Professional Documents
Culture Documents
INTRODUCTION
PROPOSED METHODOLGY
• Methodology is a systematic procedure of collecting information in
order to analyze and verify a phenomenon.
• The present study is based on data collected from primary and
secondary.
PRIMARY DATA:- It is the information collected directly without any
reference. Primary data consists of information obtained from interaction
and discussion with concerned officials of the organization to elicit their
opinion on various relevant matters. In the process of interaction with
officials it is planned to confirm through secondary sources.
SECONDARY DATA:- Secondary source of data includes collection of data
through study of bank records, financing and banking journal, other financial
magazines and websites on the internet.
DATA SOURCES:-
1. SECONDARY SOURCES
• INSIDE THE COMPANY( TEXT BOOKS)
• OUTSIDE THE COMPANY(TEXT BOOKS,WEBSITES)
2. PRIMARY SOURCES
• MANAGEMENT
• RESPONDENT
• `PERSONAL OBSERVATION
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LIMITATIONS
Though the project is completed successfully a few limitations can be
observed in the study.
• Study has been conducted using secondary data.
• Time constraints in completing the project.
• The study was conducted with the data available, and the analysis
was made accordingly.
• Interpretations are based on the validity of the data collected.
• Due to the busy schedule of the executives, it was very difficult to
get valuable information about the organization.
FRAME WORK
Frame work deals with the topic on which the entire project is depended
up on i.e, trade finance in HDFC bank. This is the focus issue of the
entire 8 weeks project and it consists of five chapters:
CHAPTER1:- Describes the “introduction to the project, objectives of the
work, methodology, limitations of the study”.
CHAPTER2:- Portrays the “profile of the HDFC bank”
CHAPTER3:- this chapter explains about theoretical study of “trade
finance”
CHAPTER4:- case study
CHAPTER5:-this chapter consists of findings, summary and suggestions
relating the topics studied.
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OBJECTIVES
• To gain practical understanding on all aspects of trade finance and
to sharpen the skill sets in dealing with trade finance documents.
• To review the historical perspective and past performance of
HDFC bank in trade finance.
• To gain insights of trade finance activities of HDFC bank
HDFC PROFILE
PROMOTERS
HDFC is India's premier housing finance company and enjoys an
impeccable track record in India as well as in international markets.
Since its inception in 1977, the Corporation has maintained a
consistent and healthy growth in its operations to remain the market
leader in mortgages. Its outstanding loan portfolio covers well over a
million dwelling units. HDFC has developed significant expertise in
retail mortgage loans to different market segments and also has a
large corporate client base for its housing related credit facilities. With
its experience in the financial markets, a strong market reputation,
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BSINESS FOCUS
1. operational excellence
2. customer focus
3. product leadership
4. people
CAPITAL STRUCTURE
As on 31st March, 2010 the authorized share capital of the Bank is
Rs.550 crore. The paid-up capital as on said date is Rs.
457,74,32,720/- (45,77,43,272 equity shares of Rs. 10/- each). The
HDFC Group holds 23.73 % of the Bank's equity and about 16.97 %
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of the equity is held by the ADS Depository (in respect of the bank's
American Depository Shares (ADS) Issue). 26.59 % of the equity is
held by Foreign Institutional Investors (FIIs) and the Bank has about
4,41,347 shareholders. The shares are listed on the Bombay Stock
Exchange Limited and the National Stock Exchange of India Limited.
The Bank's American Depository Shares (ADS) are listed on the New
York Stock Exchange (NYSE) under the symbol 'HDB' and the Bank's
Global Depository Receipts (GDRs) are listed on Luxembourg Stock
Exchange under ISIN No US40415F2002.
CBoP AND TIMES BANK AMALGAMATION
The merged entity will have a strong deposit base of around Rs.
1,22,000 crore and net advances of around Rs. 89,000 crore. The
balance sheet size of the combined entity would be over Rs. 1,63,000
crore. The amalgamation added significant value to HDFC Bank in
terms of increased branch network, geographic reach, and customer
base, and a bigger pool of skilled manpower.
DISTRIBUTION NETWORK
HDFC Bank is headquartered in Mumbai. The Bank at present has an
enviable network of 1,725 branches spread in 779 cities across India. All
branches are linked on an online real-time basis. Customers in over 500
locations are also serviced through Telephone Banking. The Bank's
expansion plans take into account the need to have a presence in all major
industrial and commercial centers where its corporate customers are located
as well as the need to build a strong retail customer base for both deposits
and loan products. Being a clearing/settlement bank to various leading stock
exchanges, the Bank has branches in the centers where the NSE/BSE have a
strong and active member base.
The Bank also has 4,232 networked ATMs across these cities. Moreover,
HDFC Bank's ATM network can be accessed by all domestic and
international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and
American Express Credit/Charge cardholders.
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RATINGS
Credit Rating
The Bank has its deposit programs rated by two rating agencies - Credit
Analysis & Research Limited (CARE) and Fitch Ratings India Private
Limited. The Bank's Fixed Deposit programme has been rated 'CARE AAA
(FD)' [Triple A] by CARE, which represents instruments considered to be
"of the best quality, carrying negligible investment risk". CARE has also
rated the bank's Certificate of Deposit (CD) programme "PR 1+" which
represents "superior capacity for repayment of short term promissory
obligations". Fitch Ratings India Pvt. Ltd. (100% subsidiary of Fitch Inc.)
has assigned the "AAA ( ind )" rating to the Bank's deposit programme, with
the outlook on the rating as "stable". This rating indicates "highest credit
quality" where "protection factors are very high.”
The Bank also has its long term unsecured, subordinated (Tier II) Bonds
rated by CARE and Fitch Ratings India Private Limited and its Tier I
perpetual Bonds and Upper Tier II Bonds rated by CARE and CRISIL Ltd.
CARE has assigned the rating of "CARE AAA" for the subordinated Tier II
Bonds while Fitch Ratings India Pvt. Ltd. has assigned the rating "AAA
(ind)" with the outlook on the rating as "stable". CARE has also assigned
"CARE AAA [Triple A]" for the Banks Perpetual bond and Upper Tier II
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bond issues. CRISIL has assigned the rating "AAA / Stable" for the Bank's
Perpetual Debt programme and Upper Tier II Bond issue. In each of the
cases referred to above, the ratings awarded were the highest assigned by the
rating agency for those instruments.
TRADE FINANCE
INTRODUCTION
Though this basic concept of trade and the role played by banks (as a lender
or otherwise) remains the same, the dimensions of trade and the role of
players under go a lot of change depending on whether the entire trade
transaction (sale/purchase) is carried on in the country, or it is a CrossBorder
transaction. It is a domestic trade in first situation, and international trade in
other.
1. Pre-shipment finance
Trade finance has been reviewing the global trade market since 1983.Trade
finance is the method of importer and exporters of commodities and goods
use to finance their business. Basically trade finance has been in existence
for many thousands of years and one can trace the roots of trade finance and
structured trade finance right back to the early days of china and the silk
route, Mesopotamia and Europe. Today trade finance is a massive, multi-
billion dollar business. As the world trades mare and more goods and
commodities are brought and sold, so more and more banks and financiers
are needed to lend money to finance the purchases and sale of these goods
and commodities. Trade finance determines how cash, credit, investment
and other assets can be utilized for trade.
DOCUMENTARY CREDITS
requires a high degree of trust between buyer and seller and it will be more
advantageous to the buyer.
DOCUMENTARY CREDITS :
STAGE I
Buyer and Seller arrive at a contract for sale, specifying the terms of sale.
Both the parties may not know the financial capacity of each other. As for
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the Seller is concerned he may prefer a bank should undertake the payment
obligation of the buyer and payment should be made available to him
immediately on dispatch of goods from his country. On the basis of this
agreement buyer (Applicant) requests his bank (Issuing Bank) for
undertaking the payment obligation on his behalf in favour of the Seller
(beneficiary). The arrangement under which a bank on behalf of the buyer
(Importer) undertakes the payment obligation, subject to fulfillment of
certain documentary conditions, is known as Documentary Credit. As per
the requirements of the contract and on the basis of the application given by
the applicant, Issuing Bank establishes the Letter of Credit and forwards the
Letter of Credit to its Correspondent Bank (Advising Bank) in the Seller’s
country, which advises the Letter of Credit to the Beneficiary At times, at
the insistence of the Seller, Buyer requests Issuing Bank to make suitable
arrangement with a bank in the Seller’s country for releasing payment
immediately to the Seller on submission of shipping documents as per
Sellers requirement. In such cases, the Issuing Bank request a bank in the
Sellers country or in any third country, to undertake the payment obligation
on their behalf under this transaction. A bank in the Seller’s country may
agree for this arrangement subject to their Correspondent relationship with
the Opening Bank.
STAGE 2:
The beneficiary after shipping the goods will present the document’s to his
bank (Negotiating Bank). Or he may have a choice of presenting the
documents to the confirming bank directly.
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They will claim reimbursement from the bank notified by the Issuing Bank
in the Letter of Credit. Simultaneously, Negotiating Bank will forward the
documents to the Issuing Bank, which will hand over the documents to the
Applicant after recovering the bill value. Applicant / Importer will accept /
pay for the bills if the documents are as per their requirement.
LETTER OF CREDIT:-
• In Land L/C: An L/C where all the parties to an L/C are located
within the country.
iv. Lead time: the time taken to receive goods after opening n L/C.
v. Storage facility
Draft :
The Beneficiary should draw it as per the tenor stipulated in the Letter of
Credit.It should be drawn either on the Issuing Bank or on the Confirming
Bank or on the Nominated Bank as per the stipulations of the Documentary
Credit.
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Invoice:
BILL OF LADING:
CERTIFICATION OF ORIGIN
All other documents like ‘packing list’, ‘weight list’, etc., would be as per
the letter of credit terms and should be in agreement with other documents.
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BANK GUARANTEES:
Definition:
BENEFICIARIES OF GUARANTEES:
TYPES OF GUARANTEES:
The different types of Bank guarantees which a borrower may require, can
be broadly classified into three categories:
• Financial Guarantee
• Performance Guarantee
• Deferred Payment Guarantee
The guarantees issued by the bank can be broadly classified into three
categories viz. Financial, Performance and deferred payment guarantees. It
is sometimes difficult to differentiate between the financial and performance
guarantees, as in both cases, the ultimate liability of the bank gets converted
in monetary terms.
A. Financial guarantees:
B.Performance guarantees:
(i) General:
(i) The beneficiary of a bank guarantee has the right to invoke the
guarantee any time during the currency of the guarantee and before
the expiry of the claim period, if any, and lodge the claim.
(ii)When a demand for payment on guarantee as per terms and conditions
of the guarantee bond is made within the validity period of the
guarantee by the beneficiary, it is deemed to be an invocation. The
demand should be made in writing. Guarantees are sometimes
invoked by telex / telegrams also.
(iii) For invoking a guarantee it is not essential, for the beneficiary to
satisfy the bank regarding the default or the quantum of actual loss
suffered by him. The bank’s obligation under the guarantee is
absolute and independent of any contract entered into by the
applicant customer.
(iv) When a guarantee is invoked by the beneficiary within the validity
period of the relative guarantee bond, it is incumbent on the bank
to meet such demand irrespective of whether the customer requests
us not to pay the amount owing to his dispute with the beneficiary
or for any other reason and also whether the bank is holding any
security or cash margin for the guarantee or not.
(v) Under no circumstances, branches should act on the instructions of the
clients not to make payment under the guarantee. To meet
commitments under the guarantee is an exclusive concern and
obligation of the Bank. If there is dispute between the client and
the beneficiary, the same has to be settled outside the Bank and
branches should not take cognizance of their disputes.
(vi) The payments to the beneficiaries should be made promptly giving
no opportunity to the parties to take recourse to courts and obtain
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CRYSTALLISATION OF BILLS
When a bill is not paid on the due date, the liability in foreign exchange has
to be converted into rupee liability. Such liability obviously cannot be kept
open in foreign currency and accordingly has to be converted into rupee
liability. As such, the bills which remain unpaid, the liability pertaining to
such bills is converted into rupee liability which is known as crystallization.
All exchange risk is to be passed on to exporter. Exporters should be
encouraged to book forward cover. Normal transit period for all foreign bills
as per FEDAI is 20 days.
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All bills on the 30th day from the expiry of normal transit period in case of
unpaid demand bills should be crystallized by converting to rupee liability
(TT selling rate on the date of crystallization or the original bill buying rate
whichever is higher will be applicable).
Interest will also be recovered on the date of crystallization for the period
from date of expiry of the normal transit period / notional due date to the
date of crystallization at the appropriate rate of interest as directed by RBI
for overdue export bills.The unpaid bill will be treated as outstanding under
the sanctioned limit of the customer with the exchange risk open against
him.
Swap cost / gain from due date to date of crystallization shall be absorbed by
authorized dealer.
For all bills in foreign currency other than exports to Iraq … 20 days.For
exports to Iraq … 60 days (provided exports conform to unguidelines).For
bills drawn in rupees … 3 days if reimbursement is provided at the centre of
negotiation.Bank located at 7 days if reimbursement is provided in India
from a centre other than negotiating bank centre 20 days in case of
reimbursing bank outside India Or Bills not under LC.
In case of export usance bills (Foreign / Rupee) where due dates are
reckoned from date of shipment or date of bill of exchange etc., no normal
transit time will be applicable, in case reimbursing bank is other than where
negotiating bank maintains Nostro account or reimbursement obtained
through other bank … normal 5 days transit period interest will be charged.
IMPORT BILLS:
If payable on demand under LC, the import bill will be crystallized, on 10th
day after the date of receipt of documents at the LC opening branch of the
bank.In case of usance bills, it will be crystallized on the due date of the
bill.If the due date or 10th day is a Holiday, the importers liability will be
crystallized the next day.The bills selling rate or the forward cover rate will
be applicable.
Interest if any on the import bill amount will be recovered in full and shall
not be set off against margin amount.
If the exporter has completed all formalities after receipt of payment, the
banks are bound to pay interest. Where:
FACTORING
FORFAITING
The forfaiter deducts interest at an agreed rate for credit period. The debt
instruments are drawn by the exporter, accepted by the importer, and will
bear an aval or unconditional guarantee, issue by the importer’s bank. The
forfeiter takes over responsibility for claiming the debt from the importer.
The forfeiter holds the notes until maturity, or sells them to another investor.
The holder of the notes presents each note to the bank at which they are
payable, as that fall due. Forfaiting is a high-value medium and long term
financing form. It involves the purchase of negotiable instruments for not
less than $100.000 and from six month to five years payment terms. The
forfeiter needs to know some important information, such as:
Pre-Shipment Credit
.
Pre-shipment Credit is offered to an exporter by way of packing credit to
enable him to finance purchase/import of raw materials, processing and
packing of the goods meant for exports.
Post-shipment Credit.
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In the case of routine exports, the maximum period allowed for realisation of
export proceeds is 6 months from the date of shipment. Banks can extend
post shipment finance at a lower interest rate upto the normal transit period
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or the notional due dates (this is calculated as the sum of the Normal Transit
Period + Usance Period, subject to a maximum of 180 days). Beyond that
period, banks lend at non-concessive rates or the normal commercial rates.
Post-shipment credit
PRE-SHIPMENT FINANCE:-
• Packing credit
This service is provided to the exporter who satisfies the following criteria:
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ELIGIBILITY
Quantum of finance
INCOTERMS 2000:
• E (EXW)
• F (FCA, FAS, FOB)
• C (CFR, CIF, CPT, CIP)
• D (DAF, DES, DEQ, DDU, DDP)
FCA … Free Carrier … Goods cleared for export by seller and delivered
to carrier as per directions of buyer (carrier may not be shipping agency).
FOB … Free on Board … Seller will deliver the goods on board (ship to
be told by buyer).
DES … Delivered EX Ship … Seller bears all costs upto the named
destination of delivery, the difference between CIF and des is only that the
risk of buyer starts from the time he takes delivery in this case.
DDU … Delivery duty unpaid … Seller bears all costs upto the stage of
delivery to destination but before payment of import duty or clearance etc.,
buyers risk starts from getting the goods cleared.
The Uniform Customs and Practice for Documentary Credits (UCPDC) are
universally recognized set of guidelines governing Letters of Credit. The
guidelines are published in the form of a Brochure by International Chamber
of Commerce. The first publication was made in the year 1933. Revised
versions were issued in 1951, 1962, 1974, 1983 and 1994. The latest
publication is known as ICC 600 and adopted with effect from 2nd July,
2007. The International Chamber of Commerce with its Headquarters in
Paris frames the guidelines. UCPDC has now become indispensable since
Letters of Credit has become one of the safe methods of International trade
settlements. The reason being that the Sellers hesitate to release their goods
before receiving payment, while Buyers prefer to have control over the
goods before parting with their money.
The UCPDC gives the maximum possible guidance and assistance to all
parties. It guides the Buyer as responsible for stipulating clearly and
precisely the documents required and the conditions to be complied with. It
stipulates the liabilities and responsibilities of the Issuing Bank, Advising
Bank, Confirming Bank, Negotiating Bank and Reimbursing Bank.
They will be binding on all the parties thereto, unless otherwise expressly
stipulated in the credit.
The Letter of Credit, by nature, are separate transactions from the sale or
other contracts on which they may be based and banks are in no way
concerned or bound by such contracts even if any reference to such contract
is included in the credit. It also clarifies that neither the Beneficiary nor the
Applicant can avail himself of any underlying contractual relationship. Non-
fulfillment of contractual obligations under the Sale contract cannot be
disputed through Letter of Credit mechanism.
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In a Letter of Credit all parties concerned deal with documents and not in
goods.
Guarantee
Issuance
2. Letter of Credit
a. Parties Involved
1. Bill Of Exchange duly accepted for payment on due date (foreign bills
stamps affixed if reqd),
2. Covering letter confirming that bill has been accepted for payment
and request to release the documents to be obtained.
3. Requisite Form A1 / FEMA declarations to be received (Annexure).
4. Bill of Entry.
Financing
Under this type of schemes, the Central Bank will rediscount the commercial
bills of exporters at preferential rates. This will provide the cheap post-
shipment financing necessary for exporters to quickly turn around funds for
further export business.
Here, the government is subsidizing the cost of funds that exporters have to
pay if they rediscount their bills with commercial banks.
under its present law in 1945. Its primary role is to aid in financing US
exports, and for medium-term(181 days to 5 years) transactions, it co-
operates with US commercial banks by providing export credit guarantees.
In setting up the EXIM Bank, the Unrecognized that job creation is a
consequence of exports. Its main customers are SMEs in the United States.
Export credit insurance agencies act as bridges between banks and exporters.
In emerging economies where the financial sector is yet to be developed,
governments often take over the role of the export credit insurance agent.
Governments traditionally assume this role because they are deemed to be
the only institutions in a position to bear political risks. Several countries in
Asia and Africa have such an organization. However, the viability of such an
organization depends on the volume of business and income from insurance
premium. In that context, credit insurance policies vary according to the type
of exports. For example, short term policies on the sale of raw materials on
180 days terms are covered up to 95 per cent for commercial risk and 100
percent for political risk. Such trades are considered relatively secure.
Nonetheless, it is good practice to get the exporter to bear a certain portion
of the risk.
houses and exporters, and could share information with financial institutions
to facilitate access to financial services. TPOs are the government agencies
that are most directly involved with the trading community, often supporting
promising trading and exporting enterprises. The support and assistance
given by the TPOs could act as a signal to banks as to which companies are
creditworthy companies. In addition, TPOs could establish network of
financial institutions, identify their credit requirement, and match trading
enterprises and financial institutions based on these requirements.
Case study
CREDIT APPROVAL MEMO
FACILITY SUMMARY:
1.1.BANKING FACILITY:
1.2Details of Security:
Primary: Hypothecation of stock and book debts
Collateral: Equitable Mortgage on the following properties.
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For CC limit:
Overdraft agreement - Obtained
Demand Promissory Note - Obtained
Letter of Continuity for Demand Promissory Note- Obtained
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Others:
Audit report for 3 Financial years- Obtained
Provisionals to be certified by CA - Obtained
Permanent SSI Certificate – Obtained
All the above documetns were obtained at the time of intial disbursement,
now we are proposing the renewal cum enhancement, the below documents
to be obtained from the customer.
Application Form
Personal Guarantee of the all Directors, shareholders covering 95% of total
share holding and the Property Owners
CA Certified networth statement of the guarantors
Board Resolution of the company
MOA and AOA
CA certificate for the existing Share Holding pattern and present Directors
Fresh stock Audit to be conducted and the report to be vetted by credit.
Renewal of insurance policy should be done
Documentation Modification/Creation of charge with ROC
Track of ICICI car loan to be wetted.
Undertaking from the customer that there is no litigation pending against
firm or its directors
Undertaking from the company there is no change in the directors of the
company, if there is any such change Form 32 filed with ROC should be
produced or a CA certificate to that effect.
Declaration from the company that none of its directors, is a director or
specified near relation of a director of a banking company
CA certificate for the Annual sales and MIB of the company as on
31.03.2009
For CC facility
OD agreement
Demand Promissory Note
Letter of Continuity
Letter of General Lien and Set off
Notarized power of attorney
Supplementary Hypothecation of stock and book debts for enhancement
amount
The 2 major Shareholders are Ananthiah & Parvathi holding about 95% of
the shareholding in the Company. We have obtained the PG of these 2
directors covering 95% of shareholding.
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Group Companies:
There are no instances of Cheque returns in respect of Car Loan taken from
ICICI Bank during the period of Sep 08 to Aug09.
There are no instances of cheque returns observed in respect of Commercial
Vehicle Loan taken from ICICI Bank. (Note :) Above vehicles EMI is going
through our bank, One is from HDFC bank OD A/c of Rs 13427 for TaTa
207 ,other is from HDFC Bank current A/c of Rs 32555 for Skoda
7.BUSINESS ANALYSIS:
7.1 Operational Performance:
Location & Infrastructure:
The company is situated at Plot No.20 & 21, ALEAP Industrial Estate,
Gajularamaram, Quthbullapur Mandal, Hyderabad which is 15 Kms away
from the main city. The property is owned by one of the Promoters – Mrs.
Parvathi. The company is located on a land admeasuring 1080 sq yds with a
total built area of 10000 sq ft. The premises+ Ground Floor+ 1st Floor have
been taken on lease from Mrs. Parvathi. In the same premises, 3rd and 4th
floors have been leased out to M/s Siflon Drugs and Pharmaceuticals Pvt
Ltd.
The company is well connected to the main road which is 21 km away from
Hyderabad in a fairly pollution free environment
Power &Water:
They are having their own borewell of 3 inches and more ever they require
minimal water for the production. They are utilizing the 110 KVA of power
from APSEB and the connection is 150 KVA
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Labour:
The industry requires both skilled and unskilled labour in addition to
administrative staff. For both the units, the company has employed around
34 people. From which 16 as technical staff,13 Unskilled people and 05
people as Administrative Staff. The key personnel are as under:
Production Manager: Mr.K.Rajini Kanth, a B.Pharmacy , looks after the
production and inventory control of the company. He is having a rich
experience of around 20 years in this field.
Quality Assurance Manager: Mr.M. Sreenivasa Rao, an Masters of Science,
looks after to establish evaluate, validate and implement all quality control
procedures and methods. He is having a rich experience of 12 year in this
field.
The unit works for 10 hours and based on the orders and project works it
will works 24 hours in 3 shifts. Each shift consists of 8 hours. The Company
has informed that they are operating at about 70% of the total capacity.
Products:
The company is basically is into manufacture and trading of SPPL products
which include Poly Tetra Fluoro Ethylene (PTFE) lined SS/MS pipes, bends,
elbows FEP lined Tees, ball Valves, PTFE moulded components and
ECTFE (Halar) coated Vessels , receivers tank etc. These are primarily used
in all pharmaceutical and bulk drugs manufacturing units.
Florfin industrie 9
Rathan mani4
Sri rama trading 2
Perfect engineering 5
There will not be much fluctuation in the raw materials and they can get the
credit period for 60-70 days
Manufacturing Process:
The operations involved in the manufacturing process are simple and well
establishes .The outline of the process are as indicated below.
c) PTFE Components:
The solid/hollow PTFE tubes extracted from Extruder are milled, drilled and
assembled to produce PTFE components like Gaskets, seatings etc. Which
are widely used for fitting and other purposes.
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Customers:
M/s Divi’s Laboratories Ltd, M/s Matrix Laboratories Ltd, & Dr. Reddy’s
Laboratories Ltd, Nicolus pharma are the main customers of the company.
Apart from the above clients, all major pharmaceuticals and bulk drug
manufacturers are associated with this company for their products which are
used in their manufacturing activity. They are enjoying the credit period of
90-110 days. Generally payments are received only after the Tubes are
installed and trail production commences with the end Customer. Due to
this, the credit period is on the higher side
Even though the credit offered is on the higher side, there have been no bad
debts till date. The Company has Rate contracts with top Customers. Earlier,
there was no Price Escalation clause in the contract. From the current year
2007, RM price escalation clause has been included in all the rate contracts.
Month-wise Sales for the last 2 financial years for Unit 1&2 are as under:
The company has achieved Sales of Rs. 413.08 lakhs during 2008-09
compared to sales of Rs. 410.35 lakhs made during 2007-08, thereby shown
a marginal increase of 0.67%.The main reason for marginal growth,
explained by the customer is that, the company is not able to secure orders to
larger extent, as the pharma industry is running under lean phase during the
last financial year and there were no major expansion plans by the
Pharma/Chemical industries during the last financial year.
However during the current financial year, the company is getting the orders
in an encouraging phase and achieved sales of Rs. 142.92 lakhs till Jul'09 as
against sales of Rs. 137.33 lakhs for corresponding period last year and
based on same estimated turnover of Rs. 450lakhs appears reasonable.
Also, the Company has orders to the tune of Rs. 150 lakhs to be executed in
the next 3-4 months. They have added new customers like Rakshita Pharma,
Sun Labs etc from whom also they are expecting orders. In view of the
same, Party has requested for enhancement.
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DP Calculation:
9. Financial Appraisal:
Remarks on Financials:
The company has achieved Sales of Rs. 413.08 lakhs during 08-09 compared
to sales of Rs.410 lakhs made during 07-08, thereby shown an increase of
0.67%. The revenue growth is only 0.67% The main reason for leser revenue
growth in sales as explained by the customer is that, the company is not able
to secure orders to larger extent, as the pharma industry is running under
lean phase during the last financial year and there were no major expansion
plans by the Pharma/Chemical industries during the last financial year.
However during the current financial year, the company is getting the orders
in an encouraging phase and achieved sales of Rs. 142.92 Lac till Jul'09 and
based on same estimated turnover of Rs.450 lakhs appears reasonable..
The Cash accruals during the last 3 years are indicated below:
FY’2009 --- Rs. 21.3 Lacs
FY’2008 --- Rs. 33.20 Lacs
FY’2007 --- Rs. 41.50 Lacs
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The Gross and Net margins are in 9.7:1 and 3.9 respectively, compare to
previous financial year ratios were declined, but the ratios are satisfactory
level to serve the proposed limits.
The TNW increased from Rs. 161.80 lakhs as at 31.03.08 to Rs 177.90 Lacs
as at 31.03.09, due to plough back of some portion of profit.
Debtor days are on the higher side. About 60% of debtors are less than 90
days old and balance are more than 90 days old. There are no debtors which
are more than 120 days. Party has informed they they are regularly
collecting money from the Customers. The position has improved in current
year.
The company has achieved Sales of Rs. 413.08 lakhs during 2008-09
compared to sales of Rs. 410.35 lakhs made during 2007-08, thereby shown
a marginal increase of 0.67%.The main reason for marginal growth,
explained by the customer is that, the company is not able to secure orders to
larger extent, as the pharma industry is running under lean phase during the
last financial year and there were no major expansion plans by the
Pharma/Chemical industries during the last financial year.
However during the current financial year, the company is getting the orders
in an encouraging phase and achieved sales of Rs. 142.92 lakhs till Jul'09 as
against sales of Rs. 137.33 lakhs for corresponding period last year and
based on same estimated turnover of Rs. 450lakhs appears reasonable.
Also, the Company has orders to the tune of Rs. 150 lakhs to be executed in
the next 3-4 months. They have added new customers like Rakshita Pharma,
Sun Labs etc from whom also they are expecting orders. In view of the
same, Party has requested for enhancement
SOURCING CRITERIA:
Remarks -
Fast Track Criteria (Non-ODAP) Actuals Eligibility
1 Years in Business - Min. 5 years 5 Y
2 Annual Sales Turnover - Min. Rs. 60 lacs 413.08 Y
3.1 Proposed WC Limits / Existing Limits - Max. 150% 131% Y
AND
Proposed Limits / Previous Year's Sales - (For Mfr Max.
3.2 20% / For Non Mfr 15%) 19% Y
Promoters Money in Business / Facility Requested (Min. 1
4 Times) 2.09 Y
Facility Amount requested (Min Rs.10 lacs / Max. Rs. 100
5 lacs) 85 Y
6 Banking Account Conduct – Good Good Y
Property Cover - Residential / Commercial - Non Mfr (Min.
7.1 110%) - -
Property Cover - Residential / Commercial / Industrial - Mfr
7.2 (Min. 110%) 156.5% Y
Property Cover - Residential / Commercial - Mfr (Min.
7.3 35%) 156.5% Y
ELIGIBLE
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QUALIFYING CRITERIA:
15. Recommendations:
Based on the above, Recommended for renewal cum enhancement of Cash
Credit facility of Rs.80.00 Lacs to M/s Siflon Polymers Private Limited The
facilities shall be backed by 1st charge on stocks, book debts of the firm and
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Total Outside <=90% of last 2 <=110% of last 2 110-150% of last 2 years average
Liabilities / years average years average
Tangible
Networth
Current ratio >=110% of last >=90% of last 2 60-90% of last 2 years average
2 years average years average
Banking
Behaviour
Overdrawing / No overdrawing Occasional Usually Overdrawn
TOD Overdrawing
SUMMARY
This project has examined the various types of financing alternatives for
trade finance.
The project has examined the financial requirements of trade finance
activities and found out that there is a need for financing at every stage of
the activities performed. The project has delt with various instruments used
in trade finance activities.
Trade finance is the backbone of all economies and key sources of economic
growth.
This project also delt with guidelines /instructions for financing trade
finance activities and also various laws governing trade finance activities are
studied in this project.
Hence how cash, credit, investments and other assets are utilized for trade
finance are studied in this project.
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SUGGESTIONS
Banking business and banking risks have become much more complicated
with globalization and the resolution in information technology. There is a
need for banking supervisory tools to keep up with changes in the market to
track the risk and ensure that they are prudently and carefully managed.
While assessing the project the profit element should be considered with risk
element collectively .
Sometimes the client business looks promising and real then certain
relaxation should be provided as far as policies are considered.