SUMMER INTERNSHIP REPORT

ON
CREDIT APPRAISAL OF TERM LOAN AND WORKING CAPITAL FINANCING
At
Punjab National Bank, Head Office

Submitted in Partial Fulfillment of the Requirement of

Masters of Business Administration (MBA)
Submitted by
Name: Gunjan Aggarwal
PG No: 02221303915

Submitted to
Name MR. R.K. gupta
Designation: CHIEF MANAGER
Batch: 2015-2017

TECNIA INSTITUTE OF ADAVANCED STUDIES

MADHUBAN CHOWK
NEW DELHI

Date of submission -

DECLARATION

I, GUNJAN AGGARWAL a student of TECNIA INSTITUTE OF ADAVANCED

STUDIES, New Delhi, pursuing MBA course hereby declare that the project work
entitled A Study on Working Capital, Term loan And Credit Appraisal carried on in
PUNJAB NATIONAL BANK, and its value added services is an original work carried
out by me availing the guidance of my project guide to my entire satisfaction. This report
bears no resemblance with any other report submitted to TECNIA INSTITUTE OF
ADVANCED STUDIES, New Delhi during the current academic year, or earlier for the
award of any degree or diploma. I am presenting this during the year 2015 in partial
fulfillment of MASTERS OF BUSINESS ADMINISTRATION (MBA)

I also declare that this project report work is not submitted to any other university for any
degree.

Date:

Name: GUNJAN AGGARWAL

CERTIFICATE

This is to certify that GUNJAN AGGARWAL, a student of MASTERS OF BUSINSS

ADMISTRATION, 2015-2017, TECNIA INSTITUTE OF ADVANCED STUDIES, New
Delhi bearing Roll No. 02221303915 has undertaken the Summer Internship Training at
CREDIT ADMINISTRATION DIVISION, PUNJAB NATIONAL BANK, HO: BHIKAJI

KAMA PLACE, NEW DELHI under my supervision & guidance. He has conducted a
study & completed the Project on.

Signature of the Guide

Seal of Organization

Mr. R.K.Gupta
Chief Manager, Credit
Administration Division;
HO: BHIKAIJI KAMA PLACE,
NEW DELHI

TABLE OF CONTENTS
NO

TITLE

PAGE NO

1.

Acknowledgement

2.

Executive Summary

3.

Introduction
i.
Background
ii.
Company Profile: Punjab National Bank

7
13

SWOT ANALYSIS

14

4.

5.

About Project

16

6.

Credit Facilities

18

7.

Term loans and working capital Loans

20

8.

Term loan Appraisal

23

9.

Working Capital Financial Appraisal

25

10.

Pricing

26

11.

Credit risk

29

12.

Case study

67

13.

Appendix

94

14.

Conclusion

95

15

Bibliography

96

ACKNOWLEDGEMENT
I wish to express my gratitude to PUNJAB NATIONAL BANK for giving me an
opportunity to be a part of their esteemed organization and enhance my knowledge by
granting permission to do summer training project under their guidance.
I am deeply indebted to the Credit Division and my company guide MR.R.K. GUPTA
(CHIEF MANAGER OF CREDIT DIVISION) of Punjab National Bank for his valuable
and enlightened guidance. He provided me with immense opportunity to learn about the
working at Credit Administration Department (CAD), HO. He took time away from his
busy schedule to help me gain insights into the Credit Management process. He helped
me with my queries at every step of the project and also arranged the critical resources
required for the successful completion of the project.

I am also highly thankful to the Library Staff of PNB who provided me the study
materials and helped me during training.
The learning during the project was immense and valuable. My work included the study
of various aspects of Credit Administration.

Regards
GUNJAN AGGARWAL
TECNIA INSTITUTE OF ADVANCED STUDIES
MADHUBAN CHOWK
EXECUTIVE SUMMARY
This was my First exposure to the corporate world and had an experience of working in
a banking. I was directly working under loan/advances: I was working on the credit
appraisal, Term loan which I feel is the basic requirement of any bank. While working I
observed the significance of the loan/advances in a bank, its working. I also got to
observe various functions of the credit department.
The project, which was given to me in this period of my summer internship, project was
to know the credit appraisal & term loan. For that, I have to talk to manager and try to
understand concept of credit in the bank.
Business needs credit facilities for long term to fund new projects, to expand existing
capacities new projects and in short term to meet operational and working capital
requirement. Banks earn interest income and fee based income on the loans and
advances disbursed.

Punjab National Bank being a leading national bank , provides ideal opportunity to study
the credit delivery mechanisms, processes and procedures prevalent in industry. Credit
Administration process at PNB has been described in details and different types of
credit facilities and credit delivery mechanisms provided to industrial consumers viz.
Overdraft, Term Loans, Working Capital, Cash Credit, Fund Based, Non Fund Based
Credit has been discussed.
Thus during this internship-period working on project and simultaneously observing has
proved to be a great experience in all as I have got to see and understand various
situations of the employees. I would like to conclude by saying that it is been a great
learning for me through this internship. I understand some realities of the bank , as, I
was part of the everyday activities of the organization. I also learned the fact that no
department can work on its own each department have to depend on other in one-way
or the other.
1. INTRODUCTION
Banking industry at a glance:
Bank is the main confluence that maintains and controls the flow of money to make
the commerce of the land possible. Government uses it to control the flow of money by
managing Cash Reserve Ratio (CRR) and thereby influencing the inflation level.
The functions of the bank include accepting deposits from public and other institutions
and to direct it as a loan and advances to party for growth and development of industry.
It extends loan for the purpose of education housing etc
The bank take the deposit at the lowest rate of interest and give loans at the higher
rates of interest the difference in this become the source of income for banks. this is
known as net interest margin

Banking Industry Of India

Structure of banking industry:

Presently, the Indian banking sector consists of 26 public sector banks, 20 private sector banks
and 43 foreign banks along with 61 regional banks rural banks and more than 90,000 credit
cooperatives
2. About Punjab National Bank
Punjab National Bank (PNB) was established in 1894 and is the second largest
government owned and over all fourth largest bank in India. It has about 6692 branches
across 764 cities and serves over 63 million customers. It has presence throughout the
length and breadth of the country and offers a wide variety of banking services that
include corporate and personal banking, industrial finance, agricultural finance,
financing of trade and international banking. Among the clients of the bank are
multinational companies, Indian conglomerates, medium and small industrial units,
exporters and non-resident Indians. The large presence and vast resource base have
helped the bank to build strong links with trade and industry. The strength of the bank
lies in its corporate belief of growth and stability.

Vision
To be a Leading Global Bank with Pan India footprints and become a household brand
in the Indo- Gangetic Plains providing entire range of financial products and services
under one roof .
To evolve and position the bank as a world class, progressive institution providing
comprehensive financial and related services.
Integrating frontiers of technology and services various segments of the society,
laying more emphasis on the weaker sections of the society.
Committed to excellence in servicing the public debt and also excelling in corporate
Mission
Banking for the unbanked
Use latest technology aimed at customer and act as an effective catalyst for an
overall socio-economic development.
To provide excellent professional services and improve its position as a leader in
financial and related services.
Build and maintain teams of motivated workforce with high work ethics.

Schemes / Products / Services (PNB)

The bank is servicing its millions of customers with the following plethora of services:
Corporate Banking
Personal Banking
Industrial Banking
Agricultural Banking
International Banking

Organizational structure

In a diagrammatical form the top-down approach at PNB can be classified as

follows:-

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Departments of the Company:

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Figure: Major Departments of Punjab National Bank (HO)

10

FUNCTIONING OF VARIOUS DEPARTMENTS

CAD
TD
RMD
IBD
HRD
Brief Introduction of Departments
Credit Administration Department (CAD): Commercial lending organization structure
in PNB consists of Branches, Mid Corporate Branches (MCBs), Large Corporate
Branches (LCBs), Circle Office, ZonalOffice and Head Office (CAD). Credit Division
(CAD) looks after the loan proposals which fall into the purview of GMsHO/ED/CMD/MC/Board. Medium corporate branches are headed by AGMs and LCB by
DGM. Authority to handle loan proposals is distributed as detailed below.
The bank has introduced Grid/Committee system in credit sanction process wherein
every loan proposal falling within the vested powers of DGM and above is discussed in
a credit committee which on the merit of the case recommends the proposal to the
sanctioning authority. Such committee have been formed both at HO, CO and FGM
level, the credit committee at HO includes GM Credit and CGM/GM-RMD. For credit
proposals falling within the vested power of CGM/GM, the credit committee at HO
includes DGM/AGM/Chief Manager-CD and DGM/AGM/Chief Manager RMD. The credit
administration division is to be assisted by Risk Management Division (RMD) and
Industry desk for risk vetting and techno-economic feasibility of credit proposal.
Various Committees and their powers
CAC at CO/ HO level

Headed by

Credit proposals

COCAC

Circle Head

Beyond loaning powers of Incumbent of

the branch but within vested loaning
powers of Circle Head

ZMCAC

Zonal Manager (ZM)

Beyond loaning powers of Circle Head

but not exceeding Rs.50 crore

HOCAC Level-I

Senior most GM (Credit) Above Rs.50 crore& up to Rs.75crore

HOCAC Level-II

Senior most ED

HOCAC Level-III

Managing
CEO

Above Rs.75 crore& up to Rs.150 crore

Director

11

&

Above Rs.150crore& up to Rs.400 crore

Management
Committee

Chairman (MD & CEO)

Above Rs.400 crore.

Human Resource Division (HRD):The banking industry being a service industry, the
human resource constitutes its most precious resource. The success of any bank
depends upon the ability and capacity to leverage its human talent, potential and
capabilities to achieve the greater efficiency increase in its market share as well as its
profitability due to the fast changing economic scenario, technological advancement and
increase in competition in the market.
This calls for attracting talented people, nurturing and developing them, providing them
necessary space for their individual growth, looking after their well-being, creating a
facilitating environment, developing an organizational culture that removes impediments
and foster in them the feeling of pride and belongingness to the organization, enabling
them to align their personal goals with the goals of the organization.
In this scenario, the role of Human Resource Development Division (HRDD) of the bank
is thus to find, attract, engage, upgrade skills, motivate, retain, grow the scarce talent
and to increase their efficiency level to enable them to deliver as per the banks Vision
and Mission through series a of HR interventions.

International Banking Division (IBD):International trade has assumed importance in

the recent years with encouraging performance of the country in the area of
exports/imports and growth in Indian economy. Foreign trade business is important for
banks, keeping in view the fact that it is a good source of generating non-interest
income. International banking division (IBD) having adequate infrastructure, plays a
major role in handling foreign exchange business particularly in exports, imports,
remittances, travel related business and Non- Resident Accounts.

Risk Management Division (RMD): Credit risk is the possibility of loss associated
with changes in the credit quality of the borrowers or counter parties. In a banks
portfolio, losses stem from outright default due to inability or unwillingness of a borrower
or counter party to honour commitments in relation to lending, settlement and other
financial transactions.
PNB has an elaborate risk management structure in place. Credit Risk management
structure at PNB involves:

12

1) Integrated Risk Management Division (IRMD)

RMD frames policies related to credit risk and develops systems and models for
identifying, measuring and managing credit risks. It also monitors and manages industry
risks.
2) Circle Risk Management Departments (CRMDs)
Risk Management Departments at circle level are known as CRMD. Their
responsibilities include monitoring and initiating steps to improve the quality of the credit
portfolio of the Circle, tracking down the health of the borrowable accounts through
regular risk rating, besides assisting the respective Credit Committee in addressing the
issues on risk.
3) Risk Management Committee (RMC)
It is a sub-committee of Board with responsibility of formulating policies/procedures and
managing all the risks.
4) Credit Risk Management Committee (CRMC)
It is a top level functional committee headed by CMD and comprises of EDs,
CGMs/GMs of Risk Management, Credit, and Treasury etc. as per the directives of RBI.
5) Credit Audit Review Division (CARD)
It independently conducts Loan Reviews/Audits.
The risk management philosophy & policy of the bank focuses reducing exposure to
high risk areas, emphasizing more on the promising industries, optimizing the return by
striking a balance between the risk and the return on assets and striving towards
improving market share to maximize shareholders value.
The credit risk rating tool has been developed with a view to provide a standard system
for assigning a credit risk rating to the borrowers of the bank according to their risk
profile. This rating tool is applicable to all large corporate borrower accounts availing
total limits (fund based and non-fund based) of more than Rs. 12 crore or having total
sales/ income of more than Rs. 100 crore.
The Bank has robust credit risk framework and has already placed credit risk rating
models on central server based system PNB TRAC, which provides a scientific method
for assessing credit risk rating of a client. Taking a step further during the year, the Bank
has developed and placed on central server score based rating models in respect of
retail banking. These processes have helped the Bank to achieve fast & accurate
delivery of credit; bring uniformity in the system and facilitate storage of data & analysis
thereof. The analysis also involves analyzing the projections for the future years.

13

3 .SWOT ANALYIS
SWOT Analysis
1. Diversified operations with 5100 branches
2. Strong I. T support with best fit approach
3. Schemes for small and medium scale businesses
4. It is the second largest state-owned commercial bank in
India with about 5000 branches across 764 cities
Strengths

5. Its 56,000+ workforce serves over 37 million customers

1. Less penetration in the urban areas

Weaknesses

2. Inadequate advertising and branding as compared to

other banks
3. Legal issues regarding employees caused a bad name of
PNB

Opportunities

1. Small scale business banking across India

2. Expansion in other countries for international banking
3. Installation of more ATMs and better customers services

Threats

1. Economic crisis and economic fluctuations

2. Highly competitive environment
3. Stringent Banking Norms by the RBI and the Govts

4 . About the Project

Objectives of the Study
To gain insights into the Credit Administration processes of banks (or PNB).
To understand the different types of credit facilities and credit delivery mechanisms
provided to industrial customers viz. Overdraft, Cash Credit, Drawing Rights, Fund
Based Credit, Non Fund Based Credit etc.
To understand the different methods available for risk vetting of lending proposals,
different risk assessment models and the different credit rating procedures.
To understand the appraisal process of Term Loan and Working Capital Financing
proposals.

14

To understand the factors affecting rate of interest levied viz. risk assessment, bank
guidelines, sectoral policies, business considerations etc.
Primary:
The main purpose of the study is the in depth study of the sanctioning and analysis of
the term loan and its appraisal by PUNJAB NATIONAL BANK for Corporates. This
includes the following:

Judge whether term loans are viable or not, i.e. whether they can generate adequate
surplus for servicing its debts within a reasonable period of time and still is left with
some funds for future development. This involves taking an over-all view of the
strengths and weaknesses of the project.
To see whether the management and organization can prove effective for successful
implementation of the project.
Secondary:
To prepare CMA data for WC assessment in order to ensure optimum investment in
current assets so that the normal operations are not affected adversely.
To track & evaluate the health of borrower accounts on a continuous basis through PMS
report that is to detect unsatisfactory/adverse signals/indicators at an early stage in a
comprehensive manner and to propose speedy corrective/remedial actions/steps to
prevent the account from becoming Non Performing Asset as well as to minimize the
loan losses.
To understand the importance of appropriate and effective risk management along with
maintenance of comprehensive risk policies.
To study the treatment of sick units either by their restructuring or by bifurcating the
units.
The bank has to answer following questions.
Whether the company is utilizing its working capital efficiently?

Whether the industry in which company falls has any major negative points, or if its
vulnerable to other economic factors?

The Company is creditworthy or not?

The Management of the Company is efficient or not?

Scope of the Study

This report covers:
Credit Administration at PNB.

15

Various types of Bank Finance.

Term Loans Financing.

Working Capital Financing.

Appraisal Process of Term Loans and Working Capital.

Credit Risk Management.

Credit Risk Models.

Post Sanction Processes.

Case Study describing actual appraisal of a Term Loan proposal and a Working Capital
Financing Proposal.
With ours being an open economy, rapid changes are taking place in the technological
and financial sector, exposing banks to greater risks. Thus, efficient project appraisals
have taken up huge importance as they can keep a check on and prevent induction of
weak accounts to a banks loan portfolio. All possible steps need to be taken to
strengthen the pre-sanction appraisal as prevention is better than cure.
This report seeks to present an overall picture of credit management in the bank as its
effectiveness is highlighted by the quality of its loan portfolio. The study also stands to
understand the process of preparation of CMA data for WC assessment as well as
credit risk management. Both of these are vital for any financial business.
In Indian financial context, it becomes important to keep a track on the borrowers
accounts in order to prevent them turning into NPA. This requires a continuous
evaluation. Furthermore, the sick units shall be suggested to undergo restructuring
and/or bifurcation.

Methodology
To fulfil the objectives of the study following methods were used:
Study of various bank guidelines and circulars.

Study of pre-approved proposals.

Personal interaction with the employees of Bank.

Developing cases based on actual work done at Credit Division.

Reading material available in the library.

Primary Sources:
Discussions with the project guide and staff members.

16

Discussions with other department heads.

Secondary Sources:
RBI guidelines regulating the activities of the banks.

Banks Credit policy and related circulars and guidelines.

Research papers, power point presentations and PDF files prepared by the bank and its
related officials.

Study of proposals and manuals.

5 .Credit Facilities
Punjab National Bank provides different types of credit facilities according to the
banking norms and convenience of the clients. Different type of facilities provided can
be classified as below:
Fund Based Facilities
Fund based facilities are those in that require immediate outlay of funds towards the
borrowing party. Punjab National Bank provides following fund based facilities:
Overdrafts
Overdraft accounts are treated as current accounts. Normally overdrafts are allowed
against the Banks own deposits, government securities approved shares and/or
debentures of companies, life insurance policies, government supply bills, cash
incentive and duty drawbacks, personal security etc. Overdraft accounts should be kept
in the ordinary current account head at branches.
Demand Loans
A demand loan account is an advance for a fixed amount and no debits to the account
are made subsequent to the initial advance except for interest, insurance premium and
other sundry charges. As an amount credited to a demand loan account has the effect
of permanently reducing the original advance, any further drawings permitted in the
account will not be secured by the demand promissory note taken to cover the original
loan. A fresh loan account must, therefore be opened for every new advance granted
and a new demand promissory note taken as security. Demand loan would be a loan,
which is payable on demand in one shot i.e. bullet repayment. Normally, demand loans
are allowed against the Banks own deposits, government securities, approved shares
and/or debentures of companies, life insurance policies, pledge of gold/silver
ornaments, and mortgage of immovable property.

17

Cash Credit Advances

Cash credit account is a drawing account against the credit granted by the bank and is
operated in exactly the same way as a current account on which an overdraft has been
sanctioned. The various types of securities against which cash credits are allowed are
pledge/hypothecation of goods or produce, pledge of documents of title to goods,
mortgage of immovable property, book debts, trust securities etc. In cash credit
accounts the borrower is allowed to draw on account within the prescribed limit as and
when required.

Bill Finance
Bill finance are the advances against the inland bills are sanctioned in the form of limits
for purchase of bills (ODD) or discount of bills (BD) or bills sent for collection. Bills are
either payable on demand or after usage period

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Non-fund Based Credit

While fund based credit facilities require immediate outlay of funds from the bank, nonfund based facilities basically include the promises made by banks in favour of third
party to provide monetary compensation on behalf of their clients if certain situations
emerge or certain conditions are fulfilled.

18

The non-fund based business is one of the main sources of bank income. Income is in
the form of fees and commissions as compared to interest income in case of fund based
lending.
Non-fund based credit plays an important role in trade and commerce. The borrowing
clients of banks prefer to avail of the non fund based facilities mainly because:
a) The facility does not require immediate outlay of funds and therefore the cost of
such funds tend to be lower than the cost of fund based credit facilities.
b) A bank guarantee (BG) or letter of credit (LOC) issued by a bank on behalf of its
client is an off-balance sheet item in the books of clients, hence do not show up
as debt or liability.
For the lending banks, cost of providing non-fund based facilities is significantly lower
than the cost of providing fund-based facilities.
Nevertheless, inherent risks associated with NFB credit facility are same as that
attached with FB credit proposals. In case of default, provision of funds becomes
necessary. Also, NFB exposure is facilities are not treated as off-balance sheet
exposure and minimum capital adequacy need to be maintained against the NFB
exposures as well.
Assessment of Non Fund based facilities shall be subjected to the same degree of
appraisal, scrutiny as in the case of fund based limits because outstanding in these
facilities are to be reckoned at 100% for exposure purposes. Therefore, need based
requirement of a borrower should be assessed after reckoning the lead time, credit
period available, source of supply, proximity of supplier, etc. in case of LCs and industry
practices and business requirements in case of LGs.
The working of NFB assessment is to be incorporated in the appraisal note. Further,
while assessing non-fund facilities, cash flow aspects should also be taken into account.
Bank Guarantees
BGs may be financial or performance in nature. In a financial guarantee, the issuing
banks assumes usual credit risk which is the domain of the banks. However, issue of a
performance guarantee involved technical competency and managerial ability of a
customer to ensure the performance of the contract for which guarantee has been
drawn.
Issuing banks responsibility against the BG is absolute. So proper appraisal needs to
be done before issuing BG as it is the responsibility of the issuing bank to honor its
guarantee when invoked.
Letter of Credit
A document issued by a bank that guarantees the payment of a customer's draft;
substitutes the bank's credit for the customer's credit. It is an undertaking issued by
bank on behalf of the buyer to the seller, to pay for the goods and services, provided

19

that the seller presents the documents which comply with the terms and conditions
stipulated in the LOC. All letters of credit are irrevocable, i.e., cannot be amended or
cancelled without prior agreement of the beneficiary, the issuing bank and the
confirming bank, if any. It is different from BG in the sense that in case of LOC, the
issuing bank does not wait for the buyer to default, and for the seller to invoke the
undertaking. While in BG, comes into play only when the principal party (the buyer) has
failed to pay its supplier.
6 Term Loans and Working Capital Loans
Term Loans
Term loans are those loans that are lent for extended period of time majorly for the
capital expenditure by the firm. This is different from the short term loans which are
mainly provided for meeting working capital requirements and maintaining short term
liquidity.
Term loans are provided for acquisition of fixed assets are to be repaid from the cash
generated from the operations. Credit delivery for term loans are broadly through two
means: Fund based and Non-fund based. Fund based term loans like cash credit
provided outright cash while non-fund based loans like Deferred Payment Guarantee
(DPG) where the liability to make payment crystallizes after the bill again such
guarantees are presented for payments.
Term loans are sanctioned for acquisition of fixed assets like land, building,
plant/machinery, office equipment, furniture-fixture and other capital expenditure like
purchase of transport vehicles and other vehicles, agricultural equipment etc. The term
loan is a loan which is not a demand loan and is repayable in terms of i.e. in Instalments
irrespective of the period or the security cover.
Term loans are normally granted for the periods varying from three to seven years and
under exceptional circumstances beyond seven years. The term loans with remaining
maturity period of above 5 years shall not exceed 50% of the term deposits with
remaining maturity period of above 5 years after taking into account the renewal of term
deposits as per the past trend, as is being done for ALM.
Since term loans are provided for a long tenure ensuring the viability of the project and
sufficient generation of cash over the long tenor of the loan becomes critical. Detailed
process of appraising Term Loan proposals is given in next section.
7 Working Capital Loans
Working Capital refers to the current asset holdings of the firm.Net working capital is the
difference between Current Assets and Current Liabilities. Working capital requirements
depend on various business specific internal factors like operating efficiency, technology
employed and the level of quality control.
Current Assets may further be classified in to two components:
i) A permanent Core Component.

20

ii) Fluctuating Component.

A manufacturing enterprise has to maintain a minimum level of inventory at any point of
time below which production could get impacted. This minimum level of current asset is
called Core Current Asset level. This would be constantly tied up in the business with
changes in sales and activity level.
Fluctuating component is the portion above this level that is continuously changing due
to changes in demand, seasonality of product etc.
Businesses finance permanent core component through long-term sources of fund like
equity or long term loans. Fluctuating Component is financed mainly by availing the
short term loans and other credit facilities from the bank. Main focus here is to avoid
overfunding or underfunding of the operations.
While over funding will amount to locking up of assets unproductively as idling cash or
inventories, at the same time under funding would seriously hamper the day-to-day
operations and pose a threat to the survival of the businesses. Hence, it is critical to
correctly determine the maximum bank finance that should be provided.
8 . CREDIT APPRAISAL FOR TERM LOAN
Credit appraisal of a term loan denotes evaluating the proposal of the loan to find out
repayment capacity of the borrower. The primary objective is to ensure the safety of the
money of the bank and its customers. The process involves an appraisal of market,
management, technical, and financial.
Getting a term loan from a financial institution is not so easy. The corporate asking for
the term loan has to go through several tests. The bank follows an extensive process of
credit appraisal before sanctioning any loan. It analyses the loan proposal from all
angles. The primary objective of credit APPRAISAL is to ensure that the money is given
in right hands and the capital and interest income of the bank is relatively secured.
While appraising a term loan, a financial institution would focus on evaluating the creditworthiness of the company and future expected stream of cash flow with the amount of
risk attached to them. Credit worthiness is assessed with parameters such as the
willingness of promoters to pay the money back and repayment capacity of the
borrower.
Credit Appraisal of Term Loans by Financial Institutions like Banks
Four broad areas of appraisal by banks are a market, management, technical and
management.
1. Market Appraisal:

21

As part of the market appraisal, the very first thing a financial institution would look at is
the gap between demand and supply. Bigger the demand-supply gap, higher is the
chances of the flourishing of that business. The demand versus the proposed supply by
the borrower should have a wide difference in demand of 50000 units against the
proposed supply of 10000 units.
Another most important parameter is marketing efforts and infrastructure. This is the
factor which converts a demand into sales for a business. The marketing side of the
company needs to be very strong as it is very critical to the success of the venture.
2.Management Appraisal:
Management of the company needs to be appraised for their intentions, knowledge, and
dedication towards the project. By intention, it is meant to evaluate the willingness of the
promoters of the company to pay the money back. It needs to evaluate the real
objective of borrowing.
Only good intentions would not generate cash flows to honor the installments of the
loan. The management needs to be strong in terms of their knowledge about business,
commitment towards achieving the set goals etc.
3 Technical Appraisal:
A technical appraisal is subject to the kind of business and industry of the borrower. If
its a manufacturing concern, all those parameters like project site, availability of raw
material and labor, capacity utilization, vicinity to selling market, transportation etc would
be examined. A project needs to be technically very sound to be able to sustain all
business cycles.
4 Financial Appraisal:
After all the other kinds of appraisal, everything boils down to financial appraisal. This
probably is the most important part of credit appraisal of business loans. The reason is
that it expresses everything in terms of money.
Financial appraisal tries to assess the correctness or reasonability of the estimates of
costs and expenses and also the projected revenues. These may include the estimation
of the selling price, cost of machinery, the overall cost of the project and the means of
financing.
Financial appraisal involves extensive financial modeling in excel. Basically, it takes the
financial statements of previous periods and forecasts the future financial position for at
least till the loan matures. From that, the cash flows of each year are compared with the
installment of loan because ultimately the cash flows are going to honor the payments
of the bank.

22

Feasibility of the project is evaluated in terms of debt servicing capacity of the firm. Debt
service coverage ratio is a key ratio which is calculated for each future financial period
and if that ratio is satisfying the norms accepted by the bank, the loan would get another
green signal.
It is difficult to explain the process of appraisal in an article or even a set of articles. It is
a very extensive work being done at financial institutions. They have a separate team of
professionals for conducting such project appraisals.
Calculating Key Financial Ratios
Current financials of existing operations, project funding information like sources of
funds etc. and future projections are used for calculating key financial ratios for a period
of time. These ratios tell us a lot about a unit's liquidity position, managements' stake in
the business, capacity to service the debts etc.
The financial ratios which are considered important are discussed as under:

Debt-Equity Ratio (DER)

DER =

()
, , .

DER signifies how much the project is leveraged. For a project of private firm, equity
capital is brought in by promoter, and hence, lower the DER higher is the promoters
stake in the project. DER also varies from industry to industry. In capital intensive
industries involving large capital investment, DER is normally higher as compared to the
other industries.
Debt Service Coverage Ratio (DSCR)
DSCR =
( ) + +
+

This ratio provides a measure of the ability of an enterprise to service its debts i.e.
`interest' and `principal repayment' besides indicating the margin of safety. The ratio
may vary from industry to industry but has to be viewed with circumspection when it is
less than 1.5. This ratio shows the relationship between cash generating capacity of the
unit and its repayment obligation and indicates whether the cash flow would be

23

adequate to meet the debt obligations and whether there is sufficient margin for the
lending banker.
Tangible Net Worth to Total outside Liabilities (TNW/TOL)
TNW/TOL= Worth (p +
)

This ratio gives a view of borrower's capital structure. If the ratio shows a rising trend, it
indicates that the borrower is relying more on his own funds and less on outside funds
and vice versa.
Profit-Sales Ratio
=

This ratio gives the margin available after meeting cost of manufacturing. It provides a
yardstick to measure the efficiency of production and margin on sales price i.e. the
pricing structure.
8.1.5 Sensitivity Analysis
The sensitivity analysis is carried out by the bank in order to evaluate capacity of the
project to absorb shocks due to adverse movement in prices/ some other adverse
developments and sustain financial viability. The viability of a project is dependent on
various factors which include selling price, cost of raw materials, cost of finance,
availability of critical inputs and dependence on market like buyer/seller market, other
key technical parameters etc.
In the absence of any defined factors and its values for carrying out the sensitivity
analysis, it has been decided that a common 5% sensitivity factor on sale price/cost
price of major raw materials should be applied in appraisals of all the projects
irrespective of the industry. However, 10% sensitivity factor may be applied in highly
volatile industries by assessing the expected volatility in sale price/ cost price of major
raw materials in future on case to case basis.

9 Working Capital Financing Appraisal

24

Appraisal of working capital financing proposals is mainly focused on accurate

assessment of working capital needs of the business. Objective here is to avoid
overfunding or underfunding of the operations. Working capital assessment is widely
researched topic and has evolved over a time.
9.1. Methods of Lending
i) Simplified Turnover Method
Simplified Turnover method based on turnover for assessing working capital finance up
to Rs. 2 crore (up to Rs. 5 crore in case of SME units) shall continue.
ii) MPBF System
Existing MPBF system with flexible approach is followed for units requiring working
capital finance exceeding the above-mentioned amount.
iii) Cash Budget System
Cash Budget System shall be followed in Sugar, Tea, Service Sector, construction
activity, Film Production accounts etc.

. Working Capital Financing Guidelines

1 Tandon Committee Recommendations (MPBF System)
This committee was formed in 1974 under the chairmanship of Shri P.L.Tandon for the
purpose of calculating the effective working capital requirement. It fixed norms for 15
major industries and indicate the maximum permissible limits for inventory holdings.
However, deviations werent allowed to meet unforeseen conditions. The three methods
suggested for lending were:
First Method of Lending:
Banks can work out the working capital gap, i.e. total current assets less current
liabilities other than bank borrowings (MPBF) and finance a maximum of 75 per cent of
the gap; the balance to come out of long-term funds, i.e., owned funds and term
borrowings. This approach was considered suitable only for very small borrowers i.e.
where the requirements of credit were less than Rs.10 lacs.
MPBF: 75% of working capital gap (Total Current Assets Other Current Liabilities)
Second Method of Lending:

25

Under this method, it was thought that the borrower should provide for a minimum of
25% of total current assets out of long-term funds i.e., owned funds plus term
borrowings. A certain level of credit for purchases and other current liabilities will be
available to fund the build up of current assets and the bank will provide the balance
(MPBF). Consequently, total current liabilities inclusive of bank borrowings could not
exceed 75% of current assets. RBI stipulated that the working capital needs of all
borrowers enjoying fund based credit facilities of more than Rs. 10 lacs should be
appraised (calculated) under this method.
MPBF: 75% Total Current Assets Other Current Liabilities
Third Method of Lending:
Under this method, the borrower's contribution from long term funds will be to the extent
of the entire CORE CURRENT ASSETS, which has been defined by the Study Group
as representing the absolute minimum level of raw materials, process stock, finished
goods and stores which are in the pipeline to ensure continuity of production and a
minimum of 25% of the balance current assets should be financed out of the long term
funds plus term borrowings.
MPBF: 75% [(Total Current Assets Core Current Assets) Other Current Liabilities]
Third method of lending was not accepted by RBI for practical implementation and
hence is of only academic interest.
2 Chore Committee Recommendations
This committee streamlined the above guidelines further by stipulating annual review of
working capital credit limits above 50 lacs. Also the bifurcation of cash credit into
demand loan and cash credit components has also been withdrawn.
3 Nayak Committee Recommendations (Simplified Turnover Method)
Nayak committee recommended not to apply the norms for inventory and receivables.
Rather, the working capital limits shall be computed on the basis of a minimum of 20%
of their projected annual Turnover for new and existing units. Out of this, the borrower
shall provide 1/5th of the estimated working capital requirement (5% of PATO) as
margin money of working capital.

26

The Bank has the policy of evaluating MPBF for those limits that exceed 2 crore and up
to 5 crore, for limits less than 2 crore, the bank has a policy of following the simplified
turnover method.
Cash Budget System
Customers enjoying working capital limits in excess of Rs.5 crore can be given option to
adopt the cash budgeting method at the discretion of the bank. In case such borrowers
choose the cash budget system of lending, they have to satisfy the bank that they have
necessary infrastructure in place to submit the required information periodically in time.
The scope of internal MIS should be satisfactory and commensurate with the level of
operations. The borrower must have a finance professional and computerised
environment.
Cash flow based lending is more customer-friendly. This is well suited to units dealing in
seasonal products, construction activities and order based activities. Cash flow based
lending method is popular in developed countries
10 .Pricing
Loan pricing which was earlier based on the BPLR (Benchmark Prime Lending Rate)
regime has now been administered under MCLR (Marginal Cost of Funds Based
Lending Rate)regime as per the RBI directives. Under MCLR system banks specify a
rate above which all the loans are priced. MCLR rate is revised from time to time as per
the leads of RBI review of interest rates that depends on the macroeconomic situations.
At PNB, pricing of loans depends on following factors:
a) Credit Rating of the Client
Better the risk rating of a business lower is the spread (interest charged) over the base
rate.
b) Nature of the business sector
Apart from the credit rating, the business sector to which a borrower belongs also
effects the pricing of the loan. For example pricing for a business in Food processing
sector with credit rating AA will be different from a business in Real estate sector
having the same credit rating AA.

27

c) Special Business Considerations and Competitive Pressures

In consortium financing, PNB have to keep the pricing in line with the other business
partners. Also due to competitive consideration and a view of garnering further business
from reputed clients discounts can be offered. Sometimes, there are special lending
schemes for various sectors having specific pricing guidelines.
All the loans are secured against the collaterals. During the loan appraisal process
collateral are valued for margin of safety requirements and valuation is verified. Type of
banks claim on the collateral i.e. mortgage, hypothecation, first pari-passu charge, lien,
etc is decided.
In addition, the terms and condition for maintenance of the collateral are laid down.
Further Guarantee is sought for the loan from the group holding company. This is known
as Corporate Guarantee. Sometimes personal guarantee is also sought from the
Promoters in case of privately held companies or partnerships.
FACR is one critical financial ratio which is ascertained to ensure that loans are
adequately covered by fixed assets.

11 .Credit Risk
Credit risk is the most fundamental risk faced by a banking company. It is the risk of
default or decline in credit standing of the borrower. It is most difficult to quantify due to
the large amount of subjectivity involved in it.
Traditionally credit risk has been managed by setting up limits to the global exposure,
industry exposure, country exposure and individual client/group exposure. Credit risk
management is extremely important as the pricing of a portfolio or a transaction is
dependent on the risk factor built in.
Credit risk management has mainly two objectives:
1. Manage the asset portfolio in a manner that ensures that the bank have adequate
capital to hedge their risks.
2. Match the return to the risks.
Among the different types of risks, credit risk is the crown jewel as the profitability and
liquidity of the bank depends largely on forecasted cash flows.

28

Credit Risk needs to quantified so that it becomes more objective to deal with it. PNB
has its own credit risk analysis policy.

Risk Analysis at PNB

PNB has elaborate risk management structure, process and procedures in place. For
the appraisal of the loan proposals, RMD provides the risk ratings for the client and
project based in the patented internal models of the PNB that have been developed
based on statistical analysis of data.
These models are placed on central server based system PNB TRAC, which provides
facility to assess credit risk rating of a client.
This credit risk rating captures risk factors under four areas:
1. Financial evaluation (40%)
2. Business or industry evaluation (30%)
3. Management evaluation (20%)
4. Conduct of account (10%)
Cumulative weighted score is calculated and rating of the project/company is
ascertained as per the chart below:
Rating Category

Description

Score Obtained

Grade

AAA

Minimum risk

Above 80.00

AAA

Between 77.50 - 80.00

AA+

Between 72.50 77.50

AA

Between 70.00 72.50

Between 67.50 70.00

AAA+

Between 62.50 67.50

Between 60.00 62.50

Between 57.50 60.00

ABB+

Between 52.50 57.50

BB

Between 50.00 52.50

Between 47.50 50.00

BBB+

Between 42.50 47.50

Between 40.00 42.50

B-

AA

BB

Marginal risk

Modest risk

Average risk

Marginally

Acceptable

Risk

29

High Risk

Between 30.00 40.00

Caution Risk

Below 30.00

Some of the important risk rating models used in loan appraisals are summarized
as below:
S.
No.
1
2
3

Large Corporate

Applicability
Total Limit
Above Rs. 15 Cr.

Mid Corporate

Between 5 Cr. and 15 Cr.

Credit Risk Rating

New

Project

Rating

Models
Entrepreneur

New

Business Model
Credit Risk Rating model
for banks and FI

Above Rs. 5 Cr.

New

Business

Cr.
Cost of Project above Rs.
15 Cr.

requiring

finance b/w Rs. 20 Lakhs

and 5 Cr.

Sales
Above Rs. 100 Cr.
Between Rs. 25 Cr and 100

Cost of Project up to Rs. 15

Cr.

All Banks and Financial Institutions.

Rating Models and Their Applicability

PNB also takes into account the ratings of the company/project from the independent
credit rating agencies like ICRA, CRISIL, Fitch, CARE etc. Rating history of the
borrower is studied and any degradation in the rating demands causal analysis.
In some cases, final sanction is conditional upon the completion of credit rating by
external agencies
12. CASE STUDY
1. Proposal in Brief :
Sanction of Term Loan of Rs. 68.11 crore and Bank Guarantee of Rs. 4.05 crore for
rehabilitation and operation and maintenance of major district road and part of State
Highway in Kerala namely Vidyanagar- Meppady- Seethangoli (MDR) and Uppala
Kaniyana Road (MDR) having total length of 25 Kms. The project is annuity based and
half yearly annuity is Rs. 10.73 Cr., which will start from March 2018 and will be
received for 13 years and last annuity will receive in Sept 20302. Risk Rating: B2, Score
47.93% under NPM indicating Marginally Acceptable Risk.

30

ITEM NO:
CRR
Group Name

GIST OF THE PROPOSAL

Activity
A. Sanction of Working Capital Limits:
Existing
FB
0.00
Banking
NFB-BG
0.00
Total
0.00

B2 with score of 42.62%

Under New project model.
ABCD Group ( ABCD)
Others Infrastructure
(Rs. in Cr.)
Proposed
(Roads)
0.00
Sole banking
4.05
4.05

PNB share
100%
Gist
of crore
FreshforTerm
Loan of and
68.11
CR.
(i) For Fresh Term Loan: Sanction of Term
Loan of Rs. 68.11
Rehabilitation
operation
and maintenance of major district road proposal
and part of State Highway
in Kerala namely
Vidyanagarfor Construction
of Roads
and
Meppady- Seethangoli (MDR) and Uppala Kaniyana Road (MDR)
having
total
length
of
25
Kms.
BG Limit of Rs.4.05 Cr.
with total cost of Rs. 99.95 crore to be met by way of debt of Rs. 68.11 crore, promoters contribution
of Rs. 16.93 crore and VGF from State Govt. of Rs. 14.91 Crore.
Purpose
Rehabilitation and operation and maintenance of major district road and
part of State Highway in Kerala namely Vidyanagar- MeppadySeethangoli (MDR) and Uppala Kaniyana Road (MDR) having total
length of 25 Kms.
Cost of Project
Total Debt
Promoters
contribution
Grant
Proposed TL
(our share)
DER (Including Grant
Amt)
Repayment Period
Door to door tenor

Rs. 99.95 crore

Rs. 68.11 crore
Rs. 16.93 crore.
Rs. 14.91 crore
Rs. 68.11 crore
2.14:1
121 months.
139 months including construction period of 12 months, moratorium
period of 6 months and repayment period of 121 months.

A. Approval of ROI/Service charges as under:

Facility
Existing
Proposed
Rate of interest

TL

NA

Processing Fee

NFB

NA

Upfront fee

TL

NA

Document
Charges
Commission on
NFB
Other charges, if

TL

NA

5 year MCLR i.e. 9.70%

+1.30% i.e. 11.00% p.a.
i.e. concession of 2.15%.
50% concession i.e. Rs.
60750/50% concession with min.
Rs. 45.00 Lacs.
As applicable

NA

50% concession

NA

As applicable

BG
TL

31

Applicable rate
5 year MCLR i.e. 9.70%
+3.45% i.e. 13.15% p.a.
Rs. 300.00 per lakh or part
thereof.(Rs. 121500/-)
0.90% of the loan amount
with Min. Rs. 90.00 Lacs
Rs. 400/- per Lac or part
thereof max. Rs. 50000/BG: 0.50% per quarter min.
Rs. 200/During implementation:

any
TL
review
charges etc.

10 paisa per Rs 100

After implementation: 5
paisa per Rs 100

B. Approval of other Issues, if any: NIL

Whether fresh/renewal/
Fresh
enhancement
Asset Classification and
NA. As it is a fresh Account.
PMS Rank with score as on
31/03/2016
Credit Risk Rating by Bank
Rating Date of
is B2 indicating Marginally
Rating
Acceptable Risk
Present
B2
27.05.16
Facility Rating:
Previous
NA
NA
Present
Previous

LB2
NA

27.05.16
NA

Score

ABS

Reasons
degradation

for

47.93
NA

NPM
NA

NA
NA

LGD-6
NA

NA
NA

NA
NA

Rating from External

Agency

Not yet rated. The Borrower shall get itself rated within 3 months from date of
sanction failing which additional interest of 1% p.a. shall be charged.

Whether priority/non priority

sector as per PS&LB
guidelines

Non Priority

Weather Agriculture/
Retail/SME/ Others

Other- Infrastructure

a) Whether Sensitive sector

Retail Estate / Capital
Market.
b) Applicable Risk Weight
Consortium/ Multiple
Banking
Lead bank
PNBs Share %
Date of application
Date of receipt of proposalHO
Date of acknowledgement
given to the party
Date of clarifications, if any,
received at HO
Date of submission of
proposal
Date of original sanction
Date of last sanction
Authority/In Principle
Consent/ NBG clearance
with date
Customer ID No.
Activity code

NO
100% (being Unrated)
Sole-Banking
NA
100%
10.03.2016
03.05.2016
27.04.2016
20.06.2016
21.06.2016
NA. fresh relationship
NA, In-principle consent approved by NBG on 21.03.2016 at ROI of
BR+0.90%+0.50%TP i.e. 11.00%{Concession of 2.10%},
Upfront/Processing fee/Commission on BG: 50% concession.
Not created yet
-

32

4. Brief History:
The ABCD a state Govt. undertaking invited Proposal for Rehabilitation of State Highways and Major
District Roads - Package (A) (Modified) Total 25 Km in the state of Kerala under Design Build Finance
Maintenance & Transfer (DBFMT) on Annuity basis.
AB Tollways Ltd is a Company, which is a corporate partnership between Aand B group for execution of
Infrastructure Projects had submitted a bid for execution of Rehabilitation of State Highways and Major
District Roads. The main Criteria for selection of bidder was quoting of lowest annuity to be paid by the
concessioning authority. There were 4 bidders for this project. The details of the same are given
hereunder:
Sr. No.

Bidder Name

Annuity in Cr.
(half yearly)

Lower

AB Tollways Pvt. Ltd.

10.73

L1

EK Consortium Ltd.

12.21

L2

E Engeering

13.50

L3

B Constructions Pvt. Ltd.

14.20

L4

AB Tollways Limited has quoted lowest annuity and declared as L1/Successful bidder.
The company has quoted half yearly annuity of Rs.10.73 cr. The Letter of Award (LOA)
was issued on 30th January 2016.
It was one of the conditions of tender document to float a new SPV for executing the project. Hence AB
TL has incorporated a new company under the name and style of ABCD Kerala Project Ltd., for executing
the project. ABTL will be having 99.99% shareholding in the SPV. The required concession agreement
has also been executed on 29th February 2016.
AB Tollways Ltd.
AB Tollways Ltd. Is a corporate partnership between A and B Group and was incorporated in 2005-06 for
executing BOT projects in Punjab A Builders (India) Private Limited and B Buildcon Private Limited along
with its associates are the major promoters and shareholders of ABTL.
The company has successfully completed and is operating 4 BOT projects and 2 operation and
maintenance projects in the state of Punjab. It has also entered into contracting activity and completed
one NHAI project in the year 2009-10 in the state of Punjab, 1 project in Rajasthan, and 1 in Maharashtra
recently as EPC contractor.
The company is dealing with our bank since 2006 and the track record of the company is satisfactory
The details of the BOT projects undertaken ABTollways Ltd are as under:
Particulars
A
B
C
D
Concession Period
17 years
17years
17 years
17 years
Awarding Authority
PIDB#
PIDB
PIDB
PIDB
Construction period as per 24 months
18 months
18 months
18 months
tender document
Actual Construction period
12 months
12 months
12 months
24 months
Toll Commencement date
6th March 2007
6th March 2007
20th Nov.2007
14th May 2009
Toll Collection in 2014-15 (Cr)
31.25
9.49
37.58
19.89
Toll collection till 30th Dec 2015
25.44
7.98
29.83
14.82
Banker
X
X
Y
Y
Details of 2 Operation & Maintenance Projects:
Particulars
Concession Period

(JN)
12 years

33

Awarding Authority
Toll Commencement date
Toll Collection from May Dec 2015

PWD (B&R)
May 2015
3.18 cr

The company had handed over Ropar-Phagwara project and Jagraon Nakodar project in the year 201415 after completion of contract. PWD (B&R) has once again awarded JN project to RRTL for operation
and maintenance. The concession period is 12 years and the toll collection has started in May 2015.
AB Group have successfully completed 9 BOT projects in the states of Maharashtra, Punjab and
Rajasthan. All the projects of the group have been completed within the time frames with good track
record with respective bankers.
4.A Facilities Recommended:
Nature
Existing
Proposed
Secured/Unsecured along with the
basis thereof (As per RBIs
guidelines)
Fund Based
Fund Based Ceiling
0.00
0.00
Non Fund Based
ILG

0.00

4.05

Unsecured

Non Fund Based Ceiling

Term Loan

0.00
0.00

4.05
68.11

Unsecured

ILC (Sub limit of TL)

TOTAL COMMITMENT

0.00
0.00

0.00
72.16

4.B Our Commitment and Maximum Permissible Exposure Norms:

Existing
Proposed % of Banks Capital
As per Exposure Norms
Funds as on 31.03.16
Amount (%age)
Rs.47,921 Cr.
Company
0.00
72.16
0.15%
7188.15 15%
Group
442.64
524.80
1.10%
19168.40 40%
4.C Exposure of the Borrowing Concern from PNB Group: - Nil
4.D Short Term Loans sanctioned by PNB in last 12 months, if any- NIL
4.E Details of facilities provided outside consortium including exposure on account of
derivatives, if any NIL
5.A
Facilities from PNB Subsidiaries/Exposure by way of investment in Equity/
Debentures/Derivatives/Foreign Exchange etc. : Nil

5.B
(i)Detail of loans from other Banks/Financial Institutions/Other Institutions
- (including WC limits, Term Loans, Lease, ICDs, Corporate Loans, Debentures
etc.)-NA, Fresh.
(ii)Non-interest Income/Service Charges by other Banks: - NA, Fresh
5.C Credit Rating by agencies {CRISIL/ICRA/CARE/FITCH INDIA} with purpose of such rating.
Agency
Rating
Date
of Significance of Purpose
Validity
Rating
Rating
Date
The Borrower shall get itself rated within 3 months from date of sanction failing which additional interest
of 1% p.a. shall be charged. Thereafter, the rating should be obtained and furnished to the Rupee Term
Lenders at least at annual intervals.
5D.
Details of Working Capital Limits from the Consortium/Multiple Banking/JLA Nil
Details of Group /Allied/Associate firms and the facilities sanctioned to them along with
conduct of these accounts with our Bank/ other Banks and comments on adverse

34

indicators, if any.:
Group exposure from Banking Industry:
6.A. Details of Group exposure with our Bank and comments on adverse indicators, if
any.:
(Rs. in Cr.)
Name of the company
FB Limit
NFB Limit
Term Loans
Grand Total
AB Tollways Ltd

15.00

60.00

0.00

3.00

7.00
22.00

74.00
137.00

AB Rajasthan Infra Projects Ltd

AB Highways Ltd.
AB Pvt. Ltd
Total

29.10
66.57
95.39
20.45
72.13
283.64

7.A(i) Financial Position of the Company:

The company is incorporated on 23rd February 2016 and is a subsidiary of ABTollways Ltd. Since no
other activity is being carried out in the borrowing company, there are no past financials. However, the
key financials of the parent company RRTL are as under:
Financials of M/s. AB Tollways Ltd:
(Rs. in Cr.)
Particulars
31.03.13
31.03.14
31.03.15
Audited
Audited
Audited
Operating Income
173.87
145.01
182.98
(Toll Income, Contract Income etc.)
Other Income
6.92
5.83
3.48
Operating Profit/ Loss
33.51
0.92
13.45
Profit before tax
40.43
6.75
16.93
Profit after tax
27.53
8.34
20.31
Depreciation/Amortization
of
Capital
Exp.
29.06
65.01
24.39
undertaken on Road projects (on BOT basis
Cash profit/ (Loss)
56.59
73.35
44.70
Paid up capital
33.50
33.50
33.50
Share Application Money
------Reserves & Surplus
142.18
146.10
161.45
Share premium
65.00
65.00
65.00
Misc. expenditure not w/ off
0
0
0
Accumulated losses
Deferred Tax/liability
24.52
22.93
19.06
a) Tangible Net Worth
265.20
267.53
279.01
b) Investment in allied concerns
128.86
143.81
163.03
c) Net owned funds
136.34
123.72
115.98
Total Borrowings
Secured
Unsecured
Total Assets
Out of which fixed assets & Capital expenditure
(Roads on BOT basis)
Net Working Capital
Current Ratio
Debt Equity Ratio
Term liability/ Adjusted TNW

35

197.63
197.63
512.50
286.51

167.42
167.42
512.70
247.27

160.87
160.87
516.42
384.16

31.04
1.70
0.70
1.36

10.98
1.16
0.59
1.28

(11.96)
0.86
0.52
1.26

170.67
118.84
72.13
81.00
442. 64

Particulars

31.03.13
Audited
1.81
19.27%
468.24
437.20
31.04
44.26
75.30
(31.04)

TOL/Adjusted TNW
Operating Profit/ total receipts
Long Term Sources
Long Term Uses
Surplus/ Deficit
Short Term Sources
Short Term Uses
Surplus/ Deficit

31.03.14
Audited
1.98
0.63%
443.53
432.55
10.98
69.18
80.16
(10.98)

31.03.15
Audited
2.05
7.39%
429.79
441.75
(11.96)
86.63
74.67
11.96

7A (ii) Peer Group Comparison: NA

7A (iii) Key Financials upto last quarter (as per published Un-audited Results in case
of
listed companies): NA
7A (iv) Details of ADRs/GDRs issued by the borrowing company: NA.
7B.
Brief discussion on Financial Indicators - NA, New Company
7.C Capital Market Perception: NA, Not a listed company
7.D
Details of investment in Shares, Debentures, Units or investment of funds outside the
business etc. (Along with comments in case of increase): NA
7.E
Details of Liabilities not accounted for/Contingent liabilities: Nil
Details of derivatives transactions: NA
7.F Position of assessment of income tax/sales tax/wealth tax of the borrowing
concern/partners/proprietor/promoter directors/guarantors:
NA, being a new company. Further, ITR of the directors & holding company(RRTL) has been filed
upto AY 15-16.
7.G
Information on litigation initiated by other banks/FIs against the borrower as per latest
Audited Balance Sheet, if any: NA, being a new company.
7.H Any other adverse features/qualifications in Notes of accounts as per latest Audited
Balance Sheet, if any: NA, being a new company.
7.I Overall likely impact of (7.C to 7.G) on the financial position of the borrowing unit: NA, being a
new Company.
8.
SECURITY
For working capital limits: NA
i.

For Term Loan :

A. Primary
First Charge over annuity to be receivable from Road Infrastructure company Kerala
Ltd with escrow arrangement.
-

Hypothecation of all movables, tangible & intangible, receivables, cash & investments, project
current assets, all project agreements and monies lying in Trust & Retention A/c into which all the
investments in the Project and all Project revenues and insurance proceeds are to be deposited.

Assignment of all the rights along with escrow arrangement on annuity to the extent as
permissible under the already executed concession agreement.

36

Name of
Guarantor

Relationship
with
borrower

Net Worth

Prev.
As at
31.03.14

Shri K DirectorDirector
Shri P, Director Director
Shri
S
,Director
Director
Shri R
Director
Corporate
Guarantee of
M/s
AB
Tollways Ltd.
signment of all insurance
thereof in favour of bank.
-

Present
As at
31.03.15

Immovable property

Prev.
As at
31.03.14

Present
As at
31.03.15

Date of
confidential report

Prev.

As

Present

6.19
4.43
3.74

6.95
4.43
3.00

4.08
2.20
11.77

9.77
2.20
14.34

23.06.15 28.04.16
26.06.15 28.04.16
23.06.15 28.04.16

3.23
NA

3.23
279.01

2.76
0.00

2.76
0.00

23.06.15 28.04.16
12.06.16

policies related to the Project and insurance proceeds received, if any,

Substitution rights for appointment of any other party in the event of default as available with the
concessionaire in favour of bank by way of required power of attorney and subject to terms and
conditions as contained in the concession agreement.

Collateral: Nil
v Status of verification of the IP:
Name of the Officer, who
Designation
PF No.
visited the site/IP
AGM(B) proposed that Site shall be physically verified before disbursement.

Date of Visit

vi Status of Registration with CERSAI: NA.

Whether the acknowledgement for registration with CERSAI has been recorded in Title-Deed
Register NA
If yes, the Asset ID/Security Interest ID No. and date is mentioned below: NA
If no, the reason for not registering with CERSAI be given: NA
8. C
Security Margin (Fixed Asset Coverage Ratiofor term loans): NA
9. Position of Account as on:
a) WC Limits: NA
b) Term Loan: NA
c) Whether end-use has been verified: NA, being a fresh borrower.
10.A Conduct of the Account including in terms of restructuring done, if any, along with details
of terms & conditions not complied with. Comments on following should be given: NA. Fresh
relationship.
However, our bank has financed the holding company i.e. ABTL and other group companies, AB
Rajasthan Infra Projects Ltd B Buildcon Pvt Ltd and AB Highways Ltd. Conduct of these account is
satisfactory. All the projects of ABTL and Other two projects namely AB Rajasthan Infra Projects Ltd.

37

financed by our bank have been implemented and toll collection has commenced.
10.B i) Value of the Account - NA. Fresh relationship
10.B ii) Deposits with details Nil
10.B (iii) Value of Group accounts:
AB Tollways Ltd
(Rs. In Crore)
Limit
2014-15
2015-16
Nature
Amou
Average
Interest/
Yield(% Average
Interest/
Yield(%
nt
Availmen Commissio )
Availmen Commissio )
t
n
t
n
Working
15.00
1.85
12.33
1.68
11.20
capital(FB)
NFB
60.00
0.41
0.19
Term Loan
12.96
12.97
Any
other
0.08
0.08
income such as
Escrow account
fee, etc.
Total
15.30
14.92
AB Rajasthan Infra Projects Ltd
Limit
2014-15
2015-16
Nature
Amount Average
Interest/
Yield Average
Interest/
Yield
Availment
Commission
(%)
Availment
Commission
(%)
NFB
3.00
Term Loan
131.20
18.15
16.69
Any other
0.05
0.05
income
such
as
Escrow
account
fee, etc.
Total
18.20
16.74

B Buildcon Pvt Ltd

Limit
Nature
Amount
Working
capital(FB)
NFB
Any other
income
such
as
Escrow
account
fee, etc.
Total

7.00
79.00

Average
Availment

2014-15
Interest/
Commission
0.29

Yield
(%)

(Rs. In Crore)
2015-16
Average
Interest/
Availment
Commission
0.91

0.24
0.08

0.30
0.08

0.61

1.29

Yield
(%)

PART II
11.A(i) Industry Rating: In terms of L & A Cir. No.08/2016 dated 28.01.2016, the industry rating
for Road project on BOT basis is Neutral.
11 A.(ii) Detailed Industry Scenario and Comments on management, production and

38

marketing as well as Borrowers' diversification, expansion, modernisation programme :

As per Appendix III
12.
Present Proposal:
Sanction of fresh Bank Guarantee limit of Rs. 4.05 Cr.

Sanction of fresh term loan of Rs. 68.11 Cr. for rehabilitation and operation and
maintenance of major district road and part of State Highway in Kerala namely
Vidyanagar-Meppady-Seethangoli(MDR) and UppalaKaniyana Road (MDR) having
total length of 25 Kms.
a) Justification for Fund Based Working Capital Limits: NA
b) Justification for Non Fund based limits: The Company have to provide performance security
of Rs. 4.05 Crores to the authority within 90 days from the date of Concession Agreement in the
form of Bank Guarantee. The Performance Security shall remain in force till the end of
construction period or shall be released upon the request of the concessionaire in case of
expenditure on project is not less than 30% of project cost. The BG is proposed at 10% cash
margin.
c) Justification for Term Loan/ILC:
The ABCD, a state Govt. undertaking is engaged in the development of State Highways and Major District
roads and had invited Proposal for Rehabilitation of State Highways and Major District Roads - Package
(A) (Modified) Total 25 Km in the state of Kerala under DBFMT on Annuity basis.
AB Tollways Limited has been selected as successful bidder based on lowest annuity quoted as
compared to other 3 bidders. The LOA is received on 30 th January 2016. The half yearly annuity quoted
by ABTL is Rs.10.73 cr.
Scope of work: Rehabilitation of the existing carriageway to the specified standard and operation and
maintenance of the road during the concession period. The Rehabilitation work will be within the available
ROW include improvements to the horizontal and vertical alignments, construction of new pavement,
construction/rehabilitation of major and minor bridges, culverts, road intersections, interchanges, drains,
road safety enhancement, project facilities and the operation and maintenance.
Location of the project
Rehabilitation, operation and maintenance of two road projects in
Kasardgod District having total length of 25 Km.
Vidyanagar-Seethangoli road and Upala Kaniyana Road
Length of the Road
25 KM
Awarding Authority
ABCD , State Government Undertaking
Date of Award
30th January 2016
Date of signing of Concession 29th February 2016
Agreement
Concession Period
14 years including Construction period of 12 months
Construction period as per
12 months
tender document
Annuity
Project is annuity based with half yearly annuity of Rs.10.73 Cr.
backed by LC for a period of 13 years commencing from March
2018.
Payment of Annuity
The annuity will be paid through LC. The first annuity will be paid
after 6 months from the date of COD i.e. August 2017.
Road Name

Type of Road
MDR
MDR#

Vidyanagar Meppady-Seethangoli Road

Uppala KaniyanaRoad
Total

39

Length of the road (Km)

9.40
15.60
25.00

#MDR- major district road

The project road constitutes 2 roads in Kasargod District comprising of 25 Km length. Vidyanagar
Meppady-Seethangoli Road i.e road 1 starts from NH 17 and ends at Kumbala Badiadakka road and
Uppala Kaniyana Road starts at NH 17 ends at Kerala Karnataka Border. The entire ROW for both
roads is available with the government and no new land acquisition is involved.
The total concession period for the project is 14 years, including the construction period of 12 months.
The concession period will commence after completion of 180 days from the date of signing of the
concession agreement i.e appointed date. The concession agreement has already been executed on 29 th
February 2016.
The period of 180 days has been given by the Authority for financial closure with permitted extension on
request and if found in order of period not exceeding 30 days.
The company has decided to give EPC contract to M/s. B Buildcon Pvt. Ltd. on a fixed price of Rs. 89.08
Crore Buildcon is engaged in the activity of construction and contracting and has a very vast experience
in execution of road projects of more than 15 years. The company is presently executing 3 construction
projects in Kerala state having the total contract value of Rs. 132.83 crore. Considering the experience of
the company in operating in the state of Kerela for execution of projects as also considering the fact that
the company has major machinery, equipment and other resources required for the execution of the
project, it has been decided to give the EPC work to B Buildcon Private Limited.
The project is annuity based and half yearly annuity is Rs. 10.73 Cr., which will start from March 2018 and
will be received for 13 years and last annuity will receive in Sept 2030. Annuity will be directly deposited to
the proposed Escrow Account. Further, as per the RFQ, the state government has also agreed to open a
revolving letter of credit covering the entire annuity amount and period for the payment of the annuity.
A. Appraising agency: The Project has been appraised by the company internally.
1. Whether vetted by any Technical Officer/ Other Official of Bank (Name and designation to
be furnished): Yes, cost estimates given by the company vetted from banks empanelled
Engineers for Road Projects M/s Yardi Prabhu Consultants and Valuers, Mumbai. As per his
report dated 14.6.2016, the cost of construction estimated at Rs. 89.08 crore and pre operative
expenses amounting Rs. 2.83 crore is reasonable.
Further, AGM(B) has submitted that the total project cost has been defined in the concession
agreement as under:
-

Total project cost means the lower of;

i)
The capital cost of the project as set forth in the financial package,
ii)
The actual capital cost of the project on completion.
In view of the above, the cost estimates given by ABCD in RFQ as Rs. 81 crore has no relevance
as far as project cost for the purpose of financing is concerned.
AGM(B) therefore, recommended for accepting Rs. 99.95 crore as total project cost, which
includes soft cost of Rs. 10.87 crore as vetted by banks approved LIE.

(iii) Summary of cost of project and means of finance:

Cost of Project:
Cost of Project
Cost of construction (EPC Contract value)
Contingency 5%
Preliminary & Preoperative expenses
Interest on term loan during construction
Interest on term loan post construction till receipt of first annuity

40

(Rs in Crore)
Amount
84.84
4.24
2.83
4.29
3.75

Total Cost of Project

Means of Finance

99.95*
Amount
16.93
14.91
68.11
99.95

Equity
VGF (viability gap funding from authority)
Term Loan
Total

*AGM(B) has submitted that The Cost of Project accepted by ABCD is Rs. 81.00 crore, which is
excluding preliminary and pre operative expenses, interest during construction and interest after
construction but before the receipt of first annuity. Construction cost considered by ABCD as per
tender document is Rs. 81 crore i.e. Rs. 3.24 crore per KM.
The cost of construction (EPC contract value) is inclusive of 1% labour cess. The construction cost per
KM worked out by the company is Rs. 3.36 crore as against Rs. 3.24 crore considered by ABCD. The
cost worked out by ABCD is based on commodity and other indices in 2014-15 and the difference of Rs.
0.12 per KM is mainly on account of this.
The project will be funded out of equity of Rs. 16.93 Cr., Grant from the Authority i.e VGF of Rs. 14.91 Cr.
and term loan of Rs. 68.11 Cr. Authority will release the VGF after 50% equity is brought in by the
company and as per the stage of construction completion which is given hereunder:
Construction Phase
Grant (Rs.In Crores)
25%
50%
75%
90%
100%
Total

3.73
3.73
3.73
2.79
0.93
14.91

iv) Sources of Promoters Contribution and the time schedule as to when the funds will be
brought.:
The total contribution from the promoter company i.e. ABTL is proposed at Rs. 16.93 Crores, which will be
brought in from internal cash accruals of the company.
The construction of road will commence from September 2016. The detail of equity to be brought in
respective financial years is given hereunder:
Particulars
Equity

2016-17
11.51

2017-18
5.42

Total
16.93

ABTL is generating toll income from 5 road projects in Punjab. During the year 14-15, the company has
booked the total income of Rs.113.52 crores with PAT of Rs. 20.31 Crores and cash accruals of Rs. 44.70
Crores. The toll income till 31.12.2015 is Rs. 83.06 Cr.
Availability of internal resources with the company to bring in the required equity during the next two years
is estimated hereunder:
(Rs. in crores)
2017-18
Particulars
2016-17
159.78
Total income
140.63
62.97
PAT
42.44
85.16
Cash accruals
72.76
47.40
Repayment to be made during the year
49.81
37.76
Surplus available
22.95

41

Thus the company has the required means to bring in the required equity contributions.
v)Status of tie-up of loans: Company has requested our bank for entire funds requirement by way of
term loan of Rs. 68.11 Cr and BG limit of Rs. 4.05 Cr.
vi)Brief explanation for each major individual item of cost of Project with present status along with
comments on the reasonableness/competitiveness:
Construction cost: The total construction cost as estimated by the company is Rs. 84.84 Crores.
Particulars
Amount
Site clearance
0.32
Earth work
0.90
Granular sub base courses and base courses
9.43
Bituminous courses
21.78
Culverts
3.09
Repairs and rehabilitation of bridge and culverts
0.05
Electrical work
1.98
Drainage and protective works
39.54
Traffic signs, road marking etc
3.89
Bus bay
0.54
Wayside Amenities
1.92
Pavement distress treatment before strengthening
0.58
Sub total
84.00
Add: Labour cess 1%
0.84
Total 84.84
Add: Contingencies 5%
4.24
Total
89.08
The company intends to give a fixed price EPC contract for construction project to B Buildcon Private
Limited (BBPL) for the total consideration of Rs. 84.84 Cr. BBPL is the promoter company of ABTL and
has more than 25 years of experience in the contracting industry including construction of roads and
bridges. RBPL is currently executing two construction contracts having total contract value of Rs. 132.00
Cr. Considering the experience of BBPL in the contracting industry and working in Kerala it has been
decide to award the EPC contract for this project to them.
Preliminary Expenses: The Company has estimated the preliminary and pre-operative expenses at Rs.
2.83 crores and the details of the same are as under:
Paticulars
DPR Preparation Cost

Amount
0.89

Legal and professional and financial Closure Expenses

Performance Guarantee Commission
Insurance/Misc exp.
Total

1.78
0.06
0.10
2.83

Interest during construction: Rate of interest assumed is 11% p.a. payable monthly.
The construction period awarded in the tender is 12 months and interest during
construction has been worked out based on schedule of construction planned by the
company and the debt draw down schedule. The detailed working of interest during
construction period is as under:

42

Particulars

Sept
16

OctDec.16

Jan. 17March 17

Completion of
construction %
Construction cost
Preliminary and preoperative
Interest during
construction
Interest post
completion
Total out flow
Promoters
contribution
VGF from Authority
Loan from the
lenders
Total inflow
Cumulative loan
amount

15%

25%

35%

AprJune
17
20%

July and
Aug. 17
5%

Total

Sept. 17
to Feb.
18

Total
Project

100%

13.36

22.27

31.18

17.82

4.45

89.08

0.00

89.08

2.83

0.00

0.00

0.00

0.00

2.83

0.00

2.83

0.05

0.52

1.03

1.52

1.17

4.28

0.00

4.28

16.25

22.79

32.21

19.33

5.62

96.20

3.75
3.75

3.75
99.95

5.18

3.53
3.73

2.80
7.46

3.37
2.79

0.86
0.93

15.74
14.91

1.19
0.00

16.93
14.91

11.07
16.25

15.53
22.79

21.95
32.21

13.17
19.33

3.83
5.62

65.55
96.20

2.55
3.75

68.11
99.95

11.07

26.60

48.55

61.72

65.55

0.00

2.55

68.11

Contingency: The total construction cost of the project is estimated at Rs. 84.84 Cr. and
company has provided for contingency of 5% on the same amounting to Rs. 4.24
Crores.
vii Comments on all major technical aspects like locational advantage, Technology/
manufacturing process, power, man power, utilities, transportation, etc.
The said project includes two roads namely Vidyanagar-Seethangoli road and Uppala Kaniyana road.
Vidyanagar road starts at Vidyanagar from NH-17 and ends at Kumbala Badiadakka Road. UppalaKaniyana road starts from NH-17 at Kaikamba and ends at Bayar nesr Kerala- Karnataka Border.
The project roads have good connectivity to National Highways and State Highways.
Summary of profitability, Break-Even, DSCR and IRR with comments thereon including
Assumptions underlying profitability projections:
The road project has been awarded with the total concession period of 14 years with construction period
of 12 months. The project is fixed annuity based project with annuity period of 13 years. The construction
is estimated to commence from September 2016 and will be completed till August 2017. The first annuity
is payable after 6 months from the date of COD, hence the first annuity is expected in February 2018.
In case of completion of construction prior to schedule COD, then the bonus for earlier completion of the
project will be paid. Such bonus will be paid along with first annuity. The bonus will be equal to product of
average daily annuity and no. of days of earlier completion.
Amount of fixed half yearly annuity is Rs.10.73 Cr. i.e Rs. 21.46 Cr. p.a. payable for 13 years. The total
annuity payable for concession period is Rs. 278.98 Cr
Expenditure: The revenue costs associated with the project are mainly routine operation and
maintenance of the project. Routine operation and maintenance cost mainly consist of routine type of
repairs and maintenance, salary and wages of staff appointed for maintenance, administrative and other
cost required for maintenance of the project. The total estimate cost is Rs. 1.51 Cr. p.a. which is expected
to increase by 10% every year.

43

Periodic maintenance/renewal costs: The tender provides for the periodic maintenance and major
repairs till the facility is finally handed over to the Authority) with renewal (major maintenance) to take
place within 5th to 7th year. This being a capital expenditure has been provided in the cash flows and
amortized over the life of the project.
The periodic maintenance costs have been considered by company and the details of the same are as
under:
Particulars

Rs. in crores

Due in 2022-23 & will be completed in 2023-24

10.27

Due In 2028-29 & will be completed in 2029-30

14.57

Profitability: The construction of the project is estimated to be complete in August 2017 and first annuity
will be received in February/March 2018. The cash accruals are estimated at Rs. 5.68 Crores for the year
2017-18 and Rs. 13.30 Crores in the year 2018-19. The Net profit in the year 2017-18 is estimated at Rs.
1.20 Crores i.e. 10.59% of annuity income.
The project is eligible for Income Tax benefit U/s 80 (I) of the Income Tax Act. However, though the profits
of the company will be tax free, the company will have to pay Minimum Alternate Tax (MAT) @ 20% on
the book profits and has been factored in accordingly.
DSCR: Since the company is a SPV for execution of the Kerala Road Project, the DSCR for the project
and the company is the same:
(Rs. in crores)
1
2
3
4
5
6
7
8
9
10
11
Particulars
17-18
18-19
19-20
20-21
21-22
22-23
23-24
24-25
25-26
26-27
27-28
Profit after tax
0.62
4.76
5.55
6.11
6.50
5.81
5.53
6.16
7.52
9.02
10.00
Depreciation
4.48
7.39
7.39
7.39
7.39
8.00
8.69
8.69
8.69
8.69
8.69
Interest on term
loan
4.37
7.21
6.78
6.25
5.68
5.06
4.38
3.65
2.81
1.84
0.74
Total (A)
9.48
19.36
19.72
19.75
19.57
18.87
18.61
18.50
19.02
19.55
19.43
Interest on term
loan
4.37
7.21
6.78
6.25
5.68
5.06
4.38
3.65
2.81
1.84
0.74
Repayment of
term loan
1.50
3.50
4.60
5.00
5.50
6.00
6.50
7.25
8.35
9.75
10.16
Total (B)
5.87
10.71
11.38
11.25
11.18
11.06
10.88
10.90
11.16
11.59
10.89
DSCR (A/B)
1.61
1.81
1.73
1.75
1.75
1.71
1.71
1.70
1.70
1.69
1.78
Average DSCR
1.73
Maximum DSCR
1.81
Minimum DSCR
1.61
The commercial operations of the company are estimated to commence from the year 2017-18 and
hence computation of DSCR is from the said year.
Particulars
Stand Alone Project 2017-18
Company as a whole 2017-18
Debt-Equity Ratio
2.14
2.14
Average DSCR
1.73
1.73
Minimum DSCR
1.61
1.61
Interest coverage ratio
1.39
1.39
(ISCR)
2.07 (for full year of operation)
2.07 (for full year of operation

44

Detailed Sensitivity Analysis:

The project has been subject to sensitivity analysis to gauge the viability under different business
scenario. The project is fixed annuity based project, hence increase in expenses and ROI can affect the
viability of the project. The sensitivity has been worked out under different scenario as under:
Particulars
Avg.DSCR
Minimum DSCR
Maximum DSCR
Base case
1.73
1.61
1.81
Increase in Expenses by 10%
1.71
1.60
1.80
Increase in ROI by 1%
1.68
1.53
1.72
It can be seen from the above table that even after increase in cost by 10% and ROI by 1%, the Avg
DSCR is above 1.65 and minimum DSCR is above 1.50.
ix Status of various statutory approvals and clearances:
Condition/permission
Status
Award of the project
LOA dated 30th January 2016 received
Concession agreement
The company has signed the concession agreement on 29 th February
2016
Financial closure
To be achieved within 180 days of signing the concession agreement
i.e. by September 2016
Right of way
The concessionaire will hand over the ROW in accordance to clause
10.3.2 of the concession agreement (Appointed Date being the date
of achieving financial closure).
Land acquisition
The government already has all the required land and no fresh land
acquisition is required
Environment clearance
The road being less than 30 KM and cost being less than 100 Cr.,
environment clearance is not required for the project
Tree cutting
After survey by the company
Permission from Railway Authority
NA
Permission
of
the
State Not required
Government for extraction of
boulders from quarry
Permission of Village Panchayat Not required
and Pollution Control Board for
installation of crushers
Licence for use of explosives
Not required
Permission
of
the
State Water will be drawn from local bore wells and company will take
Government for drawing water from permission at the time of execution
river/reservoir
Licence from Inspector of factories The company will apply for the licence at the time of setting up
or other competent authority for batching plant.
setting up Batching Plant
Clearance of Pollution Control The company will apply at the time of setting up batching plant.
Board for setting up Batching Plant
Clearance of Village Panchayats The company will apply the same at the time of setting up Asphalt
and Pollution Control Board for Plant.
Asphalt Plant
We are stipulating that Company to obtain statutory & non-statutory approvals, consents, NOC &
clearances required for Project implementation.
x

Present physical & financial status of project, if any:

45

Physical Progress: The EPC contractor has started activities including site mobilisation,
mobilization of hot mix plant and site survey has been completed and preparation of DPR is in
advanced stage of completion. However, the EPC contractor will start the billing for the contract only
after financial closure and after the appointed date. By starting all these activities, the project will be
completed before time and the company will be able to get early completion bonus which has not
been considered in the finance model on a conservative side.
Financial Progress: The Company has received share application money of Rs. 8.74 crore and has
given mobilisation advance of Rs. 8.91 crore to EPC Contractor-M/s B Buildcon Pvt. Ltd.
Implementation schedule:
Issue of LOA
30th January 2016
Signing of concession agreement
29th Feb. 2016
Financial Closure
September-16
Start date of construction
September-16
Construction completion date
August-17
Start of First Annuity Payment
February-18
Concession period ends
August-30
xiii Draw Down Schedule Quarter-wise:
The construction period is 12 months. Hence the company will draw the term loan in 12 months period in
line with the execution of the project. The quarterly draw down schedule is projected as under:
Particulars
Sept 16
Oct Jan Apr July
Sept
Total
Dec 16
Mar 17
June 17
Sep 17
Feb 18
Equity
5.18
3.53
2.80
3.37
0.86
1.19
16.93
VGF
3.73
7.46
2.79
0.93
0.00
14.91
Debt
11.07
15.53
21.95
13.17
3.83
2.56
68.11
xiv) The construction will be completed in August 2017 and 1 st annuity will be received in March 2018.
Hence, the interest for the period till receipt of annuity has been capitalized.
xv) Proposed Repayment Schedule:
The loan is proposed to be repaid in structured 20 half yearly installments
Moratorium (in months)
Repayment period in months
No. of installment
Starting Date

6 months
121 months
20 half yearly installments
18 months from the date of first disbursement i.e.
March 2018
End Date (Last installment)
March 2028
Tail Period(18.59%)
29 Months
Door to door tenor (years)
139 months
The year wise repayment schedule is as under
Total repayment
Installment
1.50
2017-18
March 1.50
Sept 1.50
3.50
2018-19
March 2.00
Sept 2.10
4.60
2019-20
March - 2.50
Sept - 2.50
5.00
2020-21
March - 2.50
Sept - 2.75
5.50
2021-22
March - 2.75

46

2022-23
2023-24
2024-25
2025-26
2026-27
2027-28
Total

Sept - 3.00
March - 3.00
Sept- 3.25
March- 3.25
Sept - 3.5
March- 3.75
Sept 4.00
March- 4.35
Sept - 4.75
March 5.00
Sept - 5.25
March - 4.91

6.00
6.50
7.25
8.35
9.75
10.16
68.11

Detailed projected profitability projections, balance-sheet, cash flow are as per Appendix IV.
D) Review of existing term loan with present outstanding: NA, fresh relationship
13. Pricing:
Facility
Existing
Proposed
Applicable rate
TL
NA
5 year MCLR i.e. 9.70% 5 year MCLR i.e. 9.70%
Rate of Interest
+1.30% i.e. 11.00% p.a. +3.45% i.e. 13.15% p.a.
i.e. concession of 2.15%.
Processing Fee
NFB
NA
50% concession i.e. Rs. Rs. 300.00 per lakh or part
60750/thereof.(Rs. 121500/-)
Upfront fee
TL
NA
50% concession with min. 0.90% of the loan amount
Rs. 45.00 Lacs.
with Min. Rs. 90.00 Lacs
Document
TL
NA
As applicable
Rs. 400/- per Lac or part
Charges
thereof max. Rs. 50000/Commission on
BG
NA
50%
concession
i.e. BG: 0.50% per quarter min.
NFB
1.00% p.a +ST i.e. Rs. Rs. 200/- (Rs. 8.10 Lacs per
405000/- p.a.+ST
annum)
Other charges, if TL
NA
As applicable
During implementation:
any
10 paisa per Rs 100
TL
review
After implementation: 5
charges etc.
paisa per Rs 100
(a) Justification:
AGM(B) has submitted that the group has been banking with us since May 2006. The track record of the
group in terms of project performance, revenue and debt servicing is satisfactory.
ABTL, the holding company, maintains significant balances in the various escrow and current accounts
held with the bank.
NBG in its meeting held on 21.03.2016 have approved for evincing interest in the proposal at the above
pricing. Considering the value of the account, float in escrow and current accounts, long relation with the
group and future business prospects, AGM(B) has recommended for approval of pricing as above.
ZM, Ludhiana has endorsed the recommendation of AGM(B).
HO Views: We endorse the recommendations of AGM(B) & ZM.
ROI/other charges stipulated by other participating banks, if applicable: NA
(a) Projected income value:
(Rs. in Cr.)

Income value of borrowal account

47

Sr. Interest/discount income from:

No.

Actual income Budgeted

Remarks
during current income for the
FY 2015-16
next FY
Total Income from FB Credit Facilities A
NA2016-17
2.00
(Interest - CC, OD, PC, TL, Bills Inland & Foreign, Commitment
Charges, TL Review Charges etc.)
Total Income from NFB credit
B
Facilities (Commission - ILC, FLC,
ILG, FLG & Buyer's / Seller's
Credit)
Total Other Income (Processing Fee, C
Upfront Fee, Documentation Charges,
Misc. Income etc.)

NA

0.00

NA

0.70

Net Interest Income on balance lying

in Current Account @ 9.00% p.a. on
average balance (including Allied /
Group Concerns)

NA

NA

NA

NA

NA

2.70

Net Interest Income on balance

lying in Saving Accounts @ 4.00%
p.a. on average balance
(Promoters / Family Accounts)

Grand Total (A+B+C+D)

14. Other Issues not discussed elsewhere: NA
15. Strengths & Weakness with mitigants, if any:

Strength-:
Excellent track record of the holding company, AB Tollways Limited (ABTL) in execution of BOT
Projects. ABTL is having track record of completing majority of projects before stipulated time.
RRTL is currently operating 5 large toll based projects in Punjab. The annual toll collection for the
year 2014-15 from all the 5 projects was Rs.113.52 crores.
The group as a whole has completed more than 12 BOT projects in the state of Punjab,
Maharashtra and Rajashtan. The promoters are experienced in this line of activity, with
established track record.
The scope of work involves only rehabilitation, operation and maintenance of Kerala Road
project.
Project is fixed annuity based, hence no risk of drop in traffic or change in Government policy is
involved.
The construction period for the project is 12 months and in case the company completes the
project before time, bonus will be paid to the company.
The total concession period is 14 years including construction period of 12 months. The total door
to door tenure of the loan is proposed at 139 months. Thus, there is a substantial tail after the
debt servicing is completed.
Weakness:

48

The performance of the infrastructure Industry is directly proportional to the economic growth of
the country. Any slowdown in this, can affect the performance of the company.
Mitigant: The project is fixed annuity based backed by LC from ABCD & there are assured level
of revenues.

Risk Analysis and Mitigation:

RISK FACTORS
RISK LEVEL & RISK
LIES WITH
SPONSOR RISK
Sponsor
Low With Sponsor

Experience
Execution
Capability

&

MITIGATION/COMMENTS

Sponsors have requisite experience in development,

construction and operations of infrastructure projects.
The sponsors also have the requisite financial,
managerial and implementation capability.

2. DEVELOPMENT RISK
I.Pre Construction Risk
Finalization of key Low
With
contracts/
Concessionaire
agreements
Impact
Environment

Approval/
Consents/
Permits

Funding Risk

on

Concession Agreement with the Authority is already

executed on Feb. 29, 2016.
EPC Agreement has been executed on a fixed
price, fixed time and turn-key basis.
Low With Authority
Environment clearance is not required and since it is
a existing alignment of the road, no new land
acquisition is required. The only permissions required
are pollution control and village panchayat
permission for Asphalt and Batch mixing plant, which
the company will apply for at the time of installation
of the same.
Low With Authority All required permits and approvals are under
and Concessionaire
process.
Environment clearence is not required. The only
permissions required are pollution control and village
panchayat permission for Asphalt and Batch mixing
plant, which the company will apply for at the time of
installation of the same.
Medium
With At the end of construction, the overall project debtLenders
and equity ratio is proposed to be 2.14:1 (Including VGF).
Concessionaire
The project sponsors are resourceful and have a
demonstrated track record of meeting their
investment commitments.

II Construction Risk
Land Acquisition
Low With Authority According to the Concession Agreement, the
and Concessionaire
Authority is under obligation to hand over 100% of
the Right of Way, free from all encumbrances for the
project site.
The Project is for rehabilitation and operation and
maintenance of major district road and accordingly
all required ROW is already available with authority
and no land acquisition is required.

49

 The EPC work will be executed by B Buildcon Pvt.

Ltd.
RICKL shall appoint an Independent Engineer to
oversee the activities of RRKRPL during design,
construction, operation and maintenance of the
Project Highway.
Increase in cost
Low
With Fixed price, fixed time turnkey EPC/construction
Concessionaire
contracts covering major portion of capital
expenditure have been envisaged.
The EPC cost has been estimated keeping in view
the
current
market
scenario,
the
project
requirements.
Adequate contingency provision in the project cost
has been estimated.
Proven sponsor's track record delivering results
under BOT schemes.
Utilities
during Low With Authority The Government of Kerala will assist RICKL in
construction
and Concessionaire
obtaining access to necessary infrastructure like
power; water etc. during construction of the road.
Force Majeure (FM) Low With Authority Comprehensive insurance package during
and Concessionaire
construction/operation envisaged. An insurance
adviser will be appointed for the purpose.
The Concession Agreement covers termination
payment under various Force Majeure Events, where
priority payment towards debt due has also been
incorporated.
3.OPERATIONAL RISK
Underperformance Low With Lenders Adequate O&M arrangements would be put in
of Facility
and Concessionaire
place so as to meet the standards set out in the
Concession Agreement. An O&M manual is already
in place according to which the maintenance
procedures shall be carried out.
Operations to be carried out as per industry
practices.
The group has substantial experience in
construction, operation and management of road
projects.
Insurance Risks
Low
With RRKRPL proposes to obtain a comprehensive
Concessionaire
insurance package covering various insurable risks
relating to the construction and operations of the
Project.
Revenue Risks
Low With Authority,
Project is fixed annuity based backed by LC,
Lenders
and payable half yearly commencing 180 days from
Concessionaire
COD.
Force Majeure
Low With Lenders Upon the occurrence of any Force Majeure Event
and Concessionaire
prior to the Appointed Date, the period set forth in
Clause 24.1.1 for achieving Financial Close, shall be
extended by a period equal in length to the duration
Performance
Construction
Contractors

of

Medium
With
Concessionaire

50

of the Force Majeure Event.

Upon the occurrence of any Force Majeure Event
after the Appointed Date but before COD, the
Concession Period and the dates set forth in the
Project Completion Schedule shall be extended by a
period equal in length to the duration for which such
Force Majeure Event subsists.

Risk of Material
Default

16. A

16.B

If force majure event subsists for a period of 180

days or more within a continuous period of 365 days
then either party may in its discretion terminate this
agreement as per clause no. 34.8, where payment of
debt due has been duly stipulated.
Low With Authority The Authority, RRKRPL and Senior Lenders would
and Concessionaire
enter into the Substitution Agreement under which
the Senior Lender would have the right to substitute
RRKRPL in case of any committal of material breach
of the terms of the Concession Agreement, or in case
of any material default in payment under the
Financing Documents.
Concession Agreement provides for a grace
period before the contract would be terminated in
case of default.

Deviations in the proposal observed by the recommending authority: Nil

Recommendations :

Keeping in view the above, AGM(B) has recommended for sanction of fresh term loan of
Rs. 68.11 crore and Bank Guarantee of Rs. 4.05 crore on the terms & conditions as per
AppendixI and approval of pricing as per item no 13 of this note.
Nature
Term Loan
BG
Total Commitment

Proposed (Rs. in crore)

68.11
4.05
72.16

Detailed Terms and Conditions are as per Appendix I.

AGM(B) has certified that the stipulated terms and conditions have been duly discussed
with the borrower.
17. ZM Recommendations:
ZM, Ludhiana has also recommended for approval of sanction of fresh Term Loan of Rs.
68.11 crores and Bank Guarantee of Rs. 4.05 crore and approval of ROI/other charges
as proposed by AGM(B) subject to following stipulations:

51

 Corporate guarantee of Holding company i.e. M/s Rohan Rajdeep Tollways Limited
be taken, apart from the guarantees of directors.
Cost of project be got vetted from the banks empanelled lender Engineer.
Margin on BG limit be kept in the shape of FDR under Banks Lien.
18. HO RECOMMENDATIONS:
1) Credit Risk Rating including Risk Factors & Mitigation:

The credit risk rating of the account is B2 with a score of 47.93%, signifying
Marginally Acceptable Risk, as per risk rating report dated 27.05.2016 carried out by
IRMD (HO) based on New Project Model(IRMD,HO report dated 27.05.2016 enclosed
as per Appendix VIII)
Major risk factors/other risk factors identified and factored in the Credit Risk Rating Report and its
mitigants are as under

S.No
Risk Factors

Mitigants by AGM(B)

DER
at
1.86
and
The project is annuity based project with half yearly annuity of
repayment period of Rs.
11 10.73 crore backed by LC for a period of 13 years
years is higher than
commencing from March 2018. As such higher repayment period
benchmark values.
of 11 years does not have major impact on the company.
IRR
at
15.32
and
The project is annuity based project with half yearly annuity of
Sensitivity on IRR at 14.27
Rs. 10.73 crore backed by LC for a period of 13 years
is lower than benchmark
commencing from March 2018. As such IRR at 15.32 is
values.
reasonable keeping in view the receipt of annuity backed by LC.
Most of the statutory
The company will apply for licenses from factories etc.,
clearances yet to clearance
be
of pollution control board and clearance of village
obtained by the company
Panchayats at the time of setting up Batching Plant and Asphalt
plant.
Delay in payment The
of project is annuity based project with half yearly annuity of
annuity may impact Rs.
the 10.73 crore backed by LC for a period of 13 years
revenue
commencing from March 2018. As such risk relating to delay in
payment of annuity is of no relevance.
BO/ZO to get the company
A condition in this regard has been stipulated to get the external
externally rated as per
rating done within a period of 3 months otherwise penal interest
extant guidelines
will be charged.
HO Views: We are stipulating that AGM(B) & ZO to monitor the Risk factors identified by IRMD, HO and
take necessary remedial steps to safeguard banks interest.
(2) Loan Policy:
The proposal conforms to banks policy guidelines.
(3) Industry Exposure:
Overall exposure ceiling for Infrastructure- Roads & Ports sector has been fixed at 5% of the total
advances of the bank as at 31.03.2016 and segment-wise sub-ceilings have been fixed as under:
(Rs. In crore)
Industry
Infrastructure-Road & ports

52

Exposure
% of Gross Credit in the Industry
Exposure Ceiling as per current loan policy
Amount of NPA in industry
% to total advances in the industry

13920.00
3.22%
5%
494.03
1.14%

Proposed credit exposure is within internal ceilings stipulated by the Bank.

Recommendations :
In view of the foregoing, we endorse the recommendations of AGM(B) and ZM, Ludhiana for approval of
the followings:
(A) Sanction of:
Fresh term loan of Rs. 68.11 crore and Bank Guarantee of Rs. 4.05 crore for rehabilitation and
operation and maintenance of major district road and part of State Highway in Kerala namely
Vidyanagar- Meppady- Seethangoli (MDR) and Uppala Kaniyana Road (MDR) having total
length of 25 Kms.
(B) Pricing (as per item 13):
Facility
TL
Rate of Interest
Processing Fee

NFB

NA

Upfront fee

TL

NA

Document
Charges
Commission on
NFB
Other charges, if
any
TL
review
charges etc.

TL

NA

Proposed
5 year MCLR i.e. 9.70%
+1.30% i.e. 11.00% p.a.
i.e. concession of 2.15%.
50% concession i.e. Rs.
60750/50% concession with min.
Rs. 45.00 Lacs.
As applicable

NA

50% concession

NA

As applicable

BG
TL

Existing
NA

Applicable rate
5 year MCLR i.e. 9.70%
+3.45% i.e. 13.15% p.a.
Rs. 300.00 per lakh or part
thereof.(Rs. 121500/-)
0.90% of the loan amount
with Min. Rs. 90.00 Lacs
Rs. 400/- per Lac or part
thereof max. Rs. 50000/BG: 0.50% per quarter min.
Rs. 200/During implementation:
10 paisa per Rs 100
After implementation: 5
paisa per Rs 100

The above is proposed on the terms and conditions as proposed in Appendix-I and additional
stipulations as follows:ZM Stipulations:
Corporate guarantee of Holding company i.e. M/s AB Tollways Limited be taken, apart from the
guarantees of directors.
Cost of project be got vetted from the banks empanelled lender Engineer(Since Done).
Margin on BG limit be kept in the shape of FDR under Banks Lien.

HO Stipulations:
i. Company to submit an undertaking certifying that accounts of all the group/allied concerns/companies are
in standard category. Further, the branch to extract CIR of the group companies from CIBIL &
Highmark at borrowers cost.

53

ii. Company to obtain statutory & non-statutory approvals, consents, NOC & clearances required for Project
implementation.
iii. The envisaged promoters equity contribution for the financial year 2016-17 to the extent of Rs. 11.51 Cr.
to be brought upfront before release of loan.
iv. Company to maintain DSRA equivalent to installment plus interest of minimum two quarters till LC to be
issued by ABCD .
v.
BO shall visit major risk factor, as identified by the IRMD, and take corrective steps, wherever
required, in order to safeguard the Banks interest.
vi. BO/ZO to monitor the timely induction of Promoters Equity Contribution so that the project is
implemented as per schedule within the given time & cost estimates.
vii. The Borrower shall get itself rated within 3 months from date of sanction failing which additional interest of
1% p.a. shall be charged.
viii. BO/ZO to get the Due Diligence Report before disbursement.
ix. Interest to be recovered on monthly basis as and when levied.
x. BO/ZO to ensure before release of loan that 100% right of Way is available.

Detailed terms & conditions

APPENDIX I
Facility 1
Nature
facility
Amount
Margin
Purpose

Primary
security

of Term loan
Rs. 68.11 crores
31.87% (DER to be maintained at 2.13:1 at all times during the
execution of the project)
To finance
implementation
DBFMT
project
involving
Rehabilitation, operation and maintenance of major district road
and part of State Highway in Kerla namely Vidyanagar- MeppadySeethangoli (MDR) and Uppala Kaniyana Road (MDR)
The term loan together with interest, liquidity damages, costs,
charges, expenses and all other monies payable by the borrower:

54

Escrow over annuity receivables

Assignment
of
rights
under
concession
agreement
Substitution rights under concession agreement
If at any time during the subsistence of the Loan, Bank is of the
opinion that the security provided by the Company, has become
inadequate to cover the loan outstanding, Company shall provide
such other security as may be acceptable to the Bank to cover
such deficiency
Personal and Personal Guarantees of:
corporate
a> Mr. S
guarantees
b> Mr. A
c> Mr. D
d> Mr. R
Shortfall
In addition to the guarantees, all the guarantors would provide
undertaking
irrevocable undertaking that any shortfall in the resources of the
Company for completing the said Project and overrun in the cost
of the Project and shortfall in revenue for meeting the loan
servicing obligations shall be met by them by infusion of fresh
equity / preference capital / unsecured interest free loans.
Up Front Fee
With 50% relaxation (normal rate being 0.90% of the Term Loan
amount) + Service Tax
Documentatio As prescribed
n charges
Interest
One Year MCLR+1.60% = 11% p.a
Draw Down
The draw down procedure is stipulated as under:
Draw down to be made preferably once a month, based on
progress of construction work
Company will submit Draw Down request along with CA
certificate, certifying the expenditure incurred on the
Project
Disbursement amount will be based on CA certificate
regarding expenditure incurred and progress report of
Lenders Engineer appointed by the bank.
Insurance
Insurance Cover (as applicable to such type of projects) with
agreed bank clause to be obtained

55

Repayment

Prepayment
charges

Mandatory
prepayment

Principal amount of loan is proposed to be repayable in 121

months in 20 half yearly installments starting six months from
commencement of commercial operations i.e March 2018
Rs. Crores
Total
Installment
repayment
1.50
2017-18
March - Rs. 1.50 cr
Sept - Rs.1.50 cr
3.50
2018-19
March - Rs. 2 cr
Sept -Rs.2.10 cr
4.60
2019-20
March -Rs. 2.50 cr
Sept - Rs.2.50 cr
5.00
2020-21
March- Rs. 2.50 cr
Sept- Rs.2.75 cr
5.50
2021-22
March - Rs. 2.75 cr
Sept- Rs.3 cr
6.00
2022-23
March- Rs. 3 cr
Sept- Rs.3.25 cr
6.50
2023-24
March- Rs. 3.25 cr
Sept - Rs.3.5 cr
7.25
2024-25
March- Rs. 3.75 cr
Sept -Rs 4 cr
8.35
2025-26
March- Rs. 4.35 cr
Sept - Rs 4.75 cr
9.75
2026-27
March - Rs.5 cr
Sept - Rs.5.25 cr
10.16
2027-28
March - Rs. 4.91 cr
Except as provided below, the Company shall not pay the
outstanding principal amount of the loan in part or full.
For any premature prepayment the company shall pay
prepayment premium of 1% of the amount prepaid.
In case of prepayment out of own sources no prepayment penalty
to be charged.
Upon occurrence of any of the following events, the company
shall mandatorily prepay the outstanding loan amount of the Loan
in full or part, as the context may require, without payment of
prepayment premium from the proceeds of any amount
exceeding Rs. 5.00 Crores received on behalf of the Company for
any such event, if such event involves the receipt of:
a. Any liquidated damages/ penalties paid under any of the
Project Documents to the extent not applied to pay penalties
under the Project Document or to pay for the completion of work
contemplated by such Project Document that was not
contemplated because of the circumstances giving rise to such

56

payment of liquidity damages

a Any proceeds in connection with breach of warranty or
guarantee under any project document to the extent not
applied to repair or replace the defective component that is
subject to such warranty
b Any insurance proceeds to the extent not applied to repair,
renovate, restore or reinstate the Project Assets
c Any proceeds of any termination payment / buy out
payments received under the Concession Agreement
d The proceeds resulting from exploration or other taking by
any Government Authority of the Project Assets of the
Company
e The proceeds resulting from an arbitral or judicial award in
connection with any of the Project Documents

Penal Interest

Upon such prepayment, the installments of loan payable as per

the Repayment Schedule shall stand reduced proportionately.
In case of default in payment of any installment of Principal
amount of the Loan, interest thereon or other monies (except
liquidity damages) becoming due on their due dates, the
Company shall pay on such defaulted amount, penal interest at
the rate of 2% per annum in additional to the applicable rate of
interest for the period of default.
TL to be released on execution of documents as per banks
guidelines.

Loan
documentatio
n
Registration of Charge in favour of ROC in favour of the bank to be got
charges
registered within the stipulated time period
Facility 2
Nature of facility
Amount
Purpose

Margin
Processing fee
Commission
Primary security

Bank Guarantee (project specific)

Rs. 4.05 Crores
Issue of Performance Guarantee in favour of for execution of
Kerala Road project.
The guarantee shall remain in force for construction period or
shall be released on expending on the project 30% of the Total
Project Cost.
The maximum validity of the guarantee would be 12 months
(date of completion of construction).
10%
50% relaxation
With 50% relaxation in normal rates
Counter indemnity of the company

57

Pre disbursement conditions:

Before seeking disbursement, the company shall to the satisfaction of the Bank:
1 Procure and furnish joint and several undertaking to the effect that Equity will be
brought in and that project DER will be maintained at minimum level of 2.13:1
during all times during construction of the project
2 Procure and furnish joint and several undertaking to the effect that ABTL, the
holding company shall retain the majority economic equity interest and
management control over the Company
3 Obtain all statutory clearances required for the Project and submit confirmation to
the Bank in this respect
4 Create and maintain security interest mentioned above under security and
collateral security head
Overall terms and conditions
1. The borrower should maintain adequate books of accounts. As per applicable
accounting practices and standards, which should correctly, reflects its financial position
and scale of operations and should not radically change its accounting system without
notice to the Bank.
2. The borrower should submit to the bank such financial statements as may be
required by the Bank from time to time in addition to the set of such statements to be
furnished by the borrower to the bank as on the date of publication of the borrower
accounts.
3. In case of default in repayment of the loan/advances or in the payment of the interest
thereon or any agrees instalments of the loan on the due date(s) by the borrower, the
Bank and /or the RBI will have an unqualified right to disclose or publish the borrowers
name or the name of the borrower/unit and its directors/partners/proprietors as
defaulters/willful defaulters in such manner and through such medium as the Bank or
RBI in their absolute discretion may think fit.
4. The bank will have the right to share credit information as deemed appropriate with
Credit Information Companies (CICs) or any other institution as approved by RBI from
time to time.
5. The borrower should not induct into its Board as person whose name appears in the
willful defaulters list of RBI/CICs. In case such a person is already on the Board of the
company, it would take expeditious and effective steps of removal of that person from its
Board. Nominee directors are excluded for this purpose.
6. In the event of default in repayment to the Bank or if cross default has occurred the
Bank will have the right to appoint its nominee on the Board of Directors of the borrower
to look after its interests.
7. In stressed situation or restructuring of debt, the regulatory guidelines provide for
conversion of debt to equity. The bank shall have the right to convert loan to equity or
other capital in accordance with the regulatory guidelines.
8. Bank will have the right to examine at all times the borrowers books of accounts and
to have the borrowers factories inspected. From time to time, by officer(s) of the bank
and/or qualified auditors and /or technical experts and or management consultants of
the banks choice. Cost of such inspection shall be borne by the borrower.

58

9. After provision of tax and other statutory liabilities, unless expressly permitted
otherwise, the bank will have a first right on the profits of the borrower for repayment of
amounts due to the bank.
10. The borrower shall keep the Bank informed of the happening of any event likely to
have a substantial effect on their profit or business: for instance, if the monthly
production or sales are substantially less than what had been indicated, the borrower
shall immediately inform he bank with explanations and the remedial steps taken and
/or proposed to be taken.
11. Effect any change in the borrowers capital structure where the shareholding of the
existing promoter(s) gets diluted below current level or 51% of the controlling stake
(whichever is lower), without prior permission of the Bank for which 60 days prior
notice shall be required.
12. The borrower will utilise the funds for the purpose they have been lent. Any
deviation will be dealt with as per RBI guidelines.
13. Promoters shares in the borrowing entity should not be pledged to any
Bank/NBFC/Institution without our prior consent.
14. Each of the following events will attract penal interest/charges as applicable, at rates
circulated from time to time, over and above the normal interest applicable in the
account:
a. For the period of overdue interest/instalment in respect of Term Loans and overdrawings above the drawing power/limit in Fund Based Working Capital Accounts on
account of interest/devolvement of letters of credit/bank guarantee, insufficient stocks
and receivables etc.
b. Non submission of Audited Balance Sheet within 8 months of closure of financial
year.
c. Non submission/ delayed submission of Follow-up/ Review Data such as QRS/ QMS
information, Project Progress Report etc. wherever stipulated, within due date.
d. Non submission of review/renewal data at least one month prior to due date.
e. Non-obtention of External credit risk rating from agency approved by RBI.
Other term and conditions
1. In the event of default, or where signs of inherent weakness are apparent. The Bank
shall have the right to securities the assets charged and in the event of such
securitization, the Bank will suitably inform the borrower(s) and guarantor(s).
2. Formulate any scheme of amalgamation or reconstruction.
3. Undertake any new project, implement any scheme of expansion/ diversification or
capital expenditure or acquire fixed assets (except normal replacements indicated in
funds flow statement submitted to and approved by the bank) if such investment results
into breach of financial covenants or diversion of working capital funds to financing of
long-term assets.
4. Invest by way of share capital in or lend or advance funds to or place deposits with
any other concern (including group companies); normal trade credit or security deposits
in the ordinary course of business or advances to employee can, however, be extended.
Such investment should not result in breach of financial covenants relating to
TOL/Adj.TNW and current ratio agreed upon at the time of sanction.

59

5. Enter into borrowing arrangement either secured or unsecured with any other bank,
financial institution, company or otherwise or accept deposits which increases
indebtedness beyond permitted limits, stipulated if any at the time of sanction.
6. Undertake any guarantee or letter of comfort in the nature of guarantee on behalf of
any other company (including group companies).
7. Declare dividends for any year except out of profits relating to that year after making
all due and necessary provisions and provided further that such distribution may be
permitted only if no event of default/breach in financial covenant is subsisting in any
repayment obligations to the Bank.
8. Create any charge, lien or encumbrance over its undertaking or any part thereof in
favour of nay financial institution, bank, company, firm or persons.
9. Sell, assign, mortgage or otherwise dispose of any of the fixed assets charged to the
Bank. However, fixed assets to the extent of 5% Gross Bloc may be sold in any financial
year provided such sale does not dilute FACR below minimum stipulated level. (Not
applicable for unsecured loans.)
10. Enter into any contractual obligation of a long term nature or which, in the
reasonable assessment of the Bank, is detrimental to lenders interest, viz. acquisitions
beyond the capability of borrower as determined by the present scale of operations or
tangible net worth of the borrower/ net means of promoters etc., leveraged buyout etc.
11. Change the practice with regard to remuneration of Directors by means of ordinary,
remuneration or commission, scale of sitting fees etc, expect where mandated by any
legal or regulatory provisions.
12. Not to Undertake any trading activity.
13. Permit any transfer of the controlling interest or make any drastic change in the
management set-up including resignation of promoter directors.
14. Repay monies brought in by the Promoters / Directors / Principal Shareholder and
their friends and relatives by way of deposits / loans / advances. Further, the rate of
interest, if any, payable on such deposits / loans / advance should be lower than the
rate of interest charged by the Bank on its term loan and payment of such interest will
be subject to regular repayment of instalments to term loans granted / deferred payment
guarantees executed by the bank or other repayment obligations, if any, due from the
borrower to the Bank.
15. The borrower shall keep the Bank advised of any circumstance adversely affecting
the financial position of subsidiaries / group companies or companies in which it has
invested, including any action taken by any creditor against the said companies legally
or otherwise.
16. The borrower shall deal with our bank / banks under consortium / multiple banking
arrangement exclusively, shall not open current account/s with any other bank without
our prior permission. The borrowers entire business relating to their activity including
deposit, remittances, bills / cheque purchase, non-fund based transactions including
LCs and BGs, Forex transactions, merchant banking, any interest rate or currency
hedging business etc. should be restricted only to the financing banks under
consortium/ multiple banking arrangement.
17. No commission to be paid by the borrowers to the guarantors for guaranteeing the
credit facilities sanctioned by the Bank to the borrowers.

60

18. Approach capital market for mobilizing additional resources either in the form of debt
or equity.
19. Fund Based Limits both in Working Capital and Term Loan, should be regulated
through as Escrow Mechanism as agreed among banks to avoid any kind of diversion of
funds
APPENDIX - II
(a)
Details of Associate/ Allied/ Group concerns and the facilities sanctioned to
them
Name Activity
Financials (Last 3 years)
Dealin Facilities
of the
g
Nature &
Co.
Bank Amount
AB
Infrastructu Period
31.03. 31.03. 31.03.
Tollwa re
and
TLRs.
13
14
15
ys Ltd
contracting Total
350.36cror
173.87 145.01 182.98
,
PNB,
es
income
SBI,
Profit after 27.53
8.34
20.31
Canar CC-Rs.15
tax
a,
cr
PAT/Sales 15.33
5.58%
10.81
%
%
%
L&T
BGRs.
Cash
56.59
73.34
81.39
Infra
60.89
accruals
crores
240.68 244.61 259.94
TN Worth
TOL
271.82 268.10 256.47
Outstandin
TOL/TNW
1.13
1.10
0.99
g TL Rs.
Current
66.22
40.51
69.03
167.47
Assets
crores
Current
77.76
69.18
91.44
Liab.
CCCurrent
1.50
1.38
1.52
Rs.11.72cr
ratio
without TL
BG Rs.
installmen
15.97 cr
t
(Rs.in cr)
Name of the Activity
Financials (Last 3 years)
Dealin Facilities
Co.
g Bank Nature &
Amount
B Builders Industrial Period 31.0 31.0 31.0
FB+TL
(India)
contracti
Rs.125
3.13 3.14 3.15
Pvt.Ltd.
ng,
crore
Total
722. 445. 312.
(BBIPL)
SBI,
and
income
47 00
61
Bank
NFB
Profit
14.9 10.9 4.28
Central Rs.138.0
after
2 1
Bank
0 crore
tax

61

PAT/Sa
les%
Cash
accrual
s
TN
Worth
TOL
TOL/T
NW
Current
Assets
Current
Liab.
Current
ratio

Name
Activity
of the
Co.
B
Constructio
Buildco n,
n
contracting,
Private
Limited

2.06
%
24.9
7

2.45
%
19.3
1

1.37
%
14.8
0

193.
95
323.
11
1.67

204.
47
223.
64
1.09

204.
26
157.
94
0.77

325.
96
222.
30
1.47

241.
69
157.
32
1.54

199.
06
125.
57
1.59

Financials (Last 3 years)

Period
Total
income
Profit
after tax
PAT/Sal
es%
Cash
accruals
TN
Worth
TOL

31.03
.13
421.0
7
13.97

31.03
.14
403.5
5
12.49

31.03
.15
363.2
1
8.84

3.32 3.09
2.43
% %
%
22.91 20.40 20.17
110.7
6
219.7
9

123.1
5
208.0
7

62

129.9
2
252.4
7

Axis
Bank
Saras
wat
Coop.

(outstand
ing as on
29.02.20
16 )
FB+TL
Rs.
52.08cr
NFB
67.70 cr

(Rs.in cr)
Dealing Facilitie
Bank
s
Nature
&
Amount

ICICI
Bank
Canara
Bank
Axis
Bank
Ratnak
ar Bank

FB Rs.
84 cr
NFB
Rs. 358
cr
Balanc
e
Rs.79.4
1
cr
and Rs.

TOL/TN
W
Current
Assets
Current
Liab.
Current
ratio

Name of Activity
the Co.

B
Road
Developer
s Private
Limited

SPV for
InfraStructur
e,
Project,

1.98 1.69
200.6
9
166.0
3
1.21

200.6
5
162.0
7
1.23

326 cr

1.94

PNB

257.8
3
204.8
2
1.26

Financials (Last 3 years)

Period
Total
income
Profit
after tax
PAT/Sale
s%
Cash
accruals
TN Worth
TOL
TOL/TN
W
Current
Assets
Current
Liab.
Current
ratio

2012- 2013- 201

13
14
415
0.27 0.20
0.26

0.18

96.30 90.23
%
%
0.26

9.88 10.06

9.6
5
0.0
0
-

0.01

0.00

0.00

0.001

0.00

0.01

0.00

0.12

0.00

63

0.0
01
0.0
01
-

(Rs.in cr)
Dealing Facilitie
Bank
s
Nature
&
Amount
Nil

Name of Activity
the Co.

AB
Infrastruct
ure

Name
the Co.

SPV for
road
projects
in
Maharas
htra

of Activity

(Rs.in cr)
Deali Faciliti
ng
es
Bank Nature
&
Amou
nt

Financials (Last 3 years)

Period
Total
income
Profit after
tax
PAT/Sales
%
Cash
accruals
TN Worth
TOL
TOL/TNW
Current
Assets
Current
Liab.
Current
ratio

31.03.20 31.03.20 31.03.20

13
14
15
8.89
8.36
2.25
2.46

1.94

0.11

27.67%

23.20%

5.10%

4.91

4.35

0.90

5.98
16.19
2.70
3.58

7.28
9.72
1.33
1.57

-0.47
0.00
0.00
1.67

0.73

0.51

2.16

4.90

3.07

0.77

Financials (Last 3 years)

64

NIL

(Rs.in cr)
Dealin Facilitie
g
s
Bank Nature
&

Amount
AB
Infrastructu
re Private
Limited

SPV for
Amritsa
r Bus
Termin
al
Project

Period
Total
income
Profit after
tax
PAT/Sales%
Cash
accruals
TN Worth
TOL
TOL/TNW
Current
Assets
Current
Liab.
Current
ratio

Name of Activity
the Co.
AB Toll SPV for
Roads
Amritsa
Limited
r
wagha
Road
Project

31.03.1
3
6.23

31.03.1
4
6.44

31.03.1
5
6.74

2.02

1.47

-1.92

32.42%
4.15

22.83%
1.52

0.50

5.72
4.21
0.73
4.22

7.63
2.68
0.35
6.93

5.97
6.38
1.07
11.21

4.21

2.40

6.38

1.00

2.88

1.76

(Rs.in cr)
Dealin Facilities
g Bank Nature &
Amount

Financials (Last 3 years)

Period
Total
income
Profit after
tax
PAT/Sales%
Cash
accruals
TN Worth
TOL
TOL/TNW
Current
Assets

31.03.1
3
36.90%

31.03.1
4
36.90

31.03.1
5
36.90

1.18

1.81

2.92

3.20%
13.05

4.91%
13.68

7.91%
14.79

52.39
175.77
3.35
17.50

54.21
154.28
2.84
18.20

57.12
152.42
2.67
11.22

65

NIL

BOB
India
Infra
Debt

TL
220.00 cr
O/S
Rs.165.5
9 cr

Current
Liab.
CR

Name of Activit
the Co.
y
AB
Rajastha
n
Infra
Projects
Ltd

Name
the Co.

SPV
for
Ghat
Ki
Guni
Road
Projec
t

16.80

11.42

6.38

1.04

1.60

1.76

(Rs.in cr)
Dealin Facilities
g Bank Nature &
Amount

Financials (3ast 3 years)

Period
Total
income
Profit after
tax
PAT/Sales%
Cash
accruals
TN Worth
TOL
TOL/TNW
Current
Assets
Current
Liab.

of Activity

31.03.1
3
2.54

31.03.1
4
16.69

31.03.1
5
17.47

-1.92

-14.19

-11.90

-0.87

-5.54

-2.33

57.54
150.32
2.61
16.98

64.72
133.26
135.05
2.51

31.45
163.38
5.20
7.06

0.94

1.79

1.35

Financials (Last 3 years)

66

PNB

TL
112.50
TL
23.72
NFB 7.50
O/s TLRs.120.1
6 cr
BG- Rs.
3.00 cr

(Rs.in cr)
Dealin Faciliti
g
es
Bank Nature
&
Amoun

t
AB Warora
ROB
Infrastructu
re

Name
the Co.

SPV
for
Warora
ROB
in
Maharasht
ra

of Activity

AB Katol
ROB
Infrastructu
re

SPV
for
Katol
Byepass
in
Maharasht
ra

Period
Total
income
Profit after
tax
PAT/Sales%
Cash
accruals
TN Worth
TOL
TOL/TNW
Current
Assets
Current
Liab.

31.03.1
3
-

31.03.1
4
0.95

-2.21

-5.08

-0.97

2.82

12.78
25.43
1.99
0.48

13.96
25.09
1.80
0.54

14.61
23.15
1.59
1.50

1.39

1.38

0.02

Financials (Last 3 years)

Period
Total
income
Profit after
tax
PAT/Sales%
Cash
accruals
TN Worth
TOL
TOL/TNW

31.03.1
3
-

31.03.1
4
-

12.04
27.39
2.27

16.52
30.05
1.82

67

31.03.1
5
3.31SBI

TL23.75
O/S
Rs.22.
45
BG
0.87
o/s Rs.
0.65 cr

(Rs.in cr)
Dealin Faciliti
g
es
Bank Nature
&
Amoun
t
31.03.1
5
TL2.89SBI
26.80
O/S
-5.72
Rs.
25.96
cr
3.83
18.83
26.61
1.41

Current
Assets
Current
Liab.

Name of the Activit

Co.
y

AB
Highwa
ys Ltd.

SPV
for
Morind
a
Kurali
Projec
t

SPV
for

0.46

0.64

3.43

3.16

0.02

Financials (Last 3 years)

Period

31.03.1
3

31.03.1
4

Total
income
Profit after
tax
PAT/Sales%
Cash
accruals
TN Worth
TOL
TOL/TNW
Current
Assets
Current
Liab.

Name Activity
of the
Co.
AB
Hydro

0.37

Dealin Facilitie
g
s
Bank Nature
&
Amoun
t
31.03.1
5
TL - PNB
Rs.73
cr
24.75
72.28
2.92
0.08
3.39

Financials (Last 3 years)

Period

O/s Rs.
73 cr

31.03.1
3

68

31.03.1
4

Dealing
Bank

31.03.1
5

Facilitie
s
Nature
&
Amount

Power
Project
s

Chikotr
a
Hydro
Power
Project

Total
income
Profit after
tax
PAT/Sales%
Cash
accruals
TN Worth
TOL
TOL/TNW
Current
Assets
Current
Liab.

Bank
of TL-7.00
Maharashtr
cr
a
O/S
Rs.
7.00 cr

3.93
7.62
1.93
0.26
1.77

(b)
Comments on conduct of these accounts with our bank/other banks:
Satisfactory
(c)
Comments on adverse Financial Indicators, if any: NIL
APPENDIX III
(A)
Detailed Industry Scenario (As per latest updates of the
rating agency approved by the bank for advising the industry rating)
India has the second largest road network across the world at 4.7 million km. This road
network transports more than 60 per cent of all goods in the country and 85 per cent of
Indias total passenger traffic. Road transportation has gradually increased over the
years with the improvement in connectivity between cities, towns and villages in the
country.
In India sales of automobiles and movement of freight by roads is growing at a rapid
rate. Cognizant of the need to create an adequate road network to cater to the
increased traffic and movement of goods, Government of India has set earmarked 20
per cent of the investment of US$ 1 trillion reserved for infrastructure during the 12th
Five-Year Plan (201217) to develop the country's roads.
Market size
The value of roads and bridges infrastructure in India is projected to grow at a
Compound Annual Growth Rate (CAGR) of 17.4 per cent over FY1217. The country's
roads and bridges infrastructure, which was valued at US$ 6.9 billion in 2009 is
expected to touch US$ 19.2 billion by 2017. The financial outlay for road transport and
highways grew at a CAGR of 19.4 per cent in the period FY09-14.The plan outlay for
2015-16 stepped up budgetary support for Road Transport and Highways to Rs 42,912
crore (US$ 6.43 billion).

69

Key Investments/Developments
Some of the key investments and developments in the Indian roads sector are as
follows:
The Government of India plans to award 100 highway projects under the Public-Private
Partnership (PPP) mode in 2016, with expectations that recent amendments in
regulations would revive investor sentiments in PPP projects in the infrastructure sector.
The Ministry of Road Transport and Highways has undertaken development of about
7,000 km of national highways under Bharatmala Pariyojana at an estimated cost of Rs
80,000 crore (US$ 12 billion) in consultation with state governments. National Highways
Authority of India (NHAI) has invited bids for preparing Detailed Project Reports (DPRs)
for road development along the borders and coast lines under the Bharat Mala project.
The Union government approved the construction of around 1,000 km of expressways
at a cost of Rs 16.68 crore (US$ 2.5 million) on a design-build-finance-operate-transfer
(DBFOT) mode. The approved corridors are Delhi-Chandigarh (249 km), BengaluruChennai (334 km), Delhi-Jaipur (261 km) and Vadodara-Mumbai (400 km). The
government will also take up the development of 135 km long Eastern Peripheral
Expressway at an estimated cost of Rs 5,763 crore (US$ 865 million).
Government Initiatives: The Government has unveiled investments plans totalling Rs 10
trillion (US$ 150 billion) in highways and shipping sector by 2019. A total of 599
highways projects covering around 12,903 km of national highways have been
sanctioned1, incurring an expenditure of Rs 108,000 crore (US$ 16.2 billion).
The government, through a series of initiatives, is working on policies to attract
significant investor interest. The Indian government plans to develop a total of 66,117
km of roads under different programmes such as National Highways Development
Project (NHDP), Special Accelerated Road Development Programme in North East
(SARDP-NE) and Left Wing Extremism (LWE), and has set an objective of building 30
km of road a day from 2016.
Kerala Roads
There are 72 state highways in Kerala. Of them, MC Road (Main-Central Road),
proposed Hill Highway (Kerala) and Main Eastern Highway are the largest.The State
Road Improvement Project (SRIP) envisages to improve and upgrade 1200 km of State
Highways and Major District Roads to enhance the capacity and riding quality with
proper maintenance plan, road safety and reducing the expenditure on periodic
maintenance. The project is implemented by ABCD Company Kerala Ltd. Road
Infrastructure Company Kerala Limited (RICK) was incorporated on March 2012 as a
Special Purpose Vehicle with paid up capital contributed by Government of Kerala
(51%) and Kerala Road Fund Board (49%).[5] About 29 road sections totalling to a
length of 469 km has identified for rehabilitation improvements by the company.
Rehabilitation project include strengthening/reconstruction of pavement/structure,

70

junction improvements, provision of road furniture, bus bay byes and other traffic
management measures. The company plans to upgrade 32 roads of 644 km. Upgrades
involve widening the carriageway with paved shoulder (1.5 m on either side), widening
of narrow CD works, geometric improvements, junction improvements, identifying the
grade separation requirements, etc.
The company is executing rehabilitation project awarded by RICKL which is annuity
based project.
(B) Comments on
:i.

Management

ABTL, the holding company is having large experience in infrastructure projects,

construction and contracting industry. ABTL has completed four large BOT projects in
the State of Punjab and is also a concessionaire in two operations and maintenance
projects is the state. In addition to this the group has completed 6 projects in the state of
Maharashtra and two in Rajasthan, The promoter companies are managed by technical
professionals, which is evident from the fact that they have received awards from
different sectors from time to time. The persons behind the project and company are
technically qualified and have large experience in this field.
The group has experience of completing and executing infrastructure projects,
especially in the roads segment of more than 12 years and overall has completed more
than 16 projects in various states.
ii.
Quality of Management (Including Corporate Governance)
RRTL is a flagship company of AB Groups Infrastructure division. ABTL was promoted
by three corporate companies i.e ABuilders (I) Pvt. Ltd., B Buildcon Pvt. Ltd. and B
Road Developers Pvt. Ltd. The SPV RRHL will be subsidiary of ABTL.
The list of proposed promoter Directors of SPV AB Highways Ltd. is given
hereunder:
Directors
Mr. S
Mr X
Mr. D
Mr. R

Group
A
A
B
B

General (details such as qualification/experience of directors/ promoters, main

products, capacity, major brands, geographical market for products and major buyers
expertise like technology, brand, marketing, etc.)
Shri S , is one of the promoter of A Group, Pune. He is a civil engineer and has been in
the construction line for more than 30 years and has successfully executed several
prestigious projects in the past.

71

Mr. D is the promoter of B Group from Nagar. The group is engaged in industrial,
infrastructure contracting. He is a Civil engineer and having more than 20 years of
experience in this field.
A& B group have completed together various prestigious projects and is having skilled
technical staff and required infrastructure to execute such kind of projects. AB Tollways
Limited has been responsible for completion of 10 major projects. The track record of
AB Tollways Limited has been excellent and majority of the projects have been
completed on time.

APPENDIX IV

72

Rohan Rajdeep Infra

Projects Ltd.
Profit and Loss
Account

12

12

12

12

12

12

12

12

12

12

12

12

12

1718

1819

1920

2021

2122

2223

2324

2425

2526

2627

2728

2829

2930

3031

10.
73
0.5
7
11.
30

21.
46
1.1
5
22.
61

21.
46
1.1
5
22.
61

21.
46
1.1
5
22.
61

21.
46
1.1
5
22.
61

21.
46
1.1
5
22.
61

21.
46
1.1
5
22.
61

21.
46
1.1
5
22.
61

21.
46
1.1
5
22.
61

21.
46
1.1
5
22.
61

21.
46
1.1
5
22.
61

21.
46
1.1
5
22.
61

21.
46
1.1
5
22.
61

10.
73
0.5
7
11.
30

0.7
6
0.0
0
4.4
8
5.2
4

1.6
7
0.0
0
7.3
9
9.0
5

1.8
3
0.0
0
7.3
9
9.2
2

2.0
2
0.0
0
7.3
9
9.4
0

2.2
2
0.0
0
7.3
9
9.6
0

2.4
4
0.0
0
8.0
0
10.
44

2.6
8
0.0
0
8.6
9
11.
37

2.9
5
0.0
0
8.6
9
11.
64

3.2
5
0.0
0
8.6
9
11.
94

3.5
7
0.0
0
8.6
9
12.
26

3.9
3
0.0
0
8.6
9
12.
62

4.3
2
0.0
0
11.
70
16.
02

4.7
5
0.0
0
16.
85
21.
60

2.6
1
0.0
0
7.0
2
9.6
3

6.0
6
4.3
7
0.0
0
1.6
9

13.
56
7.2
1
1.3
6
7.7
0

13.
39
6.7
8
2.0
9
8.6
9

13.
21
6.2
5
2.4
5
9.4
0

13.
00
5.6
8
2.5
8
9.9
0

12.
17
5.0
6
2.0
4
9.1
5

11.
24
4.3
8
2.1
3
8.9
8

10.
97
3.6
5
1.9
2
9.2
4

10.
67
2.8
1
3.1
1
10.
97

10.
35
1.8
4
4.3
5
12.
86

9.9
9
0.7
4
5.6
1
14.
87

6.5
8
0.0
0
6.0
0
12.
58

1.0
1
0.0
0
7.3
2
8.3
3

1.6
7
0.0
0
7.6
6
1.6
7

0.4
9
1.2
0

1.7
9
5.9
1

2.0
0
6.7
0

2.1
5
7.2
5

2.2
5
7.6
4

2.1
9
6.9
6

2.3
0
6.6
8

1.9
4
7.3
1

2.3
0
8.6
7

2.7
0
10.
17

3.7
2
11.
15

3.1
5
9.4
4

2.0
8
6.2
5

0.4
2
1.2
5

5.6
Cash accruals
8
Projected Cash Flow Statement
Cash flow
statement

13.
30

14.
08

14.
64

15.
03

14.
96

15.
37

16.
00

17.
36

18.
86

19.
84

21.
14

23.
09

8.2
7

Particulars

Annuity Payment
Deferred Income
Total income

Routine maintenance
Concession Fees
Depreciation
Total Expenses

Profit before interest

Interest
Other Income
Profit before tax

Provision for tax

Profit after tax

Particulars
Promoters
equity
VGF from

16-17

1718

11.51
11.19

5.4
2
3.7

18-19

1920

2021

2122

73

2223

2324

2425

2526

2627

2728

2829

2930

Authority
Term loan

48.55

Profit after tax

Depreciation

Total inflow
Capital
expenses
Repayment of
term loan

71.25

2
19.
56
1.2
0
4.4
8

7.39

6.7
0
7.3
9

7.2
5
7.3
9

7.6
4
7.3
9

6.9
6
8.0
0

6.6
8
8.6
9

7.3
1
8.6
9

8.6
7
8.6
9

10.
17
8.6
9

11.
15
8.6
9

9.4
4
11.
70

6.2
5
16.
85

13.30

14.
08

14.
64

15.
03

14.
96

15.
37

16.
00

17.
36

18.
86

19.
84

21.
14

23.
09

5.1
4
6.5
0

7.2
5

8.3
5

9.7
5

10.
16

7.2
9
0.0
0

7.2
9
0.0
0

5.91

34.
38
28.
70
1.5
0

3.50

4.6
0

5.0
0

5.5
0

5.1
4
6.0
0

VGF written
off

0.5
7

1.15

1.1
5

1.1
5

1.1
5

1.1
5

1.1
5

1.1
5

1.1
5

1.1
5

1.1
5

1.1
5

1.1
5

Total out flow

30.
77

4.65

5.7
5

6.1
5

6.6
5

12.
28

12.
78

8.4
0

9.5
0

10.
90

11.
30

8.4
3

8.4
3

12.
26
8.3
3
20.
59

20.
59
8.4
9
29.
08

29.
08
8.3
8
37.
47

37.
47
2.6
8
40.
14

40.
14
2.5
9
42.
73

42.
73
7.6
0
50.
33

50.
33
7.8
6
58.
19

58.
19
7.9
6
66.
15

66.
15
8.5
4
74.
68

74.
68
12.
71
87.
39

87.
39
14.
66
102
.05

71.25
0.00

71.25

Opening
balance

0.00

Surplus/ deficit
Closing
balance

0.00
0.00

Projected Balance Sheet

16- 17Particulars
17
18
Promoters
equity

0.0
0
3.6
1
3.6
1

3.61
8.65
12.26

1819

1920

2021

2122

2223

2324

2425

2526

2627

2728

2829

2930

16.
93
13.
19

16.
93
10.
89
21.
06
48.
88

16.
93
9.7
5
28.
70
55.
38

16.
93
8.6
0
35.
66
61.
19

16.
93
7.4
5
42.
34
66.
73

16.
93
6.3
0
49.
65
72.
89

16.
93
5.1
6
58.
32
80.
41

16.
93
4.0
1
68.
49
89.
43

16.
93
2.8
6
79.
64
99.
43

16.
93
1.7
1
89.
07
107
.72

16.9
3

Net worth

11.
51
11.
19
0.0
0
22.
70

16.
93
14.
34
1.2
0
32.
46

7.11
37.
23

16.
93
12.
04
13.
80
42.
77

Term loan

48.
55

66.
61

63.1
1

58.
51

53.
51

48.
01

42.
01

35.
51

28.
26

19.
91

10.
16

0.0
0

0.0
0

0.00

Total
liabilities

71.
25

99.
07

100
.33

101
.28

102
.39

103
.38

103
.20

102
.23

101
.14

100
.31

99.
58

99.
43

107
.72

112.
82

Fixed assets

71.

99.

99.

99.

99.

99.

105

110.

110.

110.

110.

110.

117.

124.

VGF
Reserves and
surplus

74

0.57
95.3
2
112.
82

Net block

25
0.0
0
71.
25

95
4.4
8
95.
46

95
11.8
7
88.
07

95
19.
26
80.
69

95
26.
64
73.
30

95
34.
03
65.
92

.08
42.
03
63.
05

22
50.
72
59.
50

22
59.
40
50.
81

22
68.
09
42.
12

22
76.
78
33.
43

22
85.
47
24.
74

50
97.
18
20.
33

79
114.
02
10.7
6

Cash and bank

balances

0.0
0

3.6
1

12.
26

20.
59

29.
08

37.
47

40.
14

42.
73

50.
33

58.
19

66.
15

74.
68

87.
39

102.
05

Total assets

71.
25

99.
07

100
.33

101
.28

102
.39

103
.38

103
.20

102
.23

101
.14

100
.31

99.
58

99.
43

107
.72

112.
82

Depreciation

Conclusions
1. Lending is more of an art than an exact science. Taking perfect lending decisions
requires understanding the business of the company and analysing it from
multiple perspectives. While attempt is made to infuse objectivity in the
appraisal, sound lending decisions involves taking subjective view of the
proposal. This is where experience and judgment of the appraiser plays a key
role.
2. Since bank lends the funds deposited by the general public with expectations of
safety and security, the lending decisions taken by the banks primarily focus on
the safety of funds. Risk aversion and risk diversion are the main parameters in
the bank lending.
3. To remain viable, a bank must earn adequate profit on its investment. This calls
for adequate margin between deposits rates and lending rates. In this respect,

75

appropriate fixing of interest rates on both advances and deposits is crucial.

Unless interest rates are competitively fixed and margins are adequate, bank
may lose customers to their competitors and become unprofitable.
4. To mitigate risk, banks lend to a diversified customer base. Diversification should
be in terms of geographical location, nature of business etc.
5. Banks achieve diversification by specifying strict exposure norms that limit the
exposure to a particular industry, business group and company.
6. Appraisal of working capital proposal is focused on ascertaining the working
capital requirement of funds. Overfunding will lead to operational inefficiencies
while underfunding could impact the normal operation.
7. Different industries possess different challenges in WC assessment as; the WC
varies from industry to industry.
8. Post sanction processes that include monitoring of accounts, ensuring end use
of funds etc. are as critical as pre sanction appraisal process for the security of
funds.
9. The project is rejected without detailed appraisal if it has some features like
bankers report on the promoters is not satisfactory, promoters are reported to
have indulged in illegal and anti-social activities, financial position of the
promoter company is not satisfactory, cost of the project is unduly high, industry
to which a particular unit belongs has low priority or is included in the negative
list of government guidelines etc.
15. BIBLIOGRAPHY
Books:

Varshney, P.N. (2014) Banking Law and Practice (25th Edition), Sultan Chand &
Sons Publication.

Indian Institute of Banking and Finance, (2014) Bankers Hand Book on Credit
Management, Taxmann Publications Pvt. Ltd.

Mukherjee, D.D. (2010) Credit Appraisal, Risk Analysis and Decision Making (6th
Edition), Snow White Publication Pvt. Ltd.

76

Websites:

http://www.rbi.org.in/home.aspx - RBI official website.

https://www.pnbindia.in/En/ui/Aboutus.aspx

https://www.pnbindia.in/En/ui/CorporateMission.aspx

http://www.crisil.com/research/research.jsp

PNB Journals (for internal circulation only):

1. PNB, Annual Report 2016.
2. PNB, Credit Policy 2016.
3. PNB, Risk Rating Policy 2016.
4. Discussion with company mentor.

77