Credit Risk Analysis of Steel Customers and Analysis Regarding Norms of Banks Providing Working Capital Finance

Department of Management Sciences (PUMBA)
University of Pune
CERTIFICATE
This is to certify that the Summer Project titled “Credit Risk Analysis of
Steel Customers and Analysis Regarding Norms of Banks Providing
Working Capital Finance” carried out at the Zonal office of HDFC BANK,
has been submitted by Mr.Nitin Kumar Banka, 2nd year MBA Finance with
additional in Banking & insurance student of The Department of Management
Sciences, University of Pune (PUMBA), towards the partial fulfillment of the
requirement for the award of the Masters in Business Administration
(MBA++) and the same has been satisfactorily carried out under the guidance
of Mr. Ashutosh Kolte during the academic year 2008 - 2010.
Mr. Ashutosh Kolte External Dr. B.V. Sangvikar

Lecturer Examiner Head of Department
PUMBA PUMBA
Department of Management Sciences -1- University of Pune (PUMBA)

ACKNOWLEDGEMENT
It is very important for me to put forward my sincere gratitude to Mr. Shreedhar
Kochikar, AVP, Business Banking (Working Capital), Regional Office, Pune. I am
thankful to him for not only giving me this excellent project but also for patiently
answering to all my queries during the period, even after having very busy schedules.
I would like to put forth my earnest thanks to the college Head of Department Prof.
B.V. Sangvikar and my internal project guide Mr. Ashutosh.P.Kolte for providing me
vital inputs to co-relate the present project work with theoretical concepts and hence
provide a sound base to the report structure.
Lastly, I would like to thank all my friends for all the co-operation and God for giving me
the strength to move on when the times were difficult.
This project was not just a professional training for me, but an academic learning on the
exposure in area of credit risk Analysis, which has become an area of interest for me.
It was a pleasure to be associated with HDFC Bank. The experience that I have garnered
has had a profound impact on my career choices.
I carry high regards for the complete team of HDFC Bank.
Nitin Kumar Banka

Department of Management Sciences (PUMBA)
University of Pune

Table of Contents
SR NO. TITLE PAGE NO.

1.0 Objective 4
2.0 Company Profile 5
3.0 Introduction to Working Capital Finance 8
4.0 World Steel Industry Scenario 12
5.0 Analysis Of Steel Customers 17
6.0 Analysis of the Norms of Working Capital Finance 55
7.0 Conclusion 81
8.0 Bibliography 82

OBJECTIVE OF THE REPORT
The report was divided into two parts.
¾ The first report was regarding the analysis regarding the major steel clients of the bank in
Pune. Presently the steel prices are rising and there is a great impact of that on the steel
manufacturers as well as the steel traders. So the analysis was all about the impact of the
steel price on the business of the steel customers of the bank and then provide a
recommendation that whether the bank should continue with the steel customers or not.
And if yes, what are the risks that are related with the financing to these clients.
¾ The second report was regarding the study of the different banks in providing working
capital finance. The study covered the norms of all major banks in providing the
working capital finance. And then provide the conclusion, which are the most suitable
options to the customers while requiring the working capital finance from the banks or
financial institution.

HDFC BANK
The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive
an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private
sector, as part of the RBI's liberalisation of the Indian Banking Industry in 1994. The bank was
incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in
Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January
1995.
HDFC is India's premier housing finance company and enjoys an impeccable track record in
India as well as in international markets. Since its inception in 1977, the Corporation has
maintained a consistent and healthy growth in its operations to remain the market leader in
mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has
developed significant expertise in retail mortgage loans to different market segments and also has
a large corporate client base for its housing related credit facilities. With its experience in the
financial markets, a strong market reputation, large shareholder base and unique consumer
franchise, HDFC was ideally positioned to promote a bank in the Indian environment.
BUSINESS FOCUS
HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build sound
customer franchises across distinct businesses so as to be the preferred provider of banking
services for target retail and wholesale customer segments, and to achieve healthy growth in
profitability, consistent with the bank's risk appetite. The bank is committed to maintain the
highest level of ethical standards, professional integrity, corporate governance and regulatory
compliance. HDFC Bank's business philosophy is based on four core values - Operational
Excellence, Customer Focus, Product Leadership and People.
CAPITAL STRUCTURE
The authorised capital of HDFC Bank is Rs.450 crore (Rs.4.5 billion). The paid-up capital is
Rs.311.9 crore (Rs.3.1 billion). The HDFC Group holds 22.1% of the bank's equity and about
19.4% of the equity is held by the ADS Depository (in respect of the bank's American Depository
Shares (ADS) Issue). Roughly 31.3% of the equity is held by Foreign Institutional Investors
(FIIs) and the bank has about 190,000 shareholders. The shares are listed on the The Bombay
Stock Exchange, Mumbai and the National Stock Exchange. The bank's American Depository
Shares are listed on the New York Stock Exchange (NYSE) under the symbol HDB.

DISTRIBUTION NETWORK
HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of over
1229 branches spread over 444 cities across India. All branches are linked on an online real-time
basis. Customers in over 120 locations are also serviced through Telephone Banking. The Bank's
expansion plans take into account the need to have a presence in all major industrial and
commercial centers where its corporate customers are located as well as the need to build a strong
retail customer base for both deposits and loan products. Being a clearing/settlement bank to
various leading stock exchanges, the Bank has branches in the centers where the NSE/BSE has a
strong and active member base.
The Bank also has a network of about over 2526 networked ATMs across these cities. Moreover,
HDFC Bank's ATM network can be accessed by all domestic and international Visa/MasterCard,
Visa Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders.
MANAGEMENT
Mr. Jagdish Kapoor took over as the bank's Chairman in July 2001. Prior to this, Mr. Kapoor was
a Deputy Governor of the Reserve Bank of India.
The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25 years and
before joining HDFC Bank in 1994 was heading Citibank's operations in Malaysia.
The Bank's Board of Directors is composed of eminent individuals with a wealth of experience in
public policy, administration, industry and commercial banking. Senior executives representing
HDFC are also on the Board. Senior banking professionals with substantial experience in India
and abroad head various businesses and functions and report to the Managing Director. Given the
professional expertise of the management team and the overall focus on recruiting and retaining
the best talent in the industry, the bank believes that its people are a significant competitive
strength.
BUSINESSES
HDFC Bank offers a wide range of commercial and transactional banking services and treasury
products to wholesale and retail customers. The bank has three key business segments:

Retail Banking Services
The objective of the Retail Bank is to provide its target market customers a full range of financial
products and banking services, giving the customer a one-stop window for all his/her banking
requirements. The products are backed by world-class service and delivered to the customers
through the growing branch network, as well as through alternative delivery channels like ATMs,
Phone Banking, Net Banking and Mobile Banking. The HDFC Bank Preferred program for high
net worth individuals, the HDFC Bank Plus and the Investment Advisory Services programs have
been designed keeping in mind needs of customers who seek distinct financial solutions,
information and advice on various investment avenues. The Bank also has a wide array of retail
loan products including Auto Loans, Loans against marketable securities, Personal Loans and
Loans for Two-wheelers. It is also a leading provider of Depository Participant (DP) services for
retail customers, providing customers the facility to hold their investments in electronic form.
Wholesale Banking Services
The bank's target market ranges from large, blue-chip manufacturing companies in the Indian
corporate to small & mid-sized corporates and agri-based businesses. For these customers, the
Bank provides a wide range of commercial and transactional banking services, including working
capital finance, trade services, transactional services, cash management, etc. The bank is also a
leading provider of structured solutions, which combine cash management services with vendor
and distributor finance for facilitating superior supply chain management for its corporate
customers. Based on its superior product delivery / service levels and strong customer orientation,
the Bank has made significant inroads into the banking consortia of a number of leading Indian
corporates including multinationals, companies from the domestic business houses and prime
public sector companies. It is recognised as a leading provider of cash management and
transactional banking solutions to corporate customers, mutual funds, stock exchange members
and banks.
Treasury
Within this business, the bank has three main product areas - Foreign Exchange and Derivatives,
Local Currency Money Market & Debt Securities, and Equities. The Treasury business is
responsible for managing the returns and market risk on this investment portfolio.

WORKING CAPITAL FINANCE
1. For running an establishment, two types of capital are required:
Fixed capital: Money for acquiring fixed assets such as land, building, equipments etc.
Working capital: Money for purchasing/ stocking of raw materials, payment of salary,
power etc., and for financing the interval between the supply of goods and receipt of payment
post sales. i.e. finance to meet the cost involved during the working capital cycle.
The products being offered can be broadly categorized into fund based and non-fund based as
follows.
¾ Fund Based: Funded Services from HDFC Bank are meant to directly bolster the
day-to-day working of a small and a medium business enterprise. From working
capital finance to credit substitutes; from export credit to construction equipment
loan. The bank caters to virtually every business requirement of an SME.
The lending of funds can be by the way of Demand Loan repayable on demand or
Term Loan repayable over a period of time at agreed intervals. It can also be by the
way of Overdraft where the credit limits upto the amount to be lent is set in the
Current Account or a Cash Credit account where against the security of stocks or
receivables a limit upto the sanctioned level of lending is made available to the
borrower in the form of running account allowing withdrawals upto the limit as per
his requirement. Lending can also take the form of Bills Discounting where the bank
lends against the bills of exchange drawn in favour of the borrower but payable at a
future date by placing the amount of the bill less discount charges at the disposal of
the borrower by discounting the bill.
¾ Non-fund Based: Under Non-Funded services HDFC Bank offers solutions that act
as a catalyst to propel your business. Imagine a situation where you have a letter of
credit and need finance against the same or you have a tender and you need to equip
yourself with a guarantee in order to go ahead. This is exactly where we can help you
so that you don't face any roadblocks when it comes to your business.
There are certain types of advances which do not involve the deployment of funds at
least in the initial stage. These are called Non-Fund Based Credit. A Performance
Guarantee issued by the bank on behalf of a customer to the third party in India or
abroad are some of the examples of this type of finance. Even the funds are not
involved at this stage, bank is taking risk, and on the failure of its client to fulfill the
terms of guarantee or letter of credit, we will have to pay out the funds to the

beneficiary on behalf of the customer and recover it later from the customer. A letter
of credit is a written instrument issued by the banker at the request of a buyer
(applicant) in favour of the seller (beneficiary) undertaking to honour the documents
or drafts drawn by the seller in accordance with the terms and conditions specified in
the credit, with a specified time. The parties involved in letter of credit are Applicant,
Opening bank, Advising bank, Seller/Beneficiary, Negotiating bank and Conforming
bank.
2. Working capital : It is the money for purchasing/stocking of raw materials , payment of
salary, power etc. and for financing the interval between the supply of goods and receipt
of payment post sales i.e. finance to meet the cost involved during the operating cycle.
Two possible interpretations of Working Capital:
¾ Balance Sheet concept
¾ Operating Cycle concept
Balance sheet concept: It is presented by the excess of current assets over current liabilities and
the amount is normally available to finance current operations.
Operating Cycle Concept:
Operating Cycle = ICP (Inventory Conversion Period)+ RCP( Receivables Conversion Period)
ICP=AVERAGE INVENTORY/ (COST OF SALES /365)
RCP= ACCOUNTS RECEIVABLES/(ANNUAL CREDIT SALES/365)
3. Customer Appraisal: It is a process through which we arrive at the credit decision gauging
the ability and the intention of the borrower.
¾ Borrower Appraisal: Every credit proposal whether small or big originates from an
individual, group of individuals or a body run by the individuals. It is important to
ascertain the credit worthiness of the people behind the show. Confidence is the basis
of all credit transactions. Thus, if the bank officer has no confidence in honesty,
willingness and the ability of the borrower to repay the loans at the maturity or when
called upon to repay. Similarly, no credit facility should be granted to the borrower,
unless one has sufficient confidence in the borrower that it will not be necessary to
enforce the securities or seek legal redressal for recovery of advances. The necessary
information regarding the customer is obtained from the following
- Application form
- Borrower’s dealing with the bank
- Reports obtained from the persons dealing with them

- Reputation in the society or community which he/ she belongs to
- Credit information from other banks and financial institutions with whom
he is having dealings.
- Family information
- Other business interests of the promoter’s family ( the financials of all the
group business must be obtained)
- Other sources
¾ Management Appraisal: In every family owned concern there is usually a key
stakeholder and decision maker, so the involvement and competence level must be
ascertained.
¾ Financial Appraisal: The main source of information for judging the viability and
financial strength of the operations of the borrower are financial statements which
consists of two parts. i.e. Balance Sheet and Profit & Loss Account.
4. Charging of primary/ collateral security: Once the appropriate security is selected, bank’s
charge on the security should be ensured by observing necessary formalities, so that in case
of default by a borrower, the security will be available to the bank to recover its dues.
However, it should be noted that whatever may be the mode of charge, bank only has defined
rights in it, until the debt due is repaid. The Retail Assets Overdraft Operations unit would
ensure that the appropriate charge on various securities is registered with the ROC for Private
and Public Ltd. Companies within a period of 30 days from the execution of the documents.
The important modes of charging the securities are:
- Pledge: The purpose is to secure payment of a debt or to secure performance of a
promise. Any movable property can be pledged. Delivery (actual or constructive) is
necessary to complete a pledge. In case of default by the pledger to repay the debt
the pledgee can, after giving notice to the pledger, sell the goods pledged to him.
However, the pledger has no right to use the goods pledged. Where pledged
securities or goods are indivisible, the pledgee can sell securities or goods only of
that much quantity by which the loan amount will be satisfied.
- Hypothecation: the possession of the property in the goods and other movables
offered as security remains with the borrower and an equitable charge is created in
favour of the lender. The term hypothecation is described as under:” Charge against
property for an amount of debt where neither ownership nor possession is passed on
to the creditor”. If the borrower fails to liquidate the advance granted to him against
Department of Management Sciences - 10 - University of Pune (PUMBA)

hypothecated goods, under agreement, he has to give the possession of goods to
hypothecatee (bank). At this stage, hypothecation converts into pledge and the
banker as hypothecatee enjoys the powers and rights of pledge and the banker as
hypothecatee enjoys the power and rights of pledgee. In case of the default by the
borrower, if the possession of goods hypothecated to the bank is not handed over to
the bank, the hypothecation may be converted to the pledge after giving due notice
to the borrower.
- Mortgage: Mortgage is the transfer of an interest is specific immovable property
for the purpose of securing the payment of money advanced or to be advanced by
way of loan, an existing or future debt or the performance of the agreement which
may lead to a pecuniary liability. The borrower is called the ‘mortgagor’ and lender
the ‘mortgagee’.
- Lien: it is the right of a creditor to retain in his possession the goods and securities
owned by the debtor until the debt has been discharged, but has no right to sell the
goods and securities to be retained. There are two types of lien i.e. particular and
general.
- Assignment: It means to transfer of a right of an actionable claim, existing or
future. The transferor of actionable claim is called the ‘assignor’ and the transferee
is called ‘assignee’.
5. Calculation of Working Capital: For instance if an SSI units estimates a sales turnover of
Rs. 80 Lacs and the bank, bank based on the past performance, installed capacity, available
market and other factors, satisfies itself achievement of the estimated turnover of Rs. 80
Lacs, the working capital assessment would be done as under:
Estimated Sales turnover Rs. 80 Lacs

Minimum Working Capital @25% of the estimated sales Rs. 20 Lacs
which represents 3 months’ sale.
Contribution of the borrower Rs. 4 Lacs
Minimum bank credit for working capital @20% Rs. 16 Lacs

THE SCENARIO OF WORLD STEEL INDUSTRY
The government's decision to lean on primary steel producers to fight inflation while doing
precious little to curb iron ore prices has produced an anomalous situation.
But no such exercise has been undertaken for iron ore, the key raw material needed to produce
steel and accounting for as much as 35 per cent of steel manufacturers' costs. Most of the steel
makers do not have captive iron ore mines and so buy their iron ore from the state-owned
National Mineral Development Corporation (NMDC), which also comes under the steel ministry.
NMDC, ever since it raised iron ore prices for domestic steel firms by a massive 47 per cent last
October, is charging its domestic customers a massive 97-231 per cent more than it is charging its
major overseas customers like Japanese and Korean steel mills.
Perhaps the last straw for Indian steel producers is a new export duty of 5-15 per cent, which
prevents them from getting something out of the higher prices prevailing internationally. Little
wonder that steel firms are foreseeing a clear decline in their margins.
Iron ore prices were raised by a large margin last October, whereas since January steel companies
have gone through several price hikes and rollbacks. So they have been able to pass on at least
some of the impact of higher iron ore prices though not all as prices of other raw materials like
coking coal have also risen sharply.
With Indian tariff barriers having gone down over time (currently there is no import duty on steel)
it is impractical for the Indian government to try to curb domestic prices, except very temporarily,
for such a widely traded commodity like steel. So differences between raw material and finished
product prices will narrow once the temporary selling price freeze is over. This needs correcting
by making the process of allocating mines to steel producers transparent and based on open
tendering. Once this is done, the time taken to allocate mines will come down. This should
happen once the new mining policy is in place.
Indian steel is globally competitive and nothing should be done to take away from this through
the imposition of controls and transaction costs.
Globally, demand of steel has come down, especially from the infrastructure sector, resulting in a
dip in prices. “The gap between domestic and international steel prices has reduced. They have
not come at par. The domestic steel producers have been holding the price line for over three
months now to help the government check spiralling inflation. The contribution of the commodity
in the Wholesale Price Index (WPI) has increased in the last one month as inflation peaked to 13-
year high of 12.63 per cent. Steel prices have a weightage of about seven per cent in the
Wholesale Price Index (WPI).

Steel prices are falling. In certain markets in the world they are tumbling down. In India, as per
several market reports, the prices have fallen in various measures. There are obvious reasons for
that.
¾ Industrial growth is slowing down. Construction has been hit by the credit crunch and
loss of speculative demand for housing, higher costs of construction and the rise in the
rates of home loans.
¾ There is the monsoon factor. Overall, one could not expect steel demand to grow strongly
in these circumstances.
Under these conditions and also considering the global trend, the steel prices could not
have risen, despite the fact that some of the prices were maintained below the global level
at the producers' end for some time. Therefore, there is no government action required on the
steel market. There is no need for the government to ask steel makers to hold prices down. They
have no options now and will do so irrespective of whether the government asks them to do so or
not.
The very fact that the export prices of billets from the CIS have been quoted at only $950, down
from $1,250 a few weeks ago, steel scrap prices have fallen to as low as $450 per tonne and the
export price of iron ore fines being quoted only at $100 per tonne, FOB Indian ports, there are
reasons for the government to relax a little, stay away from active interventions in the market and
let the market correct itself to the overall global and domestic conditions.
The recessionary conditions will take the shine off from steel. It will, as has already been
witnessed, bring down the prices of steel raw materials. Therefore, the steel industry or the
government need not worry about the spot market prices of many of the major raw materials. It
has never been experienced differently in the past. It is only the annual contracts on cooking coal
which are matters of concern. The contracts were signed at huge levels corresponding to the
record prices of steel prevailing at that time. The steel industry did not foresee the downturn that
could cause a major problem for them such as the one they are faced with. They were more
concerned about supply security and feared capacity under utilisation if they were not through
with the contracts.

The Steel Situation: Production, Prices and Shipments
Here we look at what's been happening with steel — from production and prices to shipments and
inventories — so far in 2008, through last month, and how it compares with this time last year.
Production
¾ World crude steel production in July dropped 1.6 percent from June, yet it remained 6.2
percent ahead of the same month last year, according to the International iron and Steel
Institute.
¾ Total world crude steel production was 815.1 million metric tons in the first seven
months of 2008, a 6.1 percent increase over the same period in 2007. July 2008
production of 117.2 metric tons was down from 118.8 million in June as China’s
production dropped by 4.4 percent, reflecting the industrial slowdown as the country
prepared to host the Summer Olympics in August.
In July 2008, China’s million metric tons growth rate slowed to 9.6 percent, compared to
its growth rate peak of 26.3 percent in January 2006. Nonetheless, China's crude steel
production for July 2008 was 7.5 percent higher than in July 2007. In the first seven
months of 2008, China produced 308.3 million metric tons of crude steel, an increase of
9.3 percent compared to the same period in 2007.Overall, Asia produced 66.4 million
metric tons of crude steel in July 2008 compared to 62 million metric tons in July 2007, a
7.1 percent increase in crude steel production.
Other key findings from the IISI:
¾ The largest producer in the European Union this July was Germany, with 3.8
million metric tons of crude steel.
¾ The United Kingdom produced 1.1 million metric tons of crude steel, a decrease
of -3.9 percent compared to the same month last year.
¾ South America recorded a 12.8 percent increase in crude steel production with
4.5 million metric tons in July 2008.
Brazil produced 3.2 million metric tons, 11.5 percent higher than in July 2007.

Prices : “Carbon steel prices are exploding by 46 percent this year after rising just 2 percent last
year while stainless steel prices have dropped 14 percent off the record highs of 2007 — when
prices increased by 42 percent," Purchasing.com noted earlier this month.
Overall, steel prices are expected to average $933/ton for hot-rolled sheet this year, up from $527
in 2007, and then $948 next year, Purchasing reported. Cold-rolled sheet is projected at $1,019
this year, up form $614 in 2007, and then rise to $1,051 in 2009. Hot-dipped galvanized is
projected to average $1,066 this year, up from $656 in 2007 and then average $1,061 next year.
Shipments : In terms of shipments, steel products from United States and Canadian metals
service centers continued to decline on a year-over-year basis in July, according to the Metals
Service Center Institute (MSCI). Yet the rate of decline slowed both in the U.S. and Canada
versus earlier months' reporting.
Steel product shipments from U.S. metals service centers for the first seven months of this year
totaled 30.35 million tons, a 3.6 percent decline from the same period last year. Canadian metals
service centers' shipments for the first seven months of 2008 totaled 2.16 million tons, down 2.6
percent.
The MSCI's Metals Activity Report provides the following highlights:
¾ In July, steel product shipments from U.S. metals service centers totaled 4.07 million
tons, a 2.1 percent decline from July 2007.
¾ U.S. inventories of steel products, at 13.12 million tons at the end of July, were down 2.2
percent from July 2007 and, at current shipping rates, represent a 3.2-month supply.
¾ Canadian metals service centers shipped 265,400 tons of steel products during July,
down 1.8 percent from a year ago.
¾ Canadian inventories at the end of July were at 1.08 million tons, down 10.1 percent from
the end of July 2007 and, at current shipping rates, represent a 4.1-month supply of steel
on hand.
Finally, in its August 2008 report on business conditions, the Precision Metal forming
Association (PMA) determined that North American metalworking companies are anticipating
weak business to continue over the next three months.

When asked what the trend in general economic activity will be during the next three months,
metal formers expect only a slight improvement. Twenty percent of the 147 metal forming
companies in the U.S. and Canada report that activity will improve (up from 17 percent in July),
52 percent predict activity will remain unchanged (compared to 48 percent last month) and 28
percent forecast a decline in business conditions (down from 35 percent in July).
Current average daily shipping levels remained virtually unchanged in August
Steel prices dip on rising supply and cheaper scrap supply

Steel prices, which had crossed Rs 40,000 a ton mark after ebbing to Rs 35,000-37,000 within a
span of six months, are once again on a downward trend. This time, there has been a fall of over
Rs 5,000 in last 10 days owing to a host of reasons. The current rates are ruling at around Rs
38,000 a ton. Steel angles used for industrial purposes are also being quoted at around Rs 40,000
a ton, which is again a reduction of close to Rs 5,000.
Interestingly, Beijing Olympics too have been one of the major factors in the price movement. As
a part of efforts to reduce pollution during this mega event, Chinese steel makers had shut down
the blast furnaces to ensure clean air. Now, as the event is heading towards an end, the units have
restarted, which would increase the supply in the days ahead leading to the downward trend in the
prices, say traders.
Apart from this, melting scrap which India imports has become cheaper to USD565-570 a ton as
against USD720. The scrap prices in the international market have come down due to lesser
demand for construction steel arising out of holidays in Europe, as well as long stoppage and
slow progress in construction work in the Middle-East due to Ramzan and seasonal drop in
demand, said a senior official in a leading steel company.
The domestic market, which is expecting a further downfall in the coming days, also apprehends
a rise after that. Krishna Rathi of Vidarbha Steel and Hardware Chamber said apart from the
international reasons, high interest rates and low rains in the state have also led to the fall. Praful
Doshi, local steel trader, said the Chinese units resuming work has ensured further supply in the
market with the rates coming down in anticipation of increased supply. Even as these factors may
have eased the rates, it mainly depends on the availability of iron ore, the basic raw material for
making steel. Its shortage will continue to keep steel dearer.

SHARADA INDUSTRIES
1. COMPANY HISTORY AND BACKGROUND
Sharada Industries (SI) started in the year 1974 in the business of making of motor vehicle parts
Mr. Parabhalar Modak after gaining experience for 20 years in the same Industry, he ventured on
his own to start “Sharada Industries“. He successfully executed his skills to the fullest by
establishing the units at Bhosari Pune and therefore setting up the founding stones of “ Sharada
Industries “.
The unit at Bhosari is divided into 7 units
Unit 1 Sharada Indisustries (Parent Company) workspace area 720 sq. Mtr. Operations -
Welding, & assembly.
Unit 2 Workspace area 720 sq. Mtr. Operations - pressing , Welding , pipe cutting , Rolling
Unit 3 Workspace area 720 sq. Mtr. Operations- Pressing , Shearing , Welding
Unit 4 Workspace area 720 sq. Mtr. Operations- Profile Cutting , Shearing , pressing Gas
cutting , welding
Unit 5
Workspace area 720 sq. Mtr. Operations -Painting, Powder coating, Pickling, Bush
fitting, Finishing
Unit 6
Workspace area 806 sq. Mtr- Operations Pressing, Welding Gas Cutting
Unit 7 workspace area 1010 sq. Mtr Operations Welding, Tapping, Boring, & Machining
The Growth Pattern of Sharada Industries is as: In the year 1974 Sharada Industries founded at
Bhosari, worked as Weldo works with handful of people.
Like new venture faced the share of struggles and Successes but it was able to stand the test of
time for the past 30 years with the skilled & experienced entrepreneur development with the zeal
& dedication towards the organisational goals. The company has grown from 3 people to over
100 people and from one manufacturing unit to 7 units. SI is operating from its location in
Bhosari for over 20 Years. The company initially made material Bins for Telco (Tata Motors)
with the earning of Rs. 25000/- per Month. Company is combined with efficiency & reliability
Sharada Industries assures their customers that the finished product will be of highest quality,
competitively priced & efficient delivery. To supplement their manufacturing setup, they have
well equipped facilities and in-house Tool manufacturing facilities. Sharada Industries is entirely
Customer Driven and has it's strong technical focus combine their experience and knowledge
with the most modern computer assisted equipment to create special, precise motors parts. The
result is consistent, quality production from first order through each subsequent re-order.
Past Track Record in handling growth: The company has done exceedingly well in handling its
growth. Today company is considering among the top 10 sheet metal components suppliers of

TATA Motors and has a yearly turnover of Rs. 58 Cr. per year. As both Net profit and Gross
profit margins are very good to keep the business stable. Production wise company has grown
from 20 Lacs motors to 60 Lacs with additional items and from Turnover point of View Company
has grown from a turnover of Rs. 5432.4 Lacs in 2004-05 to Rs 5730.1 Lacs in 2005-06. The
company has grown from 3 people to over 100 people and from one manufacturing unit to seven
manufacturing unit. Company has never faced a labour problem and well managed company with
many workers working with the company from last 20 years. The total employee strength is 90
labourers and 10 other staff
1 Level of decentralization : The company is managed by Mr. P.V.Modak & Other
Experienced workers and they follow the concept of centralization as
involvement of management in day to day affair is very high
2 Empowerment of key executives: As all the key employees report directly to
respective heads other responsibility is increased as they handle their Respective
department independently.
3 Importance given to finance function: The Finance is managed by a Mr. Modak,
having experience of more than30 years in the field of accountancy and finance.
4 Human resource management: As stated earlier due importance is given to each and
every employee of the company and hence the employee turnover ratio is almost nil
5 Strategy for the next two years: To continue the momentum of growth with proper
planning and continuous expansion.
Companies USP (Unique Selling Point)
• One Stop Solution for Welding & Pressing & Rolling
• ISO/ TS 16949:2002 Quality System
• Specialised in Manufacturing of Motor Vehicle Parts
• In House Inspections & testing
• Well Equipped Testing Laboratory
• Professional Skilled Team
2. BUSINESS ANALYSIS
Manufacturing/distribution Company
Manufacturing Process: Sharada industries manufacturing company has 7 units one is located
at Bhosari in commercial area of Pune city. The company is having the ample land & good
infrastructural facility with dedicated modern machinery including continuous power supply of
100 % genset. Company enhanced with 5416 sq.mtr. factory floor space. Current production

capacity – SI run approximately 1 ½ shifts (12 hours) per unit, Six days a week and therefore
have additional 1 ½ shifts unused keeping in mind production fluctuations as well as new
development. No of shifts in operation is one of 8 hours each.
Inspection Facility – with latest instruments and gauges to meet the quality parameter expected
by our customer
• Testing and Validation Facility – SI outsources testing and Validation services from TATA
Motors approved NABL certified testing facilities. Company do not have current plan to
develop the facility in house.
• Performance v/s industry - The Motor Components Industry is doing well and expected to
grow Executive director of Tata Motors has speculated that the Indian Auto industry is not
going to see a slump for the next couple of years. The purchasing power of the Indian
consumer is increasing every year and the market would see a continuous growth for many
years to come. The company is fully dependent on Auto mobile industry and if we consider
the growth of company in lines with that of Industry Company will grow by minimum 10 %
for next five year, however with the companies stress on increasing its product line and
capacity which can cater to large requirement the growth of company is inevitable.
• Major competition & market shares - In Maharashtra where all major Motor Vehicle parts
Industry is based company is not having any competition in and around Maharashtra and
outside Maharashtra it is very difficult to manage cost as Transportation cost will play a
major role.
• Cyclicality in product prices / realisations - The prices are generally decided once very
year and revision in prices is done every year in industry as they Issue an open purchase order
and price is fixed. However for other customer the company is pricing its product depending
on the Credit period normally given
• Proximity to raw material suppliers, other benefits. The major Raw Material is Steel alloy of
highest grade and is purchased from a Mumbai based company
• Customer profile and concentrations - The major customer is TATA Motors.
• Terms of sale (Credit periods extended / clean / LC backed ) - Normal credit period offered
is 30-60 days clean credit
Monthly Sales Figures
Month FY Sales in Rs. (Lacs) Sales in Rs. (Lacs) Sales in Rs.
08 -09 06 -07 (Lacs) 07 -08
April 824.83 606.87 682.83
May 838.43 616.85 597.12

June 624.73 626.46 389.54
July 695.78 488.17
Aug 774.95 521.86
September 749.03 615.60
Oct 699.69 646.13
Nov 765.63 577.75
Dec 774.89 662.75
Jan 841.77 711.46
Feb 821.28 845.72
Mar 1156.81 831.29
Total 2287.99 9130.01 7570.22
3. BANKING FACILITY
Description Amount Rs./Lacs
Cash Credit 500.00
Total Credit Exposure 500.00
4. FINANCIAL APPRAISAL
P&L (All Figures In Lacs) 2007 – 08 (P) 2006 – 07 2005 – 06
Total Income 7737.1 9,103.3 5,997.8
PBDIT 7270.0 651.3 390.6
Interest 23.8 18.6 0.0
Depreciation 106.2 62.3 23.4
PBT 337.1 570.4 367.2
Tax 94.0 192.0 122.5
PAT 243.1 378.4 244.7
Cash Profits 349.3 440.7 268.1
LIABILITIES
Tangible Net Worth 1693.7 1300.8 975.2
Short Term Debt 299.6 296.7 0.0
Long Term Debt 0.0 0.0 0.0
Unsecured Loans from Promoters 0.0 0.0 0.0
Total Debt 299.6 296.7 0.0
Current Liabilities and Provisions 1190.8 1297.1 1034.4
Total Liabilities 3184.0 2914.9 2022.9
ASSETS
Net Fixed Assets 882.8 649.9 304.8
Investments 0.0 102.5
Loans and Advances 341.1 177.0 124.3
Sundry Debtors 1182.8 1684.3 945.0
Inventories 547.1 147.9 216.7
Other Current Assets 230.3 255.8 329.6
Total Current Assets 2301.2 2265.0 1615.6
Total Assets 3184.0 2914.9 2022.9
FINANCIAL RATIOS

Gross Margin (PBDIT/TI) 6.0% 7.2% 6.5%
Net Margin (PAT/TI) 3.1% 4.2% 4.1%
Current Ratio 1.54 1.42 1.56
Interest Coverage 19.67 34.94 0.00
DSCR 15.71 24.64 0.00
Debt/Equity 0.18 0.23 0.00
Leverage (TOL/Net Worth) 0.88 1.24 1.07
TOL (Excl. Unsecured loans)/Tangible Net 0.88 1.24 1.07
Current Assets/Sales 31% 25% 28%
Debtor Days 58 69 60
Inventory Days Cost of Sales 27 6 14
Creditor Days as Cost of Sales 60 56 67
5. OVERALL ANALYSIS
•Sales: The sales have shown an increase in the sales but due to the increase in the steel prices
the sales have declined. The sales in the period April 07 – June 07 were 1850.18 while the
sales in the current quarter ending June-08 are 2287.99. So if we compare the sales there is
an increase of around 24%. This is so because there is an increase in the price of steel from
28 to 48 per quintal. The director says that there is hardly any kind of effect of the rise in
the steel prices. The firm is conscious in growing its business in a gradual manner with
select customers. Due to the increase in no. Of new industries being set up around Pune, the
firm expects demand to be on a higher side for the current year.
Sales Comparison (in Lacs)
•Though there is decline in gross and net margins over the period the margins are on a higher
side if we compare them with other traders. In this regard the customer informed that they
are particular in accounting of transactions and these are the actual margins in the business.
•Current Ratio is at 1.54 indicating satisfactory liquidity position of the firm

•Leverage is at 0.88 indicating satisfactory leverage position of the firm.
•Margin: Margins show marginal decline in the last two years due to the adverse raw material
prices. Margins have decreased in the financial year 07 – 08 and are expected same in the
coming financial year.
•Other Current Assets include Advance Tax of 230.3.
•Levels of Debtors, Inventory and Creditors are as per past trends and within acceptable limits.
Risks and Mitigants
Risks Mitigants
Concentration Risk in termsThe group is presently supplying majorly to TATA motors and as
of dependence on a singlesuch is dependent on them. According to the director there will not be
customer much difference in sales because this company provides 380
components to TATA motors.
Volatility in Prices of SteelBecause the company provides a number of components to TATA
leading to pressure on margins motors and there will be a constant demand by the TATA Motors and
will not be affected by the increase in the steel price rise.
SWOT Analysis
Strength: There is an increase in the sales which shows a decent growth of business and the
company manufactures 380 components and supplies to the three units of TATA Motors
including Pune, Jamshedpur and Lucknow.
Weaknesses: The Company uses a lot of metals which shows a wide fluctuations due to an
increase in he rise in the steel prices.
Opportunities: Since the quality of the material of the company is good, it has a constant
demand by the company TATA Motors.
Threats: Increase in the steel price about 50% and slowdown in the auto industry. And due to
this the input cost has increased to about 65%. The other risk is in getting the raw material from
the suppliers.
Comments from the Director: Due to an increase in the steel price of about 60%, there is a
problem in getting the raw material from the suppliers and they demand immediate payment and
the customers of the company i.e. TATA Motors do take around 50 -60 days in making the
payments. With the increase in the price of steel there is an increase in the cost of raw material,
the manufacturing cost is increasing. So, the overall cost is increasing. Because this year TATA
Motors have declined their production so the sales is declining and expected to decrease by 10%
in the current financial year. One of the other risks involved is the salaries and the turnover. The
profit margin of the company is around 6 % – 7 % which is same as the last year. The
maintenance cost is increasing due to which there is a decrease in margin.

MITTAL PRECISION STEEL TUBES Pvt. Ltd. (MPSTPL)

The company has two manufacturing units:
a) MITTAL PRECISION STEEL TUBES PVT. LTD. - located at CHAKAN, PUNE.
b) PHEONIX PRESS PARTS (PPP) – located at MIDC, CHINCHWAD, PUNE.
The company was established in the year 1990 in the name of Yashshree Press Parts by the
Mittals (Chinchwad Unit) as a partnership firm. The firm was earlier known as Bansal Packaging
Pvt. Ltd. and was bought over by Mittals in 1990. In the year 2000 additional area was purchased
to add to manufacturing capacity of Yashshree Press Parts. This was converted into Mittal
Precision Steel Tubes Pvt. Ltd. (MPSTPL) in the year 2002. The directors being four members
from Mittal’s family – Mr. Premchand Mittal – the main promoter with the three sons – Arun,
Anil and Sunil. In the meanwhile Yashshree Press Parts was renamed to Pheonix Press Parts and
was merged in MPSTPL in the year 2002. They have taken ISO 9001 – 2000 Certification and
Certificate of Appreciation from Tata Johnson Controls.
PRODUCT RANGE
The chakan unit is into manufacturing of Precision Steel Tubes of the following varieties in the
table which are used in various automotive and industrial components. The Chinchwad unit is
also a manufacturing unit.
1. CHAKAN UNIT IS : 3074 ASTM, BS, DIN, JIS • OD 12.7 mm TO 50.8 mm
etc. in the size of
• THK 0.8 mm TO 4.0 mm
2. CHINCHWAD • Heavy duty sheet metal
UNIT (PPP)
• Tubular welded Sub – assemblies.
GROUP CONCERNS : MPSTPL is a part of the group companies of the Mittal Family – which
includes Vasant Industries, Mittal Precision Autocomps Pvt. Ltd (MPSTPL) and Rohit Industries
and Phoenix Press Parts that is a division of MPSTPL.
¾ Operational Performance
• Location
MPSTPL has two manufacturing units one is at Chinchwad and the other one at Chakan. The
registered office of the company is in the Chinchwad unit.
1. MPSTPL GAT No. 392/1, Chakan Talegoan Road, Mahalunge, Chakan, PUNE – 410501
2. PPP 30/11, D-II Block, MIDC , Chinchwad, PUNE – 411019

• Area
1. MPSTPL Total area – 66000 sq. ft. of which factory building is of 34000 sq. ft and having
electrical connections of 300KVA.
2. PPP Total area – 14000 sq. ft. of which factory building is of 10000 sq. ft and having
electrical connections of 130 HP.
• Production
1. Chakan Unit It has installed capacity of 2000 MT per month. The unit has installed the
latest and unique roll design for all its rollers. The unit also has the
machines like Steel Tube Mill along with 100 KW high frequency
induction welder, Looper & Decoiler, Straightening Machine, Draw
Bench, Cutting Machine etc
2. Chinchwad Unit The unit is well equipped with machines like Hydraulic press, Mechanical
Press, Press Brake, Shearing Machine, Co2 Welding Machines, Spot
Welding Machine, and Powder Coating Machine.
• Staff Strength:The total staff strength is around 50 employees out of which 20 are at
Chakan and 30 at Chinchwad.
• Expenses
The major expenses of the company are in Raw Material (74% of total income) and
Employee Costs (9.8% of the total)
• Purchases (Raw material)
a) The basic raw material used in MPSTPL is Steel Sheets, Steel Pipes, and Frames.
b) Credit period extended by the suppliers to MPSTPL is around 30 days.
¾ Market Position
• Customer Segments: The main customers of the Chinchwad unit are from the field of
Automobile Industry while the Chakan unit caters to the automobile as well as the other
industrial companies. The major customers of the company are
- Tata Motors
- Harita Grammer Ltd.
Out of the total sales of the firm, 8 percent are supplied to the sister concern Vasant
Industries and 10% to Rohit Industries. The credit period extended by MPSTPL to its
customers is between 30 – 60 days.
• Sales figures of both the units for the last 12 months are as follows:
Mittal Precision Phoenix parts

Month FY Sales in Rs. Sales in Rs. Month Sales in Rs. Sales in Rs
(Lacs) 06 -07 (Lacs) 07 -08 FY (Lacs) 06 - (Lacs) 07 -08
07
April 249.96 241.10 April 108.88 137.32
May 260.95 172.32 May 97.96 143.97
June 184.43 162.25 June 97.44 144.91
July 194.74 181.36 July 112.43 129.88

Aug 225.84 202.02 Aug 101.49 139.59
September 226.97 205.09 September 115.70 153.81
Oct 203.43 269.67 Oct 147.01 207.87
Nov 222.48 209.67 Nov 181.72 280.44
Dec 259.75 358.81 Dec 148.15 295.31
Jan 255.73 232.32 Jan 180.81 295.92
Feb 212.37 256.84 Feb 181.47 223.69
Mar 256.64 437.12 Mar 181.78 202.17
Total 2753.29 2928.62 Total 1654.84 2354.93
Month FY Sales in Rs.
(Lacs) 08 -09
April 347.12
May 451.15
June 287.00
Total 1085.27
3. BANKING FACILITY
Mittal Precision Phoenix Press Parts
Cash credit facility 210.00 Cash credit facility 73.00
WCDL 190.00 WCDL 22.00
Term Loan 150.00 Term Loan -
Total Credit Exposure 550.00 Total Credit Exposure 95.00
Consolidated financials for the Chakan and Chinchwad Unit
P&L (All Figures In Lacs) 2007 – 08 (P) 2006 – 07 2005 – 06
Total Income 4264.4 3741.2 2707.1
PBDIT 282.7 155.5 133.7
Interest 33.0 23.9 22.4
PBT 249.6 97.7 76.4
Tax 0.0 22.8 12.1
PAT 249.6 74.9 64.3
Cash Profits 249.6 108.8 99.2
LIABILITIES
Tangible Net Worth 615.7 439.2 333.6
Short Term Debt 393.6 454.5 134.6
Unsecured Loans from Promoters 0.0 46.0 31.9
Total Debt 436.4 500.5 456.2
Current Liabilities and Provisions 787.7 383.4 300.4
ASSETS
Investments 49.5 2.0 2.0

Loans and Advances 17.7 4.1 16.4
Sundry Debtors 996.6 773.8 594.4
Inventories 382.5 210.0 170.7
Total Assets 1839.2 1323.2 1090.1
FINANCIAL RATIOS
DSCR 5.98 5.56 1.02
Debt/Equity 0.71 1.14 1.37
Leverage (TOL/Net Worth) 1.99 2.01 2.27
TOL (Excl. Unsecured loans)/Tangible Net 1.99 1.73 1.98
Current Assets/Sales 35% 30% 31%
Inventory Days Cost of Sales 35 21 24
Creditor Days as Cost of Sales 45 35 39
5. OVERALL ANALYSIS
• Though there is decline in gross and net margins over the period the margins are on a higher
side if we compare them with other traders. In this regard the customer informed that they are
particular in accounting of transactions and these are the actual margins in the business.
• Current Ratio is at 1.65 indicating satisfactory liquidity position of the firm
• Leverage is at 1.99 indicating satisfactory leverage position of the firm.
• Margin: Margins show marginal decline in the last two years due to the adverse raw material
prices. Margins have increased in the financial year 07 – 08.
• Other Current Assets include Advance Tax of 65.7 Lacs.
• Sales: The sales have shown an increase in the sales but due to the increase in the steel prices
the sales have declined. The sales in the period April 07 – June 07 were 1001.87 while the
sales in the current quarter ending June-08 are 1085.27. So if we compare the sales there is an
increase of around 9%. This is so because there is an increase in the price of steel from 28 to
46 per quintal. The firm is conscious in growing its business in a gradual manner with select
customers. Due to the increase in no. Of new industries being set up around Pune, the firm
expects demand to be on a higher side for the current year.

•Levels of Debtors, Inventory and Creditors are as per past trends and within acceptable limits.
Risks and Mitigants
Risks Mitigants
Concentration Risk in terms ofThe group is presently supplying majorly to TATA motors and as
dependence on a singlesuch is dependent on them. However, they have taken steps to
customer diversify the customer base which adds Cummins India, Johnson
Controls, TATA Marco Polo, YUTAKA Auto Parts etc.
Volatility in Prices of SteelThe group is taking steps to renegotiate prices with its customers and
leading to pressure on margins the major customer TATA motors has informed that they would be
reimbursing the group for the difference shortly.
Ways Out: Business Cash Flows, Sale of primary security, Sale of collateral security, Personal
guarantee and legal course.
SWOT Analysis
Strength: There is an increase in the sales which shows a decent growth of business.
Weaknesses: The Company uses a lot of metals which shows a wide fluctuations due to an
increase in he rise in the steel prices. The major customer of the company is TATA Motors to
which the company provides 80% of the sales.
Opportunities: Since the quality of the material of the company is good, it can take orders from
various auto companies. The company also has diversified into manufacturing of gensets, colour
coated sheets used in the construction process.
Threats: Increase in the steel price about 60% and slowdown in the auto industry.
Comments from the Director: Due to an increase in the steel price of about 60%, the customers
of the company are demanding the payments immediately and the end customer demands a
minimum of 60 days and above.

With the increase in the price of steel there is an increase in the cost of raw material, the
manufacturing cost is increasing. So, the overall cost is increasing. Because this year TATA
Motors have declined their production so the sales is declining and expected to decrease by 10%
in the current financial year. One of the other risks involved is the salaries and the turnover. The
profit of the company is declining because of a reduction in sales. There is a huge gap between
the supplier and the vendor. The maintenance cost is increasing due to which there is a decrease
in margin. The company has started diversifying their business and has started to make contacts
with the companies like Cummins India, Johnson Controls, TATA Marco Polo, and YUTAKA
Auto Parts.

SUJALI ENTERPRISES
M/s Sujali Enterprises is a proprietary concern, dealing in the business of welding rods, sheet
metals, steel pipes and Co2 welding wires.
The firm was started in the year 1989 by Mrs. Sujata Sandesh Seth who is the proprietor of the
firm. The educational qualification of the proprietor is B.A.(H) and having a sound experience of
15 years in the business. Her husband Mr. Sandesh m Seth is the key person behind the business.
His educational qualification is post graduation in Materials management. The firm is dealing
with M/s Automotive Stampings & ASSY Ltd., Boxpack Mfg. Ltd., and Industrial Products Co.
etc. At present the firm mostly deals in trading of Co2 welding wires which are manufactured by
M/s Shakunt Enterprises Pvt. Ltd., Ludhiana. The firm is the only distributor in Pune.At present,
the firm is selling approx 25MT per month of Co2 welding wires and they want to increase this to
50 MT. In view of the increased demand from the automobile segment, the turnover is expected
to increase Rs. 500 Lacs during the current financial year.
The firm is a stock holding firm, they supply to the suppliers of TELCO, TEMPO, and BAJAJ
Auto. In the aim to maintain the largest variety of stock, the firm also procures from distributors
and stockiest. The huge variety and quantity of stock is the main feature of the firm and is the
main success factor.
The firm is into trading of various metal components like: Steel tubes, welding rods, welding
wires and MS pipes. These components find their application in various industries, from
manufacturing of metal parts, tin and sheet works, molding and casting industries, foundries,
infrastructure firms etc. Also, these parts are required for any set up of a plant. Thus, the wide
range of application of the firm's products ensure the year on year growth of the firm. Most of the
firms in this trade do not maintain extremely high levels and various variety of stock, since this
requires huge investment, huge storage space and expertise. The newer firms have the huge
investment as the main entry barrier.
Major suppliers of the firm: GE Ltd, JM Oberoi, ISPAT, B&H Electron, Tondon Steel Pvt Ltd,
Nika Steel Pvt Ltd, Zenith Steels etc.
Major clients for the firm: The major clients are Devchaya industries, Autoplus Engg, Dolphin
industries, Gadsing industries, Sanyog Industries etc who all are suppliers of TELCO, TEMPO,
BAJAJ Auto and other automobile companies.

Sales for the Company:
Month FY Sales in Rs. (Lacs) 08 -09 Sales in Rs. (Lacs) 06 -07 Sales in Rs. (Lacs) 07 -08
April 17.10 33.16 27.25
May 18.59 26.50 25.77
June 17.85 19.69 20.91
July 29.46 28.34
Aug 25.09 34.20
September 28.79 30.81
Oct 26.43 29.76
Nov 34.83 24.73
Dec 35.02 32.19
Jan 31.94 23.19
Feb 28.57 18.76
Mar 35.47 17.04
Total 53.54 354.95 312.95
3. BANKING FACILITY
Description Rs./Lacs Amount
Cash Credit 25.00
P&L Sheet (All figures in Rs. Lacs) Mar 31, 08 Mar 31, 07 Mar 31, 06
Total Income 314.2 346.0 345.8
PBDIT 16.8 14.6 13.2
Interest 1.5 1.3 0.6
PBT 12.6 11.4 11.5
Tax 0.0 2.5 0.0
PAT 12.6 8.8 11.5
Cash Profits 15.3 10.7 12.6
Liabilities
Tangible Net worth 62.4 47.3 53.5
Unsecured loans from promoters 19.7 22.0 17.2
Total Debt 22.6 34.0 20.5
Current Liabilities & Provisions 53.6 60.2 30.1
Assets
Loans & Advances 0.0 0.0 0.0

Inventories 16.3 4.9 6.5
Other Current Assets -7.4 -10.2 4.8
Total Assets 138.6 141.5 104.1
Financial Ratios
Net Margin (PAT / TI) 4.0% 2.6% 3.3%
DSCR 6.85 2.27 7.76
Debt / Equity Ratio 0.36 0.72 0.38
Leverage (TOL / Tangible Net worth) 1.22 1.99 0.95
TOL (excl Unsec loans) / Tangible NW 0.69 1.04 0.47
Current Assets / Sales 29% 30% 25%
Inventory Days cost of sales 20 5 7
Creditors days as cost of sales 50 53 33
5. OVERALL ANALYSIS
• Sales show a decreasing trend over the period.If we compare the sales of the period April 07 -
08 to the month of June 08 is 73.93 while in the April 08 – 09 to the month of June 09 is
53.53. So if we see both the figures then there is a decrease of around 28% in the sales. This is
so because there is an increase in the price of steel from 32 to 50 per quintal and because the
customer base is decreasing. The firm is conscious in growing its business in a gradual manner
with select customers. The firm is trying to increase

• Gross/Net Margins: the gross margins are increased from last year and so the net margin
which has increased from 2.6% to 4.0%
• Current Ratio is at 2.18 indicating satisfactory liquidity position of the firm but maintaining
such a high current ratio is the blockage of cash which can be further used in the business and
the amount of working capital loan taken from the bank will be less if this is used in the
appropriate manner.
• Other Current Assets include Advance Tax of -7.4 Lacs. Other current assets show a negative
trend in the last two financial years
• Levels of Debtors, Inventory and Creditors are as per past trends and within acceptable limits.
The debtor’s turnover have decreased from 116 to 94 days, the inventory turnover have
increased from 5 to 20 days and the creditors level have decreased from 53 to 50 days.
Risks and Mitigants
Risks Mitigants
Volatility in Prices of SteelThere is not much affect on the margins.
leading to pressure on margins
Stiff competition The firm is having a wide range of products in its portfolio and is a
one stop shop for steel. Often other traders in the market procure
material from the firm as they have almost all the types of steel.
Considering this and the goodwill the promoters have built up over
the years, the firm is able to maintain its position vis-a-vis its
competitors.
Ways out : Business Cash flows, Sale of primary security, Sale of collateral security, Personal
guarantee (wherever available), Legal recourse
Industry Risk: The firm is engaged in trading of steel in form of components like: Steel tubes,
welding rods, welding wires and MS pipes. These components find their application in various
industries, from manufacturing of metal parts, tin and sheet works, molding and casting
industries, foundries, infrastructure firms etc. Also, these parts are required for any set up of a
plant. Thus, the wide range of application of the firm's products ensure the year on year growth of
the firm. The steel trading industry is dominated by unorganised sector and there multiple number

of players in the market. The differentiation is in terms of ability of the trader to cater to the needs
of the customers in terms of variety of the products requiring the trader to maintain high stocks.
One of the other factors impacting the industry is the volatility in steel prices depending on
market demand and supply. In this regard the firm has the ability to maintain stocks and is able to
manage the volatility in prices.
Business Risk: The firm is catering to a large no. Of customers besides walkin customers and as
such concentration risk is not there in terms of customers. The firm has the requisite infrastructure
including storage space for the stock and vehicles for transportation enabling them to maintain
business levels and increase turnover.
Financial Risk: The financials of the firm are satisfactory and there is improvement year on year.
The liquidity and leverage position of the firm is satisfactory. There is decline in margins,
however, overall margins continue to be above the industry average.
Management Risk: Management of the firm has 19 years vintage in the business and has the
relevant expertise to manage the business successfully. The promoters have contacts in the
industry and have goodwill in the market. The management is professional in their approach.
Comments from the Entrepreneur: The steel prices are rising because there is an increase in
the demand of steel and the steel prices are higher in the international market. Due to this there is
a decrease in the supply of raw material and in regard to this the production cost is becoming
higher. There is almost a decrease of 28% if compared to the last year sales. The major risks are
that they require more funds to sustain the hike in steel prices. So, ultimately the investment is
increasing. The profit margin is increasing. One of the other risks is that the company being a
trading company has to maintain the stock so it is blocking a lot of money. There is not much risk
involved due to the increase in the steel price.

ASVEE TRADING COMPANY
Asvee trading company was established on 29-04-1979. The firm is now over 28 years into metal
trading. This is the 2rd generation of the family in the business. The firm started as a small player
in metal trading. Sheer hard work and quality of service and products has led to the firm grow
into the huge size it is now. It has taken years of hard work and dedication by the Oswals to earn
the name and reputation that the firm has as of now.
Mr. Chandulal Oswal, the founder started a firm by the name “SteelAll” in 1979. It was started as
a partnership firm between the brothers Arun, Satish, Vilas and sister Saroj Oswal. In 2002, the
businesses were split in 2002 as per the respective products detailed in the chart above. Thus,
ASVEE Trading was established in 2002 as a partnership firm Between Vilas Oswal, his wife
Lata Oswal and son Paresh Oswal. The segregation of businesses has lead to business being
carried out in a more organized way and has also led to growth in turnover.
Over the years Steel All had build a reputation among its clients as a reputed trader of metal
products. The same has carried forward to the next generation companies viz Masvee, Asvee and
Vilas Steel fabrications. ASVEE has taken good care of the existing client relationships with their
prompt service and good quality and ready inventory of all kinds of Steel parts. This has led to
the firm increasing the turnover year on year.
Management
Mr. Vilas and Paresh Oswal are the main managing partners in the firm. Mrs. Lata Oswal does
not participate in the day to day business workings.
All the managers are key people in the firm and are associated with the firm since inception. They
have good experience in the field of metal trading and have a strong say in the business working.
The firm has total staff strength of 22 people. This excludes the daily wages workers, and
unskilled staff working at the go down premises.
The firm is a stock holding firm for products of SAIL, Rashtriya Ispat, and Jindal South West etc.
In the aim to maintain the largest variety of stock, the firm also procures from distributors and
stockists. The huge variety and quantity of stock is the main feature of the firm and is the main
success factor.
The firm is into trading of various metal components like: M.S. plate, Angle Channel, Beam,
Round Bars, Square Bars, Hot Rolled and cold rolled Sheets, TMT bars.

These components find their application in various industries, from manufacturing of metal parts,
tin and sheet works, molding and casting industries, foundries, infrastructure firms etc. Also,
these parts are required for any set up of a plant. Thus, the wide range of application of the firm's
products ensure the year on year growth of the firm. Most of the firms in this trade do not
maintain extremely high levels and various variety of stock, since this requires huge investment,
huge storage space and expertise. Asvee, being very old in the trade and having a huge storage
space for the inventory is well placed. The newer firms have the huge investment as the main
entry barrier.
Key Strengths of the firm:
1. The firm has a huge godown which is located outside the octroi limits and hence its customers
can save up to 2% in procurement costs, since most of the clients are located outside the Pune
city limits. Hence, this is one reason why most of the city based metal traders cater to only
select customers within the city whereas Asvee can cater to both city as well as outside city
locations with a competitive advantage of being cost effective as well as having the highest
level of inventory and the largest variety of stock.
2. The firm is a very big trader for metal and holds significant level of inventory. This is the very
reason, many retailers and distributors for the same purchase the stock from Asvee.
3. The firm has 5 delivery vehicles for doorstep delivery. The firm has earned a big repute in the
industry for its sales and service guarantee.
4. The firm has its own weighing scale of capacity 40 tones whereas the same is not available
with other traders. The availability of the weighing scale gives the advantage of in house
weighing and reduces the costs and delivery time as well as hassle involved to go to separate
weighing stations.
5. The most important factor for the success of Asvee is the trust the people have in the firm and
also the fact that the firm is operating from the past 3 generations.
Sales for the Company:
Month FY Sales in Rs. (Lacs) 06 -07 Sales in Rs. (Lacs) 07 -08 Sales in Rs. (Lacs) 08 -09
April 352 427.23 372.0
May 389 458.20 479.0
June 382 406.62 423.0
July 363 338.21
Aug 267 304.14
September 331 323.0
Oct 285 339.0
Nov 472 400.0

Dec 414 374.0
Jan 414 390.0
Feb 406 402.0
Mar 353 342.0
Total 4428 4505.4 1274.0
Major suppliers for the firm:

Name % supply
Jindal South West 11
Rashtriya Ispat Nigam Ltd 27
SKS Ispat & Power Ltd 8
Pushpak Steel Industries 7
Orange City Steel Industries Pvt Ltd. 4
Major clients for the firm:
Name % supply
Rieco Industries 6
Millennium Engg. & Contr. Pvt Ltd 4.5
DGP Hinoday Industries Ltd. 2
EON Kharadi Infrastructure Pvt Ltd. 3.5
Dhiraj Engg Works 3.5
3. BANKING FACILITY
Description Rs./Lacs Amount
Cash Credit 350.00
Adhoc 30.00
P&L Sheet (All figures in Rs. Lacs) Mar 31, 08 Mar 31, 07 Mar 31, 06
Total Income 4,452.5 4,453.3 4,365.4
PBDIT 299.5 269.0 303.1
Interest 96.3 87.5 78.0
PBT 191.2 169.6 213.8
Tax 65.0 60.0 72.0
PAT 126.2 109.6 141.8
Cash Profits 138.2 121.5 153.0
Liabilities
Short Term Debt 394.7 221.6 105.9

Total Debt 750.1 507.5 370.1
Assets
Loans & Advances 34.6 14.8 21.2
Inventories 730.0 568.3 543.1
Total Assets 1282.9 1285.2 1063.5
Financial Ratios
Net Margin (PAT / TI) 2.8% 0.0% 3.2%
DSCR 2.44 1.14 2.96
Leverage (TOL / Tangible Net worth) 1.93 1.70 1.29
5. OVERALL ANALYSIS
• Current Ratio is at 2.91 indicating satisfactory liquidity position of the firm but
maintaining such a high current ratio is the blockage of cash which can be further used in the
business and the amount of working capital loan taken from the bank will be less if this is used
in the appropriate manner.
• Other Current Assets include Advance Tax of Rs.212.74 Lacs.
• Sales show consistent rising trend over the period.If we compare the sales of the period April
07 -08 to the month of June 08 is 1292.05 while in the April 08 – 09 to the month of June 09 is
1274. So if we see both the figures then there is a decrease of 2%. This is so because there is
an increase in the price of steel from 34 to 46 per quintal. The firm is conscious in growing its
business in a gradual manner with select customers. Due to the increase in no. Of new

industries being set up around Pune, the firm expects demand to be on a higher side for the
current year.
• Levels of Debtors, Inventory and Creditors are as per past trends and within acceptable
limits.
Risks and Mitigants
Risks Mitigants
Volatility in Prices of SteelThe customer has a vintage of 28 years in metal trading and over the
leading to pressure on margins years the customer has gained experience and expertise and hence can
manage the impact of price fluctuations. Further as discussed with the
Customer, they are stockists and as such whatever, the price rise the
same is passed on to their customers. Since everybody is aware of the
steel prices there is ready acceptance of the price rise by their
customers.
Stiff competition The firm is having a wide range of products in its portfolio and is a one
stop shop for steel. Often other traders in the market procure material
from the firm as they have almost all the types of steel. Considering
this and the goodwill the promoters have built up over the years, the
firm is able to maintain its position vis-a-vis its competitors.

guarantee (wherever available), Legal recourse
Industry Risk: The firm is engaged in trading of steel in form of sheets, angles, beams, bars etc.
The firm is a stockist for products of SAIL, Rashtriya Ispat Nigam, Jindal South West etc. The
products are sold to mainly industries to be utilised in construction and manufacturing of
machinery parts. The steel trading industry is dominated by unorganised sector and there multiple
no. Of players in the market. The differentiation is in terms of ability of the trader to cater to the
needs of the customers in terms of variety of the products requiring the trader to maintain high
stocks. One of the other factors impacting the industry is the volatility in steel prices depending
on market demand and supply. In this regard the firm has the ability to maintain stocks and is able
to manage the volatility in prices.
Business Risk: The firm is catering to a large no. of customers besides walkin customers and as
such concentration risk is not there in terms of customers. The firm has the requisite infrastructure
including storage space for the stock and vehicles for transportation enabling them to maintain
business levels and increase turnover.
Financial Risk: The financials of the firm are satisfactory and there is improvement year on year.
The liquidity and leverage position of the firm is satisfactory. There is decline in margins,
however, overall margins continue to be above the industry average.
Management Risk: Management of the firm has 28 years vintage in the business and has the
relevant expertise to manage the business successfully. The promoters have contacts in the
industry and have goodwill in the market. The management is professional in their approach.
Comments from the Entrepreneur: The steel prices are rising because there is an increase in
the demand of steel and the steel prices are higher in the international market. Due to this there is
a decrease in the supply of raw material and in regard to this the production cost is becoming
higher. There is almost a decrease of 30% if compared to the last year sales. The major risks are
that they require more funds to sustain the hike in steel prices. So, ultimately the investment is
increasing. The profit margin is constant as last year but if we consider the inflation then there is
a decrease of 0.5%. One of the other risks is that the company being a trading company has to
maintain the stock so it is blocking a lot of money. There is not much risk involved due to the
increase in the steel price.

K.V. STEEL CORPORATION
1. COMPANY HISTORY & BACKGROUND
M/s. K.V.Steel Corporation is a proprietary concern. The business was started in 1989 in the
name of K V Sales Corporation. Subsequently, it was renamed as K.V.Steel Corporation. The
firm is industrial supplier of hardware items, Valves, Stainless steel, pipe & pipe fitting products
in Pune & has distribution network in Maharashtra as well as outside Maharashtra 80% of the
business is in the state while remaining 20% is spread in the places like Jalandhar, Gurgaon, etc.
The firm is also stockiest & representative for APL brand hardware items, in Pune, which are
specially designed for Chemical & engineering companies. The products supplied are:
• M.S. & G.I. Pipes & Fittings of TATA & BIRLA.
• Whole series of structural steels of SAIL, TISCO & VAIZAG.
• M.S. & S.S. Copper Brass Fasteners of GKW, APL, UNBRAKO & TVS.
• Valves & Cocks of LEADER, AUDCO, OSCAR, UTAM, PRINCE, etc.
The valves are used by the industries such as Sugar, Breweries, Forging, Varnish, Automobiles,
etc.
The firm deals with structural steel, pipes, nut bolts and hardware of TATA, BIRLA, SAIL,
TISCO, VAIZAG, etc. Some of their customers are Kalyani Thermal Systems Ltd., Bharat
Forge Ltd., Sudarshan Chemicals Ind. Ltd., Poonawalla, Deepak Nitrite Ltd.,etc. K.V.Steels
buys their stock through brokers as well as directly from companies like Maharashtra Stainless
ltd.
Sales of the past:
FY 2008-2009(1st QTR) FY 2007-2008 FY 2006-2007

April 251.9 140.47 84.17
May 132.54 131.35 50.02
June 213.12 119.33 80.48
July 96.09 73.43
August 100.36 78.04
September 105.22 72.91
October 151.83 90.64
November 122.94 106.45

December 126.17 127.35
January 170.68 184.57
February 112.99 121.7
March 151.66 97.59
TOTAL 597.56 1529.09 1167.35
3. BANKING FACILITY
Particulars Existing Facilities Renewal Proposed Facilities

(HDFC Bank (Rs. in Lacs)) (HDFC Bank)
Cash Credit 50 50
Total 50 50
4. FINANCIAL APRRAISAL
P&L Sheet(All figures in Rs. Lacs) 31-Mar-08 31-Mar-07 31-Mar-06

Total Income 1,455.50 1,117.10 808.2
PBDIT 26.7 16.2 10.6
Interest 3.5 1.4 0.9
PBT 22.2 13.8 8.6
Tax 0.0 0.0 0.0
PAT 22.2 13.8 8.6
Liabilities
Total Debt 163.3 40.4 43.8
Assets
Loan & Advances 19.8 6.3 7.6
Other current assets 46.6 0.5 7.8

Total Assets 509.7 272.9 209.0
Financial Ratios

Interest coverage 7.64 11.90 12.45
DSCR 7.64 11.90 12.45
Debt/Equity Ratio 2.47 0.82 1.15
Leverage (TOL/Tangible Net worth) 6.7 4.56 4.50
TOL (excl Unsec loans)/Tangible NW 3.93 3.44 3.14
Current assets/sales 33% 20% 23%
Debtor days 100 67 73
5. OVERALL ANALYSIS
Sales: Compared to last year, this year’s sale is at higher side but compared to sales in April
2008, sales in May 2008 is very low i.e. it dropped by 47.38%.this was because of the hike in
steel prices. In the month of June 2008, it again increased to Rs.132.54 from Rs.213.12 lac.
Gross margin: The gross margin has increased to 1.8% from 1.4%.
Net margin: The net margin has increased from 1.2% to 1.5%.
Current Ratio: The current ratio has increased to 1.19 from 1.16.

Debt/ Equity ratio: Debt/ Equity ratio has increased to 2.47 from last year’s 0.82.
Debtor’s turnovers are increased to 100 days from 67 days which shows the negative sign.
Inventory turnover has remained the same i.e. 5 days. Creditor’s level is increased from 56 to
72 days.
Risk & Mitigants
Risks Mitigants
Volatility in Prices of SteelThe customer has 19 years of experience and hence can manage the
leading to pressure on margins impact of price fluctuations. Further as discussed with the Customer,
they are stockists and as such whatever the price rise, the same is
passed on to their customers. Since everybody is aware of the steel
prices there is ready acceptance of the price rise by their customers.
Stiff competition The firm is having a wide range of products in its portfolio. Often
other traders in the market procure material from the firm.
Considering this and the goodwill the promoters have built up over
the years, the firm is able to maintain its position vis-a-vis its
competitors.
SWOT Analysis:
Strength: Years of experience in this particular business.
Weakness: Loss due to price hike.
Opportunity: Booming infrastructure sector of the country.
Threat: Increasing prices of crude oil, steel & other raw materials.
Comments of the Entrepreneur: According to Mr. Ritesh, steel prices are increasing because
of the Olympic Games that are coming up in China. To improve the infrastructure of the country,
China is demanding more and more of steel. So the export of steel is increasing which in turn
affecting the price. Also, the raw materials’ cost is going high which is again affecting the steel
prices.
The hike in the steel price has direct effect on the sales. The supply has decreased decreasing the
profit margin.

SHIRIDI STEELS RE-ROLLERS PVT. LTD.
1. HISTORY & BACKGROUND

The Company was incorporated in 1998. It has eight directors namely Mr.Vinod Goyal,
Mr.Yogesh Goyal, Mr.Aakash Goyal, Mr.Aditya Poddar,Mr.Arun Poddar, Mr.Rajesh Oswal,
Mr.Sachin Oswal, Mr.Vijay Oswal.
Oswal and Poddar family has its business on similar lines at Alandi, Pune.Goyal family earlier
has 2 rolling mills and 1 foundry at Jalna. However since the operations are unviable due to
increase in power tariffs in the region, they decided to close these ventures and joined Oswal and
Poddar family in this business. With the experience of Oswal and Poddar family, the group
decided to implement the plant at Goa. For this, they acquired the Company at Cuncolim.The
reason for implementing the plant at Goa was based on various incentives offered by the Govt of
Goa (Union Territory) and also nearness to Southern Market, where there are very few players in
this field.The operations in Goa are mainly looked after by Mr.Yogesh Goyal. Other directors are
based in Pune. As far as the shareholding pattern goes the three families – Goyals,Poddars and
Oswals hold 33.33% each in both Shirdi Steel and its group concern viz.Shraddha Ispat Pvt Ltd.
Shirdi Steel has a group co. viz.Shraddha Ispat Pvt.Ltd, which is into making of Sponge Iron.It
was floated in March 2004 by the same promoters. Investment by Shirdi Steel in Shraddha Ispat
is nil to date.
The Company has group concern viz. Shraddha Ispat Pvt Ltd, which is engaged in the business of
manufacturing of sponge iron. The Co started in December 2004 and as on 2006-07, the
Company has achieved the turnover of Rs. 71.45 Cr, Net profit of Rs. 7.20 Cr and total debt of
Rs. 14.75 Cr. There are no inter firm transfer of the funds.
Production Cycle: The production cycle for manufacturing of re-rolled products consists of:-
Iron.Ore----->Sponge Iron----->Ingot------>MS / Re-rolled products
Since the company has experience in manufacturing of re-rolled products, they initially decided
to start Shirdi Steel, which is into re-rolled products.As far as profit margins are concerned,
Sponge Iron has more margins than re-rolled products and re-rolled products have more margins
than Ingots. Hence, after Shirdi Steel, the group started with Sponge Iron project. Now, since this
project is stabilising, the group has decided to acquire another unit at Cuncolim, for manufactur
of Ingots. With this, the group will complete entire backward integration and value addition.

The Company is engaged in the manufacture of angles, flats and channels. They are not
manufacturing TMT bars as they are low margin business.
Operational Performance
The factory is located at Cuncolim Industrial Estate, Cuncolim in GIDC. It enjoyed a 5 year
income tax exemption, being a new industrial unit and also 15 year Sales Tax exemption. The
installed capacity is around 48000 tonnes p.a. The output is approx. 2500 tonnes p.m. It operates
in two shifts of 10 hours.
The company has 57 variety products .The range of producs are:

Angles : 20*3 and 75*6
Flat : 18*4 to 100*12
Channel: 70*14 to 100*50
There are 40 employees working for it. Raw material is sourced locally and on cash
basis.Payment for raw material purchased has to be made the next day.The raw material used in
Ingots which is made from Sponge Iron which in turn is produced from Iron Ore. The raw
material used in Ingots and Furnace Oil which are locally sourced from the local manufacturers.
Nothing is sourced from the sister concern.
It is then heated in Oil furnace. After heating it passes through the rough mill for adjusting its
size.The next process is shaping it in the Intermediate Mill which then goes through the Polish
Mill for polishing thus giving the finished product for sales.
The company has three furnaces. Out of this 2 furnaces are for higher end products and 1 for
lower end product.
Market Position
Problems of re-rolling industry:
1 Financial Crunch as most of the banks and FIs are cautious about lending to this
sector
2 Inadquate Power Supply and Raw Materials
3 Unorganised Sector
4 Increase in Raw Material Prices
Demand Drivers
Growing infrastructure across the country, Housing sector is booming, Govt is keen in reducing
the duties and giving boost to this industry
Demand Supply Scenario: There are approx. 1200 re-rolling mills in India with the total installed
capacity of 27 mn MT.Against this, the demand for the product is approx. 23mn MT.However the
industry is going through restructuring and this will lead to closing down of some of the small /

unorganised players.Therefore, more or less the demand supply gap will continue to be present.
Further, most of the re-rolling mills are engaged in the manufacture of TMT bars, which is low
margin high volume business and there are less players in the product range offered by Shirdi
Steel.
Prospects for Shirdi Steel:There are few competitors to the co.apart from Pushpak viz.Bhoruka
Steel, Mahavir Rolling, G P Malhotra Steel etc.The profitability of these cos is as good as or
better than Shirdi Steel.However, barring Bhoruka Steel, other players are catering to Western or
Northern areas of the country.The Company's plant at Goa is mainly catering to Southern part.
There are very few players in this area. In Goa region, Shirdi is the only main player and hence it
almost enjoys a monopoly in its segment with more than 80% market share.
Shirdi's products are the Structural Steel products like Angles, Channels, Flats, Rectangle/Round
bars. These products are mainly used in every industry/residence/offices etc.These products are
mainly used by heavy engineering units and electric depatments.Major selling markets are the
sates of Kerala, Karnataka, Maharashtra and Goa with 50% of sales coming from Kerala
alone.The Company has more than 80% market share in Goa, 30% each in Kerala and Bangalore,
60% in Karnataka and about 10% share in Maharashtra.The Company maintains an inventory of
one month and gives 20 days credit to debtors.
Sales of the company(Rs. In Lacs):

Month Sales 06-07 Sales07-08 Sales 08-09
April 656.37 1014.03 1478.50
May 868.05 1123.19 1534.36
June 779.26 1275.77 1569.57
July 828.99 1310.43
August 987.80 1209.87
September 981.52 1116.20
October 507.07 1403.04
November 757.43 1317.57
December 1245.83 1687.45
January 1056.95 1562.88
February 1226.01 1247.06
March 1541.86 2155.50
Total 11437.15 16423.02
The company has achieved a turnover of Rs 16423.02 lacs during the year 2007-08
Locational Advantages
Benefits for the Company in Goa:
The Company’s in Goa have following major advantages.
- Availability of power at lower cost forms major part of cost of production.

- Close proximity to Marmagoa Port facilitates import of scrap.
- Close proximity to ingot manufacturing companies in Goa.
- Rolling Mills in down South purchase raw material from Goa and hence there raw material cost
are higher than the Company and hence the Company is cost competitive over other players in
neighboring states like Karnataka, Kerala, & southwestern Maharastra.
Besides local market in Goa, the market in and around Goa is easily accessible.
Other benefits to the Company:
- The company has got pollution NOC.
- Power tariff in Goa is cheaper compared to any other neighboring states.
- Proximity to the customers.
- Proximity to Marmagoa Port for import of scrap.
- Lesser labour problems.
- Good infrastructure facilities in the state.
Products & its uses: The customer is engaged in the manufacturing of re-rolled products like
structural steel – MS angles, MS flats, MS shapes etc. These products are used mainly in
infrastructure projects. The consumers of the product are various infrastructure developers,
traders etc.
3. CREDIT FACILITY
Particulars Existing Facilities Renewal Proposed Facilities

(HDFC Bank (Rs. in Lacs) (HDFC Bank)
Cash Credit 750 750
WCDL - 35
Total 750 785
P&L Sheet (All figures in Rs. lacs) 2007-08 P 2006-07 2005-06

Total Income 16,350.5 11,366.5 8,845.6
PBDIT 950.0 1,435.4 1,208.3
Interest 42.4 13.0 8.4
PBT 872.8 1,387.6 1,171.3
Tax 0.0 22.5 1.7
PAT 872.8 1,365.1 1,169.6
Cash Profits 907.6 1,399.9 1,198.2
Liabilities
Tangible Networth 1779.6 1779.6 1536.7

Short Term Debt 423.0 329.1 327.2
Total Debt 423.0 430.6 327.2
Assets
Loans & Advances 218.3 354.1 286.7
Sundry Debtors 1277.1 998.3 605.5
Inventories 1083.3 478.4 580.1
Total Assets 3602.8 2634.5 2147.2
Financial Ratios
Net Margin (PAT / TI) 5.3% 12.0% 13.2%
DSCR 22.42 108.68 143.64
Leverage (TOL / Tangible Networth) 1.02 0.48 0.40
5. OVERALL ANALYSIS
RATIOS:
Current Ratio: The current ratio is comfortable indicating adequate liquidity in the WC system.
With plough-back of majority of accruals the liquidity is expected to further strengthen.
Leverage: Leverage is low on account of most the profits are ploughed back in the system. For
last 3 years leverage is below 0.5.
Interest Coverage: This is comfortable for last 3 years
There are no extrnal borrowings and hence DSCR is at the comfortable level

Debtor, Inventory & Creditors levels are steady for last 3 years. Out of the current liabilities, the
major part i.e. Rs. 181.80 lacs is provision for dividend and creditors is Rs. 56.29 lacs.
Sales: Sales shows increasing trend. The sales has increased from Rs. 8845.60 lacs to Rs.
11366.50 lacs in 2007. The Company expects to achieve the turnover of Rs. 120 Cr in the year
2007-08.
Margin: Margin shows increasing trend.This is mainly on account of reduction in variable costs.
Due to increase in the production, fixed cost per unit as well as variable cost has reduced and
hence margin has increased.
Short Term Loans are working capital facility from HDFC Bank Ltd.
Investment has increased during the year and it is with Cosmos Bank and Indian Overseas Bank.
The customer was with Cosmos Bank and hence they have invested in the bank’s share as per
norms. Also group concern is with IOB and hence they have invested in shares of IOB.
SWOT Analysis:
Strengths: Account Conduct is Good, Sales shows good growth in the business
Weakness:
¾ The customer uses lots of metals, which shows wide fluctuations
¾ The competition in this product range is high
¾ The price which is major cost is controlled by Govt of Goa and in case it increases, it
will affect the margin.
Opportunities: Due to increase in the infrastructure demand, the customer’s products has good
scope for the business
Threats:Price fluctuations

Comments of the Entrepreneur: Increase in the price of steel globally, does not directly
affect the company. They are getting profits from the inflation because there is continous
development and the demand for infrastructure is increasing day by day. As there customer are
builders and engineers they are suffering any nkind of heavy losses.but the main is required to
have a constant watch not only towards the price of steels but also towards the changes in the
price of oil and petrol ,as it directly affects the prices of coal.
Ways Out
- Ways out Business Cash flows
- Sale of primary security
- Sale of collateral security
- Personal guarantee (wherever available)
- Legal recourse

MAHALAXMI STEELS
1. COMPANY PROFILE
The Mahalaxmi Steel is a proprietorship concern. The business was started by Mr. Manoj Gupta
who has completed MBA (Marketing) and has basic degree BE (Mech.), in February 2001with
the help of his family but he started full fledged business in 2005. The firm is Iron & Steel trader.
The firm Mainly Deals with the trading and distribution of tools, Alloy Steel Bright Shafting,
Mild Steel Products like M/S Angels, Channel & Beams. The Firm is the Industrial Suppliers to
Major Industries in and around Pune. The regular clients are the Industries like, Suttati
Enterprises Pvt. ltd, Precision Automation & Robotics (I) Ltd (PARI). Maheshwari Forgings &
Sane’s.
The huge variety and quantity of stock is the main feature of the firm and is the main success
factor. The firm is into trading of various metal components like: M.S. plate, Angle Channel,
Beam, Round Bars, Square Bars, Hot Rolled and cold rolled Sheets, TMT bars. Thus, the wide
range of application of the firm's products ensure the year on year growth of the firm.
Major suppliers are Bhushan steel Ltd., Balaji steel Traders and Om Enterprises.
Major customers of the firm are Ravian Groups, Siddhivinayak Kohinoor Association, Surya
engineering, Shubhashree, Kumar housing corporation ltd.,etc.
Recently the business has been developed through the orders of the following clients (figures. In
Lacs):
Raviraj group Rs. 2261934.00
Pride purple Sheth Rs. 4359869.00
Prathamesh developers Rs. 491450.00
Kumar housing corporation ltd Rs. 2336793.00
Shubhashree Rs. 1244283.00
Sales of the company:
FY 2008-2009 (1st FY 2006-

QTR) FY 2007-2008 2007 FY 2005-2006
APRIL 116.68 112.19 109.23 95.52
MAY 451.49 432.05 153.81 179.30
JUNE 870.33 832.06 218.31 115.17
JULY 1080.29 259.23 118.42

AUGUST 1297.18 196.33 137.75
SEPTEMBER 1555.24 156.19 115.47
OCTOBER 1804.00 125.08 156.05
NOVEMBER 1919.86 126.49 133.60
DECEMBER 2086.44 191.43 147.81
JANUARY 2283.27 182.88 185.23
FEBRUARY 2417.95 243.94 132.57
MARCH 2655.15
3. BANKING FACILITY
In Rs. Lacs Existing Facilities (HDFC Bank) Proposed Facilities(HDFC Bank)

Cash Credit 47.00 22.00
Total 47.00 22.00
4. FINANCIAL ANALYSIS
P&L Sheet(All figures in Rs. Lacs) March 31, 2008P 31-Mar-07 31-Mar-06
Total Income 2,544.30 2,054.60 1,633.50
PBDIT 56.3 34.2 42.1
Interest 24.0 19.0 15.7
PBT 32.4 13.0 24.4
Tax 0.0 0.0 6.0
PAT 32.4 13.0 18.4
Liabilities
Total Debt 374.9 230.9 122.5
Assets
Net Fixed Assets 11 12.9 30.9
Loan & Advances 5.5 11.0 0.0
Other current assets 55.1 113.3 12.5

Total Assets 699.6 442.2 352.2
FINANCIAL RATIOS
Gross Margin (PBDIT/IT) 2.2% 1.7% 2.6%
Net Margin (PAT/IT) 1.3% 0.6% 1.1%
Interest coverage 2.35 1.80 2.68
DSCR 1.21 0.75 1.95
Debt/Equity Ratio 6.17 5.24 2.87
Leverage (TOL/Tangible Networth) 10.52 9.03 7.25
TOL (excl Unsec loans)/Tangible NW 0.97 1.38 1.48
Current assets/sales 17% 14% 19%
Debtor days 49 27 66
5. OVERALL ANALYSIS
Sales: If the sales figures of first quarter of financial year 2008- 2009 are compared with the
sale figures of first quarter of financial year 2007- 2008, the sales are approximately the same.
Sales of April 2008 – June 2008 is little higher than sales of April 2007- June 2007.
Gross margin: The gross margin has increased to 2.2% from 1.7%.
Net margin: The net margin has increased from 0.6% to 1.3%.
Current Ratio: The current ratio has increased to 1.55 from 1.81.
Debt/ Equity ratio: Debt/ Equity ratio has increased to 6.17 from last year’s 5.24.

Debtor’s turnover is increased to 49 days from 27 days. Inventory turnover has moved up
from 3 days to 4 days. Creditor’s level is increased from 27 to 39 days.
RISKS AND MITIGANTS
Risks Mitigants
Volatility in Prices of Steel leadingThere is not much affect on the margins.

to pressure on margins
Stiff competition Even with the stiff competition,the firm is able to maintain
its position vis-a-vis its competitors.
guarantee (wherever available), Legal recourse.
Industry Risk: The firm is engaged in trading of steel for last 3 years. The increasing trend in the
sales shows that the business is growing at a good pace. The firm is having turnover of approx. 23
crores. They have wide range of products. Thus, the wide range of application of the firm's
products ensure the year on year growth of the firm. The steel trading industry is dominated by
unorganised sector and there multiple number of players in the market. The differentiation is in
terms of ability of the trader to cater to the needs of the customers in terms of variety of the
products requiring the trader to maintain high stocks. One of the other factors impacting the
industry is the volatility in steel prices depending on market demand and supply. In this regard
the firm has the ability to maintain stocks and is able to manage the volatility in prices.
Business Risk: The firm is catering to a large no. of customers. Most of the big firms are their
customers. The firm has the requisite infrastructure including storage space for the stock enabling
them to maintain business levels and increase turnover.
Financial Risk: The financials of the firm are satisfactory and there is increase year on year. The
leverage position of the firm is satisfactory. There is decline in margins, however, overall margins
continue to be above the industry average.
Management Risk: Management of the firm has 3 years of experience in the business and has
the relevant expertise to manage the business successfully. The promoters have contacts in the
industry and have goodwill in the market.

CENTRAL BANK OF INDIA
For the development of small and medium enterprises, central bank of India provides the
following:
1. MSE’s (Micro and small enterprises) Manufacturing Advances
Category Rates of interest for MSE

Upto Rs. 50000 BPLR – 2.25%
Rs. 50000 – Rs.100 Lacs BPLR – 2.00%
Above Rs. 100 Lacs As per the credit rating of the account as per
loan policy of the bank
2. Food and Agro based processing industries

Irrespective of loan amount BPLR – 2.00%
3. MSE’s service advances

Upto Rs. 25000 BPLR – 1%
Rs. 25000 – Rs.2 Lacs BPLR
Above 2 Lacs - Rs. 100 Lacs BPLR + 2%
Above Rs. 100 Lacs As per the credit rating of the account as per
loan policy of the bank
4. Retail traders advances under priority sector

Upto Rs. 25000 BPLR – 1%
Rs. 25000 – Rs.2 Lacs BPLR
Above 2 Lacs - Rs. 20 Lacs BPLR + 2%
5. For medium enterprises the interest rate to be charged on ME is as per the credit rating of the
account as per loan policy of the bank.
6. BPLR – 13.00%
DENA BANK
1. Acknowledgement for receipt of loan application which are complete in all respects.
2. No processing fee and BPLR – 13.00%.
3. Time norms for disposal of loan application :
Upto Rs.25,000 2 weeks

Over Rs.25,000 and upto Rs.5,00,000 4 weeks

Over Rs.5,00,000 8 weeks
4. Collateral security
1. No Collateral required upto Rs.5 Lacs
2. Over Rs.5 Lacs and upto Rs.50 Lacs (based on good track record and financial
position of SME unit.) – No Collateral
3. For advances sanctioned upto a limit of Rs.50 Lacs without collateral security
/ third party guarantee; guarantee is available under Credit Guarantee Scheme
for SME i.e. Credit Guarantee Trust Fund Scheme for Micro & Small
Enterprises (CGTMSE). For obtention of guarantee, a guarantee fee of 1.5%
of credit facility sanctioned for a period of 5 years and Annual service fee @
0.75% of sanctioned amount as on 31st March every year is payable. 50% of
guarantee fee under this scheme is borne by Bank.
5. Loan Quantum
Working Capital Finance Minimum 20% of projected annual sales turnover (Nayak
Committee norms)
Margin (Stake of borrowers) • Upto Rs.25,000 : NIL
• Over Rs.25,000 : 15 to 20% (depending upon
purpose & quantum of advances)
6. Under Dena Shakti Scheme – Scheme for financing to Women Entrepreneurs :

Interest rebate of 0.5% is available in respect of advances upto Rs.15 Lacs
subject to certain conditions.
7. Interest Rates on SSI -The current interest rates are as under:
S. No Size of Loan Rate of Interest

1 Upto Rs. 50,000 BPLR -- 2.50%
2 Above Rs. 50,000 & upto Rs. 2.00 Lacs BPLR -- 1.50%
3 Above Rs. 2.00 Lacs and upto Rs. 5.00 Lacs BPLR
Above Rs. 5.00 Lacs and upto Rs. 10.00
4 BPLR
Lacs
The rates of interest on
loans/Advances classified under SSI
5 Above Rs. 10.00 Lacs sector are to be based on credit
rating, however maximum rate will
be BPLR + 2%
ICICI Bank
ICICIC bank provides the following schemes to the SME’s for their working capital requirement
and to meet with their day to day operations. The working capital facilities offered includes Fund
based and Non-Fund bases facilities

• Fund Based : Cash Credit, Overdraft, Working Capital Demand Loan, Term Loan
• Non Fund Based: Bill Discounting, EPC, LC & BG, CMS and Limits for Foreign
exchange.
1. Flexi Credit (FC)
Purpose It is product suitable for customers in need of working capital

requirement but their financials reflect only average strength.
They can take Overdraft (OD)/Demand Loan (DL)/Letter of
Credit (LC)/Bank Guarantee (BG)/Term Loan (TL) under this
program.
Facilities Available Term Loan / Cash Credit / Overdraft / Bank Guarantee/ Letter
of Credit
Eligibility Proprietorship, Partnership, Company
Quantum of Finance 10Lacs to 5 crore
Maximum Amount 5 crores
Age of business 3 Years (Cases with 1 full year audited financials can also be
funded under this program)
2. Enterprise Credit (FC)

Purpose It is a product suitable for customers with decent financial but
not in a position to offer higher collateral. Suitable for
customers with both term loan and working capital
requirement.
Facilities available Overdraft / Demand Loan/ Letter of Credit/Bank
Guarantee/Cash credit /Export Packing Credit.
Eligibility Proprietorship, Partnership, Company
3. Lending against Credit Card Receivables (LACR)

Purpose Credit Card Securitization (CCS) / Loan Against Credit Card
Receivables (LACR) is a product which offers O/D limits
against security of credit card swipes routed through ICICI
bank machines.
Facilities available Overdraft / Demand Loan/ Term Loan
Eligibility Should have Credit card swiping Machine

Documents required while applying for the loan
S. No Documents
1. Audited Financials for Last 3 years for the Entity
2. Tax Audit Report for Last 3 years along with copy of ITR
3. ITR of all the Partners/ Directors/ Proprietor for last 2 years
4. Latest sales tax/VAT/service tax return
5. Latest income tax return
6. Bank statement for last 12 months
7. Latest income tax return
8. Sanction letter for existing limits.
9. Certificate of registration
10. Proof of ownership: Title Deed, Municipal Tax/ Municipal Charge Bill / Receipt,
Property Tax Paid Bill
11. Residence Proof: Telephone Bill/Electricity Bill Driving License/Valid Passport
12. Identity proof: Driving License, Passport, Pan Card
Collateral (for EC and FC)
S. No Particulars
1. Properties accepted as Security include - Residential / Commercial / Industrial (on
case to case basis) / Godowns (only for Logistics and C&F business).
2. The property needs to be owned and self occupied
3. The security cover may vary from as low as 30% of the facility to as high as
200%.Collateral security coverage is decided by our Credit Professional on
examining the basic documents of your business i.e.: Financials, Bank statements
etc.
4. Loans can be granted to the extent of 60% of the property value with additional
security of charge on current assets, fixed assets, and personal guarantee of
promoters.
CHARGES/FEES PAID
S. No Charges/ fees Value

1. Processing Fees 1-2%
2. Interest Charges 12-15%(depends upon the client)
3. Renewal Fees Negotiable
3. BG/LC Commission Decided at the time of issuance of LC/BG.
4. Transaction charges Nothing specified

5. Current charges As per schedule of charges for current account.
6. Other Charges As mentioned in the sanction letter.
7. BPLR 15%
IDBI (Industrial Development Bank of India)

SME Finance - IDBI has been actively engaged in providing a major thrust to financing of
SMEs. With a view to improving the credit delivery mechanism and shorten the Turn around
Time (TAT), IDBI has set up Centralized Loan Processing Cells (CLPCs) at major centers
across the country. To strengthen the credit delivery process, the CART (Credit Appraisal &
Rating Tool) Module developed by Small Industries Development Bank of India (SIDBI), which
combines both rating and appraisal mechanism for loan proposals, was adopted by IDBI
for faster processing of loan proposals. Recently, a number of products have been rolled out
for the SME sector, which considerably expanded IDBI’s offerings to its customers.
BPLR 12.75%
Dealer Finance
Eligible Segments Distribution chain partners comprising dealers, stockists, distributors,
etc.
Facility Overdraft, Cash Credit, Term loan, Other working capital facilities
Purpose OD/ CC: Working capital/ Meeting temporary mismatch of funds.
TL: Acquisition of fixed assets, renovation of premises, retiring of high
cost debt, etc.
Other working capital facilities on case to case basis.
Loan Amount Minimum: Rs.10 Lacs and Maximum: Rs 500 Lacs.
Tenor One year to 3 years.
Pricing Linked to BPLR
Security Exclusive charge on all assets of the borrower.
Personal Guarantee of the borrower.
Collateral security as deemed necessary.
Processing charges Upto 1% on the loan amount.
FUNDING UNDER Credit Guarantee Fund Scheme for Micro and Small
Enterprises (CGFMSE)
Eligible Segments Should be a Micro and Small Enterprise (manufacturing / services) as

defined under MSMED Act 2006.

Purpose Working Capital & Term Finance for capex / takeover of existing loans
Loan Amount Minimum Rs.25 thousand
Maximum Rs.50 Lacs.
Tenor As per the facilities requested.
Pricing Annual Service Fee and One time Guarantee Fee as specified by Credit
Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).
Interest rate linked to BPLR.
Security Guarantee cover from CGTMSE to the extent applicable on a case-to-
case basis but not exceeding Rs.37.50 Lacs. Exclusive charge on current
and fixed assets purchased out of Bank’s finance. Personal guarantee of
the borrower. No collateral/ 3rd party guarantee will be taken.
Processing charges Upto 1% of the loan amount.
DIRECT CREDIT SCHEME with SIDBI
Eligible Segments All entities in the SME segment as covered under MSMED Act 2006.
Purpose Working Capital & Term Finance capex / takeover of existing loans.
Loan Amount Minimum Rs.10 Lacs.
Maximum Rs.20 Crore.
Tenor Depending upon the nature of facilities.
Pricing Linked to BPLR
Security Charge on fixed and current assets. PG of the proprietor / partners/
promoter directors.
Processing charges Upto 1% of the loan amount. Service tax as applicable.
WORKING CAPITAL FINANCING – IT & ITES ENTITIES
Eligible Micro, Small and Medium Enterprises as per definition given in MSMED Act
Segments 2006 The entity must be engaged in export of software / software services to
acceptable countries.
Facility Overdraft-limit. Loan Equivalent Ratio (LER) for Booking of Forward
Contracts against underlying transactions.
Purpose Working capital finance.
Loan Minimum Rs.25 Lacs and Maximum Rs. 200 Lacs.
Amount
Tenor 12 months.
Pricing Linked to BPLR.
Processing Upto 1.00% of loan amount.
charges
Security Hypothecation of entire current assets.
Hypothecation of the company’s equipments like servers, Routers, Work
stations etc.
Personal Guarantee of Proprietor / Partner / Directors of the company

UNION BANK OF INDIA
Union Bank of India has adopted a policy package for stepping up credit to Small & Medium
Enterprises [SME] with the approval of the Board in its meeting held on 30th September 2005
and subsequently following steps have been initiated in this direction. They provide three
products.
BPLR 12.50%
1. Union High Pride
Quantum Above Rs 5 crores to Rs 25 crores.

Appraisal/Assessment Based on FBF with relaxed terms i.e. Current Ratio at 1.1:1,
DER at 3.00:1 and DSCR at 1.50:1.
Collateral Collateral coverage of not less than 20% of total exposure.
Interest rate Rate ranging from 125 bps below BPLR to maximum
BPLR for Working Capital based on credit rating. Further
interest concession upto 0.50% in case of SME rated by
SMERA or CRISIL.
2. Union Procure
Purpose Financing the purchases of dealers supplying products to

Corporates.
Quantum of finance Above Rs 25 Lacs to Rs 25 crores
Appraisal/Assessment Based on Turnover/FBF with relaxed terms i.e. Current Ratio
not less than 1.17:1, TOL/TNW not exceeding 4.00:1.
Collateral Minimum coverage of 30% of advance value.
Pricing Based on Credit Rating with floor rate of 175 bps below BPLR.
Facility Bills drawn by Corporates on Vendors duly accepted by the
latter.
Margin Nil
3. Union Supply
Purpose Financing against Receivables of the Vendor of goods supplied to the

Corporates.
Quantum Above Rs 25 Lacs to Rs 25 crores.
Appraisal/ Based on Turnover/FBF with relaxed terms i.e. Current Ratio not less than
1.10:1, TOL/TNW not exceeding 4.00:1.
Assessment
Collateral Minimum coverage of 10% of advance value.
Pricing Based on Credit Rating with floor rate of 300 bps below BPLR.

Facility Bills drawn by Vendors on Corporates duly accepted by the latter.
Margin Nil
HSBC(Hong Kong Shanghai Bank Corporation)

The bank provides ‘Business Credit’, a unique lending facility for SME’s. It is indeed the credit
facility which suits the working capital needs.
S. No. Particulars Details

1. Purpose Working capital requirements
2. Credit amount Rs. 5 Lacs – Rs. 35 Lacs
3. Period of facility 1 year
4. Margin required No margin up to 15 Lacs. 25% for credit above Rs. 15
Lacs
5. Interest rate(RLR) 20-22%
6. Interest calculation Interest calculated on daily balances and interest charged
method on monthly basis on the amount utilized
7. Minimum amount due 5% of the outstanding balance as specified on sanction
letter or Rs. 1000 whichever is higher
8. Processing fee 2% plus applicable taxes
9. Late payment charges Rs. 300 plus applicable taxes
10. Annual renewal fee 1% plus applicable taxes
11. Prepayment No prepayment charges
12. Guarantor Personal guarantee of partners in partnership firm or
Directors in Private limited company. Not applicable to
sole proprietors (where personal guarantee applicable
the minimum age is 21 and maximum is 65.
13. Collateral No collateral security is required.
14. RLR 13.75%
Financial Documents
• Sole Proprietor • Last 2 year audited B/S, P&L account

• Partnership • Last 2 year IT returns
• Private Limited • Bank statement for at least 6 months up to 15 Lacs and 12
Company months for above 15 Lacs
Documents
1. Sole Proof of the • Sales/Vat/Service Tax/Excise Registration
Proprietor firm – any of • Registration under Shops and Establishment Act.
the given • Pan ID/ It return of the concern
• Water/ Electricity/ Municipal Tax bill in the

name of the concern.
• MAPIN card in the name of the concern.
Proof of the • Passport
individual– • Photo PAN card
any of the • Voter’s Id
given • MAPIN card
• Driving License
Proof of • Passport
Residence • Voter’s Id
Address– any • Driving License
of the given • Ration Card
• Society Outgoing Bills
• LIC Policy
• Water/ Electricity/ Telephone bill
PAN Card /
PAN allotment
number/Form
60 of the
concern.
2. Partnership • Proof of firm as per Sole proprietor.
Firm • Proof of the partners
• Proof of the residence address
• Partnership deed
• PAN Card / PAN allotment number/Form 60 of
the concern.
3. Private • Proof of the company (Sole proprietor)
Limited • MOA, AOA
Company • Certificate of incorporation
• Board resolution
• Copy of annual establishing the shareholding
pattern
• List of Directors
• Copy of Form 32 filed with ROC
• Proof of the individual identity to be submitted
for all the authorized signatories, all principal
shareholders and at least two Directors
4. Partnership • Proof of firm as per Sole proprietor.
Firm • Proof of the partners
• Proof of the residence address
• Partnership deed
• PAN Card / PAN allotment number/Form 60 of
the concern.

STANDARD CHARTERED
The bank provides loans for the working capital of SME’s. For the Medium Enterprises it
provides
• Fund based
• Non – Fund Based
It covers manufacturers, traders, non-manufacturers (service), Professionals.
Medium Enterprises multi Product (Combination of two or more products)
• OD/CC/TL
• WCTL
• PC
• Bank guarantee
• PCFC
• Pre shipment and Post Shipment Finance/LER(Forward Contracts)
Collateral Security
The bank takes the property as collateral security. It divides the property into the following
• Residential – Luxury/Common
• Commercial
• Quasi commercial
• Industrial
The weightage given on the property is as follows:

1. Residential Luxury 70%
Common 75%
2. Commercial 60%
3. Quasi 60%
commercial
4. Industrial 10%
If the party is not having any property then the loan is given on the basis of FD. The interest rate
is 11%.
Limits: X > 47.30 Lacs. Over and above 1crore CAP of 110 Crores is required. Mid market
above 110 crores. In case of corporate banking X.500 crores. And the rate i.e FTP (Fund
Transfer Price) is FD rate plus 2%.
Basic Criteria
Manufacturing Turnover must be above 92 Lacs
Wholesale 322 Lacs
Non –Manufacturing 460 Lacs

There is a product named WINTAGE product for the existing line of activity (over and
above 3 years). The documents are the returns filed for the last three years and the audited
Balance Sheet must be there. All this is verified by PAMAC and then the request goes to Chennai
for the approval and then the sanction letter is issued.
CC/OD limits
• Three years audited Balance Sheets

• Projected Balance Sheet for two years
• Director and Guarantor
• Personal Guarantee taken as 51% holding – minimum three directors.
In case of Partnership/Sole proprietorship
• Identity of all partners

• Six month bank statements with all existing bankers to check that there should be no
discrepancy.
• Verify IT returns
FEDERAL BANK
The bank provides loan schemes to SME’s under the following
• Trade sector
• Service Provider
• Manufacturing Sector
TRADE SECTOR
Purpose To set up a new venture / to meet Working Capital Requirement

Eligibility Individuals/Firms/Companies or any other legal entity engaged in
lawful business activity
Quantum of Finance 20% of the projected turnover for limits upto 2 crores .MPBF for
limits above 2 crores
Maximum Amount 500 Lacs
Margin • FA – 25%
• Stock – 25%
• Book Debts – 40%
• Cash Margin – For non funded 20%

Repayment Maximum period 30 months subject to review every year
Rate of Interest Based on Credit Risk Assessment
• FB1 – 12% (BPLR – 1.75%)

• FB2 – 12.75%(BPLR – 1.00)
• FB3 – 13.75(BPLR)
Security Working Capital
• Hypothecation/pledge of stock/book debts.

• Drawings against book debts shall be restricted to max 50%
of the limit book debts beyond 90% shall not be considered
for drawing power. In exceptional cases book debts upto
180days considered with justification, at next higher level.
Collateral If value of the landed property taken as primary security for TL is in
excess of TL required, then such excess value could be considered to
meet collateral security requirement.
Processing Fees • TL - 0.50%
• CC - 0.25%
• Non-funded – 0.125%
Service Charges • Branch Head – up to 15%
• Regional Head – up to 25%
SERVICE PROVIDER

Eligibility • FB1
• FB2
• FB3
Nature of facility TL/WC/Non – funded limits
Quantum of Finance 20% of the projected turnover for limits upto 2 crores .MPBF for
limits above 2 crores for contractors(limit on contract value)
Margin • FA – 25%
• Stock – 25%
• Book Debts – 40%
• Cash Margin – For non funded 20%
Repayment Maximum period 30 months subject to review every year
Rate of Interest Based on Credit Risk Assessment
• FB1 – 12% (BPLR – 1.75%)

• FB2 – 12.75%(BPLR – 1.00)
• FB3 – 13.75(BPLR)
Security Working Capital

• Drawings against book debts shall be restricted to max 50%
of the limit, except contractors book debts beyond 90 days

shall not be considered for drawing power. In exceptional
cases book debts upto 180days considered with justification,
at next higher level.
Collateral If value of the landed property taken as primary security for TL is in
excess of TL required, then such excess value could be considered to
meet collateral security requirement.
Processing Fees • TL - 0.50%
• CC - 0.25%
• Non-funded – 0.125%
Service Charges • Branch Head – up to 15%
Manufacturing Sector

Quantum of finance Working capital :20% of the projected turnover
Max. amount Rs. 500 Lacs
Margin • Fixed Assets : 25%
• Stock : 25%
• Book debts : 40%
• Cash Margin : For non fund- 20%
Repayment Max. period 30 months
Rate Of Interest FB1-12.00% (BPLR-1.75%)
FB2-12.75% (BPLR-1.00%)
FB3-13.75% (BPLR)
Security Primary

• Drawings against book debts shall be restricted to max 50% of
the limit, except contractors book debts beyond 90 days shall
not be considered for drawing power. In exceptional cases book
debts up to 180days considered with justification, at next
higher level
Collateral
Without CGTMSE cover
Mortgage of landed property(without stipulation of margin) &/
or other approval collateral securities with existing margin
norms, should cover the enrire liability.
With CGTMSE
• Max. limit upto Rs. 50 Lacs

• Neither collateral security nor third party guarantee is
taken.

Processing Fees • Cash Credit- 0.25%
• Non funded - 0.125%
• Term Loan- 0.50%
Service charges • Branch Head – up to 15%
ORIENTAL BANK OF COMMERCE
Purpose For meeting Working Capital and acquiring assets for business needs.
Eligibility • Traders who are individuals, firms, companies, co-operative
societies, dealing in those goods, which are not prohibited.
• Small business concerns/agencies providing services such as
Xeroxing, dry cleaning, license to deal in petroleum, license for the
applicable business, petrol pump dealers, auto services center,
ISD/STD/PCO booths and others.
Quantum of Max. composite loan of Rs.25Lacs
Finance
Maximum 25 Lacs
Amount
Margin 20%
Repayment Working capital limit to be reviewed every year. However , limit upto
Rs.2Lacs shall be renewed every 3 yrs.
Rate of Interest 13.75%
Security/ • Cash credit/Term Loan upto Rs.2 Lacs:
Collateral 1. In case of CC limit Hypothecation of stock (stock
statement to be ob yearly basis & insurance to be done
invariably).
2. Hypothecation of assets purchased out of loan amount.
3. Personal guarantee of adequate net worth acceptable to the
Bank.
4. Nil collateral.
5. No financial statements are required except statements of
sales, purchases, overheads and net profit.
• Loan/limit above Rs.2Lacs and upto Rs.5Lacs:
1. In case of CC limit hypothecation of stocks (stock
statement to be ob yearly basis & insurance to be done
invariably).
2. In case of Term Loan hypothecation of assets purchased
out of loan amount.
3. Collateral security in the shape of NSC, LIC policy
(surrender value) etc. with value of at least 25% along
with 1/3 party guarantee of adequate net value or
mortgage of immovable property having realizable value

equivalent to 75% of amount sanctioned.
•
Loan/limit above Rs.5Lacs:
Collateral security in the shape of NSC, LIC policy (surrender
value) etc. with value of at least 50% along with 1/3 party
guarantee of adequate net value or mortgage of immovable
property having realizable value equivalent to amount
sanctioned.
Processing Fees 0.50% of loan amount with min. of Rs.500/-.
PLR 13.25%
CLEAN LOAN TO TRADERS

Amount Interest Rates (%)
Upto 0.50 Lacs PLR – 2.00% i.e. 11.25%
Above 0.50 Lacs upto 2 Lacs PLR – 1.50% i.e. 11.25%
Above 2 Lacs upto 10 Lacs PLR – 1.00% i.e. 11.25%
Above 10 Lacs upto 25 Lacs PLR i.e. 11.25%
BANK OF BARODA
The bank provides loans to the Small and Medium Enterprises as:
• SME Short Term Loan
• SME Medium Term Loans
PLR 12.75%
SME Short Term Loan
Purpose To meet temporary shortfall / mismatch in liquidity, for meeting

genuine business requirements only.
Eligibility Small and Medium-sized Corporates, business and Trading houses
(including partnership firms).
Eligibility Criteria • Satisfactory credit rating for the last three years
• Latest Balance Sheet etc. should be available.
• Satisfactory financial performance in terms of sales /

turnover and profits. Negative variance, if any, should not
be more than 10%.
• Satisfactory dealings with the Bank for at least five years.
Quantum of Upto 25% of the existing Fund based Working capital limits
Finance (depending on the Credit Rating), subject to a minimum of Rs. 10

Lacs and maximum of Rs. 250 Lacs.
Period Not exceeding 180 days – minimum 90 days
Margin 18%
Rate of Interest 0.5% below the existing rate on working capital limits
Security/Collateral • First charge / Equitable mortgage of fixed assets of the
company / firm or extension of existing first charge /
equitable mortgage of fixed assets, ensuring that there is a
minimum asset cover of 1.50.
• Extension of Charge on current assets for the additional

facility ensuring that adequate drawing power is available.
• Extension of all existing guarantees of Directors / Third

party guarantees to cover the additional facility.
Processing Fees 0.1% of the amount of loan, with a minimum of Rs. 10,000/- and
maximum of Rs. 25,000/-.
SME Medium Term Loans

Purpose To augment enterprise’s working capital gap and to help in
improvement of current ratio and also for meeting genuine business
requirements. The facility will also be available for repayment of
secured and unsecured Loans of other banks or institutions, but not
for any purpose, which is not related to the enterprises activity.
Eligibility Small and Medium-sized Corporates, business and Trading houses
(including partnership firms).
Eligibility Criteria • Satisfactory credit rating for the last three years
• Latest Balance Sheet etc. should be available.
• Satisfactory financial performance in terms of

Sales/turnover and profits. Negative variance, if any, should
not be more than 10%.
• Debt-equity ratio should not be higher than 2.5:1 and

average DSCR should be not less than 1.5:1.
• Satisfactory dealings with the Bank for at least Three years.
Quantum of Upto 25% of the existing fund based Working capital limits
Finance (depending on the Credit Rating), subject to a minimum of Rs. 25
Lacs and maximum of Rs. 500 Lacs.

Margin 18%
Repayment Not exceeding –36- months, to be repaid in equal quarterly or half-yearly
installments.
Rate of Interest • 0.5% - 1.0% over the Bank’s BPLR, only for the additional
Loan to be granted under the Scheme.
• Prepayment penalty of 1%, if loan is prepaid within -24-

months of drawdown.
Security/Collateral First charge / Equitable mortgage of fixed assets of the Company /

firm or extension of existing first charge/ equitable mortgage of
fixed assets, ensuring that there is a minimum asset cover of 1.50
Processing Fees 0.1% of the amount of loan, with a minimum of Rs. 25,000/- and
maximum of Rs. 50,000/-.
Service Charges No
COSMOS BANK
PRODUCTS:
• Cash Credit
• Bill Discounted
• Non funding facility :-letter of credit & bank guarantee
• Both term loan and overdraft facility available
Purpose • Term Loan for capital investment in fixed assets, such as
Plant & Machinery, Construction/Purchase of factory
Shed/Office Premises, Furniture & Fixtures, Technical
Gadgets/Equipment, etc.
• Vehicle Loan for commercial vehicles, used for the factory,

transportation etc.
• Working Capital Facilities, such as

- Cash-Credit for working capital requirement i.e. to avail the
credit
against the security of stock, debtors or other liquid assets.
- Bills Discounting for finance against accepted bills of the
reputed
buyers.
- Non-Funding Limits, such as Letter of Credit & Bank
Guarantee can
be extended for securing large contracts / work orders.
Eligibility • The applicant should be regular member or nominal member

of bank.
• Applicant should have banking relation with our bank.
• The applicant shall be engaged with trading/ industrial/
Service activity with valid Licenses.
Type of facility Operative Overdraft facility with cheque book.
Quantum of 500 Lacs
Finance
Maximum Loan upto Rs. 50 Lacs
Amount
Margin NA
Repayment On demand or 3 years; Renewable with necessary documents.
Rate of Interest 13% p.a
Security Stock & Debtors will be collateral security, only initial stock/debtors
(Collateral) statement will have to be submitted.
Security (Prime) • In the form of immovable constructed property in
Corporation Limits: if outside Corporation limit- TP Plan &
Collector NA is required. The property shall be self
occupied.
• Any other assignable security such as NSC, LIC, Shares,
FDRs etc in support of the above 1.
• If only shares are offered as security, the maximum limit will
be restricted to Rs.20.00 Lacs.
Processing Fees @ 0.10% of the Loan Demand
Margin 25% of the marketable Security value in bank’s favour (Limit will
be 75%).
Important points for Security:
• The property shall have clear & marketable title & salability.
• Valuation Report of the Panel Value to be considered.
• The property shall not be older than 25 years.
• It should be self occupied.
• If the property is already mortgaged with the bank; the unencumbered portion can
be considered in deserving cases.
• The property will have to be mortgaged with registered mortgage.

BANK OF INDIA
Working Capital Assessment :For providing the working capital loan the bank assess the
working capital of the enterprises.
Upto 5 crores Branches should obtain and scrutinise latest audited financials of the constituent
in all cases of WC limits above Rs.10 Lacs. Turnover Method would be
applicable as mandated under Nayak Committee Recommendations for
financing working capital needs of the SMEs @ 20% of the projected turnover
based on the assumption of a three month operating cycle. It is abundantly
clarified that this 20% is the minimum WC limit to be sanctioned even if the
proponent’s operating cycle is shorter than 3 months. Branches should,
however, ensure to restrict the drawings in such cases to actual drawing power.
MPBF method may be resorted in specific cases with longer operating cycle.
• In case of provisional balance sheets it should be ensured that in the audited financials,
the variation is not beyond +/- 5%.
• The next year’s sales projections made by the borrower, however, would have to be
corroborated by the trend in sales over 2 years, last year actual sales through
verification of the following indicative parameters (besides the financial data
submitted by the borrower):
¾ Sales Ledger/Sales Turnover.

¾ Credit Summation in the account.
¾ Sales Memos or Invoices/Delivery Challans.
¾ Sales Tax Paid/Turnover Tax/Excise Register, as applicable,
¾ Electricity Bills –wherever applicable.
¾ Orders on hand/expected orders.
¾ Installed capacity vis-à-vis the projections.
¾ Overall market trend etc.
Such projections should be within reasonable limits say 25% over last year’s sales. However, in
exceptional cases deviations from this may be allowed if supported by LCs/Firm orders on hand
etc.
The bank consider the following ratios of the firms in providing the working capital finance
Current Ratio:
While a benchmark current ratio of 1.33:1 is always desirable, it is felt that some relaxations are
provided to SMEs in their Current Ratio. The bank may be permitted to maintain a minimum
current ratio of 1.20:1 as against 1.25-1.33:1 stipulated for others. Deviations from this range are

not to be allowed (except by one level above the sanctioning authority), particularly if the rating
gets below AA. Borrower has to improve the position by building up the current assets through
infusion of more capital/funds.
Debt-Equity Ratio:
The following may be accepted as the benchmark in this regard:
W/C Limits up to Rs.5 Crores to Micro & Small Enterprises - 4:1.

W/C Limits over Rs.5 Crores to Micro & Small Enterprises - 3:1.
W/C Limits to Medium Enterprises: 3:1.
Advances to SMEs & SSIs

(a) The rate of interest for all existing and fresh advances to be made to the SMEs will be as
under:
(i) The structure of rate of interest
Slab Existing rate Revised rate
Limit upto Rs.25000/- 10.25% 10.25%
Limit over Rs. 25000/- and upto Rs. 50000/- 10.75% 11.25%
Limit over Rs.50000/- and upto Rs. 2 Lacs 11.75% 12.25%
Limit over Rs. 2 Lacs & upto Rs. 5 Lacs 12.50% 13.00%
Limit over Rs. 25 Lacs As per Credit As per Credit
Risk rating Risk rating
(ii) For limits over Rs.25.00 Lacs, the applicable rate is determined by their Risk Rating within a
band 2% above and below the BPLR . The existing interest structure i.e. the proposed rate
with effect from 01.01.2008 are shown in the following table:
UBICR 0 11.50
UBICR 1 12.50
UBICR 2 13.75
UBICR 3 14.75
UBICR 4 15.25
UBICR 5 15.25
(b) Units rated by accredited Credit Rating Agencies under Performance & Credit Rating Scheme
of NSIC for Small Industries and enjoying credit limits above Rs.2 Lacs will be given further
relaxation in the rate of interest as provided below:

1. Highest Rating Reduction of interest by 0.50%
2. Second Highest Reduction of interest by 0.25%
Rating
(c) Any further relaxation in the rate of interest will be approved by Head Office in terms of the
existing delegation in this regard.
PUNJAB NATIONAL BANK
The bank provides loans to SME’s under the following categories:

1. PNB SME SAHAYOG SCHEME
Purpose The limit can be utilized for contingencies like additional purchase of raw
materials including packing materials/handling charges for the execution
of bulk orders, taking part in national/international trade exhibitions for
creating market base, payment of consultancy charges, repairs to
machinery, labour payments, etc.
Eligibility The scheme is applicable to the existing borrowers whose account
have been classified as standard assets as on 31st March for the last
three consecutive years and is having credit limits above Rs. 20
Lacs.
For sanctioned limits (Term Loan and working capital) above Rs.
20 Lacs the threshold rating should be ‘BB’ as on the closing of
previous financial year and earlier years should not be less than ‘B’.
Quantum of The eligible borrowers will be sanctioned a special credit limit for an
Finance amount equal to 20% of the aggregate working capital limits (i.e. fund
based and non fund based separately) sanctioned to the unit, subject to a
maximum of Rs.25 Lacs and no further adhoc facility should be
sanctioned.
Assessment A simple assessment will be made by computing 20% of the aggregate
cash credit working capital limits (i.e. limits against stocks and bills put
together) or Rs.25 Lacs, whichever is lower. “A unit having aggregate
working capital limits of Rs.25 Lacs will be eligible for a limit of Rs.5
Lacs and a unit having aggregate working capital limit of Rs.150 Lacs or
above, will be eligible for a limit of Rs.25 Lacs”.
Margin Varies between 17 – 20 %
Repayment The borrowers are free to utilize the facility up to 12 times in a year. Each
amount of withdrawal is repayable within maximum period of two
months and there should be a gap of 15 days between the date of
complete repayment of outstanding and the next withdrawal. In any case,
an amount once drawn cannot remain outstanding for more than 2
months. The account is not meant for utilization as a running cash credit
account.
Rate of Interest The rate of interest shall be charged as per extant guidelines linked with
credit risk rating
Security Collateral security to be obtained as per bank's extant guidelines. The

charge on available security by way of primary/collateral to the existing
sanctioned limits will be extended to cover the clean cash credit limit.
Processing Fees 1%
Service Charges No
Accounting The adhoc facility will be made available in the existing account by way
Procedure of increasing the existing limit by 20% or Rs.25 Lacs, whichever is lower
for the stipulated period for which the facility is being extended.
However, the limit so enhanced will automatically be reduced to the
original limit on expiry of the stipulated period. The limit will have to be
reviewed once in every year along with the other working capital limits.
The limit has to be enhanced / reduced if there is a revision in the
quantum of working capita1limits sanctioned.
2. FINANCE FOR TRADERS
Purpose The bank extends credit to the retail and wholesale traders on attractive terms to
meet their requirements of working capital and term loan. Financing stock in
trade, book debts and other assets to be used in the trade. Acquiring book / fixed
assets like setting up of show room, ACs, delivery van, etc.
EligibilityTraders
Quantum of • Small Traders may be granted facility of term loan for working
Finance capital to extent of 60% to 80% of their requirement subject to
maximum of Rs. 5 lac.
• For other traders with a working capital requirement of above Rs.

5 lac, 60% to 80% of their requirement can be financed with no
upper limit.
Term Loan 60% to 80% of the cost of assets to be purchased. There is no upper limit.
Margin Varies between 17 – 20 %
Repayment • Term loan for acquiring fixed assets is repayable in equated
monthly/quarterly installments within a period of 5 to 7 years.
• Term loan for working capital to small traders up to Rs.5 Lacs is
repayable in equal monthly/quarterly installments within a period of 3
to 5 years.
Rate of For advances upto Rs.2Lacs:
Interest
• Working Capital: BPLR - 1% p.a.
• Term Loans: BPLR - 1% + 0.5% (TP) p.a.
For advances above Rs.2Lacs and upto Rs.20Lacs:
• Working Capital: BPLR p.a

• Term Loans: BPLR + 0.5% (TP) p.a
For advances above Rs.20Lacs:

• Based on Credit Risk Rating
• BPLR to BPLR+ 2% + 0.5% (TP) p.a
Security • Hypothecation/pledge/mortgage of assets to be created with the amount
of loan.
• Mortgage of immovable property.
• Negative lien on immovable property.
• Suitable third party guarantee
Processing 1%
Fees
Service No
Charges
BANK OF MAHARASHTRA
The bank provides the following products:
• Cash Credit
• Working Capital
PLR 14%
Purpose To provide working capital finance

Eligibility Individuals/Firms/Companies or any other legal entity engaged in lawful
business activity
Quantum of
Maximum up to 200 Lacs
Finance
Term Loan Size of the advance Mark up Effective ROI(%)
Up to Rs. 50,000 BPLR(-) 2.5 11.50%
Greater than 50,000 up to BPLR(-) 2.00 12.00%
2.00 Lacs
#Greater than Rs. 2 Lacs up BPLR(-)0.75 13.25%
to & inclusive of Rs. 25.00
Lacs
#Greater Rs. 25.00 Lacs& BPLR 14.00%
up to Rs. 1.crore
#Greater Rs.1. crore BPLR + 1. 15.00%
Margin • Upto Rs.25000 :NIL
• Above Rs.25000:25%
Repayment Up to 3 years
Rate of BPLR – 13.25%
Interest Size wise advance SME Advance-CC/WC limit
upto Rs.50000 BPLR(-)2.50% 10.75%
>50000 upto Rs.2Lacs BPLR(-)2.00% 11.25%
>Rs.2Lacs & upto Rs.25Lacs BPLR(-)0.75% 12.50%
>Rs.25Lacs & upto Rs.1crore BPLR 13.25%
>1crore BPLR(+)1.00% 14.25%

Security Collateral
Processing Up to Rs. 25,000/- Nil
Fees
Rs. 25,001/- to Rs. 1,00,000/- Rs. 250/-
Rs. 1,00,001/- to Rs. 2,00,000/- Rs. 250/- per Lacs or part thereof
Time Norms • Upto Rs.25000 :2 weeks
• Over Rs.25000 and upto Rs.5Lacs :4 weeks
• Over Rs.5Lacs :8-9 weeks
STATE BANK OF INDIA

Purpose Financing franchisees of Reliance Industries limited for petroleum retail
outlets. Term loan and working capital.
Eligibility The following having dealership-appointment letter from Reliance
• Corporate
• Non corporate
• Individuals
Quantum of Term loan – maximum Rs.100 Lacs

Finance Cash credit – as per eligibility.
Margin Term loan – 15-25 %
Working Capital-25%
Repayment Term Loan
• Fixed rate of interest - Maximum of 54 EMIs after a moratorium of
6 months
• Floating rate of interest – Maximum of 78 EMIs after a moratorium

period of 6 months
Cash credit – Repayable on demand and to be renewed every year

Rate of Interest 12.25% PLR
Security/Collateral Primary security: Mortgage of land. Hypothecation of stocks/other
assets created out of bank finance.
Collateral security: Security value should be 150% of the overall
exposure in case of dealers with good track record (in any business) of
three years and 200% in other cases. Personal guarantees of the promoters
(dealers). Third party guarantee wherever required
Processing Fees Processing fees:- 0.5%
Transport Plus
Purpose To finance new trucks/tankers/trailers/tippers/luxury buses including take

over of existing similar loans from other banks/institutions

Eligibility Profit making Corporates/Non-Corporates (surface transport operators)
owning more than 10 well-maintained vehicles (including the proposed).
Quantum of Minimum Rs. 10 Lacs and maximum Rs. 10 crores.
Finance
Term Loan: 100 % of the cost of the chassis, inclusive of excise duty.
Other expenses are to be borne by the borrower. Where body building is
not required, 80 % of the cost of the vehicle will be financed. An
additional Term Loan limit, subject to a maximum of 20% of the original
limit may be sanctioned for repair of the vehicle, on or after the 3rd year
if the loan account is regular.
Cash Credit: 80% of receivables.
Maximum Amount 10 Crores
Margin 20%
Repayment Term Loan: Maximum 5 years. Repayment will be in Equated Monthly
Installments (EMI), starting two months after disbursement. Cash Credit:
Repayable on demand, renewal every year
Rate of Interest For Term loans, 8.50% p.a. with monthly rests and for Cash Credit,
11.75% p.a. with monthly rests.
Security Primary: Hypothecation of vehicles financed as well as book debts.
Collateral i) At least 50% of the loan amount
ii) Personal guarantee of promoters and two third-party guarantors.
Processing Fees Processing fees:- 0.5%
Service Charges No
Prepayment Term Loan: Maximum 1% p.a. on the pre-paid amount, for the residual
period.
Insurance As per Banks guidelines.
Applicability Metro/urban/semi-urban centers
SME CREDIT PLUS
Upto Rs. 50,000 8.50%

Above Rs. 50,000 to Rs. 2 Lacs 9.50%
Above Rs. 2 Lacs to Rs. 5 Lacs 10.25%
Above Rs. 5 Lacs to Rs. 25 Lacs 11.00%
Above Rs. 25 Lacs based on credit
-
assessment
SMALL BUSINESS CREDIT CARD
Repayable in 3
Size of Credit limit Rate
years and above
Upto Rs. 50,000 8.5 1.25% below SBAR 9.00
Above Rs. 50,000 to Rs. 2 Lacs 9.5 0.25% below SBAR 10.00
Above Rs. 2 Lacs to Rs. 5 Lacs 10.25 0.50% above SBAR 10.75
Above Rs. 5 Lacs to Rs. 25 Lacs 11.00 1.50% above SBAR 11.75
Above Rs. 25 Lacs based on
- 11.00 to 12.75% -
credit assessment

EICHER MOTOR LIMITED
Repayable in 3 years and Rate

Loan Category Rate
above
Upto Rs. 6 Lacs 9.00 1.00% below SBAR 9.25
Upto Rs. 8 Lacs 10.00 SBAR 10.25
TRANSPORT PLUS
Corporates Type Description Rate

Rs. 15 Lacs to Rs. 7.5 Cr Term loan 0.75% above SBAR 11.00
Rs. 10 Lacs to Rs. 10 Cr Cash Credit 0.50% above SBAR 10.75
HDFC BANK
The bank provides the following:
Purpose Working capital

Eligibility Turnover of Rs.60 Lacs , At least in business from 5 years and 3 years
profit
Quantum of Min. Rs10 Lacs up to Rs.25 crores
Finance
Maximum 25 crores
Amount
Margin • Stock-25%
• Bad debt-40%
Repayment No
Rate of Interest Min. 12.25% PLR being 16%
Security Primary – stock and book debts
Collateral 110% of the loan amount
Processing Fees 1%
Service Charges Not applicable
Renewal fee 0.50%

CONCLUSION OF THE REPORT
The first report was regarding the analysis of the steel customers.
The steel manufacturers say that they do not have much impact on their business. The processing
costs have increased because there is an increase in the price of raw material. Further they say
that the impact is due to the rise in the fuel prices and there is a rise in the demand for housing
and infrastructure sector in Pune. Due to this demand there is a rise in the demand for steel and
growth in sales. So, this has an impact on the net margin of the steel manufacturers and
effectively increases the profits of the firm. So the business of the steel manufacturers is growing
and there is no problem in financing them for the requirement of their working capital finance by
the bank. In fact the bank can negotiate with these clients with their interest rate. The banks
should increase the interest rates and should charge a minimal amount as processing fees.
While if we see the steel traders, some of them say that there is an increase in the demand of steel
but others say that the developers have a huge amount of steel dumped with them for their
requirement. So, there is a decrease in their clients which further impact their net margin. They
say that the margin is same as last year. So, if we take the inflation factor they are on the loss. So
the bank should have a think over financing the small traders of the steel sector.
The second report was regarding the analysis of the norms of different banks providing working
capital finance. The entrepreneurs have the different options available with them in the financial
market. Basically the entrepreneurs look at the following things:
PLR (Prime Lending Rate) Number of Documents required
Collateral Security Interest rate
Service charges Processing fees
Renewal fees Repayment schedule
The customers look for the banks market position and value. Their previous experience with the
bank and their friend’s experience with other banks provide them the reference to have a
relationship with the bank. The customer mainly looks for the minimal obligations and the ease in
getting the amount they required for the loan. So, the proposed customer looks for the minimum
interest rate with the maximum possible service in the shortest span of time. The proposed
customers must look for those banks which have lowest NPA’s (Non Performing Assets) and the
flexibility in the repayment process if required.

BIBILIOGRAPHY
¾ www.hsbc.co.in
¾ www.stancharetered.co.in
¾ www.statebankofindia.com
¾ www.federalbank.com
¾ www.unionbankofindia.com
¾ www.hdfcbank.com
¾ www.hsbc.co.in
¾ www.obcindia.co.in
¾ www.centralbankofindia.co.in
¾ www.icicibank.com
¾ www.denabank.com
¾ www.idbibank.com
¾ www.bankofbaroda.com
¾ www.cosmosbank.com
¾ www.bankofindia.com
¾ www.pnbindia.com
¾ www.bankofmaharashtra.in
¾ www.smallindustry.com
¾ www.india.smetoolkit.org
¾ www.smebank.com
¾ www.sme.in
¾ www.ficci.com
¾ Financial management by I M Pandey.
¾ Financial Management by Khan and Jain.
HDFC also provided a product note on working capital finance.

Credit Risk Analysis of Steel Customers and Analysis Regarding Norms of Banks Providing Working Capital Finance

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Credit Risk Analysis of Steel Customers and Analysis Regarding Norms of Banks Providing Working Capital Finance

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Department of Management Sciences (PUMBA)

Mr. Ashutosh Kolte External Dr. B.V. Sangvikar

Department of Management Sciences -1- University of Pune (PUMBA)

It is very important for me to put forward my sincere gratitude to Mr. Shreedhar

Kochikar, AVP, Business Banking (Working Capital), Regional Office, Pune. I am

provide a sound base to the report structure.

the strength to move on when the times were difficult.

has had a profound impact on my career choices.

I carry high regards for the complete team of HDFC Bank.

Nitin Kumar Banka

Department of Management Sciences -2- University of Pune (PUMBA)

SR NO. TITLE PAGE NO.

Department of Management Sciences -3- University of Pune (PUMBA)

The report was divided into two parts.

Department of Management Sciences -4- University of Pune (PUMBA)

Department of Management Sciences -5- University of Pune (PUMBA)

Department of Management Sciences -6- University of Pune (PUMBA)

Wholesale Banking Services

Department of Management Sciences -7- University of Pune (PUMBA)

Department of Management Sciences -8- University of Pune (PUMBA)

Department of Management Sciences -9- University of Pune (PUMBA)

Department of Management Sciences - 10 - University of Pune (PUMBA)

Estimated Sales turnover Rs. 80 Lacs

Department of Management Sciences - 11 - University of Pune (PUMBA)

Department of Management Sciences - 12 - University of Pune (PUMBA)

Department of Management Sciences - 13 - University of Pune (PUMBA)

Other key findings from the IISI:

Department of Management Sciences - 14 - University of Pune (PUMBA)

The MSCI's Metals Activity Report provides the following highlights:

Department of Management Sciences - 15 - University of Pune (PUMBA)

Current average daily shipping levels remained virtually unchanged in August

Steel prices dip on rising supply and cheaper scrap supply

Department of Management Sciences - 16 - University of Pune (PUMBA)

Department of Management Sciences - 17 - University of Pune (PUMBA)

Department of Management Sciences - 18 - University of Pune (PUMBA)

Department of Management Sciences - 19 - University of Pune (PUMBA)

Department of Management Sciences - 20 - University of Pune (PUMBA)

Sales Comparison (in Lacs)

Department of Management Sciences - 21 - University of Pune (PUMBA)

Risks and Mitigants

Department of Management Sciences - 22 - University of Pune (PUMBA)

1. COMPANY HISTORY AND BACKGROUND

b) PHEONIX PRESS PARTS (PPP) – located at MIDC, CHINCHWAD, PUNE.

Department of Management Sciences - 23 - University of Pune (PUMBA)

b) Credit period extended by the suppliers to MPSTPL is around 30 days.

- Harita Grammer Ltd.

Mittal Precision Phoenix parts

Department of Management Sciences - 24 - University of Pune (PUMBA)

Department of Management Sciences - 25 - University of Pune (PUMBA)

Department of Management Sciences - 26 - University of Pune (PUMBA)

Department of Management Sciences - 27 - University of Pune (PUMBA)

Department of Management Sciences - 28 - University of Pune (PUMBA)

Department of Management Sciences - 29 - University of Pune (PUMBA)

Department of Management Sciences - 30 - University of Pune (PUMBA)

Sales Comparison (in Lacs)

Department of Management Sciences - 31 - University of Pune (PUMBA)

Department of Management Sciences - 32 - University of Pune (PUMBA)

Department of Management Sciences - 33 - University of Pune (PUMBA)

1. COMPANY HISTORY AND BACKGROUND

Department of Management Sciences - 34 - University of Pune (PUMBA)

Department of Management Sciences - 35 - University of Pune (PUMBA)

Major suppliers for the firm:

Department of Management Sciences - 36 - University of Pune (PUMBA)

Department of Management Sciences - 37 - University of Pune (PUMBA)