A SUMMER PROJECT REPORT ON

TERM LOAN IN PROJECT FINANCING

FOR

Adinath cables and conductots pvt limited

(A Unit of JVL Agro Industries)

ALWAR, RAJASTHAN
SUBMITTED TO

FACULTY OF MANAGEMENT STUDIES

MOHAN LAL SUKHADIA UNIVERSITY, UDAIPUR
MBA (2010-12)

Guided by: MR. DEEPAK TIWARI HEAD ACCOUNTS & FINANCE

Submitted By: SHYAM LAL JANGID MBA-II PART

DECLARATION

I, the undersigned, hereby declare that the Project Report entitled TERM LOAN IN PROJECT FINANCING FOR JVL AGRO FOODS, ALWAR written and submitted byme to the Faculty of Management Studies, Mohan Lal Sukhadia University, Udaipur, Rajasthan, in partial fulfillment of the requirements for the award of degree of Master of Business Administration, is my original work and the conclusions drawn therein are based on the material collected by myself.

Place: Alwar Date:

Students signature: (SHYAM LAL JANGID)

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Preface

Practical training has been incorporating the curriculum of MBA, which enables the management studies to finalize themselves with the practical aspect of management. This is very important and beneficial as it cultivates in the student sense of professionalism and makes them ready to face the real life challenges in their respective future. Thus a student gets theoretical aspects in classroom and how these are implemented in practical training in industry. The main objective of practical training is to develop practical knowledge & awareness about industrial environment and business practices in the students as a supplement to theoretical studies of administration and management in specific area like Finance, Marketing, HRM etc., it increases the skills, abilities and attitude to perform specific job in industrial environment.

Fortunately I got golden opportunity to visit and complete my two months training at JVL Agro Industries Ltd. I got a chance to see the functioning of all departments & imbibe a lot learning of subjects.

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Acknowledgement

I would like to thank JVL AGRO FOODS for giving me a wonderful opportunity to develop the strategy for future growth and expansion. I would like to express gratitude to Mr. DEEPAK TIWARI for sharing the journey of conceptualizing and developing all the ideas. They stood in times of difficulty and despite of their busy schedule devoted a major chunk of his time towards this project. They have been a part of all the activities and duly guided the project to its destination. I am indebted for their endeavors in making this project a success. & I am indebted to them for providing insight into the tedious Documentation Process. They have taken their best efforts so as to facilitate all necessary inputs for the project. I would like to thank Mr. DEEPAK TIWARI (head - accounts and finance, Alwar Branch) for his constant endeavor in making this project a success. He has truly fulfilled his role as a guide during my real term financing training in from to. I would like to acknowledge the help and support extended by all the employees of JVL agro foods whose names have not been mentioned here. They all have been very co-operative and provided impetus to this project. Without their help this project would not have reached its destination. I would also like to thank my Institution Faculty of Management Studies, Rajasthan and DR. HANUMAN PRASD, CORDINATOR (RMAT) for providing me this magnificent opportunity to work and learn and for providing us such a wonderful platform to get us exposed to the industry. I will not miss the opportunity of expressing gratitude towards all my professors for the knowledge they shared with me which provided necessary ingredients to this project.

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INDEX
CHAPTE R NO. 01 CONTENTS PAGE NO 01-14 08 09 06 11 12 13 14 15 16 17-18 19 20-23 24 25 26-27 27 27-32 33 34 34-36 37-39 40 41
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INTRODUCTION AND COMPANY PROFILE HISTORY GROWTH STORY IN SHORT FORM COMPANY PROFILE VISION, MISSION AND ACHIEVEMENTS MANAGEMENT PROFILE PRODUCT MIX COST EFFICIENT PRODUCTION FACILITY PENETRATION OF COMPANY CURRENT PRODUCTION CAPACITY SALES AND DISTRIBUTION STRATEGIC CORPORATES BUSINESS ENABLERS BALANCE SHEET

02

PROJECT FINANCING PROJECT FINANCE INTRODUCTION SOURCE OF FINANCE AGREEMENT IN PROJECT FINANCING

03

TERM LOAN INTRODUTION FEATURE OF TERM LOAN TERM LOAN PROCEDURE IMPORTANT TERMS

04

DOCUMENTATION OF TERM LOAN

ONE PAGER CMA OF JVL AGRO FOODS DETAILS OF PROPOSED PROJECT

41-42 43-51 52

INTRODUCTION
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AND COMPANY PROFILE

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HISTORY

JVL Agro Industries was formerly known as Jhunjhunwala Vanaspati. Jhunjhunwala Vanaspati, incorporated in the year 1989, manufactures hydrogenated vegetable oil (Vanaspati Ghee) and refined oils, at its manufacturing facility at Varanasi in Uttar Pradesh. What started as a modest unit, with a production capacity of 25 MT per day is today the single largest manufacturing company of hydrogenated vegetable oil in India producing over 300 MT per day. The company uses a modern physical process for production of hydrogenated vegetable oil and refined oil as opposed to the traditional chemical based process, employed by a majority of producers. The company is an ISO 9001-2000 certified company for its quality system for manufacture and supply of branded hydrogenated vegetable oil and refined oil. The recognition establishes Jhunjhunwala Vanaspati as a quality oriented organization. In terms of growth, the company has also promoted the setting up of a hydrogenated vegetable oil plant in Colombo, Sri Lanka and recently acquired an edible oil plant at Alwar (Rajasthan) in February 2007. This has helped the company to ramp up production and acquire customers and market share in the western region. The Vanaspati Ghee (hydrogenated vegetable oil) and edible oils businesses of Jhunjhunwala Vanaspati are marketed under the brand name Jhoola. The company today has a strong and extensive distribution network across India, built over the years, which is its major strength. With its distributors, 17 depots, and sales points and over 100 sales staff, the company also has a presence with a large number of retailers. Special emphasis is laid on production of retail packs, packaging and quality for customers of all facets. The company has created a manufacturing facility by acquiring one unit in Rajasthan for production of mustard oil and with its joint venture in Sri Lanka for production of Vanaspati Ghee. This has helped the company to increase its production and reach out new markets and customers in North and West India. The company hopes
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to grow its consumer base and product portfolio with new alliances and acquisitions. The equity shares of the company are listed on the Bombay Stock Exchange (BSE) and Kanpur Stock Exchange in India.

Cutting a long story short Lajawaab taste, mazedaar results 1990

Commenced production with a 25 TPD capacity

1993
Achieved 100-TPD production at Varanasi

1995
Switched vanaspati processing from chemical to modern mechanical technology

1999
Installed a 60 TPD unit for refined oil at Jaunpur, introducing crude soybean and palm olien oil

2000
Increased vanaspati production capacity to 200 TPD

2005
Introduced a fractionation unit of 200 TPD capacity Gross sales

2006
Acquired Rajasthan-based mustard oil seed-crushing and refining plant Invested in Adamjee Extraction, Sri Lanka, to import saturated fats under the Jhoola brand Product sales in the states of UP, Bihar, Jharkhand, Madhya Pradesh, Uttaranchal and Chhattisgarh.

2007
Emerged as the first Uttar Pradesh vanaspati manufacturer to commission a 3-MW power plant Formed a wholly-owned Singapore subsidiary under JVL Overseas Pte Ltd Introduced products in the Northeastern states

2008
Commissioned an edible oil refinery/saturated fats unit in Bihar Commenced production of a new refinery in Uttar Pradesh, plant supplied by Alfa Laval with the latest technology, Initiated de-oiled cake exports
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 2009 Commenced commercial production from the Bihar unit Introduced products in Jammu and Kashmir, Himachal Pradesh and West Bengal

2010
Commenced development of the Haldia unit with 1,200 TPD refining capacity, captive power, plant and oleochemical section. Date of Establishment 1989 Revenue Market Cap Corporate Address 275.293 ( USD in Millions ) 1900.912 ( Rs. in Millions ) Jhunjhunwala Bhawan,Nati Imli, Varanasi-221001, Uttar Pradesh www.jhoola.com

Management Details

Chairperson - D N Jhunjhunwala MD - S N Jhunjhunwala Directors - Adarsh Jhunjhunwala, Alka Khemka, D N Jhunjhunwala, D N Jhunjhunwala, H L Agrawal, H L Agrawal, Harsh Agarwal, Kanhaiya Lai Goenka, Kanhaiya Lal Goenka, Mahesh Kedia, S K Dikshit, S N Jhunjhunwala, S K Dikshit, S N Jhunjhunwala, Shyam Poddar, Sunil Kumar Tripathi
Business Operation Background Consumer Food

JVL Agro Industries was formerly known as Jhunjhunwala Vanaspati. Jhunjhunwala Vanaspati, incorporated in the year 1989, manufactures hydrogenated vegetable oil (Vanaspati Ghee) and refined oils, at its manufacturing facility at Varanasi in Uttar Pradesh. What started as a modest unit, with a production capacity of 25 MT per day is today the single largest manufacturing company of hydrogenated vegetab

Financials

Total Income - Rs. 12446.3 Million ( year ending Mar 2010) Net Profit - Rs. 292.2 Million ( year ending Mar 2010) Sunil Kumar Tripathi

Company Secretary Bankers

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Auditors

Garg & Co

Vision
To delight the consumer through a complete vegetable oils solution, through continuous research and development in healthier oil varieties, leading to a single-stop convenience

Mission
We expect to extend our leadership from saturated fats to the entire vegetable oil segment in the first stage and then to agro-based premium food products thereafter, from one region in India to a global manufacturing and marketing presence

tAwards and achievements

The companys brand Jhoola was recently awarded Globoil Gold Award, 2006 as the 'fastest growing Vanaspati brand in India' by Globoil India. The company is ISO 9001-2000 certifiedy Promote

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MANAGEMENT PROFILE

S.No 1

Name D N Jhunjhunwala

Designation Chairman

S N Jhunjhunwala

Managing Director

Sunil Kumar Tripathi

Company Secretary

S K Dikshit

Director

Mahesh Kedia

Director

Kanhaiya Lal Goenka

Director

Harsh Agarwal

Director

Adarsh Jhunjhunwala

Whole Time Director

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Addressing Wider Market through an Intelligent Product Mix

One of the leading brands in Central, Northern and Eastern India Leveraging its established Brand power to sell all its products

Jhoola

Refined Palm Oil Refined Soybean Product Mix Saturated fats Palmoline Vegetable Oil Mustard Oil Fatty Acid
13

In India Palm, Soybean and Mustard constitutes 75% of total edible oil consumption

Customised Packaging From 200 ml to 1 litre to 15 kg

Addressing the varied quantity needs of consumers

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Cost Efficient Production Facilities

Single largest Saturated fats manufacturing unit in India In-house facility for packaging material production Reduced packaging cost A 3-MW captive plant in the Varanasi facility, fulfilling most of units power requirement
14

One of the lowest per ton production cost

Reduced power cost compared with the prevailing grid tariff

Northern and Central Indias largest crude oil importer Invested in ERP for transparency, enhanced scalability and accuracy Trusted 2-decade relationship with suppliers locally and internationally Enhanced capacity utilisation

Better bargaining power and logistical competitiveness

Informed decision making

Uninterrupted raw material supply

Over 80% capacity utilisation in Varanasi, Bihar and Alwar units

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Feeding the States Account for >60% of Indias Population

Transformed from a Regional player to a Zonal entity

Available in 17 Indian states and 2 union territories, accounting for more than 60% of the total population

UP and Bihar are the largest saturated fats and refined oil consuming market in India

International Markets

De-oiled cake exported to Vietnam, Bangladesh,

15

Thailand, China, Indonesia and South Korea

Pan North, Central, East and North-East India Network of over 30 depots and 12 sales points Available in more than 5000 retail outlets in India Sales agreement with large retail formats like Big Bazaar in UP

Distribution Network

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Current Production Capacity

Saturated fats and Edible oil production capacity Capacity (TPA) 198,000 231,000 33,000 80,000 90,000

Plant Location UP and Bihar UP and Bihar UP Rajasthan Rajasthan

Product Saturated Fats Refined Palm Oil Refined Soybean Oil Mustard Seed Crushing Solvent Extraction

Packaging material production capacity

1,800,000 HDPE jars per annum 4,200,000 tins per annum Also manufactures the handles and caps required for the containers
16

TPA Tonnes Per Annum; TPD Tonnes Per Day

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SALES AND DISTRIBUTION OF PRODUCTS

Product Name

Year Month

Sales Sales % of STO Quantity Value(Rs.Million)

Deacidified Oil

2010

03

113576.27

4405.30

35.70

Refined Oil

2010

03

80581.85

3379.90

27.39

Oil - Traded

2010

03

64700.39

2230.00

18.07

Mustard Oil

2010

03

25294.94

1289.20

10.45

DOC

2010

03

72167.02

766.50

6.21

Fatty Acid Oil

2010

03

6904.60

194.60

1.58

Mustard Seed Traded

2010

03

1511.39

39.90

0.32

DOC - Traded

2010

03

2997.28

36.00

0.29

Refined Oil/Vanaspati

2010

03

0.00

0.00

0.00

Red Palmolein &

2010

03

0.00

0.00

0.00
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Enter Esterified

Edible Oils

2010

03

0.00

0.00

0.00

Vanaspati

2010

03

0.00

0.00

0.00

Gasification

2010

03

0.00

0.00

0.00

Fatty Distillation

2010

03

0.00

0.00

0.00

HDPE Jars

2010

03

0.00

0.00

0.00

Tins

2010

03

0.00

0.00

0.00

Strategic corporate pillars Experience

JVL possesses over two decades of rich experience in the vegetable oil industry.
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Product range
JVL provides an extensive range of vegetable oils comprising refined (palm oil and soya oil),saturated fats (vanaspati) and mustard oil.

Relationships
JVL enjoys long-term relationships with plantation owners in Indonesia and Malaysia ensuring timely and cost-effective raw material delivery.

Logistics
JVLs positioning as northern and Central Indias largest crude oil importer translates into better bargaining and logistics competitiveness.

Brand
The Jhoola brand is available across 18 Indian states and two union territories, enjoying a market-leading share in Central Indias edible oil market.

Scale
JVLs saturated fats manufacturing unit is the single-largest in India, resulting in optimized production and conversion costs.

Integration
JVL is integrated from plantation access to product packaging (18,00,000 HDPE jars per annum and 42,00,000 tins per annum as well as manufacturing container handles and caps).

Energy
JVL invested in a 3-MW captive power plant in its Varanasi facility, feeding 100% of the units requirements.

Quality
JVL is certified for the prestigious ISO 9001-2008.

Distribution
JVL enjoys an entrenched presence in North India through a distribution network comprising over 30 depots, over 5,200 dealers and thousands of retail outlets.

Customization
JVL caters to the needs of various Indian consumers through various packaging options ranging from 200 ml to 15 ltrs to 15 kg.

Customer-centric JVL offers customers a superior price-value proposition in terms of

product diversity,

Business enablers A. Robust product portfolio

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JVL enjoys a growing presence in four major edible oil categories palm oil, soybean oil, mustard oil and vanaspati (hydrogenated vegetable oil). This wide positioning makes it possible for the Company to capitalize on more opportunities than single-product players. The Company is also among Indias few large integrated players, better placed over small and mid-sized manufacturers in countering scrotal cyclicality. The Companys economies of scale translated into enhanced bargaining power, optimized production costs and superior product availability.

B.

Scale

JVL is among Indias largest edible oil producers. Some of the production highlights in 2010-11 comprise: Increased vanaspati production from 1, 14,526 MT in 2009-10 to 1, 24,570 MT Increased refined oil (palm oil and soya oil) production from 84,395 MT in 2009-10 to 1, 25,239 MT Increased mustard oil production from 26,486 MT in 2009-10 to 41,483 MT Increased de-oiled cake production from 69,638 MT in 2009-10 to 72,321 MT Increased fatty acid oil production from 6,825 MT in 2009-10 to 12,823 MT The increase in production was derived from the following: The Greenfield Bihar unit produced 51,734 MT of refined oils in 2010-11 as against 16,369 MT in 2009-10 The Varanasi fractionation capacity expanded from 300 TPD to 700 TPD our assets Used as a cooking medium by midland lower-income groups, comprising 70% of Indias population .The share of refined palm oil and saturated fats in the edible oil market stands at 50% and 15% respectively. The demand for refined oil has grown steadily, owing to rising incomes and health awareness. The cumulative refined palm oil demand in India is pegged at over 7 mn MT per annum. Vanaspati, refined oils and mustard oilare also used as a cooking medium in kitchens, hotels, restaurants, sweet makers/halwaais, namkeen makers and industrial consumers (bakers and confectioners). While vanaspati is essentially saturated fat, refined and mustard oil are unsaturated fats. Vanaspati is widely consumed in UP and Bihar and refined palm olein is fast-emerging as a popular cooking medium in both these states. Mustard oil is widely consumed in eastern Uttar Pradesh and Bihar while refined soybean oil is a popular cooking medium in North India. These products enjoy steady round-the-year consumption and are less prone to demand cyclicality. De-oiled cake is used for cattle and poultry feed.

C. Location
JVLs manufacturing facilities are located strategically to capture consumption upturns:
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 Varanasi (Uttar Pradesh): Located in eastern UP, which accounts for the highest vanaspati per capita consumption in India Dehri-on-sone (Bihar): Located in a state that is among Indias largest vanaspati and RBD palm olein markets Alwar (Rajasthan): Located proximate to raw material sources as Rajasthan is Indias largest mustard seed producer Haldia (West Bengal): This upcoming plant is located near the Haldia port, facilitating international trade The Company transports imported raw material (crude palm oil) from Kolkata port (700 km from Varanasi and 600 km from Pahleza) through its rail network, which is cheaper than road transportation. Besides, the upcoming plants proximity to the Haldia port is expected to reduce freight and will prove cheaper than transporting by trucks.

D. Product utility and Acceptance

Palm oil is the most affordable of all oils (mustard, soybean and sunflower) used in refined and saturated forms. It also possesses a higher nutrition value than other edible oils and is largely Vanaspati/hydrogenated vegetable oil RBD palm oil RBD palm olefin Refined soybean oil Mustard oil

JVLs product portfolio

Products Installed capacity (MT per annum) Vanaspati (Varanasi, UP) 84,000 Red palm olefins and esterifies oil (Varanasi, UP) 90,000 Mustard oil (Alwar, Rajasthan) 81,000 Refined oil/vanaspati (Dehri-on-sone, Bihar) 1, 50,000

E. Markets and brand

The edible oil industry comprises big, small and MNC players. The Company faces competition from national and regional players. International competitors comprise multinational players like Cargill India, Bunge India and Louis Dreyfus Commodities, while Indian competitors comprise Ruchi Soya, Adani Wilmar, Gokul Refoils and
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Solvents , K S Oils, Emami Biotech, among others. The Company has grow, competition notwithstanding, on account of direct raw material import, scale economies and logistics advantages. The Company markets products under the Jhoola, Payal and Joohi umbrella brands. Vanaspati is sold under the Jhoola brand RBD palm olein under Jhoola and Payal brands Refined soybean oil under Jhoola Health brand Mustard oil under Jhoola, Joohi and Shankar brands Our brands are easily recognised and well-accepted. They are sold in diverse pack sizes (200 ml, 500 ml, 1 litres, 2 litres, 5 litres, 10 litres, 15 litres and 15kg) to meet various requirements. Besides household consumers, JVL also caters to institutional clients fromthe hospitality, bakery and confectionery sectors. The Companys stock keeping units comprise 11 for vanaspati, five each for refined soyabean and palm oil and eight formustard oil. The Companys biggest consumption centres comprise Uttar Pradesh and Bihar, contributing over 70% of revenues. The Company enjoys about a 30%market share across these core markets.

F. Quality and R&D

At JVL, our quality policy is enshrined in our ability to consistently meet customer expectations through process and manufacturing improvements. We possess confidence-enhancing certifications like ISO 9001-2008 and AGMARK for newly introduced mustard oil. We also enjoy certifications from high-quality standard authorities like PFA (Prevention of Food Adulteration Act) and VOP (vegetable oil product) specification from the Government of India. Our quality infrastructure comprises centralized laboratories for inspecting incoming raw material quality (oils, packaging material and chemicals), intermediate materials and finished products, leading to negligible rejection rates.

G. Raw material
Our principal raw materials include crude palm oil, soybean degum/refined oil and mustard seeds. We import crude palm oil from Indonesia and Malaysia, soybean degum from Argentina and Brazil. These are also purchased from within the country. As a prudent policy, we source mustard seeds ahead of requirement. Procurement strengths
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 JVL is a direct importer of its principal raw material It is among Indias largest manufacturers and marketers of vanaspati, strengthening bargaining power Its brands are prominent across target markets, resulting in a premium It enjoys logistical advantages across primary markets owing to its proximity to key consumption centers

H. Information technology
Information technology is JVLs backbone, networking its offices, manufacturing facilities and depots and resulting in a quicker access to real time information. It currently uses ERP (based on SQL). At JVL, the implementation of MIS links technology, information and people. The Company established day-to-day production information based on the physical stock of commodities, thereby controlling losses. It developed a techno-commercial hub of 1015 competent people resulting in a better coordination between production, planning and marketing.

Balance Sheet as at March 31, 2011

(Rs. In crore)

Schedule

March 31,2011

March 31,2010

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Sources Of Funds Share Capital Prefernces Warrant Reserve and Surplus Loan Funds Secured and Unsecured Loan Deferred Tax Liabilities 148.56 19.97 410.58 Applications Of Funds Fixed Assests Less: Depreciations 203.00 34.23 68.77 Investments Currents assests and loan advances Inventories & Sundry Debtors Cash Bank Balance Loans and Advances 432.39 332.77 96.66 861.82 Less: Liabilities Net Current Assests 639.73 222.09 410.58 323.33 297.88 95.97 717.18 330.04 387.14 534.71 19.72 164.20 25.72 138.48 9.09 340.38 18.30 534.71 12.84 19.00 210.21 12.84 0.00 163.19

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Project Financing

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Project finance
Project finance is the long term financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of the project sponsors. Usually, a project financing structure involves a number of equity investors, known as sponsors, as well as a syndicate of banks or other lending institutions that provide loans to the operation. The loans are most commonly nonrecourse loans, which are secured by the project assets and paid entirely from project cash flow, rather than from the general assets or creditworthiness of the project sponsors, a decision in part supported by financial modeling.[1] The financing is typically secured by all of the project assets, including the revenue-producing contracts. Project lenders are given a lien on all of these assets, and are able to assume control of a project if the Parties to a Project Financing

Parties to project financing

There are several parties in a project financing depending on the type and the scale of a project. The most usual parties to a project financing are; 1. Project company 2. Sponsor 3 Borrowers 4. Financial Adviser 5. Technical Adviser 6. Lawyer 7. Equity Investors 8. Regulatory agencies 9. Multilateral Agencies 10. Host government

.contractual

framework

The typical project finance documentation can be reconduct to four main types
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Shareholder/sponsor documents Project documents Finance documents Other project documents

Source of finance requirement to set up a project

Capital structure Menu of financing Equity capital Preference capital Internal accrual Term loan Debentures Working capital advance Miscellaneous sources Raising venture capital in international market

Engineering, Procurement and Construction Contract - (EPC Contract)

The most common project finance construction contract is the EPC Contract. An EPC contract generally provides for the obligation of the contractor to build and deliver the project facilities on a turnkey basis, i.e. at a certain pre-determined fixed price, by a certain date, in accordance with certain specifications, and with certain performance warranties. EPC contract is quite complicated in terms of legal issue therefore the project company the EPC contractor shall have enough experiences and knowledge about the nature of project in order to avoid their faults and minimize the risks during the contract execution. Other alternative forms of construction contract are project management approach and alliance contracting. Basic contents of an EPC contract are:
o o o o o o o

Description of the project Price Payment Completion date Completion guarantee and Liquidated Damages (LDs): Performance guarantee and LDs Cap under LDs

Operation and Maintenance Agreement - (O&M Agreement)

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An agreement between the project company and the operator. The project company delegates the operation, maintenance and often performance management of the project to a reputable operator with expertise in the industry under the terms of the Operations and Maintenance (O&M) agreement. The operator could be one of the sponsors of the project company or third party operator. In other cases the project company may carry out by itself the operation and maintenance of the project and may eventually arrange for the technical assistance of an experienced company under a technical assistance agreement. Basic contents of a O&M contracts are:
o o o o o

Definition of the service Operator responsibility Provision regarding the services rendered Liquidated damages Fee provisions

Concession Deed
Agreement between the project company and a public-sector entity (the contracting authority). The concession agreement concedes the use of a government asset (such as a plot of land or river crossing) to the Project Company for a specified period of time. A concession deed would be found in most projects which involve Government such as in infrastructure projects. The concession agreement may be signed by a national / regional government, a municipality, or a special purpose entity set up by the state to grant the concession. Examples of concession agreements include contracts for the following:

A toll-road or tunnel for which the concession agreement giving a right to collect tolls / fares from public or where payments are made by the contracting authority based on usage by the public o A transportation system (e.g. a railway / metro) for which the public pays fares to a private company) o Utility projects where payments are made by a municipality or by endusers. o Ports and airports where payments are usually made by airlines or shipping companies. o Other public sector projects such as schools, hospitals, government buildings, where payments are made by the contracting authority.
o

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Shareholders Agreement - (SHA Agreement)

The agreement between the project sponsors to form a special purpose company (SPC) in relation to the project development. This is the most basic of structure held by the sponsors in project finance transaction. This is an agreement between the sponsors and deals with:
o o o o o o

Injection of share capital Voting requirements Resolution of disputes Dividend policy Management of the SPV Disposal and pre-emption rights

Off-Take Agreement
An agreement between the project company and the off taker (the party who is buying the product / service the project produces / delivers). In a project financing the revenue is often contracted (rather to the sold on a merchant basis). The off-take agreement governs mechanism of price and volume which make up revenue. The intention of this agreement is to provide the project company with stable and sufficient revenue to pay its project debt obligation cover the operating costs and provide certain required return to the sponsors. The main off-take agreements are:

Take-or-pay contract: under this contract the off-taker on an agreed price basis is obligated to pay for product on a regular basis whether or not the off-taker actually takes the product. Power purchase agreement: commonly used in power projects in emerging markets. The purchasing entity is usually a government entity. Take-and-pay contract: the off-taker only pays for the product taken on an agreed price basis. Long-term sales contract: the off-taker agrees to take agreed-upon quantities of the product from the project. The price is however paid based on market prices at the time of purchase or an agreed market index, subject to certain floor (minimum) price. Commonly used in mining, oil and gas, and petrochemical projects where the project company wants to ensure that its product can easily be sold in international markets, but off-takers not willing to take the price risk Hedging contract: found in the commodity markets such as in an oilfield project. Contract for Differences: the project company sells its product into the market and not to the off-taker or hedging counterpart. If however the market price is below an agreed level, the off taker pays the difference to the project company, and vice versa if it is above an agreed level. Throughput contract: a user of the pipeline agrees to use it to carry not less than a certain volume of product and to pay a minimum price for this.

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Supply Agreement
An agreement between the project company and the supplier of the required feedstock / fuel. If a project company has an off-take contract, the supply contract is usually structured to match the general terms of the off-take contract such as the length of the contract, force majeure provisions, etc. The volume of input supplies required by the project company is usually linked to the projects output. Example under a PPA the power purchaser who does not require power can ask the project to shut down the power plant and continue to pay the capacity payment in such case the project company needs to ensure its obligations to buy fuel can be reduced in parallel. The main supply agreemnts are: The degree of commitment by the supplier can vary. Fixed or variable supply: the supplier agrees to provide a fixed quantity of supplies to the project company on an agreed schedule, or a variable

supply between an agreed maximum and minimum. The supply may be under a take-orpay or take-and-pay. Output / reserve dedication: the supplier dedicates the entire output from a specific source, e.g. a coal mine, its own plant. However the supplier may have no obligation to produce any output unless agreed otherwise. The supply can also be under a take-or-pay or take-and-pay Interruptible supply: some supplies such as gas are offered on a lower cost interruptible basis often via a pipeline also supplying other users. Tolling contract: the supplier has no commitment to supply at all, and may choose not to do so if the supplies can be used more profitably elsewhere. However the availability charge must be paid to the project company.

Loan Agreement
An agreement between the project company (borrower) and the lenders. Loan agreement governs relationship between the lenders and the borrowers. It determines the basis on which the loan can be drawn and repaid, and contains the usual provisions found in a corporate loan agreement. It also contains the additional clauses to cover specific requirements of the project and project documents. Basic terms of a loan agreement include the following provisions.

General conditions precedent Conditions precedent to each drawdown Availability period, during which the borrower is obliged to pay a commitment fee Drawdown mechanics An interest clause, charged at a margin over base rate A repayment clause Financial covenants - calculation of key project metrics / ratios and covenants Dividend restrictions Representations and warranties
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The illegality clause

Intercreditor Agreement
Intercreditor agreement is agreed between the main creditors of the project company. This is the agreement between the main creditors in connection with the project financing. The main creditors often enter into the Intercreditor Agreement to govern the common terms and relationships among the lenders in respect of the borrowers obligations. Intercreditor agreement will specify provisions including the following.

Common terms Order of drawdown Cash flow waterfall Limitation on ability of creditors to vary their rights Voting rights Notification of defaults Order of applying the proceeds of debt recovery If there is a mezzanine funding component, the terms of subordination and other principles to apply as between the senior debt providers and the mezzanine debt providers.

Tripartite Deed
The financiers will usually require that a direct relationship between itself and the counterparty to that contract be established which is achieved through the use of a tripartite deed (sometimes called a consent deed, direct agreement or side agreement). The tripartite deed sets out the circumstances in which the financiers may step in under the project contracts in order to remedy any default. A tripartite deed would normally contain the following provision. Acknowledgement of security: confirmation by the contractor or relevant party that it consents to the financier taking security over the relevant Project contracts.

Notice of default: obligation on the relevant project counterparty to notify the lenders directly of defaults by the project company under the relevant contract.

Step-in rights and extended periods: to ensure that the lenders will have sufficient notice /period to enable it to remedy any breach by the borrower. Receivership: acknowledgement by the relevant party regarding the appointment of a receiver by the lenders under the relevant contract and that the receiver may continue the borrowers performance under the contract Sale of asset: terms and conditions upon which the lenders may transfer the borrowers entitlements under the relevant contract.

Tripartite deed can give rise to difficult issues for negotiation but is a critical document in project financing.
Page | 31

Common Terms Agreement Terms Sheet

Agreement between the borrower and the lender for the cost, provision and repayment of debt. The term sheet outlines the key terms and conditions of the financing. The term sheet provides the basis for the lead arrangers to complete the credit approval

to underwrite the debt, usually by signing the agreed term sheet. Generally the final term sheet is attached to the mandate letter and is used by the lead arrangers to syndicate the debt. The commitment by the lenders is usually subject to further detailed due diligence and negotiation of project agreements and finance documents including the security documents. The next phase in the financing is the negotiation of finance documents and the term sheet will eventually be replaced by the definitive finance documents when the project reaches financial close.

Page | 32

Term loan

Term loan
Page | 33

Term loan given by financial institutions and banks have been the primary source of long-term debt for private firms and most public firms. Term loans, also referred to as term finance; represent a source of debt finance which is generally repayable in less than10 years. They are employed to finance acquisition of fixed assets and working capital margin Term loan differ from short-term bank loans which are employed to finance shortterm working capital need and tend to be self-liquidating over a period of time, usually less than one year

Features of term loan

The following features of term loans may be discussed. Currency Security Interest payment and principal repayment Restrictive covenants

Currency

Financial institutions give rupee term loans as will as foreign currency term loans. The most significant form of assistance provided by financial institutions, rupee term loans are given directly to industrial concerns for setting up new projects as well as for expansion, modernization, and renovation projects. These funds are provided for incurring expenditure for land, building, plant and machinery, technical know-how, miscellaneous fixed assets, preliminary expenses, preoperative expenses, and margin money for working capital.

Financial institutions provide foreign currency term loans for meeting the foreign currency expenditure towards import of plant, machinery and equipment, and payment of foreign technical know-how fees. The periodical liability for interest and principal remains in the currency/ currencies of the loan and is translated into rupees at the prevailing rate of exchange for making payments to the financial institutions

Security
Page | 34

Term loans typically represent secured borrowing. Usually assets, which are financed with the term loan, provide the prime security. Other assets of the firm may serve as collateral security. All loans provided by financial institutions, along with interest, liquidated damages, commitment charges, expenses, etc. ate secured by way of: 1. first equitable mortgage of all immovable properties of the borrower, both present and future; and 2. hypothecation of all movable properties of the borrower, both present and future, subject to prior charges in favour of commercial banks for obtaining working capital advance in the normal course of business.

Interest payment and principal repayment

The interest and principal repayment on term loans ate definite obligations that are payable irrespective of the financial situation of the firm. To the general category of borrowers, financial institutions charge an interest rate that is related to the credit risk of the proposal, subject usually to a certain floor rate. Financial institutions impose a penalty for defaults. In case of default of payment of interest, the borrower is liable to pay further interest on interest (compound interest) at the document rate. For default in repayment of instalments of principal, the borrower is liable to pay by way of liquidated damages, additional interest at the of 2 percent per annum for the period of default on the amount of principal in default, In addition to interest, lending institutions levy an upfront fee on the sanctioned loan amount usually at the rate of one percent.

The principal amount of a term loan is generally repayable over a period of 4 to 7 years after an initial grace period of 1to 2. typically, term loans provided by financial institutions are repayable in equal semi-annual instalments or equal quarterly instalments.

Note that the interest burden declines over time, whereas the principal repayment remains constant. This means that the total debt servicing burden (consisting of interest payment and principal repayment) declines over time. This pattern of debt servicing burden typical in India, differs from the pattern obtaining in western economies where debt is typically amortized in equal periodic instalments.

The latter pattern is relatively more acceptable to borrowers because it does not result in a heavy debt servicing burden in earlier years. However, presently, financial institutions in India do not follow the scheme of equal periodic amortization. Yet they try
Page | 35

to ensure, by suitably modifying the debt repayment schedule, within limits, that the debt servicing burden is not very onerous.

Restrictive covenants

In order to protect their interest, financial institutions impose restrictive covenants on the borrowers. While the specific set of restrictive covenants depends on the nature of the project and the financial situation of the borrower, loan contracts often require that the borrowing firm:

broad base its board of directors and finalize its management set-up in consultation with and to the satisfaction of the financial institutions; make arrangements to bring additional funds in the form of unsecured loans/ deposits for meeting overruns / shortfalls; refrain from undertaking any new project and/ or expansion or make an investment without the prior approval of the financial institutions; obtain clearances and licenses from various government agencies; repay existing loans with the concurrence of the financial institutions; refrain from additional borrowings or seek the consent of the financial institutions for additional borrowings;

further, loan agreements impose restrictions on the transfer of shareholding by promoters / associates.

Term loan procedure

Page | 36

The procedure associated with a term loan involves the following steps:

Submission of loan application

The borrower submits an application from which seeks comprehensive information about the project. The application form covers the following aspects promoters background particulars of the industrial concern particulars of the project (capacity, process, technical arrangements, management, location, land and buildings, plant and machinery, raw materials, effluents, labour, housing, and schedule of implementation). Cost of the project Means of financing Marketing and selling arrangements Profitability and cash flow Economics considerations Government consent

Initial processing of loan application

When the application is received, an offer of the financial institution reviews it to ascertain whether it is complete for processing. If it is incomplete, the borrower is asked to provide the required additional information. When the application is considered complete, the financial institution prepares a flash report, it is decided whether the project justifies a detailed appraisal or not.

Appraisal of the proposal project

The detailed appraisal of the project covers the marketing, technical, financial, managerial, and economic aspects. The appraisal memorandum is normally prepared within two months after site inspection. Based on that a decision is taken whether the project will be accepted or not.

Page | 37

Issue of the letter of sanction

If the project is accepted, a financial letter of sanction is issued to the borrower. This communicates to the borrower the assistance sanctioned and the terms and conditions relating thereto.

Acceptance of the terms and conditions by the borrowing unit

On receiving the letter of sanction from the financial institution, the borrowing unit convenes its board meeting at which he terms and conditions associated with the letter of sanction are accepted and an appropriate resolution is passed to that effect. The acceptance of the terms and conditions has to be conveyed to the financial institution within a stipulated period.

Execution of loan agreement

The financial institution, after receiving the letter of acceptance from the borrower, sends the draft of the agreement to the borrower to be executed by authorized persons and properly stamped as per the Indian stamp act, 1899. the agreement, properly executed and stamped, along with other documents as required by the financial institution must be returned to it. Once the financial institution also signs the agreement, it becomes effective.

Creation of security

The term loans (both rupee and foreign currency) and the deferred payment guarantee assistance provided by financial institutions are secured through the First mortgage, by way of deposit of title deeds, of immovable properties and hypothecation of movable properties. As the creation of mortgage, particularly in the case of land, tends to be a time consuming process, the institutions permit interim disbursements. The mortgage, however, has to be created within a year from the date of the first disbursement. Otherwise the borrower has to pay an additional charge of 1 percent interest.

Page | 38

Disbursement of loans

Periodically, the borrower is required to submit information on the physical progress of the projects, financial status of the project, arrangement made for financing the project, contribution made by the promoters, projected funds flow statement, compliance with various statutory requirements, and fulfillment of the pre-disbursement conditions. Based on the information provided by the borrower, the financial institution will determine the amount of term loan to be disbursed from time to time. Before the entire term loan is disbursed, the borrower must fully comply with all terms and conditions of the loan agreement.

Monitoring

Monitoring of the project is done at the implementation stage as well as at the operational stage. During the implementation stage, the project is monitored through Regular reports, furnished by the promoters, which provide information about placement of orders, construction of buildings, procurement of plant, installation of plant and machinery, trial production, etc. Periodic site visits, Discussion with promoters, bankers, suppliers, creditors, and others connected with the project, Progress reports submitted by the nominee directors, Audited accounts of the company.

During the operational stage, the project is monitored with the help of Quarterly progress report on the project, Site inspection, Reports of nominee directors, and Comparison of performance with promise. The most important aspect of monitoring, of course, is the recovery of dues represented by interest and principal repayment.

Debt service coverage ratio(DSCR)

Page | 39

The payment of interest and repayment of principal within the stipulated tie measured by DSCR. Gross cash accruals are related to projects liability in respect of interest and payment of instalment towards principal. The gross cash accruals should normally be 1.6 to 2 times to assure that the project has inherent strength and potential to service debt.

Security margin

The term loan is sanctioned against the security of fixed assets. Security margin represents the excess value of fixed assets over the term loan. Normally, The term loan is 75 percent of the value of fixed assets. The security margin is 25 percent.

Term loan are granted subject to the following terms and conditions.

1. Clean title to land as security. 2. Insurance of assets, building and machinery separately. 3. Scrutiny of articles of association to ensure that it does not contain any restrictive clause against coverants of the financial institutions. 4. Lien on all fixed assets. 5. Personal and corporate guarantees of major share holders and associates concerns. 6. Undertaking from promoters to finance shortfalls in funds/ cost over run 7. Approval of appointment of managerial personnel by DFI. 8. Further capital expenditure only on the approval DFI. 9. Payment of dividend and issue of bonus shares subject to the approval of financial institution. 10. Undertaking for non-disposal of promoters shareholding for period of 3 years

Documentation for term loan

Page | 40

One pager

Proposal Term loan of Rs. 30.00 lacs

Company Details: Name of the Company

Directors

Jvl agro industries limited Chairman Mr. D. N. Jhunjhunwala Managing Director Mr. S. N. Jhunjhunwala Whole time Director Mr. Adarsh Jhunjhunwala Mr. H. L. Agrawal Dr. S. K. Dikshit Mr. Mahesh Kedia Mr. Kanhaiya Lal Goenka

Constitution Date of establishment Regd. Office

Limited Company 1989

Jhunjhunwala Bhawan Nati Imli, Varanasi 221001

Works Office

JVL Agro Foods (a unit of JVL Agro Industries Ltd.) 207 MIA, Alwar 301001, Rajasthan

Business Activity (New) Existing bankers

Consumer foods ( vanspati ghee, Refined Soya been and mustard oil ) Bank of Baroda Punjab National Bank State Bank of India State Bank of Bikaner and Jaipur State Bank of Hyderabad Page | 41

State Bank of Patiala State Bank of Travancore Vijaya Bank Registrar and Share Transfer Agent M/s. MCS Limited F-65, 1st Floor, Okhla Industrial Area

Proposed Facility Strengths

Phase-I, New Delhi 110020 Term loan - Rs. 70.00 lacs 1. The Directors are having good experience and vast experience in the business and industry. 2. The growth of the Company is being backed by the goodwill of the existing firms in the national market. 3. The directors are committed with a track record of timely delivery, competitive prices and customer satisfaction.

Financial Details: Total Income - Rs. 12446.3 Million ( year ending Mar 2010) Net Profit - Rs. 292.2 Million ( year ending Mar 2010)

Security Offered:

(Rs. in lacs) Current market valuation

Equitable mortgage over First charge over the factory land & Building, area 4,000 sq. mt., situated at 207 MIA, Alwar at very prime location TOTAL

160 160

CMA OF JVL AGRO FOODS

JVL AGRO FOODS, ALWAR

31.03.2009 (Audited)

31.03.2010 (Audited)

31.03.2011 (Provisional)

31.03.2012 (Projected)

30.3.2013 (projected)

PROFIT AND LOSS ACCOUNT:

Page | 42

SALES: 82 (I) INDIGENOUS (II) other income GROSS SALES: LESS: Excise Duty ADD: Other Operating Income NET SALES: Increase in Net Sales (%) COST OF SALES: (I) RAW MATERIALS A. IMPORTED B. INDIGENOUS B. LESS MODVAT CLAIM (II) OTHER SPARES INDIGENOUS PACKING MATERIAL (III) POWER & FUEL (IV) DIRECT LABOUR (V) DIRECT EXPENSES (VI) DEPRECIATION (VII) Repair & Maintenance Expenses Purchase of Goods for trading 90 SUB TOTAL: ADD: OPENING STOCK IN PROCESS DEDUCT: CLOSING STOCK IN PROCESS COST OF PRODUCTION: C O P AS % OF GROSS SALES ADD: OPENING STOCK OF FINISHED GOODS DEDUCT: CLOSING STOCK OF FINISHED GOODS COST OF SALES: COST OF SALES AS % OF GROSS SALES SELLING, GENERAL & ADMIN EXPENSES PROFIT BEFORE INTEREST & TAX (PBIT) PBIT AS % OFGROSS SALES INTEREST & OTHER FINANCE CHARGES: INTT. & FIN. CHARGES AS % OF SALES OPERATING PROFIT BEFORE TAX (PBT) PBT AS % OF GR. SALES ADD OTHER NON OPERATIVE INCOME: (I) EXPORT INCENTIVE (II) Misc income (commission) (III) INTT & OTHER INCOME (IV) Rent Received etc. (V) Profit from shares SUB-TOTAL (INCOME) .62 2 .58 3 .40 89 .80 109.37% 30 90.19% 89 .80 109.37% 4 .66 9 .85 12.00% 3 .94 4.80% 5 .91 7.20% 16 6.25% 90 3.40% 7. 3 5.59% 06 9.66% 3. 8 3.72% 7.0 .22 5.30% 36 11. 1 9.31% 4.6 .56 4.23% 8 9.32 30 90.19% 4. 6 11.7 .77 9.53% 6 8.56 103. 3 87.31% 4.2 .25 14 17.88 40 103. 3 87.31% 109.8 134 .98 87.08% 5 0.87 6.10 40 4. 3 109.8 .98 87.08% 0.86 30 3. 0 6.5 .56 134 104. 96 4.4 .53 8 .11 82 .11 22 .20 104 .31 73.48% 72 13.81% 76.79% 18 118. 0 5.96% 73.90% 54 4. 1 125.8 .00 23.21% 73.50% 54 114. 9 0.0 155 180.00 114. 9 125.7 .00 125.7 .00 155 180.00 155

76 .65 16

91. 7

92.9 .93

113 132.30

1 .88 5 .11 4 .98 2 .00 26 17 79 92

1. 7 3. 8 5. 9 2. 5

5.7 .11 3.4 .83 6.4 .00 3.2 .15

7 8.26 3 4.21 8 7.89 4

111.

137 .01 6 8.56

Page | 43

DEDUCT OTHER NON OPERATING EXP. (I) PRELIM. EXP. W/O (II) PRIOR PERIOD ADJUSTMENTS (III) loss from f&o /Other Expenses (IV)LOSS ON SALE OF Fixed Assets (V) Misc Exp W/O SUB-TOTAL (EXPENSES) Intt on tl -

31.03.2009 (Audited) 5 PROFIT BEFORE TAX / LOSS TAX PAID PROVISION FOR TAXES NET PROFIT/LOSS (PAT) PAT AS % OF GROSS SALES (I) DIVIDEND (II) RATE RETAINED PROFIT Loss b/f Bal c/f to b/s 5 .02 .91 0 .89 5 .02 6.11%

31.03.2010 (Audited) 7. 16 0. 66 6. 50 5.67% 6. 50

31.03.2011 (Provisional) 7.0 3

31.03.2012 (Projected) 8 .22

31.3.2013 (Projected) 9.32

7.0 3 5.59% 7.0 3

8 .22 5.30% 8 .22 9.32 9.32

BALANCE SHEET LIABILITIES: CURRENT LIABILITIES: Short Term borrowings from banks (including bill purchased/discounted)

31.03.2009 (Audited)

31.03.2010 (Audited)

31.03.2011 (Provisional)

31.03.2012 (Projected)

(Projected)

13 (i) from applicant bank (ii) from other banks (iii) (of which Bill purchased & disc.) (sub limit) SUB TOTAL Short Term borrowings from others Sundry Creditors (Trade) Advance payment from customers / deposits from dealers Provision for taxation Dividend payable/Prov for Dividend Other Statutory Liabilities( Due within One Year) Instalments of Term loans / Debentures / DPGs / deposits etc. (due within 1 year) Other Current liabilities & provisions (due within 1 year) Earnest Money/Security Deposits 0 Sundry Creditors (Non-Trade) Interest accrued but not due on loan Unclaimed dividend .08 24 0 .20 .48 59

14. 9

15.4 .00

30

13 .48 19 .27 88 59

14. 9 18. 0

15.4

30 .00

22.9 .99

18 22.05

0.

Page | 44

1 Outstanding liabilities .02 20 SUB TOTAL TOTAL CURRENT LIABILITIES TERM LIABILITIES Debentures (not maturing within 1 year) Sundry creditor fo capital goods Term Loans( Excluding instalments payable . within one year) Term Deposits ( repayable after 1 year) Other Loans- USL Vehicle Loans & others TOTAL TERM LIABILITIES .57 34 .05 69 10 98

0. 5 20. 5 34. 4

2.6 25.5 .99 41.0 .99 48 18

3 .47

2. 15 .60 15 .60 10 84 14. 87 1 30 12. 1 54 10. 0 1

5.2

2.24 23

23.8 .80 29.0 .27 24.2 .43

27 26.04 32 41.75

Capital Share Application Money General Reserve Subsidy Surplus (+) or deficit (-) in P & L Account Deferred Tax Liabilities Revaluation Reserve DEBT Redemption Reserve Share Premium Account Less :- Intangible Assets NET WORTH

.53

10 .53 60 TOTAL LIABILITIES .18 40 87

14. 1 62. 6

24.2 .43 94.2 .68

32 41.75 108 119.84

BALANCE SHEET ASSETS CURRENT ASSETS

31.03.2009 (Audited) 0

31.03.2010 (Audited) 0. 98

31.03.2011 (Provisional) 0.8 4

31.03.2012 (Projected) 1 .04

31.3.2013 (projected)

Cash and Bank Balances INVESTMENTS (Other than Long Term) (i) Govt. & other securities (ii) Fixed deposits with banks RECEIVABLES RECEIVABLES other than deferred & exports (Incl. bills purchased & discounted by banks) Export Receivables ( Incl. bills purchased & discounted by banks) INVENTORY

.33

0 .63 68

0. 9

0.6 .69

25 .77 78

19. 6

25.2 .52

35 42.27

19 Raw Material - INDIGENOUS Raw Material - IMPORTED Work-In-Progress .47 3 06

22. 1 4.

31.1 .98 6.5

37

Page | 45

.40 Finished Goods Other Consumable spares Indigenous Other Consumable sparesImported Advances to suppliers of Raw Materials Advance payment of tax Other Current Assets: (i) Balance With Excise Deptt. (ii) Interest Accrued on Deposits (iii) Other Current Assets (TDS, VAT Rec.) (iv)Loan & Advances TOTAL CURRENT ASSETS FIXED ASSETS (I) Land (ii) Building (iii) Plant & Machinery (iv) Furniture & Fixtures (v) Other Fixed Assets (vi) Capital Works in progress Less :- Accumulated Depreciation NET BLOCK OTHER NON CURRENT ASSETS (I) Investments in Subsidiary companies/ Affiliates (ii) Other Investments (iii) Advances to suppliers of capital goods and contractors (iv) Deferred receivables(maturity exceeding 6 months) (v) Margin money kept with banks. (vi) IDBI BRS Deferred Receivables (vii)Security/Earnest money deposits (viii) Inter Corporate Deposits (ix) Other Non current assets incl. dues from directors TOTAL OTHER NON CURRENT ASSETS INTANGIBLE ASSETS (Patents, goodwill, prelim. expenses, bad/doubtfull expenses not provided for) TOTAL ASSETS -

40 -

.56

0 .17 0 .37 50.14 2 .65 3 .53 8 .48 0 .17 6 .67 11 .87 9 .63 14 . 13 38 17 54 53 65 39 41

0. 5 0. 4 48.70 2. 5 3. 3 10. 3 0. 7 10. 8 14. 8 13. 8

0.5 0.7 .50 65.72 2.6 .65 3.5 .53 28.6 .63 0.1 .17 10.3 .38 17.3 .53 27.9 .83 23 20.47 21 24.89 10 0 28 3 84.29 2 0

0 .41 56

0. 6

0.5 .56

0 .41 56

0. 6

0.5

0 .56

60 .18 40

62. 6

94.2

108 .68 0 119.84

Total Liabilities - Total Assets

.00

0.00

BUILD UP OF CURRENT ASSETS

31.03.2009 (Audited) 19

31.03.2010 (Audited) 22.

31.03.2011 (Provisional) 31.1

31.03.2012 (Projected) 37

31.3.2013 (Projected)

Raw Material - Indigenous

Page | 46

AMOUNT MONTH'S CONSUMPTION Raw Material - Imported AMOUNT MONTH'S CONSUMPTION Consumable spares indigenousAMOUNT MONTH'S CONSUMPTION Consumable spares- Imported AMOUNT MONTH'S CONSUMPTION Stock in process - AMOUNT MONTH'S COST OF PRODUCTION Finished Goods - AMOUNT MONTH'S COST OF SALES RECEIVABLES (DOMESTIC) other than . deferred & exports (Incl. bills purchased & . discounted by banks) AMOUNT MONTH'S DOMESTIC SALES EXPORT RECV.(Incl. bills purchased & . discounted by banks) AMOUNT MONTH'S EXPORT SALES BUILD UP OF CURRENT LIABILITY ( OTHER THAN BANK BORROWINGS FOR WORKING CAPITAL) Creditors for Purchases of RMAMOUNT MONTH'S PURCHASES

.47 3 .05 3 .40 0 .45 25 .77 3 .77 -

06 2. 90 4. 40 0. 51 19. 78 2. 07 -

1 4.0 2 6.5 3 0.7 1 25.2 6 2.4 1 -

.98 4 .00 8 .56 0 .76 35 .52 2 .75 42.27

19 .27 3 .02 49 88

18. 0 2. 6

22.9 .99 2.9 .00

18 22.05 2 2.00

CALCULATION OF MAXIMUM PERMISSIBLE BANK FINANCE 31.03.2012 (Projected) 84 .29 25.5 5 28. 60 12 .54 16 5. ACTUAL / PROJECTED NWC 6. ITEM 3 MINUS ITEM 4 7. ITEM 3 MINUS ITEM 5 8. MAXIMUM PERMISSIBLE BANK FINANCE ( lower of 6 or 7) .04 13 .48 13 .48 59 59 14. 9 .09 17 43 14. 9 15.4 .00 01 16. 4 15.4 .00 30 30.00 18 14. 8 23.7 .23 30 12. 3 24.6 .30 44 52.06 7 16.4 .07 35 40.1 .30 21 .99 65 18

SECOND METHOD OF LENDING

31.03.2009 (Audited) 50

31.03.2010 (Audited) 48. 70 20 20. 10 29

31.03.2011 (Provisional) 65.7 2

31.3.2013 (Projected)

1. TOTAL CURRENT ASSETS 2. OTHER CURRENT LIABILITIES (Other than Bank Borrowings & TL Instalments due within one Year) 3. WORKING CAPITAL GAP 4. MIN. STIPULATED NET WORKING CAPITAL ( 25% ofTOTAL CURRENT ASSETS excluding Export Receivables)

.14

.57 .57

Page | 47

9. Excess borrowings representing Shortfall in NWC NWC/TCA BANK BORROWING/TCA OCL/TCA S.CREDITORS/TCA INVENTORIES/SALES (DAYS) RECEIVABLES/SALES (DAYS) CREDITORS/SALES (DAYS) .32

NIL 0 29 0 .27 0.03 0 .38 90 .17 91.76 81 39 30

NIL 0. 8 0.

#REF! 0.3 .42 #REF! 0.03 0. 5 60. 9 75.59 89.91 73.2 0.04 0.3 .23 .36

NIL 0 0 0.30 0.00 0 0.22 83 .65 60.83 60.83

. STATEMENT OF FINANCIAL CONDITION 31.03.2009 (Audited) A. PROFILE ANALYSIS 60 TOTAL ASSETS (TANGIBLE) TOTAL OUTSIDE LIABILITIES TANGIBLE NETWORTH NET SALES PBDIT OPERATING PROFITS (PBIT) NET PROFITS GROSS CASH ACCRUALS NET WORKING CAPITAL B. LIQUIDITY ANALYSIS CURRENT RATIO CURRENT RATIO (without TL instalments as CL) QUICK RATIO C. PROFITABILITY ANALYSIS PBDIT/SALES (%) PBIT / NET SALES (%) PBT / NET SALES (%) NET PROFIT / SALES (%) RETURN ON ASSETS (%) RETAINED PROFITS / NET PROFITS (%) RETURN ON CAPITAL EMPLOYED (%) RETURN ON NET WORTH(%) D. ACTIVITY ANALYSIS( IN DAYS) RECV. TURNOVER -DOMESTIC RECV. TURNOVER -EXPORT INVENTORY TURNOVER ACCOUNTS PAYABLES TURNOVER FIXED ASSETS TURNOVER RATIO .18 49 .65 10 .53 104 .31 11 .85 9 .85 5 .02 7 .02 16 .09 1 .47 1.47 0 .80 11.36% 9.44% 5.67% 4.81% 8.34% 100.00% #REF! 47.67% 114 .55 #DIV/0! 101 .66 91 .76 #REF! 59 10. 43 2 32 75. 1 6.1 .98 03 #DIV/0! 84. 2 89.9 .83 5 8.13 64 11.22% 9.32% 6.03% 5.48% 10.42% 100.00% 41.08% 43.71% 63. 0 #DIV/0! 109.2 .59 60 60.83 40 1.40 0. 8 11.89% 9.31% 5.59% 5.59% 7.46% 100.00% 28.94% 29.04% 73.3 .65 #DIV/0! 109 109.20 01 1. 0 1.60 0.6 .77 12.21% 9.53% 5.30% 5.30% 7.56% 100.00% 26.17% 25.34% 83 85.71 76 14. 8 1.6 .72 1.72 0 0.86 50 8. 8 24.6 .30 1 1.90 06 6. 3 10.2 .37 35 46.76 32 11. 1 7.0 .22 12 12.69 72 13. 6 11.7 .77 8 9.32 87 118. 0 14.9 .92 14 17.88 53 14. 1 125.8 .00 18 21.24 40 47. 5 24.2 .43 155 180.00 62. 6 70.0 .26 32 41.75 94.2 .68 76 78.09 108 119.84 31.03.2010 (Audited) 31.03.2011 (Provisional)

(Rs. Lakh) 31.03.2012 (Projected)

31.3.2013 (Projected)

Page | 48

DEBTORS ABOVE 6 MONTHS % OF DEBTORS ABOVE 6 MONTHS WORKING CAPITAL CYCLE DEBTORS DAYS (FOR RATING TOOL) CREDITOR DAYS (FOR RATING TOOL) E. GROWTH RATIOS NET SALES GROWTH (%) NET PROFIT GROWTH (%) NET WORTH GROWTH (%) CAGR-NET SALES (%) CAGR-PBDIT (%) F. LEVERAGE RATIO TOL / TANG. NET WORTH (with USL as TOL) TOL / TANG. NET WORTH (with USL as QE) DEBT EQUITY RATIO INTEREST COVER

0.00% 2.14 #REF! #REF! #REF! #REF! #REF! #REF! #REF! 4 .72 1 .30 1 .48 3 .01 42 86 3. 48 0. 20 1.

0.00% 2.57 70.02 67.40 13.81% 29.48% 41.22% #REF! #REF! 3. 9 6 0

0.00% 2.0 65.3 4 69.4 2 5.96% 8.15% 62.81% #REF! 8.08% 2.8 .35 0.9

0.00% 1.89 71.56 56.64 23.21% 16.88% 33.94% #REF! 9.18% 2 1.87 0.93

1.2 0 3.2 0 .89 0.84 2 2.48

31.03.2009 (Audited)

31.03.2010 (Audited)

31.03.2011 (Provisional)

(RS IN LACS) 31.03.2012 (Projected)

31.3.2013 (Projected)

FUNDS FLOW STATEMENT 5 PROFIT AFTER TAX DEPRECIATION DIVIDENDS FUNDS FROM OPERATIONS LONG TERM SOURCES: CHANGE IN CAPITAL NET CHANGE IN RESERVE CHANGE IN TERM LOANS TOTAL (SOURCE / DEFICIT) LONG TERM USES: NET CHANGE IN FIXED ASSETS CHANGE IN OTHER NON CURRENT . ASSETS (INCLUDING INVESTMENTS) CHANGE IN INVESTMENTS IN GROUP COS. CHANGE IN INTANGIBLES CONTRIBUTION TO WORKING CAPITAL SHORT TERM USES CHANGE IN NET WORKING ASSETS CHANGE IN OTHER CURRENT ASSETS .02 2 .00 7 .02 76 4. #REF! #REF! #REF! #REF! 34 (6.5 0) (2.7 6) 3. 84 5. #REF! #REF! #REF! #REF! #REF! 8) (2.4 #REF! #REF! 0) 0. 26 9 6 0.4 .79) 77 0. 15 (2.0 7 16.6 .16 (0 10.6 10 .63 19 14.06 11.46 9 6 18.0 0.00 7 28.7 .63 3) 16.1 .74) 10 11.46 4 (7.0 .22) (1 (1.23) 26 8. 8 9.3 .22 (8 (9.32) 50 2. 5 10.2 6. 3 3.2 .15 12 .37 8 9.32 12.69 7.0 .22 4 3.36 8 9.32

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SHORT TERM SOURCES CHANGE IN OTHER CURRENT LIABILITIES CHANGE IN BANK BORROWINGS / LOANS NET DEFICIT / SURPLUS IN S T SOURCES NET MOVEMENT IN LIQUID ASSETS CHANGE IN CASH CHANGE IN MARKETABLE INVESTMENTS NET MOVEMENT IN LIQUID ASSETS

(0.4 #REF! #REF! #REF! 7) 1. 11 2. 78 0. #REF! #REF! #REF! #REF! 70 0. 65 0. 05 0. 70 3) 1 4) 3) 0) 0 5

5.4 .56) 0.9 .51 (10.8 .42) (0.1 .20 (0.1 .20 0.0 (0.1 .20

(6 3.06 14 (10 (11.00) 0 0.46 0 0.46 0 0.46

31.03.2009 (Audited)

31.03.2010 (Audited)

31.03.2011 (Provisional)

(RS IN LACS) 31.03.2012 (Projected)

31.3.2013 (projected)

CASH FLOW STATEMENT OPERATING SECTOR 104 SALES DEBTORS (TRADE) 104 CASH FROM SALES COSTS- INTEREST & FINANCE CHARGES EXPENSES ON STOCKS PURCHASES TRADE CREDITORS 11 MANUFACTURING EXPENSES CASH COST OF SALES EXPENSES FOR INC. / DEC. IN STOCKS CASH FROM ASSET CONVERSION CYCLE SELLING, GEN. & ADM. EXPENSES ADVANCE PAYMENTS (PREPAYMENTS) ADVANCES RECEIVED 0 TAXATION DIVIDENDS CASH FROM OPERATIONS OTHER CURRENT ASSETS OTHER CURRENT LIABILITIES OTHER INCOME/EXPENSES (NET) NET CASH FROM OPERATIONS INVESTMENT SECTOR CAPITAL EXPENDITURE INVESTMENT IN GROUP COMP'S INTANG,/OTHER TERM ASSETS CASH BEFORE FUNDING 6 .89 6 .20 77 0. 26 0. 08 6 .20 43 5. 77 0. 15 4. 9 (19.5 10. 2) 18.0 (12 0.00 2.87 3) (1.4 9 (1.4 .65 (12 .57) 2.87 66 10. 6) 0.4 .79) 2 .97 92 .56 11 .75 4 .66 36 0. 79 4. 6 (2.3 33 2. 59 15. 0 4.2 .25 (10 .71) (0 2.87 5 1.9 .46) 5 6.10 88 106. 7 9.0 .87 (5 8.97 .31 3 .94 76 .65 16 0. 39 10. 4 109.3 .33 6 6.13 2) 15.7 .93 143 158.16 90 91. 7 (4.0 .91 18 20.36 71 3. 8 92.9 .93 3 (3.06) .31 72 (5.9 9) 124. 2 4.6 .56 113 132.30 8 120.3 .74 6 8.56 118. 0 5.4 .26 144 173.25 125.8 .00 10 6.75 155 180.00

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.20 FINANCING SECTOR

51 1.

1) 0.9 0 (2.7 16.1 7 4. 9.3 4 (6.5 (7.0 3) (3.8 19.3 8 0. (0.1 3) 0. (0.1 4) 0. 0.0 1 0. (0.1 3)

.57) 14 .51 (1 .74) 8 .22 (8 .22) 12 .77 0 .20 0 .20 0 .20 0.46 0.46 1.64 (1.23) (9.32) 9.32 (1.23) -

DUES TO BANKS SHORT TERM DEBTS TERM DEBTS EQUITY OTHER LOANS & RESERVES TOTAL MOVEMENT IN CASH ASSETS CASH & BANK BALANCE INVESTMENTS(OTHER THAN LONG TERM) MOVEMENTS IN CASH ASSETS 6 .20

11

6) 34 0) 1) 70 65 05 70

Details of proposed project

Physical situation
1. location of the unit 2. area of unit 3. utilities : water, power, labour 4. justification of project 5. implementation schedule
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6. cost of project

land, building, plant and machine, miscellaneous asset, prooperative expenses, contingencies 7. assessment of credit facility 8. financial viability for the existing unit for the new unit consolidated assumptions repayment schedule

Objectives of study
The objectives are: 1. To evaluate the source of project financing to fulfillment of requirement of fund or money 2. To know brief knowledge of term loan its procedure and documentation which is required to get term loan. 3. To know what is impact of term loan on companys image. 4. To evaluate the significance of term loan in project financing. 5. To know financial institutions role in term loan and procedure of term loan to get.
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Review of literature
The basic project is promoting the concept of term loan in project financing as a tool for project planning. Term loan play a significant role in project financing from initial stage to last stage to save tax and for working capital. As company wants to grow in Rajasthan, this can be achieved through quantity and quality of product to satisfy consumers. So, it is necessary to maintain good relation with commercial banks for finance. Commercial bank may be give help and opportunity to expand and to start a new project. The various methods to get financial fund and money from market, most are described below: Share capital market
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Term loans Reserve and surplus Debenture

Features of project financing are: Various sources to get finance or fund Project financing play vital role to create or organize a project planning Term loan is a better source to finance rather than another sources of finance Term loan gives a tax shield facility to promoters

1. Source of project financing which preferred by most businessman Source of Financing Share Capital Debentures Term Loan Other Percentage (%) 60 % 20% 15% 5%

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7 0% 60% 6 0% 5 0% 4 0% 3 0% 20% 15% 2 0% 5% 1 0% 0%

C De apita be l nt Te ures rm Lo an Ot he r

Prefered

P erc entage (% )

Sh ar e
Interpretation:

S o u rce o f F in a n cin g

According to above chart out of 30 businessman of Alwar, the most of the persons like preferred to get finance from share capital i.e.60%, the second most businessman likes to get finance from debentures i.e. 20% and the businessman like term loan i.e. 15% and least business man like preferred other .i.e. 5%.

2. Basic factors to consider a project picking up or not. Factor Market Growth Investment Fund Demand of Project Other Percentages(%) 40% 30% 20% 10%

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45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

40% Market Growth 30% Investment Fund 20% 10% Demand of Project Other

Opinion

P ercentages(% ) Fa ctor

Interpretations: According to above chart, market growth has the most factors which require the new project i.e.40% and another factor has 30%, 20%, and 10% part which force the new project investment fund, demand of project and other respectively.

3. Main feature of project has significance role. feature Project planning and analysis Project financing Project implication Production in new established project Percentage% 17% 22% 46% 15%

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Project planning and analysis 15% 17% Project financing

22% 46%

Project implication Production in new established project

Interpretations:

4. What do you understand by term loan? Feature A Tax Saving Tool A Debt Burden Tool A Formal Document tool of Finance All of the Above Percentage (%) 16% 23% 12% 49%

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50% 45% 40% 35% 30% O p in io n s 25% 20% 15% 10% 5% 0%

49%

A Tax S aving Too l A D eb t B urd en Too l A F orm al D oc um en t tool of F inan c e A ll of the A bove

23% 16% 12%

P erc enta ge (% ) T o o ls

Interpretations:

5. Have you taken instrument of term loan in your business or project?

Term Loan Yes No

Percentages(%) 41 % 59 %

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Term Loan

41% 59%

Y es No

Interpretations:

6. The businessman who preferred term loan as a project financing tool. Scale Level Large Scale Business Small Scale Business Both Cant Say Percentage (%) 46% 27% 23% 4%

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Percentage (%) 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 46%

27% Percentage (%)

Large Scale Business

Small Scale Business

Interpretations:

7. Divisions of the businessman according to risk factor in term loan. Risk Factor Yes No May Be Percentage(%) 56% 32% 12%

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R isk F ac to rs

12% Y es No 32% 56% M ay B e

Interpretations:

8. The reason behind to preferred the term loan as source of Financing. Factor Tax Planning Ease To Get Good Relation with Bank Instalment Payment Percentages (%) 24% 20% 11% 45%

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45% 45% 40% 35% 30% 25% O p in io n s 20% 15% 10% 5% 0% Tax P lanning 24% 20% 11% E as e To G et G ood Relation with B ank Ins talm ent P ay m ent P erc entages (% ) F a cto rs

Interpretations:

9. Have you idea about the term loans document which required by bank? Knowledge Yes No Percentage(%) 64% 36%

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A w a re n e s s

36% Y es No 64%

Interpretations:

10. Which accounting term loan has more significant role to get term loan by bank? Accounting Term Assets Debt Service coverage Ratio Valuation of the firm Ratio Percentages(%) 21% 20% 43% 16%

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R atio

16%

Accounting Term

V aluation of the firm D ebt S ervic e c overage Ratio A s s ets

43% P erc entages (% ) 2 0%

21 %

0 % 10% 20% 30% 40% 50% P re fe re n ce s

Interpretations:

11. For How Many year term loan taken by business firms? Time Period Up To 5 Years 5-10 Years More Than 10 Years Short Term Loan Percentages (%) 16% 36% 30% 18%

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40% 35% 30% Percentages 25% 20% 15% 10% 5% 0% Up To 5 5-10 Y ears M ore Than S hort Y ears 10 Y ears Term Loan T im e P e rio d P erc entages (% )

Interpretations:

12. Name of the financial instruments which provide term loan to business firms/ project Name of the Institution Commercial Bank Non Banking Finance Company SIDBI and IDBI Any other Percentages (%) 19% 21% 44% 16%

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Finanacial Instrument

45% 40% 35% 30% 25% Pe rce nta ge 20% 15% 10% 5% 0%

Commerc ial Bank Non Bank ing Finance Company SIDBI and IDBI Any other

Percentages (% ) Na m e of Institution

Interpretations:

Questionnaire
Purpose: To evaluate the concept of term loan in project financing as better tool from other resources of finance.
1. What is source of project financing which preferred by most businessman. Share capital Debentures Term loan Others

2. What are the basic factor that you will be consider before picking up a project
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Market growth Investment of fund (project financing) Demand of new project Other factor

3. According to you what is main feature of a project play vital role. Project planning and analysis Project financing Project implementation To start production in new established project

4. What do you understand by term loan? A tax saving tool A debt tool A formal documented tool All of them

5. Which kind of business owner has preferred the term loan as project financing tool? Large scale business Small scale business Both Cant have knowledge

6. Are you a business man? Yes No

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Your any relative is business man

7. If yes, have you invest fund in your business or project in form of term loan? Yes No

8. If yes, what do you think about term loan that it is a highly risky source of project financing? Yes No May be

9. What is reason that you will be prefer the term loan as source of finance? For tax planning Easy to get Good relation with bankers Payment done in installments

10. Have you any knowledge about term loan documentation which are required by bank? Yes No

11. if yes, which accounting document has more significant role to get term loan by bank? Balance sheet Goodwill or valuation of firm Ratio
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Cash flow and fund flow

12. Normally, how many years term loan has taken by business firms? Short term loan for 1-2 years Up to 5 years 5-10 years More than 10 years

13. Term loan is mostly provided by financial institution for business firms, which financial institution provides or provide most part of term loan to project or business firm? Commercial bank Non banking finance company SIDBI and IDBI Any other

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