ity o" te #ompany to servi#e its debt i(e( repayment o" prin#ipal
and interest( DSCR meas'res te n'mber o" times a #ompany,s earnings #over its total long;
Term debt;servi#ing reB'irement% in#l'ding interest and prin#ipal repayments in Term Loans%
over a period o" one year(
Tis ratio -ill elp 's to eval'ate i" an adeB'ate #as "lo- -ill be available to meet debt
obligation and also "or providing margin o" sa"ety to lenders( Tis ratio also elps to
deTermine te time -en repayment so'ld #ommen#e and te pay;ba#! period o" te Loan(
Tis ratio is a good indi#ator o" te long;Term solven#y o" a #ompany(
!orm%-a
Te pro"it be"ore depre#iation and interest /6+D*0 is divided by installments d'e
d'ring te year pl's interest(
6 + D *[[[[[[[[[[
*nstalments "or te year Z interest
79
R Do not "ill in tis ratio "or ban!s% A+:Cs and oter "inan#ial instit'tions
!'. = !orei$ e0c#a$e ri",
Im)ortace o* t#i" idicator
Adverse movements in te "oreign e.#ange rate #an ave a tremendo's impa#t on te
#ompany,s "inan#ial strengt(
reign e.#ange ris! may be eiter transa#tion based or port"olio based( Transa#tion based
ris! is d'e to time lags bet-een p'r#ases being made and payment being made% or sales
being made and payment being re#eived against tese sales( 6ort"olio based ris! is on a##o'nt
o" "oreign e.#ange Loans -ere te repayment is made on "'t're dates in "oreign #'rren#y(
Te rater needs to !no- o- te li!ely "l'#t'ation in e.#ange rate -ill a""e#t te pro"its o"
te #ompany( Depending on #omposition o" international trade% te adverse e.#ange rate
movement #o'ld a""e#t te pro"itability/#as "lo-( 6r'dent borro-ers edge teir e.pos're to
"oreign e.#ange( Only te 'n;edged part o" te "oreign e.#ange e.pos're so'ld be ta!en
into a##o'nt(
Ho1 to rate
Te rater as to s'b$e#tively rate tis indi#ator on a s#ore o" 2 to 9 based on is per#eption
and !no-ledge o" te "oreign e.#ange ris!( A potential model to allo#ate s#ore #an be te
"ollo-ingH
De"cri)tio Score
Te ris! involved is \ 82= o" TAC 2
Te ris! involved is bet-een >= and 82= o"
TAC
8
Te ris! involved is bet-een = o" TAC 1
Te ris! involved is less tan ;point rating s#ale% -i# ranges "rom SME 8 to SME >(
Borro1er Rati$ Ra$e o* Score" Ri", Le2e-
SME 8 Above >< Lo-est ris!
SME 1 54;>< Lo-er ris!
SME 7 44;5< Lo- ris!
SME 9 2 242% G'$arat% *ndia(
Lie o* acti2ity Man'"a#t'ring o"od Colo'r 6rod'#ts
Sector Cemi#al and Cemi#al 6rod'#ts
Dea-i$ 1it# %" Ae- Conne#tion
Icor)oratio 89t F'ne 8332
Name o* Director" Mr( Dasratbai 6raladbai 6atel /D*A H 2222>8420
Mr( Ramesbai +ag-anbai 6atel /D*A H 222750
Mr( Hitendra Hargovinddas Set /D*A H 2227552140
Mr( Harisbai Jesavlal Sa /D*A H 222753710
Mr( +ag-andas Jalidas 6atel /D*A H 2229970
Mr( Sasi!ant 6'rsottambai 6atel /D*A H 2229(22 Crore "or Sel"
? Man'"a#t'red *ndire#t E.port o" Dyes & inTermediates in te year 1221;27 by
G'$arat Dyest'""s Man'"a#t'rers,Asso#iation(
? +ot te Knits o" te #ompany are e.porting Oriented Knits and ave obtained te
stat's o" One Star E.port Ho'se(
Mar,eti$ Strate$yEMar,eti$ arra$emet
Strong and e.perien#e people are leading #ompany,s mar!eting department( Company,s total
t'rnover is divided intoH
? E.ports Sales
? Lo#al Sales
? E0)ort" Sa-e":
• Company,s 52= t'rnover is generated by -ay o" e.ports sales( Company as its o-n
presen#e in all most all #o'ntries( Te #ompany is e.portingod #olors in Latin
Ameri#a% A"ri#an #o'ntries% Middle East% :ar East% KS and E'rope( Almost all e.port
#'stomers are dealing -it #ompany "or many years(
• O't o" total e.ports t'rnover 42 to 52= per#entage orders are repeated orders and rest
o" te orders are ne- orders(
• Te Company as region -ise E.port Managers -o #an #ater te need o" #'stomers
individ'ally( D'e to te B'ality and timely delivery o" te material te #ompany ave
less #ompetition "rom tese #o'ntries(
• Globally many #o'ntries ave dis#ontin'ed prod'#tion o" Dyes%od #olors and
*ntermediates% ne- mar!et as opened "or *ndian man'"a#t'rer o" Dyes and
*ntermediates( As Dynemi# 6rod'#ts Ltd is already a -ell re#ogni?ed name in te
"ield globally% it as more opport'nities to grab "rom gro-ing *nternational mar!et(
104
? Loca- Sa-e":
• *n Lo#al Mar!et Company is doing mar!eting its Dyes & *ntermediates to te end
#'stomers(
• Te #ompany is te largest man'"a#t'rer o" S(6(C(6 in *ndia -i# generating
repeated order "rom te lo#al #'stomers(
• Ao-% #ompany is planning to mar!et te "ood #olors in small pa#!ing tro'g its
dealers and distrib'tors -i# #ater te lo#al needs(
• Company is also planning to arrange mar!eting arrangement -it so"t drin!
man'"a#t'res and parma#e'ti#al man'"a#t'res "or "ood #olors(
Pro)o"a- *or Pro)o"a- *or *re"# "actio o* credit *aci-itie" +y 1ay o* ta,e o2er 41it#
e#acemet6 *rom HD!C Ba,
a) San#tion o" Cas Credit Limit o" Rs( 1(7< 827(25 87 933(11
Operating 6ro"it Margin = 5(29= >(= 9 8871(>9 8871(>9 8871(>9
Knad$'sted TAC 1493(57 1525(77 1549(34 725>(>9 7958(24
Knad$'sted TOL 8823(91 83(14 1778(57 1>32(81 7239(99
Knad$'sted TOL/ TAC 2(91 2(9 2(39 2(>3
Ad$'sted TAC 1582(>9 151 1>1>(79 7175(9> 7413(52
Ad$'sted TOL 829>(78 8(7< 1578(9> 1372
Ad$'sted TOL/ TAC 2(73 2( 2(>2 2(>9 2(>8
*nterest Coverage 3(>1 >(99 7(>9 4(15
C'rrent Ratio 8(54 8(79 2(39 8(87 8(19
DSCR 5(45 8(>7 8(18 1(7< 1(12
AOC: 82 2(42 /2(9 and "'rter to Rs( 9388(12 la#s
in :Y2>;23 /A'd).
109
g) Sin#e te #ompany is into Man'"a#t'ring o"od Colo'rs% te net margin normally
remains bet-een (14= to Rs( 8>9(33 la#s in
:Y25;2> /A'd0 so-ing margin o" ;23 /A'd0 so-ing margin o" 7(>5= d'e to de#rease in margins
in te #emi#al ind'stry on a##o'nt o" ra- material pri#e "l'#t'ations -orld-ide( Te
same -as an aberration( +'t% no- te ind'stry is on revival and boom pat(
Considering te same% te #ompany as estimated te pro"it o" Rs( 994(91 la#s "or
:Y23;82 ` margin o" 4(>5=% -i# may be a##epted(
h) Te TOL/TAC o" te #ompany in#reased "rom 2(91 in :Y24;25 /A'd0 to 2( /A'd0 and to 2(>9 in :Y2>;23 /A'd0( Te #ompany as estimated
TOL/TAC at 2(39 and 2(>3 "or :Y23;82 and :Y82;88 respe#tively on a##o'nt o"
in#reased ban! borro-ings% -i# may be #onsidered #om"ortable(
i) Te #'rrent ratio o" te #ompany -as 8(54 in :Y24;25 /A'd0 -i# de#reased to 8(79
in :Y25;2> /A'd0 and -i# "'rter pl'mmeted to 2(39 in :Y2>;23 /A'd0% on
a##o'nt o" #ape. e.pansion -i# -ill be #ompleted in te #'rrent "is#al( Te
#ompany as estimated its #'rrent ratio at 8(87 and 8(19 "or :Y23;82 and :Y82;88%
-i# is reasonably a##eptable as regards to te liB'idity position o" te #ompany(
j) Te AOC: is positive d'ring :Y 122>;23 /A'd0 by Rs( 4 la#s( AOC: is
estimated negative in :Y 1223 P82 at Rs( 143(33 la#s% as per pro$e#ted "inan#ials
s'bmitted by te #ompany on a##o'nt o" in#rease in sto#! and re#eivables -i# is
!eeping in line -it te in#rease in t'rnover and te olding levels are as per te
ind'stry pra#ti#e(
k) Te overall #ond'#t o" te a##o'nt% repayment stat's et#( at Citi +an! and HD:C is
satis"a#tory(
l) Te main dire#tor is dynami# and as ri# e.perien#e o" more tan 12 years in is line
o" a#tivity(
m) Te #ompany is a registered SS* 'nit(
110
n) Mar!et re"eren#e o" te #ompany is satis"a#tory
(
o) Te overall pro$e#ted per"orman#e and "inan#ial o" te 'nit are satis"a#tory(
111
CASE STUD&=.
Detai-" o* ca"e "t%dy
Name
Sa,a-) Recreatio P2t8 Ltd8 4SRPL6
Co"tit%tio 6rivate Limited Company
Gro%) San!alp
Date o*
Icor)oratio
2(>2 12 1935(>2
Aet Sales Gro-t = 2(78= 8(7>= 11(99= 88>(>>= 5>(33=
6+D*T Margin = 8=
TOL / TAC 1(25 8(74 4
Ad$( TOL / TAC 1(25 8(74 7(9
Rati$
Te rating o" te #ompany as per SME Rating Tool #omes to SME;1 /A+S 78(27(12230( Te
segment -ise s#oring is as 'nderH
Partic%-ar" Rati$
O2era-- Scori$ SME=.
:inan#ial s#oring SME;7
+'siness s#oring SME;1
Management s#oring SME;1
*nd'stry s#oring SME;9
CIBILERBIEECGC De*a%-ter"5 Li"t
Te name o" te #ompany and its dire#tors are not appearing in C*+*L/R+*,s de"a'lter/-ill"'l
de"a'lter list as o" 78(81(122> /latest available0( Te name o" te #ompany and its dire#tors
are not appearing in ECGC,s de"a'lter list as o" 78(25(122> /latest available0
116
Aa-y"i"
a0 Te #ompany belongs a re#ogni?ed gro'p named SAAJAL6% -o as #reated a ni#e
in te ospitality se#tor(
b0 Te gro'p is aving its presen#e sin#e 83>8 and as emerged as a rep'ted name sin#e
in#eption( Te promoters o" te #ompany ave ri# e.perien#e in teir line and belong
to a reso'r#e"'l "amily(
#0 Te promoters are aving so'nd entreprene'r s!ills to a#B'ire b'siness opport'nities
to s#ale ne- eigts(
d0 Te sales/re#eipts o" te resta'rant/"ran#isee b'siness /e.isting0 o" te #ompany
-ere in#reased "rom Rs( 9>7(41 la#s in :Y25;2> to Rs( 9>3(49 la#s in :Y2>;23( Te
#ompany as a#ieved te sale o" Rs( 757(59 la#s /Resta'rant in#ome o" Rs( 722(1<
la#s and :ran#isee in#ome o" Rs( 57(93 la#s0 'pto 72(23(1223 against te estimated
sale o" Rs( 423(22 la#s /Resta'rant in#ome o" Rs( 9>9(22 la#s and :ran#isee in#ome
o" Rs( 81 to Rs( 9>(34 la#s /A6 margin o" 82(22=0 in
:Y2>;23( Te 6+D*T o" te e.isting a#tivity o" te #ompany -as in#reased "rom Rs(
54(81 la#s /6+D*T margin o" 8 to Rs( >4(83 la#s /6+D*T margin
o" 85(42=0 in :Y2>;23
"0 Te TOL/TAC o" te #ompany remained at 1(25 in :Y25;2> and 8(74 in :Y2>;23(
Te TOL/TAC o" te #ompany as been estimated at 8% dated 19(22(22 la#s(
9( Sop at 3;82% Gro'nd "loor% S'!riti Anne.ie% Aear 6rernatirt +'nglo-s;1%
Satellite% Amedabad% belongs to Mr( Jetan 6( Sa /Dire#tor0( Estimated
mar!et val'e Rs( 822(22 la#s(
Total mar!et val'e o" above properties is Rs( 728(22 la#s /Appro.0(
G%aratee: 6ersonal g'arantee o"H
8( Mr( Jetan 6( Sa /Dire#tor & property older0(
1( Mrs( Dara J( Sa /Dire#tor & property older0
7( Mr( 6an!a$ C( Sa /Dire#tor0
9( Mrs( 6ina 6( Sa /Dire#tor0
PDC5":
T-o 6DC,s "or te entire overdra"t limit ea# dated 7 monts and 3 monts "rom te
date o" "irst disb'rsement(
Proce""i$ !ee"
2(5 4(7> 4( 4(38 4(38 4(38
Itere"t 81(31 85((39 1>(48 72(47 72(47
Itere"t / rem%eratio to Director" 9(>2 1(92 1(5( 71>(82 7;23% te net pro"it o" te #ompany in#reased to Rs( 7(;23( Te #'rrent ratio estimated "or :Y 1223;82 is 8(77 times% mainly on a##o'nt
o" proposed #redit limit o" Rs( 8>2(22 la#s "rom o'r ban! and te same may be
#onsidered as satis"a#tory(
125
CASE STUD& 9
Detai-" o* ca"e "t%dy
Name o* t#e
A))-icat
S%c#i > 892(2> 893(9> 8
TOLETN & Rs( >(;23(
6ro"itability as also rose in line -it in#rease in sales o" previo's "inan#ial year(
6+D*T o" te "irm is also on in#reasing trend% -i# #an be #onsidered as satis"a#tory(
d) Aet -ort o" te "irm is in#reasing y;o;y bases% -it plo'g ba#! o" te pro"it in te
b'siness( Knad$'sted gearing o" te "irm is on iger side "or :Y 122>;23 mainly d'e
to iger side o" #reditors at parti#'lar point in Mar# 1223( *n Mar# 1223%
proprietor s'bmitted tat p'r#ase o" ra- material -as at better pri#e & te s'ppliers
also allo-ed #redit period( Hen#e% te #reditor base -as on iger side(
e) Debtor,s level o" te "irm is average 42 days "or all te past 7 years( 6roprietor as
s'bmitted tat average payment d'ration is 42 days maintained in te b'siness(
Debtors maintain reg'larity in payment% -i# #an be #onsidered as a##eptable(
f) Te C'rrent Ratio o" te "irm as been on iger side% above te ben#mar! level o"
8(77 "or all te past 7 years( C'rrent ratio "or :Y 1225;2> -as 8(99 & "or :Y 122>;23
-as at 8(55( Estimated ratio is 8(44 "or :Y 1223;82( Alto'g% it as been maintained
above te ben#mar! level% -i# #an be #onsidered as a##eptable(
CHAPTER H
131
!INDINGS
? Credit appraisal is done to #e#! te #ommer#ial% "inan#ial & te#ni#al viability o" te
pro$e#t proposed its "'nding pattern & "'rter #e#!s te primary or #ollateral se#'rity
#over available "or te re#overy o" s'# "'nds
? Credit is te #ore a#tivity o" te ban!s & important so'r#e o" teir earnings -i# go
to pay interest to depositors% salaries to employees & dividend to sareolders
? Credit & ris! go and in and
? *n te b'siness -orld ris! arises o't o"H;
• De"i#ien#ies / lapses on te part o" te management
• Kn#ertainties in te b'siness environment
• Kn#ertainties in te ind'strial environment
• Cea!ness in te "inan#ial position
? +an!,s main "'n#tion is to lend "'nds/ provide "inan#e b't it appears tat norms are
ta!en as g'idelines not as a de#ision ma!ing
? A ban!er,s tas! is to indenti"y/assess te ris! "a#tors/parameters & manage/mitigate
tem on #ontin'o's basis
? Te Credit Appraisal pro#ess adopted by te ban! ta!e into a##o'nt all possible
"a#tors -i# go into appraising te ris! asso#iated -it a loan
? Tese ave been #ategori?ed broadly into "inan#ial% b'siness% ind'strial% management
ris!s & are rated separately
132
? Te assessment o" "inan#ial ris! involves appraisal o" te "inan#ial strengt o" te
borro-er based on per"orman#e & "inan#ial indi#ators
? Te norms o" te ban! "or providing loans are not stringent% i(e( even i" a parti#'lar
#lient is not aving te "avorable estimated and "inan#ial per"orman#e% based on its
past re#ord and "'t're gro-t perspe#tive% te loan is provided(
? +y providing vario's s#emes o" loans% A.is ban! tries to #ater to te "inan#ial
reB'irements o" almost all te types o" SME 'nits(
133
CHAPTER 'J
CONCLUSION
? :inan#e management is te ba#!bone o" any organi?ations and en#e yields a n'mber
o" $ob options ranging "rom strategi# "inan#ial planning to sales(
? :rom te st'dy o" Credit appraisal o" SME% it #an be #on#l'ded tat #redit appraisal
so'ld tere"ore be based on te "ollo-ing "a#tors% te same are applied at A.is +an!H
• :inan#ial per"orman#e
• +'siness per"orman#e
• *nd'stry o'tloo!
• I'ality o" management
• Cond'#t o" a##o'nt
? A.is +an! loan poli#y #ontains vario's norms "or san#tion o" di""erent types o" loans(
Tese all norms do not apply to ea# & every #ase( A.is +an! norms "or providing
loans are "le.ible & it may di""er "rom #ase to #ase(
? Ks'ally% it is seen tat #redit appraisal is basi#ally done on te basis o" "'ndamental
so'ndness( +'t% a"ter di""erent types o" #ase st'dies% o'r #on#l'sion -as s'# tat
#redit appraisal system is not only loo!ing "or "inan#ial -ealt( Oter strong
parameters also play an important role in analy?ing #redit -ortiness o" te
"irm/#ompany(
? *n all% te viability o" te pro$e#t "rom every aspe#t is analy?ed% as -ell as type o"
b'siness% ind'stry% promoters% past re#ords% e.perien#e% pro$e#ted data and estimates%
goals% long term plans also plays #r'#ial role in in#reasing #an#es o" getting pro$e#t
approved "or loan(
134
BIBLIOGRAPH&
Ceb Sites
---(rbi(org(in
---(A.is +an!(#om
---(indianban!asso#iation(#om
---(ban!ersindia(#om
---(-i!ipedia(#om
+oo!sH
DCredit and ban!ingE +yH J( C( Aanda
135
doc_821373637.doc
This report will help researchers improving knowledge about the credit appraisal system and to have practical exposure of the credit appraisal system at AXIS Bank.
RESEARCH METHODOLOGY
? INTRODUCTION:
Credit appraisal means investigation/assessment done by te ban! be"ore providing any
loans and advan#es/pro$e#t "inan#e and also #e#!s te #ommer#ial% "inan#ial &ind'strial
viability o" te pro$e#t proposed its "'nding pattern and "'rter #e#!s te primary &
#ollateral se#'rity #over available "or re#overy o" s'# "'nds(
? PROBLEM STATEMENT:
To st'dy te #redit appraisal system in SME se#tor% at A)*S +an! Amadabad(
? OBJECTIVES:
• To st'dy te #redit appraisal metods(
• To 'nderstand te #ommer#ial% "inan#ial & te#ni#al viability o" te proposal
proposed and it,s "inding pattern(
? RESEARCH DESIGN:
Analyti#al in nat're(
? DATA COLLECTION:
• Primary data:
*n"ormal intervie- -it manager and oter sta"" members at A.is +an!(
• Secodary data:
? +oo!s
? -ebsites
? database at A.is +an!
? library resear#
? BENE!ICIARIES:
• Re"earc#er":
Tis report -ill elp resear#ers improving !no-ledge abo't te #redit appraisal system and
to ave pra#ti#al e.pos're o" te #redit appraisal system at A)*S +an!(
1
• Maa$emet St%det":
Te pro$e#t -ill elp te management st'dent to !no- te patterns o" #redit appraisal in
A.is ban!(
? LIMITATION O! THE STUD&:
• As te #redit appraisal is one o" te #r'#ial areas "or any ban!% some o" te
Te#ni#alities are not revealed(
• Credit appraisal system in#l'des vario's types o" detail st'dies "or di""erent areas o"
analysis% b't d'e to time #onstraint% o'r analysis -as o" limited areas only(
2
CHAPTER '
INTRODUCTION TO BAN(ING SECTOR
A "a)"#ot o* t#e +a,i$ id%"try
Te Reserve +an! o" *ndia /R+*0% as te #entral ban! o" te #o'ntry% #losely monitors
developments in te -ole "inan#ial se#tor(
Te ban!ing se#tor is dominated by S#ed'led Commer#ial +an!s /S+Cs0( As at end Mar#
1221% tere -ere 134 Commer#ial ban!s operating in *ndia( Tis in#l'ded 15 6'bli# Se#tor
+an!s /6S+s0% 78 6rivate% 91
reign and 834 Regional R'ral +an!s( Also% tere -ere 45s#ed'led #o;operative ban!s #onsisting o" ( *ndian ban!s are "ast reali?ing tat "ee;based
so'r#es o" in#ome ave to be a#tively loo!ed at as a basis "or "'t're gro-t% i" te ind'stry is
to be#ome a global "or#e to re#!on -it(
16
!iacia- Ic-%"io ad E0)a"io o* Ba,i$ Ser2ice"
Transition "rom #lass ban!ing to mass ban!ing and in#reased #'stomer "o#'s is drasti#ally
#anging te lands#ape o" *ndian ban!ing( E.pansion o" retail ban!ing as a lot o" potential
as retail assets are $'st 11= o" te total ban!ing assets and #ontrib'tion o" retail loans to GD6
stands merely at 4= in *ndia vis;M;vis 8
:3 DSCR >
:81ST
reign e.#ange ris! 82:87 E.pe#ted val'es o" D/E% i" Operating Cas :lo- >
:3 DSCR >
:81ST
reign e.#ange ris! 82:87 E.pe#ted val'es o" D/E% i" Operating Cas :lo- >
:3 DSCR >
:81ST
reign e.#ange ris! 82:87 E.pe#ted val'es o" D/E% i" Credit 6eriod Availed 81
+3 Cor!ing Capital Cy#le 84
+82 Ta. in#entives 82
+89 6rod'#t Related Ris!s 81
+8< 6ri#e Related Ris! 81
+19 S'stainability o" Sales 81
TOTAL 822
iii6 D%a-ity o* maa$emet
Sr8 No8 S%+ )arameter"
M4 Too Optimisti# 6ro$e#tions o" Sales and Oter
:inan#ials
84
M> Capability to raise money 8<
M81 Mi. o" 6ro"essional and Traditional
Management
8<
TOTAL 822
74
De*iitio o* Parameter" %"ed i SME too-
!' = Net Sa-e" Gro1t# Rate
Im)ortace o* t#i" idicator
Tis ratio re"ers to te #ompo'nded ann'al gro-t rate o" net sales over a period o" tree
years(
Te #ompany,s gro-t ratio vis;M;vis oter #ompanies in te ind'stry -ill be a good tool to
assess its per"orman#e( *" te gro-t rate is lo- #ompared to oters in te ind'stry% ten it
-ill enable 's to analyse te problems 'niB'e to tis #ompany(
!orm%-a
Te #ompo'nded ann'al gro-t rate over te past 7 years is #al#'lated in per#entage Terms(
CAGR /Compo'nded ann'al gro-t rate0 "or tree years U
VW/Oal'e o" sales in #'rrent year0//Oal'e o" sales in year P70X/8/70 P 8XYS822
T's it is te tird root o" sales in #'rrent year divided by sales tree years ago%
min's 8% e.pressed as per#ent(
Note"
R Aet sales U Gross sales P *ndire#t ta.es
R
r ban!s% A+:Cs% and oter "inan#ial instit'tionsHo Aet sales U net interest in#ome Z oter in#ome
!. = PBDIT Gro1t# Rate
Im)ortace o* t#i" idicator
Tis ratio re"ers to te #ompo'nded ann'al gro-t rate o" pro"its be"ore depre#iation /non
#as0% "inan#e #osts /interest0 and ta. over a period o" tree years(
A #onsistent gro-t in tis ratio indi#ates an improved per"orman#e o" te #ompany% re"le#ted
in in#reasing pro"itability /#ompared to its sales gro-t0(
!orm%-a
Te #ompo'nded ann'al gro-t rate over te past 7 years is #al#'lated in
per#entage Terms(
CAGR /Compo'nded average gro-t rate0 "or tree years U
75
VW/Oal'e o" 6+D*T in #'rrent year0//Oal'e o" 6+D*T 7 years ba#!0X/8/70 P 8XYS822
T's it is te tird root o" 6+D*T in #'rrent year divided by 6+D*T tree years
ago% min's 8% e.pressed as per#ent(
Note"
R 6+D*T denotes pro"it be"ore depre#iation% interest and ta.(
R
r ban!s% A+:Cs% and oter "inan#ial instit'tions% 'se 6+T instead o" 6+D*T!3 = PBDITESa-e"
Im)ortace o* t#i" ratio
Tis ratio indi#ates te pro"it be"ore depre#iation% interest and ta. as a per#entage o" net sales(
Te pro"it be"ore interest% depre#iation and ta. is an indi#ator o" te operational e""i#ien#y( *"
tis ratio as a per#entage o" sales is ig% ten it is a positive indi#ation o" te operating
e""i#ien#y in Terms o" ra- material #ons'mption% employee prod'#tivity and po-er
#ons'mption among oter tings( A ig val'e indi#ates greater pro"itability and en#e
betters #apability to repay te debt( Te ratio is a meas're o" te margin available to a
#ompany "rom its operations(
!orm%-a
Tis ratio /in =0 is #omp'ted by dividing te 6+D*T -it Aet Sales(
/6+D*T/Aet Sales0 . 822
R 6+D*T U Operating pro"it be"ore depre#iation% interest and ta.
R
r ban!s% A+:Cs% and oter "inan#ial instit'tionsHo Aet sales U net interest in#ome Z oter in#ome
o Kse 6+T instead o" 6+D*T
!; = TOLETN<
Im)ortace o* t#i" ratio
Tis ratio gives a olisti# representation o" total o'tside liabilities in relation to tangible net
-ort o" #ompany( *t re"le#ts te #apa#ity o" te b'siness 'nit to ass're te #reditors o" te
se#'rity tey ave "or payment o" bot interest and instalment( *t indi#ates te e.tent to -i#
te #reditors are #overed by asset(
Tis ratio so-s o- m'# o'tside borro-ings are resorted to in #omparison -it o-ners,
"'nds
76
!orm%-a
Te total o'tside liabilities are divided -it te tangible net -ort o" te
#ompany(
Total O'tside Liabilities
Tangible Aet Cort
R TOL U Total liabilities ; TAC
R TAC as de"ined in Debt EB'ity ratio
R Also #al#'late tis ratio "or ban!s% A+:Cs and oter "inan#ial instit'tions% as it -ill
give an indi#ation o" te #apital adeB'a#y o" te #ompany
!F = C%rret Ratio
Im)ortace o* t#i" ratio
C'rrent assets o" #ompany are te assets tat #an be easily liB'idated and #onverted into #as(
Te #'rrent ratio meas'res sort;Term liB'idity o" te #ompany and ability to meet its sort;
Term "inan#ial obligations( A ig ratio is good "rom te point o" vie- o" te ban! b't a very
ig ratio may a""e#t pro"itability tro'g a ig inventory #arrying #ost(
!orm%-a
Te ratio is -or!ed o't by dividing te C'rrent Assets -it C'rrent Liabilities
C'rrent Assets
C'rrent liabilities /in#l'ding instalments d'e d'ring te year0
R To get a meaning"'l #'rrent ratio% -e so'ld a##o'nt "or te v'lnerability o" a #ompany to
sort Term insolven#y( Te #'rrent ratio #o'ld be ig be#a'se o" e.#ess inventory or slo-
realisation o" debtors( Tere"ore% #'rrent assets m'st not in#l'de inventory -i# is older
tan te normal -or!ing #y#le o" #ompany /say 4;> mont0% re#eivables over 4 monts% dies%
spares reB'ired "or more tan 3 monts o" prod'#tion and disp'ted re#eivables( *" s'#
De.#ess assetsE e.ist ten please ma!e ne#essary notes in te remar!s #ol'mn( *n s'# #ases
please indi#ate yo'r assessment o" te val'e o" #'rrent ratio(
R Also #al#'late tis ratio "or ban!s% A+:Cs and oter "inan#ial instit'tions% as it -ill give an
indi#ation o" te d'ration mismat# o" te #ompany,s balan#e seet
77
!G = O)erati$ Ca"# !-o1
Im)ortace o* t#i" idicator
Tis meas're indi#ates te #ompany,s #as in"lo-s and o't"lo-s arising "rom its operations(
*t is di""erent "rom "'nds "lo- o" b'siness(
*t elps 's to eval'ate te #ompany,s ability to generate #as in"lo-s "rom operations to pay
debt% interest and dividends% and to e.plain te di""eren#e bet-een net in#ome and net #as
"lo- "or operating a#tivities( Te operating #as "lo- #an indi#ate te #ompany,s need "or
e.ternal "inan#ing(
Cile "'nds "lo- is good to mat# long Term and sort Term 'se and so'r#e o" "'nds% tis
indi#ator tries to #apt're te #apability o" te "irm to be able to meet its b'siness obligations
(
Ca-c%-atio
Operating #as "lo- / "or te last "inan#ial year0 is #omp'ted in te "ollo-ing manner
Head Amo%t
Aet Sales
Oter in#ome
Total re#eipts
LessH COGS
Gross 6ro"it
LessH SGA/Operating e.penses
6+D*T
; *n#rease / Z de#rease in non #as #'rrent assets
Z *n#rease / ; de#rease in #'rrent liabilities
Operating #as
LessH *n#ome ta. paid
6ost ta. operating #as
LessH *nterest paid on LT & ST
LessH Dividend paid
Cas "rom operations
Repayment d'e o" long Term debt
78
Ho1 to rate
Compare D#as "lo- "rom operationsE to Drepayment d'e o" long Term debtE(
Te rating is done as e.plained in te table belo-(
De"cri)tio Score
Te #ompany is li!ely to de"a'lt on repayment o" its Loans and
*nterest
O
Te #ompany is not in a position to meet its repayment obligations
"rom its o-n reso'r#es and it "a#es di""i#'lties to arrange o'tside
"'nds
8
Te #ompany is in a position to meet its repayment obligation "rom
its o-n reso'r#es and Term "'nds tat are already applied "or /and
e.pe#ted to be san#tioned sortly0
1
Te #ompany is in a position to meet its repayment obligation "rom
its o-n reso'r#es and Term "'nds
7
Te #ompany is in a #om"ortable position to meet its repayment
obligation "rom its o-n reso'r#es /no need "or o'tside "'nds0
9
!H = DSCR 4De+t Ser2ice Co2era$e Ratio6
Im)ortace o* t#i" ratio
Tis ratio meas'res te #apa#ity o" te #ompany to servi#e its debt i(e( repayment o" prin#ipal
and interest( DSCR meas'res te n'mber o" times a #ompany,s earnings #over its total long;
Term debt;servi#ing reB'irement% in#l'ding interest and prin#ipal repayments in Term Loans%
over a period o" one year(
Tis ratio -ill elp 's to eval'ate i" an adeB'ate #as "lo- -ill be available to meet debt
obligation and also "or providing margin o" sa"ety to lenders( Tis ratio also elps to
deTermine te time -en repayment so'ld #ommen#e and te pay;ba#! period o" te Loan(
Tis ratio is a good indi#ator o" te long;Term solven#y o" a #ompany(
!orm%-a
Te pro"it be"ore depre#iation and interest /6+D*0 is divided by installments d'e
d'ring te year pl's interest(
6 + D *[[[[[[[[[[
*nstalments "or te year Z interest
79
R Do not "ill in tis ratio "or ban!s% A+:Cs and oter "inan#ial instit'tions
!'. = !orei$ e0c#a$e ri",
Im)ortace o* t#i" idicator
Adverse movements in te "oreign e.#ange rate #an ave a tremendo's impa#t on te
#ompany,s "inan#ial strengt(
reign e.#ange ris! may be eiter transa#tion based or port"olio based( Transa#tion basedris! is d'e to time lags bet-een p'r#ases being made and payment being made% or sales
being made and payment being re#eived against tese sales( 6ort"olio based ris! is on a##o'nt
o" "oreign e.#ange Loans -ere te repayment is made on "'t're dates in "oreign #'rren#y(
Te rater needs to !no- o- te li!ely "l'#t'ation in e.#ange rate -ill a""e#t te pro"its o"
te #ompany( Depending on #omposition o" international trade% te adverse e.#ange rate
movement #o'ld a""e#t te pro"itability/#as "lo-( 6r'dent borro-ers edge teir e.pos're to
"oreign e.#ange( Only te 'n;edged part o" te "oreign e.#ange e.pos're so'ld be ta!en
into a##o'nt(
Ho1 to rate
Te rater as to s'b$e#tively rate tis indi#ator on a s#ore o" 2 to 9 based on is per#eption
and !no-ledge o" te "oreign e.#ange ris!( A potential model to allo#ate s#ore #an be te
"ollo-ingH
De"cri)tio Score
Te ris! involved is \ 82= o" TAC 2
Te ris! involved is bet-een >= and 82= o"
TAC
8
Te ris! involved is bet-een = o" TAC 1
Te ris! involved is less tan ;point rating s#ale% -i# ranges "rom SME 8 to SME >(
Borro1er Rati$ Ra$e o* Score" Ri", Le2e-
SME 8 Above >< Lo-est ris!
SME 1 54;>< Lo-er ris!
SME 7 44;5< Lo- ris!
SME 9 2 242% G'$arat% *ndia(
Lie o* acti2ity Man'"a#t'ring o"
od Colo'r 6rod'#tsSector Cemi#al and Cemi#al 6rod'#ts
Dea-i$ 1it# %" Ae- Conne#tion
Icor)oratio 89t F'ne 8332
Name o* Director" Mr( Dasratbai 6raladbai 6atel /D*A H 2222>8420
Mr( Ramesbai +ag-anbai 6atel /D*A H 222750
Mr( Hitendra Hargovinddas Set /D*A H 2227552140
Mr( Harisbai Jesavlal Sa /D*A H 222753710
Mr( +ag-andas Jalidas 6atel /D*A H 2229970
Mr( Sasi!ant 6'rsottambai 6atel /D*A H 2229(22 Crore "or Sel"
? Man'"a#t'red *ndire#t E.port o" Dyes & inTermediates in te year 1221;27 by
G'$arat Dyest'""s Man'"a#t'rers,Asso#iation(
? +ot te Knits o" te #ompany are e.porting Oriented Knits and ave obtained te
stat's o" One Star E.port Ho'se(
Mar,eti$ Strate$yEMar,eti$ arra$emet
Strong and e.perien#e people are leading #ompany,s mar!eting department( Company,s total
t'rnover is divided intoH
? E.ports Sales
? Lo#al Sales
? E0)ort" Sa-e":
• Company,s 52= t'rnover is generated by -ay o" e.ports sales( Company as its o-n
presen#e in all most all #o'ntries( Te #ompany is e.porting
od #olors in LatinAmeri#a% A"ri#an #o'ntries% Middle East% :ar East% KS and E'rope( Almost all e.port
#'stomers are dealing -it #ompany "or many years(
• O't o" total e.ports t'rnover 42 to 52= per#entage orders are repeated orders and rest
o" te orders are ne- orders(
• Te Company as region -ise E.port Managers -o #an #ater te need o" #'stomers
individ'ally( D'e to te B'ality and timely delivery o" te material te #ompany ave
less #ompetition "rom tese #o'ntries(
• Globally many #o'ntries ave dis#ontin'ed prod'#tion o" Dyes%
od #olors and*ntermediates% ne- mar!et as opened "or *ndian man'"a#t'rer o" Dyes and
*ntermediates( As Dynemi# 6rod'#ts Ltd is already a -ell re#ogni?ed name in te
"ield globally% it as more opport'nities to grab "rom gro-ing *nternational mar!et(
104
? Loca- Sa-e":
• *n Lo#al Mar!et Company is doing mar!eting its Dyes & *ntermediates to te end
#'stomers(
• Te #ompany is te largest man'"a#t'rer o" S(6(C(6 in *ndia -i# generating
repeated order "rom te lo#al #'stomers(
• Ao-% #ompany is planning to mar!et te "ood #olors in small pa#!ing tro'g its
dealers and distrib'tors -i# #ater te lo#al needs(
• Company is also planning to arrange mar!eting arrangement -it so"t drin!
man'"a#t'res and parma#e'ti#al man'"a#t'res "or "ood #olors(
Pro)o"a- *or Pro)o"a- *or *re"# "actio o* credit *aci-itie" +y 1ay o* ta,e o2er 41it#
e#acemet6 *rom HD!C Ba,
a) San#tion o" Cas Credit Limit o" Rs( 1(7< 827(25 87 933(11
Operating 6ro"it Margin = 5(29= >(= 9 8871(>9 8871(>9 8871(>9
Knad$'sted TAC 1493(57 1525(77 1549(34 725>(>9 7958(24
Knad$'sted TOL 8823(91 83(14 1778(57 1>32(81 7239(99
Knad$'sted TOL/ TAC 2(91 2(9 2(39 2(>3
Ad$'sted TAC 1582(>9 151 1>1>(79 7175(9> 7413(52
Ad$'sted TOL 829>(78 8(7< 1578(9> 1372
Ad$'sted TOL/ TAC 2(73 2( 2(>2 2(>9 2(>8
*nterest Coverage 3(>1 >(99 7(>9 4(15
C'rrent Ratio 8(54 8(79 2(39 8(87 8(19
DSCR 5(45 8(>7 8(18 1(7< 1(12
AOC: 82 2(42 /2(9 and "'rter to Rs( 9388(12 la#s
in :Y2>;23 /A'd).
109
g) Sin#e te #ompany is into Man'"a#t'ring o"
od Colo'rs% te net margin normallyremains bet-een (14= to Rs( 8>9(33 la#s in
:Y25;2> /A'd0 so-ing margin o" ;23 /A'd0 so-ing margin o" 7(>5= d'e to de#rease in margins
in te #emi#al ind'stry on a##o'nt o" ra- material pri#e "l'#t'ations -orld-ide( Te
same -as an aberration( +'t% no- te ind'stry is on revival and boom pat(
Considering te same% te #ompany as estimated te pro"it o" Rs( 994(91 la#s "or
:Y23;82 ` margin o" 4(>5=% -i# may be a##epted(
h) Te TOL/TAC o" te #ompany in#reased "rom 2(91 in :Y24;25 /A'd0 to 2( /A'd0 and to 2(>9 in :Y2>;23 /A'd0( Te #ompany as estimated
TOL/TAC at 2(39 and 2(>3 "or :Y23;82 and :Y82;88 respe#tively on a##o'nt o"
in#reased ban! borro-ings% -i# may be #onsidered #om"ortable(
i) Te #'rrent ratio o" te #ompany -as 8(54 in :Y24;25 /A'd0 -i# de#reased to 8(79
in :Y25;2> /A'd0 and -i# "'rter pl'mmeted to 2(39 in :Y2>;23 /A'd0% on
a##o'nt o" #ape. e.pansion -i# -ill be #ompleted in te #'rrent "is#al( Te
#ompany as estimated its #'rrent ratio at 8(87 and 8(19 "or :Y23;82 and :Y82;88%
-i# is reasonably a##eptable as regards to te liB'idity position o" te #ompany(
j) Te AOC: is positive d'ring :Y 122>;23 /A'd0 by Rs( 4 la#s( AOC: is
estimated negative in :Y 1223 P82 at Rs( 143(33 la#s% as per pro$e#ted "inan#ials
s'bmitted by te #ompany on a##o'nt o" in#rease in sto#! and re#eivables -i# is
!eeping in line -it te in#rease in t'rnover and te olding levels are as per te
ind'stry pra#ti#e(
k) Te overall #ond'#t o" te a##o'nt% repayment stat's et#( at Citi +an! and HD:C is
satis"a#tory(
l) Te main dire#tor is dynami# and as ri# e.perien#e o" more tan 12 years in is line
o" a#tivity(
m) Te #ompany is a registered SS* 'nit(
110
n) Mar!et re"eren#e o" te #ompany is satis"a#tory
(
o) Te overall pro$e#ted per"orman#e and "inan#ial o" te 'nit are satis"a#tory(
111
CASE STUD&=.
Detai-" o* ca"e "t%dy
Name
Sa,a-) Recreatio P2t8 Ltd8 4SRPL6
Co"tit%tio 6rivate Limited Company
Gro%) San!alp
Date o*
Icor)oratio
2(>2 12 1935(>2
Aet Sales Gro-t = 2(78= 8(7>= 11(99= 88>(>>= 5>(33=
6+D*T Margin = 8=
TOL / TAC 1(25 8(74 4
Ad$( TOL / TAC 1(25 8(74 7(9
Rati$
Te rating o" te #ompany as per SME Rating Tool #omes to SME;1 /A+S 78(27(12230( Te
segment -ise s#oring is as 'nderH
Partic%-ar" Rati$
O2era-- Scori$ SME=.
:inan#ial s#oring SME;7
+'siness s#oring SME;1
Management s#oring SME;1
*nd'stry s#oring SME;9
CIBILERBIEECGC De*a%-ter"5 Li"t
Te name o" te #ompany and its dire#tors are not appearing in C*+*L/R+*,s de"a'lter/-ill"'l
de"a'lter list as o" 78(81(122> /latest available0( Te name o" te #ompany and its dire#tors
are not appearing in ECGC,s de"a'lter list as o" 78(25(122> /latest available0
116
Aa-y"i"
a0 Te #ompany belongs a re#ogni?ed gro'p named SAAJAL6% -o as #reated a ni#e
in te ospitality se#tor(
b0 Te gro'p is aving its presen#e sin#e 83>8 and as emerged as a rep'ted name sin#e
in#eption( Te promoters o" te #ompany ave ri# e.perien#e in teir line and belong
to a reso'r#e"'l "amily(
#0 Te promoters are aving so'nd entreprene'r s!ills to a#B'ire b'siness opport'nities
to s#ale ne- eigts(
d0 Te sales/re#eipts o" te resta'rant/"ran#isee b'siness /e.isting0 o" te #ompany
-ere in#reased "rom Rs( 9>7(41 la#s in :Y25;2> to Rs( 9>3(49 la#s in :Y2>;23( Te
#ompany as a#ieved te sale o" Rs( 757(59 la#s /Resta'rant in#ome o" Rs( 722(1<
la#s and :ran#isee in#ome o" Rs( 57(93 la#s0 'pto 72(23(1223 against te estimated
sale o" Rs( 423(22 la#s /Resta'rant in#ome o" Rs( 9>9(22 la#s and :ran#isee in#ome
o" Rs( 81 to Rs( 9>(34 la#s /A6 margin o" 82(22=0 in
:Y2>;23( Te 6+D*T o" te e.isting a#tivity o" te #ompany -as in#reased "rom Rs(
54(81 la#s /6+D*T margin o" 8 to Rs( >4(83 la#s /6+D*T margin
o" 85(42=0 in :Y2>;23
"0 Te TOL/TAC o" te #ompany remained at 1(25 in :Y25;2> and 8(74 in :Y2>;23(
Te TOL/TAC o" te #ompany as been estimated at 8% dated 19(22(22 la#s(
9( Sop at 3;82% Gro'nd "loor% S'!riti Anne.ie% Aear 6rernatirt +'nglo-s;1%
Satellite% Amedabad% belongs to Mr( Jetan 6( Sa /Dire#tor0( Estimated
mar!et val'e Rs( 822(22 la#s(
Total mar!et val'e o" above properties is Rs( 728(22 la#s /Appro.0(
G%aratee: 6ersonal g'arantee o"H
8( Mr( Jetan 6( Sa /Dire#tor & property older0(
1( Mrs( Dara J( Sa /Dire#tor & property older0
7( Mr( 6an!a$ C( Sa /Dire#tor0
9( Mrs( 6ina 6( Sa /Dire#tor0
PDC5":
T-o 6DC,s "or te entire overdra"t limit ea# dated 7 monts and 3 monts "rom te
date o" "irst disb'rsement(
Proce""i$ !ee"
2(5 4(7> 4( 4(38 4(38 4(38
Itere"t 81(31 85((39 1>(48 72(47 72(47
Itere"t / rem%eratio to Director" 9(>2 1(92 1(5( 71>(82 7;23% te net pro"it o" te #ompany in#reased to Rs( 7(;23( Te #'rrent ratio estimated "or :Y 1223;82 is 8(77 times% mainly on a##o'nt
o" proposed #redit limit o" Rs( 8>2(22 la#s "rom o'r ban! and te same may be
#onsidered as satis"a#tory(
125
CASE STUD& 9
Detai-" o* ca"e "t%dy
Name o* t#e
A))-icat
S%c#i > 892(2> 893(9> 8
TOLETN & Rs( >(;23(
6ro"itability as also rose in line -it in#rease in sales o" previo's "inan#ial year(
6+D*T o" te "irm is also on in#reasing trend% -i# #an be #onsidered as satis"a#tory(
d) Aet -ort o" te "irm is in#reasing y;o;y bases% -it plo'g ba#! o" te pro"it in te
b'siness( Knad$'sted gearing o" te "irm is on iger side "or :Y 122>;23 mainly d'e
to iger side o" #reditors at parti#'lar point in Mar# 1223( *n Mar# 1223%
proprietor s'bmitted tat p'r#ase o" ra- material -as at better pri#e & te s'ppliers
also allo-ed #redit period( Hen#e% te #reditor base -as on iger side(
e) Debtor,s level o" te "irm is average 42 days "or all te past 7 years( 6roprietor as
s'bmitted tat average payment d'ration is 42 days maintained in te b'siness(
Debtors maintain reg'larity in payment% -i# #an be #onsidered as a##eptable(
f) Te C'rrent Ratio o" te "irm as been on iger side% above te ben#mar! level o"
8(77 "or all te past 7 years( C'rrent ratio "or :Y 1225;2> -as 8(99 & "or :Y 122>;23
-as at 8(55( Estimated ratio is 8(44 "or :Y 1223;82( Alto'g% it as been maintained
above te ben#mar! level% -i# #an be #onsidered as a##eptable(
CHAPTER H
131
!INDINGS
? Credit appraisal is done to #e#! te #ommer#ial% "inan#ial & te#ni#al viability o" te
pro$e#t proposed its "'nding pattern & "'rter #e#!s te primary or #ollateral se#'rity
#over available "or te re#overy o" s'# "'nds
? Credit is te #ore a#tivity o" te ban!s & important so'r#e o" teir earnings -i# go
to pay interest to depositors% salaries to employees & dividend to sareolders
? Credit & ris! go and in and
? *n te b'siness -orld ris! arises o't o"H;
• De"i#ien#ies / lapses on te part o" te management
• Kn#ertainties in te b'siness environment
• Kn#ertainties in te ind'strial environment
• Cea!ness in te "inan#ial position
? +an!,s main "'n#tion is to lend "'nds/ provide "inan#e b't it appears tat norms are
ta!en as g'idelines not as a de#ision ma!ing
? A ban!er,s tas! is to indenti"y/assess te ris! "a#tors/parameters & manage/mitigate
tem on #ontin'o's basis
? Te Credit Appraisal pro#ess adopted by te ban! ta!e into a##o'nt all possible
"a#tors -i# go into appraising te ris! asso#iated -it a loan
? Tese ave been #ategori?ed broadly into "inan#ial% b'siness% ind'strial% management
ris!s & are rated separately
132
? Te assessment o" "inan#ial ris! involves appraisal o" te "inan#ial strengt o" te
borro-er based on per"orman#e & "inan#ial indi#ators
? Te norms o" te ban! "or providing loans are not stringent% i(e( even i" a parti#'lar
#lient is not aving te "avorable estimated and "inan#ial per"orman#e% based on its
past re#ord and "'t're gro-t perspe#tive% te loan is provided(
? +y providing vario's s#emes o" loans% A.is ban! tries to #ater to te "inan#ial
reB'irements o" almost all te types o" SME 'nits(
133
CHAPTER 'J
CONCLUSION
? :inan#e management is te ba#!bone o" any organi?ations and en#e yields a n'mber
o" $ob options ranging "rom strategi# "inan#ial planning to sales(
? :rom te st'dy o" Credit appraisal o" SME% it #an be #on#l'ded tat #redit appraisal
so'ld tere"ore be based on te "ollo-ing "a#tors% te same are applied at A.is +an!H
• :inan#ial per"orman#e
• +'siness per"orman#e
• *nd'stry o'tloo!
• I'ality o" management
• Cond'#t o" a##o'nt
? A.is +an! loan poli#y #ontains vario's norms "or san#tion o" di""erent types o" loans(
Tese all norms do not apply to ea# & every #ase( A.is +an! norms "or providing
loans are "le.ible & it may di""er "rom #ase to #ase(
? Ks'ally% it is seen tat #redit appraisal is basi#ally done on te basis o" "'ndamental
so'ndness( +'t% a"ter di""erent types o" #ase st'dies% o'r #on#l'sion -as s'# tat
#redit appraisal system is not only loo!ing "or "inan#ial -ealt( Oter strong
parameters also play an important role in analy?ing #redit -ortiness o" te
"irm/#ompany(
? *n all% te viability o" te pro$e#t "rom every aspe#t is analy?ed% as -ell as type o"
b'siness% ind'stry% promoters% past re#ords% e.perien#e% pro$e#ted data and estimates%
goals% long term plans also plays #r'#ial role in in#reasing #an#es o" getting pro$e#t
approved "or loan(
134
BIBLIOGRAPH&
Ceb Sites
---(rbi(org(in
---(A.is +an!(#om
---(indianban!asso#iation(#om
---(ban!ersindia(#om
---(-i!ipedia(#om
+oo!sH
DCredit and ban!ingE +yH J( C( Aanda
135
doc_821373637.doc