Professional Documents
Culture Documents
Summer Training Project
Summer Training Project
CERTIFICATE
This is to certify that the project entitled Factoring in India being submitted by Sonali
Pahwa is a record of bona fide work carried out by her. She has performed the work
under my guidance and supervision in conformity with the rules and regulations of the
IFCI Factors Ltd.
Mr. Vishwanathan
Managing Director
AVP Credit
ACKNOWLEDGEMENT
I would like to express sincere gratitude to my project supervisor, Mr. Vishwanathan for
giving me the opportunity to work under his supervision and guidance.
I gained immensely from the intellectual discussions with him which always provided
me with a deeper understanding of the theoretical and practical aspects of the project.
His feedback helped me develop a comprehensive insight into the project.
I would also like to extend my gratefulness to Mr. Rakesh Kapoor, Managing Director for
allowing me to be a part of IFCI Factors Pvt. Ltd
I would also like to thank all my co-workers Mr. Pawan Goyal, Mr. Ankur Singla and
Mr. Ashwin Hariharan and Mrs. Sudesh Gulati for all their help and support.
GENESIS OF IFCI
At the time of independence in 1947, India's capital
market was relatively under-developed. Although
there was significant demand for new capital, there
was a dearth of providers. Merchant bankers and
underwriting
firms
were
almost
non-existent
Corporate Strategy
IFCI has been able to achieve a financial turnaround with the consistent support
and cooperation of all its stakeholders and is now endeavoring to re-position
itself.
In addition to its core competence in long term lending to industrial and
infrastructure sectors, IFCI aims to enhance its organizational value through
better realization of its Non-performing Assets (NPAs) and unlocking of value
of its investment port-folio including unquoted investments as well as real estate
assets.
FOCUS
Until the establishment of ICICI in 1956 and IDBI in 1964, IFCI remained solely
responsible for implementation of the governments industrial policy initiatives. It made a
significant contribution to the modernization of Indian industry, export promotion, import
substitution, pollution control, energy conservation and generation through commercially
viable and market- friendly initiatives. Some sectors that have directly benefited from IFCI
include:
Code of Conduct
I. INTRODUCTION
This Code of Conduct (hereinafter referred to as the "Code") shall be called "The
Code of Conduct for Board of Directors (hereinafter referred to as the "Board") and Senior
Management Personnel" of IFCI Limited (hereinafter referred to as the "Company").
Clause 49 of the Listing Agreement entered into with the Stock Exchanges requires,
as part of Corporate Governance, that the listed entities lay down a Code of Conduct for
Directors on the Board of an entity and its Senior Management. Senior Management has
been defined to include personnel who are members of its Core Management and Functional
Heads excluding Board of Directors.
The principles prescribed in this Code are general in nature and lay down broad
standards of compliance and ethics.
The purpose of this Code is to enhance ethical and transparent process in managing
the affairs of the Company, and thus to sustain the trust and confidence reposed in the Board
and Senior Management Personnel by the Shareholders of the Company. The Board and
Senior Management Personnel are expected to understand, adhere to, comply with and
uphold the provisions of this Code and the standards laid down hereunder in their day-today functioning.
II. APPLICABILITY
include parents, spouse and children, may have in a company or firm which has business
dealings with the Company.
The Board and Senior Management Personnel must not deprive the Company of an
opportunity that belongs to it, for his/her own/other's advantage, if he/she is in a position of
diverting the Corporate Opportunity for own benefit or to others to the detriment of the
Company. They must not compete with the Company in respect of any business transaction.
VIII. REGULATORY COMPLIANCE
Every member of the Board and Senior Management Personnel shall, in his/her
business conduct, comply with all applicable laws, rules and regulations, both in letter and
in spirit, in all the territories in which he/she operates. Any inadvertent non-compliance, if
detected subsequently, should be rectified/reported to the concerned authorities.
IX. PUBLIC REPRESENTATION AND CONFIDENTIALITY OF INFORMATION
The information for the public constituents and stakeholders, duly approved by the
Compliance Officer or other authorized official, as the case may be, shall be disseminated
through any of the following media:
Newspaper publications
X. INSIDER TRADING
Insider Trading involves the improper use of non-public price sensitive information
when dealing in securities. Employees are prohibited from engaging in insider trading as
detailed in the Code of Conduct for Prevention of Insider Trading.
XI. USE OF THE COMPANY NAME/LOGO/TRADEMARKS
The Board or Senior Management Personnel shall not use the name of the Company,
its logo or trademark for personal benefit or for the benefit of persons / entities not forming
part of the IFCI Group.
XII. CORPORATE SOCIAL RESPONSIBILITY
The Company shall continue to be committed to be a good corporate citizen not only
in compliance with all relevant regulating laws and regulations but also by actively assisting
in the improvement of the quality of life of the people in the communities in which it
operates with the objective of making them self reliant.
XIII. EQUAL RIGHTS
The Company shall continue to provide equal opportunities to all its employees and
all qualified applicants for employment without regard to their race, caste, religion, colour,
ancestry, marital status, sex, age, nationality, disability etc. Employees of the Company shall
be treated with dignity and in accordance with the Company policy to maintain a work
environment free of sexual harassment, whether physical, verbal or psychological.
Employee policies and practices shall be administered on a non-discriminatory basis in all
matters relating to recruitment, training, compensation, benefits, promotion, transfers and all
others terms and conditions of employment.
XIV. SHAREHOLDERS
The Company is committed to enhance shareholder value and shall comply with all
regulations and laws that govern shareholders' rights. The Board and Senior Management
Personnel of the Company shall duly and fairly inform its shareholders about all relevant
aspects of the organizations business and disclose such information in accordance with the
respective regulations and agreements.
XV. PROTECTION OF COMPANYS ASSETS AND RESOURCES
Each member of the Board and Senior Management Personnel has a duty towards the
Company to advance its legitimate interests while dealing with the Companys assets and
resources.
The Board and Senior Management Personnel shall not misuse, for personal gain or
otherwise, the assets of the Company.
XVI. HEALTH SAFETY AND ENVIRONMENT
The Company, Board and the Senior Management Personnel shall strive to provide a
safe and healthy working environment and comply, in the conduct of its business affairs,
with all regulations regarding the preservation of the environment of the territory it operates
in.
XVII. COMPLIANCE WITH GOOD CORPORATE GOVERNANCE PRACTICES
Each member of the Board of Directors and Senior Management Personnel of the
Company (to the extent relevant) should adhere to the following so as to ensure compliance
with good Corporate Governance Practices:
Be familiar with the broad objectives of the Company and the policies laid
down by the Government and the various laws and legislatio ns.
Pursuant to Clause 49 of the Listing Agreement, this Code and any amendments
thereto shall be posted on the website of the Company.
XX. ENFORCEMENT OF THE CODE OF CONDUCT
Each member of the Board and Senior Management Personnel shall be accountable
for fully complying with this Code.
XXI. ETHICS AND COMPLIANCE COMMITTEE
The Ethics and Compliance Committee comprising the Chief Executive Officer of the
Company, Chief Vigilance Officer of the Company and the Compliance Officer and any
other officer so nominated, will oversee the compliance of this Code.
XXII. VIOLATION OF THE CODE
The Board shall have the powers to take necessary action in case of any violation of
the Code.
The Company started its operations in February, 1997 with domestic factoring
activities. The Authorized Dealers license was obtained for export factoring
activities in November 1996. Export Factoring operations were initiated from the
month of June, 1997. In April 1999, IFCI subscribed to the share capital of the
Company besides acquiring the shareholding of 20th Century Group, thus
becoming the largest shareholder. Subsequently, IFCI also acquired the
shareholding of Mohan Group and in 2009 Foremost Factors was renamed as IFCI
Factors Limited. It is today a subsidiary of IFCI.
Being the pioneers in bringing International Factoring to India, IFCI Factors has a
rich experience of over a decade which enables it to understand the needs of its
clients in the context of their market and service them in the best possible way. It
provides innovative, customized solutions which are driven by a forward looking
management style, sound understanding of the key credit issues and a thorough
understanding of market practices.
A lean organization structure supported by an internationally recognized top of the
line software platform ensures operational efficiency and translates into delivery of
high quality services to clients. IFCI Factors prides itself in responding quickly to
the demands of its customers, which in turn empowers them to capitalize on the
attractive opportunities offered by an ever dynamic market.
With a strong infrastructure and efficient operations, IFCI Factors is able to
maintain high service levels related to providing timely funding, follow up for
collections, credit protection and management information.
Introduction
IFCI Factors Limited (erstwhile Foremost Factors Limited) is a subsidiary of IFCI
Limited, which is a leading financial institution of India.
Building relationships is vital to your business prospects. For us, this means getting
to know you as a client in detail even before you appoint us. Once a relationship is
established, we keep ourselves fully up to date at all times with your business and
your customers. We become one of your main business partners and ensure highest
quality of service delivery to you thus enabling you to stay ahead in a highly
competitive global market.
Manufacturing Sector
The factoring relationship with IFCI Factors has been designed to accommodate
the business financing needs of both new manufacturing companies as well as
those that have been existing for years.
You may need to scale up operations to meet the growing requirements of your
customers. Factoring ensures that your money is not locked in net terms extended
to clients and could be invested back into your day to day operations.
Services Sector
Service providers such as EPC Contractors, Logistic Companies, Advertising
companies and outsourcing firms etc. benefit the most by factoring their accounts
receivables. Companies that are providing a service to other commercial businesses
can seldom offer tangible assets to pledge against a traditional bank loan, blocking
their access to working capital.
Factoring from IFCI Factors can provide the cash you need to bring your business
plans to life; grab new opportunities; invest in marketing, meet payroll demands,
meeting other expenses or simply negotiate better terms with your clients. With
factoring, you focus on what you do best; sales, development, customer service and
growth, and we focus on what we do best, factoring, and assuring you steady cash
flow for your financial success.
ORGANISATION STRUCTURE
Managing Director
(R Kapoor )
VP-IT &
Internatio
nal
(A Kaul)
Manage
Manage
rr
((NR
Astt.
Manager
( SP
Pandey)
VP - Operations &
Credit (J R Jain)
Legal
Legal &
Complianc
e
Astt.
Office
Manag
(V
e-
Credi
t
AVP
AVP
(Vishwa
G)(Vinay
) G)
Chief
Strategy &
Marketing
Credi
t
Regio
Regio
Head
nal
nal
offic
office
office
e
SAVP
AVP
(Mohit
(Ram
Gagneja
esh
)
Babu)
Regio
nal
office
Sr.Mg
r.
(K.v.
Sr.Mgr.
Thiru
(R.Vis
hwa
kumar
Regio
nal
office
AVP
(Venu
Tummal
Regiona
l office
Ahmeda
bda
RM
(Sutir
tha
Astt.
Mgr.
(Utpal
Nag)
Mrg
PERFORMANCE
OF IFCI FACTORS
LTD
Mgr
Manage
r
(M.
Tirou
maran
(shiva
Prasad
neeli)
Fig 1.1
Regiona
l office
Banagal
ore
RM
(Visha
l
AVP
(ven
katr
ama
Regional
office
Bhubane
shwar
AVP
(Shi
bani
shan
Fig 1.2
The above two graphs shows that the turnover and the funds
used both have increased in last 2 yrs that to by a huge difference
which states that the performance of IFCI Factors Ltd is growing
rapidly.
The turnover in the year 2008-09 was less then 500crores that
has been increased to more than 1000 crores in the year 2009-10
and which has further been increased to more than 2500 crores in
the year 2010-11 as shown in fig 1.1
Similarly fig 1.2 shows that the use in funds in the year 2008-09
was 100 crores which has been increased to 300 crores in the
year 2009-10 and has reached to more than 800 crores in the
year 2010-11.
Factoring in India
What is factoring?
Factoring is a financial option for the management of receivables. In simple
definition it is the conversion of credit sales into cash. In factoring, a financial
institution (factor) buys the accounts receivable of a company (Client) and pays up
to 80 %(rarely up to 90%) of the amount immediately on agreement. Factoring
company pays the remaining amount (Balance 20%-finance cost-operating cost) to
the client when the customer pays the debt. Collection of debt from the customer is
done either by the factor or the client depending upon the type of factoring. We
will see different types of factoring in this article. The account receivable in
factoring can either be for a product or service. Examples are factoring against
goods purchased, factoring for construction services (usually for government
contracts where the government body is capable of paying back the debt in the
stipulated period of factoring. Contractors submit invoices to get cash instantly),
factoring against medical insurance etc. Let us see how factoring is done against an
invoice of goods purchased.
CUSTOMER
Invoice
CLIENT
Pays the
customer pays through client)
amount
Submit invoice
copy
Payment up to
80% initially
FACTOR
The above graph represents the model of factoring and the way it is being done.
Undisclosed
MATURITY FACTORING
Factor does not make any advance payment to the Client.
Notation is made on the invoice that importer has to make payment to the
Import Factor.
Import Factor collects payment and remits to Export Factor who passes on
the proceeds to the Exporter after adjusting his advance, if any.
Where foreign currency is involved, Factor covers exchange risk also.
Factoring has a long and rich tradition, dating back 4,000 years. Almost every
civilization that valued commerce has practiced some form of factoring, including
the Romans who were the first to sell actual promissory notes at a discount. The
first widespread, documented use of factoring occurred in the American colonies
before the revolution.
With the advent of the industrial revolution, factoring became more focused on the
issue of credit, although the basic premise remained same. By assisting clients in
determining the creditworthiness of their customer and setting credit limits, factors
could actually guarantee payments for approved customers. Prior to the 1930s,
factoring in this country occurred primarily in the textile and garment industries, as
the industries were direct descendants of the colonial economy that used factoring
so specifically.
As time is passing by, and we are moving into the modern era of instant
communication and a shrinking world, factoring plays an important role in the
todays business. The increasing interest rates that marked the 1980's and 1990 are
led to an increase in the number of new companies turning to the factoring
business. Factoring is a way to raise quick capital in a manner that was called "off
the balance sheet" financing. Since accounts receivables are an asset account,
factoring is a way to raise quick cash without adding the liability of loan.
Introduction
It is an ongoing arrangement between the exporter and factor. The exporter sells
invoiced receivables at a discount to the factor to raise finance for working capital
requirement. It bridges the gap between raising an invoice and getting that invoice
paid. By obtaining payment of the invoices immediately from the factor, usually up
to 80 per cent of their value the companys cash flow is improved. The factor
charges service fees that vary with interest rates in force in the money market. The
factor operates by buying the invoiced debts from the selling company. These are
purchased, usually with credit control, collection and sales accounting work. Thus
the management of the company may concentrate on production and sales and
need not concern itself with non-profitable control and sales accounting matters.
Factoring differs from a bank loan in three main ways. First, factoring differs from
traditional bank loans because the credit decision is strictly based on receivables
rather than other factors like how long the company has been in business, working
capital and personal credit score. Secondly, factoring is not a loan; it is the
purchase of financial asset. Finally, a bank loan involves two parties whereas
factoring involves three-buyer, exporter and factor.
There is some misconception regarding factoring like people believe factors are a
lender of last resort but that is not true because exporters seeking out factoring are
often in the beginning stages of growth. At first glance, factoring appears to be
expensive but does a lot more; in essence, factoring replaces the accounts
receivables and credit department.
Advantages
Disadvantages
more than the cost of other methods of financing available in the business
In 2008, the total world volume for factoring increased by 2 per cent, compared to
almost 15 per cent in 2007. We can see that Europe has shown an upward trend till
2007, and then a downward trend. If we see the trend of Asia, it is stagnant in
initial years i.e. till 2006 and then has shown a little upward trend till 2007. After
2007, a notable increase is seen and thus factoring volume crossed 200 billion.
Africa and Australia showed a similar and a stagnant trend. The factoring volume
of America is very similar to Asia, but after 2007, Americas factoring volume is
seen stagnant only The overall results illustrate that exporters and importers,
around the world, are becoming more and more familiar with the advantages to be
derived from a factoring arrangement: working capital, credit risk protection and
collection service for the exporter.
the right to collect on that invoice by agreeing to pay you the invoice's face value
less a discount--typically 2 to 6 percent. The factor pays 75 percent to 80 percent of
the face value immediately and forwards the remainder (less the discount) when
your
customer
pays
From the above diagram, it is seen that till 2007, UK has shown an upward trend,
but after 2007, factoring volume decreased significantly. USA has shown a
stagnant growth in factoring volumes. India has shown a notable increase in
factoring volumes since 2005. In 2007 factoring volumes were Euro 5.20 billion in
comparison to Euro 1.99 billion in 2005. So we can say that factoring is moving
upward in India, and soon factoring will spread its wings across the length and
breadth of the country.
It is quite implied now that factoring is a very easy and fast method. Still, its
implementation is not so good. There are certain hiccups that have come up in the
way of releasing the full potential of factoring in India. One of the main reasons for
it is the legal framework of India. Generally factoring companies need legal
protection as all advances are uncollateralized, protection for the same is not
provided.
Still there is only one direction in which factoring can go in India: upwards. As the
awareness level about the benefits of factoring increases, factoring will spread its
wings across the length and breadth of the country.
PROCESS OF FACTORING
In a typical factoring arrangement, the client (you) makes a sale, delivers the
product or service and generates an invoice. The factor (the funding source) buys
the right to collect on that invoice by agreeing to pay you the invoice's face value
less a discount--typically 2 to 6 percent. The factor pays 75 percent to 80 percent of
the face value immediately and forwards the remainder (less the discount) when
your customer pays.
BENEFITS OF FACTORING
a) Stronger Sales
Factoring can give the client a significant competitive advantage in the market
place. The client can sell his products or services more aggressively, especially to
new customer and in new market, which are outside his geographical area. The
factor is staffed with credit analysts, collection specialists and skilled accountants.
Their experience allows them to spot credit problems and other trends quickly and
to develop customized programs to meet specific business needs.
b) Management of A/C Receivables
A factor performs credit analysis, keeps records, produce reports and effectively
process collection. The client effectively utilizes the services for a fee rather than
having a separate receivable department. The factor can even operate behind the
scene handling client accounts for many businesses, particularly those with limited
manpower for receivable processing.
c) Reducing Overhead Costs
Factor generally handle the processing of invoices, including mailing ,posting
invoices to a computer, depositing cheque and drafts , entering payments and
producing regular reports. The client can greatly reduce his current overhead costs
associated with processing invoices and internal handling of collection and
maintenance and analyzing accounts receivables.
d) Maintaining Customer Relations
Sending reminder and insisting that customers pay their dues can sometimes
damage the clients relationship with the customer and thereby adversely affects
sales. However, no business can run successfully if its customer does not pay in
time. Here, the role of factor is important. The factor handles collections from
customers for the client in a professional manner, thus helping in fostering and
maintaining the clients relationship with his customers.
e) Improvement in Cash Flows and Related Benefits
The financing afforded by a factor to its client is based on sales volume, rather than
on conventional credit considerations. This feature provides the client with
additional financial leverage and improved cash flows. It helps the client in getting
early payment discounts, increase sales by offering credit terms, can take
advantage of volume discounts.
f) Increased Share Value
Usually the client fulfills its working capital requirements either by selling its
equity in public or by taking loans from financial institutions or banks. By utilizing
factoring as a source to finance its working capital requirement without selling its
equity in open market, the client can maintain equity control, thereby increasing
share value.
g) Protection against Bad Debts
An optimistic approach in the extension of credit to their customers can increase
the incidence of bad debts and can lead to financial disaster. A factor provides the
client with an experienced professional approach to credit decisions and collection
operation by examining each account Debtors credit standing and determine credit
worthiness from a credit managers point of view.
h) Flexible Source of Finance for New Entrepreneurs
Raising sources from traditional sources requires credit worthiness of the
management/promoters of the business entity and additional collateral securities
which the new business entrepreneur find difficult to fulfill. Factoring will be the
primary source of finance and the key to viability.
will bear the risk of bad debt. However, the facility, which will attract
more clients, is almost missing, in India
o Customers are still not aware of factoring Services: Factors have
not been successful in creating awareness about the concept of
factoring. The difference between factoring and bills discounting is
still not clearly understood. The customers are still not aware of the
extra benefits and services they can enjoy through factoring; they are
not demanding these services from factoring service providers.
o Bankers do not Permit their Customer to Shift their Business to
Factors: Every businessman invariably has dealings with a bank.
Hence, his banker does not permit him to shift his account receivables
business to a factor, but promises to meet his requirements.
o Network of branches is poor for factoring companies: Factoring
companies in India operate with very limited number of branches and
hence their business is also limited. This is also a reason for factoring
facilities not gaining popularity in the market.
o Factoring companies are treated as NBFCs:A major complaint
from factoring companies is that, since they are treated as NonBanking Finance Companies (NBFCs) with regard to the regulatory
norms of the Reserve Bank of India, access to low cost funds is ruled
out and hence the cost of funds is very high. Factoring companies will
feel free if NBFC tag is removed.
o Commercial Banks are Resistant to render Factoring Services:
Banks still follow their traditional method of financing receivables
and they are not willing to venture into factoring. They feel that it is
unnecessary to open separate factoring wing, perhaps owing the fact
that their profits through factoring may not be substantial as compared
to their overall profits. The very fact that the only players among the
public sector banks in the Indian market are SBI Factors and Can bank
Factors reveals this.
o Legal Environment not conducive for factoring: Legal recourses
that are available to the bank be it Debt Recovery Tribunals or
Securitization Act, are not available to factors. There is no separate
legal framework for factoring
SWOT Analysis
STRENGTHS
Good working capital
structure
Good reputation in
market
Superior product
Highly qualified
workforce
Strong relationships with
key industry members
WEAKNESSES
Lack of innovation in
factoring business
Funding
Absence of regulatory
framework
Years of experience in
factoring business
OPPORTUNITIES
THREATS
Emerging markets
business
demand
at lower cost
prepayment percentages on
submission of invoices. Balance payment is made on the receipt of payment from
the buyer.
Sales Ledger Administration: Under a domestic factoring agreement, IFCI
Factors Limited manages and operates the Sales Ledger for the Clients, monitoring
the invoices issued and payments received. IFCI Factors Limited also provides you
with valuable MIS reports to enable you to take better informed credit and pricing
decisions.
Collection of Payments: IFCI Factors Limited follows up on payment with the
Buyers (Sellers Customer ) and makes the balance payment to its Client (Seller).
Advisory Services: IFCI Factors Limited also offers advisory services to its
clients such as credit assessment for domestic buyers.
valuable MIS to enable you to take better informed decisions related to pricing,
credit terms, and debtor quality and so on.
Opportunity for Growth: The credit protection provided by IFCI Factors Limited
enables you to build your business with international buyers (who are otherwise
unwilling to open Letters of Credit) while keeping your credit exposures covered.
Instant prepayments against your
Receivables provide you with the necessary resources required for funding your
business growth.
Advisory Services: IFCI Factors Limited also offers advisory services to its
clients including credit assessment for its overseas buyers through its own network
and that of its correspondent factors
4. Corporate Loan:
Corporate Loans / Short Term Loans are offered to the customers for general
purpose / augmenting their working capital need, and are backed by suitable
security in the form of pledge of listed shares / equitable mortgage of tangible
properties.
7. International Factoring
IFCI Factors Limited commenced international factoring business in 1997 and is a
pioneer in bringing the international practice of factoring to INDIA.
For your export, International factoring works to your advantage by providing
funding, credit management and collection services for overseas sales.
Export factoring works on the same basic principle as domestic factoring. We
provide prepayment against your invoices up to an agreed percentage, with the
balance being paid when we receive payment. In addition, IFCI Factors Limited
offer open account trading without credit risks by arranging credit risks protection
on agreed terms. In the highly competitive global market this helps exporters to
bag orders by enabling them to offer more attractive payment terms to their
customers.
IFCI Factors Limited will show you the way to compete aggressively in global
markets without overseas credit risks. We are a member of Factors Chain
International (FCI), a group that includes nearly 200 of the worlds leading
financial institutions in around 62 countries. Our networks of correspondents
abroad go a long way in helping you to overcome any distance and language
barriers and establish an easy flow of communication with your customers. IFCI
Factors Limited gives you speedy and reliable reporting on your overseas customer
accounts, through modern electronic communication.
CUSTOMER
(BUYER)
Payment
OVERSEAS
CORRESPOND
ENT
Places Order
Delivers Goods
CLIENT
(SELLER)
Fixation of
Copy of
Prepayment
Balance
Prepayment
Invoice
up to 80%
Amount
Copy of Invoice
IFCI FACTORS
Payment
Prompt Prepayments
Sales Ledger Administration
CREDIT POLICY
IFCI Factors is guided by the RBIs Prudential Exposure Norms.
Compatible with the RBIs guidelines, where applicable, the Management's goal
for the business development effort of IFCI Factors is to produce a portfolio that
approximately adheres to the following concentration standards:
By Product: Not more than 30% of exposure of the company in respect of one
product. (Applicable to products other than conventional sales bill factoring based
on assignment of receivables).
By Industry: Not more than 20% of exposure of the company in respect of one
industry.
By Client: At any point of time, the outstanding to any client shall not exceed
more than 15% of IFCI Factors net worth and 25% in case of group.
By Correspondent: At any point of time, the outstanding to any Correspondent
Factor shall not exceed more than 50% of IFCI Factors net worth.
By Debtor: At any point of time, the outstanding on any debtor shall not exceed
more than 25% of IFCI Factors net worth except in case of State & Central
Government Undertakings & PSUs.
MECHANICS OF FACTORING
The Client (Seller) sells goods to the buyer and prepares invoice with a
notation that debt due on account of this invoice is assigned to and must be
paid to the Factor (Financial Intermediary).
The Client (Seller) submits invoice copy only with Delivery Challan
showing receipt of goods by buyer, to the Factor.
The Factor, after scrutiny of these papers, allows payment (,usually upto
80% of invoice value). The balance is retained as Retention Money (Margin
Money). This is also called Factor Reserve.
The drawing limit is adjusted on a continuous basis after taking into account
the collection of Factored Debts.
Once the invoice is honoured by the buyer on due date, the Retention
Money credited to the Clients Account.
Till the payment of bills, the Factor follows up the payment and sends
regular statements to the Client.
A Multi-Service Package
IFCI Factors Limited gives you a single source service package which includes
Funding
Credit assessment
Sales ledger administration
Faster collection of payments from customer
80 90% of your invoice funded Avail higher facilities than what is offered by
banks
Quick appraisal and sanction Get started with your facility before your
competition
(3) While quantification of the demand for factoring services has not been
possible, it is assessed that it would grow sufficiently so as to make
factoring business a commercially viable proposition within a period of
two/three years.
(4) On the export front, there would be a fairly good availment of various
services offered by export factors.
(6) The pricing of various services by factors would essentially depend upon
the cost of funds. Factors should attempt a mix from among the various
sources of funds to keep the cost of funds as low as possible, in any case not
exceeding 13.5 percent per annum, so that a reasonable spread is available.
(7) The RBI could consider allowing factoring organizations to raise funds
from the Discount and Finance House of India Ltd, as also from other
approved financial institutions, against their usance promissory notes
(11) There are distinct advantages in the banks being associated with
handling of factoring business. The subsidiaries or associates of banks are
ideally suited for undertaking this business; initially, it would be desirable to
have only four or five organizations which could be promoted either
individually by the leading banks or jointly by a few major banks having a
large network of branches.
(16) Since the suppliers would be able to obtain financial services from both
banks and factors, it is necessary to provide for proper linkage between
banks and factoring organizations
.
(17) The factoring of Small Scale Industrial (SSI) units could to be mutually
beneficial to both factors and SSI units and the factors should make every
effort to orient their strategy to crystallize, the potential demand for this
sector.
Factoring in India has not been as common as in Europe due to a number of factors
but the industry has recently started to grow. As India is the second fastest big
emerging economy and the tenth largest economy in the world it is expected that
the factoring industry will now start to grow very quickly.
Factoring Solutions has a relationship with one of the more innovative factoring
companies in India and we can help arrange factoring facilities for not only UK
companies exporting to India and vice versa but for domestic Indian companies
too.
In addition to factoring we can also arrange trade finance to companies importing
from India if the company if purchasing goods against firm customer order.
As with any other type of factoring arrangement there is no charge for our services
so please do not hesitate to contact Factoring Solutions for an informal chat
without any obligation whatsoever.
the same product on the surface but in reality there are fundamental operating
differences between the various factors which is where we come in.
Factoring Solutions is a specialist broker with probably more years of industry
experience than any other. We know which factors are unable to make decisions
quickly, which ones are so understaffed that their sales ledger management and
credit control is appalling and which ones despite claiming to operate a flexible
and personal service are actually governed by a strict rule book.
Our years of industry experience are available free of charge as we make no
charges for either advice or for introducing companies to the most appropriate
factoring company for their particular circumstances.
Potential factoring and invoice discounting clients looking for the cheapest deal
can be easily mislead as the real cost of the facility can end up being very different
to the original forecast.
Some factors including many of the major bank owned names have a credit control
service that is so poor (one is actually outsourced to India) that the debtors end up
taking much longer to pay and therefore the cost of factoring will end up
significantly higher than first thought as the interest element will be much higher.
Another factor might have quoted a slightly higher commission rate but will end up
cheaper in practice as their credit control is more effective. We have explained the
financial cost penalties of signing up with the wrong factor in our factoring cost
comparison
factoring cost comparison
customers arent asked to pay, they wont and it doesnt take long before the
original average credit period of 60 days has slipped to 70 days.
The decrease in the time taken to pay by customers will reduce the cost of
borrowing from the independent factoring company whilst the increase in the
average time to pay that will be seen with the large bank owned factor will result in
the client having to pay a higher cost than originally forecast.
In the example shown above, whilst both factors have quoted the same rate of
2.5% over Base the actual borrowing cost from the bank owned factor will end up
2,704 more than the independent, which if expressed as a percentage of turnover
will be 0.36%
The original offer from the bank owned factoring company was tempting as the
factoring commission was 0.25% cheaper but as can be seen, appearances can be
very deceptive and what on the surface appears to be the most cost effective route,
frequently isnt
Other side effects of poor sales ledger management include the factor reaching the
recourse date when they ask for their money back, the imposition of re-factoring
fees which can run at 0.5% to 1% per month on overdue debts and of course the
increased risk of suffering even larger bad debts.
factoring companies offer such a poor service
Factoring companies don't often achieve the levels of service that they advertise
and a good many of our enquiries are from companies that are unhappy with their
current service levels asking us to place their business with one of the factoring
companies that actually deliver on their promises.
Most companies, having read the marketing material expect that the "professional
approach" of the factor's credit control department would decrease the amount of
outstanding invoices and they become understandably concerned when the
opposite happens.
In many cases the professional approach of the factoring company consists of
sending out computer generated credit control letters and very little else.
The factoring company's profit relies on generating a higher level of factoring
commission income than it pays out in overheads with the major overhead being
staff salaries. The more clients that one person can handle, the more profitable the
account becomes for the factor but conversely the more ineffective the credit
control.
Most factoring companies will only finance an invoice for a finite period, typically
until it becomes 90 days overdue then they will require the client to repay their
investment in the debt back to them.
They will still keep the debt on their books (without financing it) in exchange for a
re-factoring fee, which is typically 0.5% to 1% per month
This can be a lucrative business for some factors, and certainly is no incentive to
collect the outstanding debts in quickly.
Our final concern is the way that some factoring companies restrict the levels of
funding by imposing artificially low credit and concentration limits
Unapproved debts and concentration limits
Recourse factoring is where all debts are at the clients risk in the event of
customer failure. One would have thought that as the factoring company is taking
little risk they would not be so restrictive on whom their client sells to, but
unfortunately that is not the case and frequently they impose credit limits and
concentration limits on their clients' customers with the sole aim of restricting the
funding.
As an example; a company with a turnover of 1.5m and total debts outstanding of
250,000 may probably have a blanket individual customer limit of 20,000 with
the factoring company refusing to fund any balance in excess of this figure
irrespective of whether they are taking the credit risk or not.
Some factors can be even more miserly than that as we were approached by a
company turning over 2m per annum where the bank owned factor was refusing
to fund any account in excess of 5,000 until they had at least two months trading
experience with that customer, irrespective of their creditworthiness.
Our most recent experience is with a small manufacturing company who despite
being offered a facility of 80% of invoices from one of the major independents
found that once the ink on the agreement was dry the factor was restricting the
funding on his major customer to 20,000 despite the average balance being in
excess of 30,000 and the customer itself being a 50m turnover concern.
At least in those cases where the factoring company is assuming the credit risk in
the event of a bad debt loss one can understand their cautious approach to setting
credit limits but unfortunately in many cases the client loses out even worse as the
factor has more reason to set restrictive credit limits
The statistics published by the factors' trade body show the total debts outstanding,
and the total payments made against these debts listed by factoring company.
Careful examination of these figures indicate that too many members of the
Association show payments of under 50% averaged over all of their clients
Most people are looking for a factoring company with an agreement written in
plain English with none of the "notwithstanding" clauses that effectively allow the
factor to do what they want, when they want.
This should be coupled with a facility where the factoring company actually
performs as promised in the marketing material, where the service is as flexible
and efficient as promised and where any potential problems with large debtor
balances and concentration limits are fully explained beforehand, where there are
no artificial funding restrictions generated by meaningless credit limits and where,
if the factor does not collect the debts efficiently the client is not penalised with
excess interest or punitive re-factoring fees.
Unfortunately whilst this perfect facility does not exist there are a few factoring
companies that offer a facility approaching "perfection" and where a genuine
personal approach is part of the standard package.
One of our favourite factoring companies is actually willing to back their service
with a guarantee that if any client is unhappy with the service within the first three
months they may terminate the facility without penalty, receiving a refund of all
factoring commission charges paid within the period in the process.
It's difficult to fault that kind of self belief in a world where most factors would
either allow an unhappy client to leave on payment of a hefty premium or would
continually put obstacles in the way of unhappy clients leaving, so that they don't
lose the income stream.
There are no charges for our services and you therefore have nothing to lose but
much to gain as we only introduce people to one of the few factoring companies
that actually perform.
WORK DONE BY ME
Methodology:
Profitability Indicator Ratios: A class of financial metrics that are used to assess
a business's ability to generate earnings as compared to its expenses and other
relevant costs incurred during a specific period of time. For most of these ratios,
having a higher value relative to a competitor's ratio or the same ratio from a
previous period is indicative that the company is doing well.
the single largest component of their total assets. This annual turnover ratio is
designed to reflect a company's efficiency in managing these significant assets.
4. Unitech Ltd
Established in 1972, Unitech is today a leading real estate developer in India.
Known for the quality of its products, it offers the most diversified product mix
comprising residential, commercial/IT parks, retail, hotels, amusement parks and
SEZs.
RESULTS:
1. Bodol Chemicals Ltd
The company has high debt-to-equity ratio due to recent purchases of fixed assets
worth Rs 8791.89 lacs and investments in capital work in progress
The liquidity ratios of the firm are good in comparison to industrial standards
Profit margins are good
The liquidity of the company is mainly constituted by debtors, cash and cash
equivalents and loans and advances. Since they are above the sector standards the
company can easily meet short term liabilities
The profit margins of the company show it is a good competitor in the sector
The assets are being put to good usage in comparison to sales
The slight increase in the ratio is due to the increase in debt for the financial year
2008-09 for purchase of intangible assets worth 7935.15 lacs and about 3,198.78
lacs in the year 2009-2010 .
The usage of fixed assets is good in respect to standards pointing to efficient and
cyclic usage in a financial year
Debt undertaken by the company is above industrial standards this can be pointed
to the increased secured loans in the two years
4. Unitech Ltd
Though the current and quick current ratios reflect good liquidity conditions but
the cash ratio highlights the fact that most of the money is stuck in the form of
projects in progress and advances to subsidiary companies
The growth margins are way above industrial standards and are a positive sign for
the company's future prospects
Good usage of assets is taking place by the firm
The high debt to equity ratio in the year 2008-09 can be attributed to the fact that
a large amount of fixed assets and investments were made
Employee cost was higher due to commissioning of Rural Marketing team Elvista
and due to increment in manpower in R & D
The company is in the process of shifting its manufacturing facilities to excise
free zones as well as current plants are being upgraded to meet increasing demands
The company though in the process of expanding will find it very difficult to get
future long term creditors due to such a high debt-to-equity ratio in comparison to
industrial standards
6. GEI
The company has good liquidity and that also in the form of cash and cash
receivables.
The profit margins of the company are comparable to industry standards
The low asset turnover ratio is attributed to the fact that some assets have been
acquired recently and have not become functional
The debt-to-equity ratio is close to one which show good management of funds
by the firm
CONCLUSION:
1. Bodol Chemicals Ltd
A problem that the company might face is that it would find it difficult to get future
loans as most of its fixed assets are under collateral of secured term loans apart
from this the shareholder's share are also under pledge to some creditor thus inorder to get any future loan the bank must wait for some asset to be freed from
collateral but since the company has a good profit it may be able to pay off loans
soon.
The reasons for loans point to the setting up of a new sulphuric acid plant in
July'10 and the launch of a new product 'Bodactive' in Aug 10. Apart from this a
new plant of single Super phosphate plant is also coming up so further debt might
be sorted out by the company.
The company is expanding and has a lot of long term debts but the profitability and
liquidity of the firm is good as well. As a factoring service provider, one can
finance this firm but at a higher interest since it has the ability to meet all current
liabilities.
Such a company is not good for factoring as the liquidity (i.e working capital) of
the company will be impacted by its increasing interest on long term loans. Weak
profitability points to delayed time in recovery from these debts. Hence, factoring
services should be avoided if possible or provided at a higher rate.
4. Unitech
Ltd
The company has good future prospects and is expanding at a good rate. From
factoring point of view it should be noted that the company has a lot of long term
liabilities to pay for and the liquidity of the firm is mainly stuck in the form of
ongoing projects. So either the factor wait for the ongoing projects to finish or
some of the long term liabilities to be paid off before thinking of giving service to
this firm or else provides service at a higher rate.
5. Elder
Pharma Ltd
This company cannot be given long term debt owing to the already mounting long
term liabilities and also due to the low profit margins in comparison to industrial
performance. The liquidity is also influenced by stock piles of inventories and
debts. Therefore, this company is not safe for factoring but if made a client larger
discount rates should be charged owing to the firm's risky stats.
6. GEI
The liquidity and debt-to-equity ratios of the firm are strong and show good fund
management in comparison to industrial standards. This company can be made a
client for factoring services.
1) Client Details:
a) Name
b) Facility
d) Address
of
the
Corporate Office
e) Constitution
f) Date of Incorporation
Registered
& Regd.
Office:
201,
Hindustan
Kohinoor Complex, L.B.S. Marg,
Vikhroli West, Mumbai 400083.
Corp.
Office:
201,
Hindustan
Kohinoor Complex, L.B.S. Marg,
Vikhroli West, Mumbai 400083.
Public Limited (Closely Held)
30th June 2000
4) Key Financials
Rs. in Crores
As on 31.03
2008
2009
2010
Audited
Audited
Audited
Net sales
55.23
56.75
68.56
PAT
0.12
0.14
0.14
0.21%
0.24%
0.20%
Tangible
Net
Worth (TNW) -@
1.02
1.17
1.31
TOL/TNW (#)
3.98
6.19
Latest financials
up to Mar 2011
(Provisional)
Sales
PAT
PAT / Sales
174.99
0.49
0.3%
Amt- Rs in
FYE March 2012
450.00
1.40
0.99
4.08
Fund Based WC
Limit
Total
45.00
(ROI-12.50%)
15.00
60.00
45.00
15.00
60.00
7) Proposed Facility
Facility
Domestic Factoring
Limits
Prepayment Percentage
80%
Name of debtor
Credit
Line
propo
sed
Relation
ship
(Years)
6.50
Expecte
d sale
during
Current
Year
Rs. in Cr
(Rs.
In Cr)
Bhuwalka
Steel
Industries Limited
Sale
during
Last
Year
5 years
63.52
90.00
Credit
period
NOA/
Escro
w/
Silent
In
days
60
NOA+
PDCs
Amt in Crores
Particulars/
FYE
Net Sales
PBT
PAT
Networth
March 2010
March 2011
477.63
3.11
2.09
24.91
526.41
5.16
3.29
9) Expected Pricing
(Amt. Rs. In Cr)
Nature of
Amount
facilities
proposed
Domestic
Factoring
5.00
Discount rate
Factoring
charges
Facility setup
charges
13.50% p.a.
0.20% per
invoice sub to
a min of 250/-
1%
10) Security
FIU PDCs
Personal Guarantee
Tangible collaterals i.e. equitable
mortgage of immovable properties /
pledge of equity shares if any
YES
YES
NA
SYNOPSIS
Corporate Office:
7th Floor, Tower 1, Equinox Business
Park, Peninsula Techno Park, Off
Bandra Kurla Road, L.B.S. Marg,
Kurla (W), Mumbai - 400070
k) Constitution
l) Date of incorporation
16/06/2009
Company
Date of rating
Summary:
AMW Auto Component Limited (AACL) was promoted by Asia Motor Works
Holding Ltd. (AMWH) which is 99.88% owned by the promoter Mr. Anirudh
Bhuwalka. AACL was incorporated on June 16, 2009 to acquire the assets of Auto
Component Division of M/s. Asia Motor Works Ltd. (AMW), which is in the
business of manufacturing of Heavy Commercial Vehicles and Auto Components,
through a slump sale transaction. The Company is in a process of executing this
slump sale transaction.
Asia Motor Works Ltd (AMW) headquartered in Mumbai, India is in the
business of manufacturing of Heavy Commercial Vehicles and Auto Components
and has two major divisions, namely, Heavy Commercial Vehicle (HCV) Division
and Auto Component Division (ACD). AMW was established in the year 2002 and
is promoted by Asia Motor Works Holding Ltd (AMWH).
Considering the robust growth potential of Auto-component industry, AMW
management believed that the auto component business can be a dominant player
if rolled out into an independent business entity with a dedicated management
team. To achieve this objective AMWs management has proposed to execute a
Slump Sale of the auto component division into the newly formed entity, AMW
Auto Component Limited (AACL).
AACL has currently taken the auto component division of AMW on lease and is
involved in manufacture of products such as Wheel Rims, automotive panels,
compressor shells, crash barriers and cable trays through its Wheel Rim, Press
Shop and Roll Forming facilities at its plant in Bhuj. The Wheel Rim facility is the
largest revenue stream of AACL and manufactures wheel rims for Commercial
Vehicles and Passenger Cars and caters to some of the largest OEMs, both
domestically and globally. The wheel rim facility of has commenced its
commercial operation (initially as a division of AMW) with full installed capacity
in December 2009, and it has sold ~1.3 million Wheel Rims till January 2011.
Wheel Rim plant has an installed capacity of 15 million units. It has bagged orders
from international OEMs including Fiat and GM and has domestic auto majors like
Maruti Suzuki, Mahindra & Mahindra, General Motors and International Tractors
etc. as its customers. The Company production facility has been approved by
Volkswagen and selected as development and production supplier for wheel rims.
AMW currently has a net worth of Rs. 397.87 Crs as on 31.03.2011 (Provisional).
The company has made a turnover of Rs. 1,342 Crs (FY 10-11 Prov), and a post
Tax loss of Rs. 48.43 Crs. The company expects to breakeven by FY 11-12 with a
TO of Rs. 4,845 Crs, and a PAT of Rs. 100 Crs. Net worth as on 31 March 2012 is
projected at Rs. 772 Crs.
AACL has started supplies under its name from the month of January 2011. As per
the Provisional Financials for the FY 2010-11, the company has made a turnover of
Rs. 38.28 Crs and PBT of Rs. 0.73 Crs. Net worth as on 31 March 2011 is Rs. 0.78
Crs. Net worth is less than the client selection criteria set in the credit policy, and
the amount required exceeds the maximum permissible exposure based on net
worth of AACL on a standalone basis however, considering the backing of AMW
in terms of corporate Guarantee for the facility amount and FIU PDCs for 50% of
the limit, in addition to the PG of promoter, debtor profile being strong with
availability of NOA/Escrow acceptance, along with paripassu charge on non
factored receivables, the facility is proposed for in principle approval.
AACL has approached us for DF facility of Rs.15 Crs and the facility to be backed
by CG of AMW, Personal Guarantee of Mr.Anirudh Bhuwalka, and FIU cheques
of AMW up to 50% of the sanctioned limit besides DPN and Transaction PDCs
from AACL.
14)
Shareholding Pattern of AACL & Asia Motor Works Ltd:
Mr. Anirudh Bhuwalka holds 98.88% in Asia Motor Works Holding Ltd which
holds 100% shares in AMW and AACL.
Name
Mr. Anirudh
Bhuwalka
Mr. Girish K. Sathe
Promoter
Nominee of Mr. Anirudh
Bhuwalka
No. of
shares
Percentage
49940
10
99.88%
0.02%
10
Mr. S.
Shankaranarayanan
10
10
Mr. Kailash
Daualtani
10
10
0.02%
0.02%
0.02%
0.02%
0.02%
31.03.2013
31.03.2014
(Estimated)
(Projected)
(Projected)
Net sales
552.69
669.26
888.32
Gross Profit
31.67
49.48
132.55
(24.81)
(10.73)
50.54
(16.56)
(7.17)
33.36
PBT
PBT/Sales (%)
PAT
PAT/Sales (%)
Cash Accruals
Tangible Net Worth
(TNW) -@
Total
Outside
Liabilities
TOL/TNW (#)
10.67
25.22
67.44
203.91
169.13
161.99
700.75
662.80
692.01
3.91
4.27
3.44
31.03.11
30.06.2010
31.03.2009
31.03.2008
(Provisional
)
(15 Months)
(12 months)
(12 Months)
(Audited)
(Audited)
(Audited)
1286.96
1078.75
557.34
479.46
Gross Profit
88.35
89.68
54.31
23.41
PBT/(Loss)
(48.36)
(58.62)
0.44
3.75
PBT/(Loss) to
Sales (%)
(3.76%)
(5.43%)
0.07%
0.78%
PAT/(Loss)
(48.43)
(52.82)
1.60
1.13
PAT/(Loss) to
Sales (%)
(3.76%)
(4.90%)
0.29%
0.24%
Cash Accruals
2.44
8.60
13.94
10.70
386.38
305.65
1209.51
611.72
3.13
2.00
Net sales
Tangible Net
Worth (TNW)
-@
397.87
455.86
Total Outside
Liabilities
1870.70
1507.46
TOL/TNW (#)
4.70
3.30
31.03.2013
(Estimated)
(Projected)
Net sales
4497.24
6510.29
PBT/(Loss)
129.17
393.26
2.87%
6.04%
PAT/(Loss)
100.07
322.22
2.22%
4.95%
Cash Accruals
202.95
430.10
772.87
1195.10
2925.50
3066.84
3.78
2.57
TOL/TNW (#)
Rs.
Fund Based WC
Limit
Total
5. Proposed Debtors:
Limits
Name
debtor
of
Credit
Line
proposed
Sale
during
Last
Year
Expected
sale
during
Current
Year
(Rs. Crores)
Credit
period
NOA / Escrow
/ Silent
In days
General
6.00
Motors India
Pvt Ltd
7.09
23.24
90
NOA/Escrow
Tractors
& 4.00
farm
Equipment Ltd
1.83
13.11
90
NOA/Escrow
International
Tractors Ltd
5.00
3.25
19.30
0.38
2.29
0.11
6.70
90
90
90
NOA/Escrow
NOA/Escrow
NOA/Escrow
1)
2)
3)
4)
5)
The non factored receivables (after excluding the proposed debtors with IFL
and another factoring company which is likely to sanction Rs. 10 Crs limit)
are estimated to be at around Rs. 35 Crs every month
As understood from the client, the value of individual invoices at times may
be as low as Rs. 50,000 hence stipulation of minimum flat charges of Rs.
250 per invoice may become too costly for the client; therefore, it is
proposed for a uniform percentage of 0.1%.
The following are the trade documents to be submitted at the time of
funding
1)
2)
3)
4)
NTR
Copy of Purchase order
Certified copy of invoices drawn on the respective debtor
Accepted delivery challans/LR/GRN
7. Expected Pricing
Nature of
Amount
facilities
proposed
Domestic
Sales
Factoring
Discount rate
Factoring
charges
Facility setup
charges
14.00%
0.1%
1.00%
15 Crs
8. Security
Security PDC/Transaction PDCs
Personal Guarantee
(no minimum
flat charges)
Corporate Guarantee
No
Others
SYNOPSIS
15) Client Details:
n) Name:
o) Boards of Directors :
Mr. Champalal G. Parekh Chairman
Mr. Prakash H. Parekh Managing Director
Mr. Parvesh Chander Suri Director
Mr.Mahesh Bhandari S Director
p) Address of the
Registered &
q) Constitution
r) Date
incorporation
s) Line of Activity /
Products of the
Company
16)
Key Financials in INR Cr
Particulars
Mar-11
Mar-10
Provisional
Audited
Net sales
%Growth
PBDT
PBDT Margin %
Depreciation
PBT
PBT Margin %
PAT
PAT Margin %
Share Capital
Tangible Net
worth
Net Fixed Assets
(Including CWP)
TOL/TNW
Current Ratio
Mar-09
Audited
Mar-08
Audited
387.55
33.02%
22.65
5.84%
5.29
17.36
4.48%
12.01
3.10%
25.26
96.28
291.35
39.50%
18.35
6.30%
4.82
13.53
4.64%
8.03
2.76%
45.16
83.69
208.84
21.45%
9.62
4.61%
3.17
6.45
3.09%
3.06
1.47%
29.32
50.39
171.95
13.75
8.00%
2.21
11.54
6.71%
7.61
4.43%
22.32
38.13
109.13
100.35
91.25
73.26
1.11
1.12
0.97
1.11
1.95
1.07
1.76
1.13
Projected March 12
Projected March 13
PBT
PAT
Net worth
Comments on financials :
Sales:
The turnover of the Company has been increasing by 30% in last two
years and has reported healthy growth in last three years.
Profit: The bottom line of the Company is satisfactory with PAT standing at INR
8.03 Cr expected to reach INR 12 Cr in March 2011.
Gearing/Liquidity: Both gearing and liquidity of the Company is satisfactory
17)
Banking details
Borrowings Arrangements
Name of the Lead Bank /
Major bank
Borrowing limits
in Cr
INR
Name of the
Bank
Fund Based WC
Limit
State Bank of
India
22.00
5.48
24.00
State Bank of
Hyderabad
10.00
4.70
9.00
State Bank of
Indore
8.00
1.80
State Bank of
Patiala
7.00
18.80
10.50
Kotak Mahindra
Bank
10.00
25.00
Bank of Baroda
8.00
12.00
Standard
Chartered Bank
8.00
16.50
Royal Bank of
Scotland
15.00
73.00
30.78
112.00
Total
18)
PIL has availed INR 10.00 Cr from India Factoring, the details of the
sanctioned facility is as under:
Facility Details
India Factoring
IFCI Factors Proposed
deal
Facility Name
Sales Bill Factoring on Sales Bill Factoring on
Silent platform
Silent platform
Currency of funding
INR
INR
Amount
INR 10.00 Cr
INR 15.00 Cr
Prepayment %
80%
90%
Credit Period
Up to 90 days
Max up to 120 days
Purpose
Trade
Finance Trade
Finance
requirement
requirement
Discount Charges %
12.00% p.a. as per 13.25% p.a. or matching
sanction letter
dated the rate offered by India
December 28, 2010. (As factoring
informed by the client the
present rate has been
increased to 13.00% p.a.)
Facility Set up fees
1.00% p.a.
Client has requested to
give
best
possible
concession on the one
time fees. We propose
0.30% p.a. for first three
years with a commitment
of utilizing a minimum
80% of the sanctioned
FIU limit or a penal
charge to be stipulated.
Commitment Fee
To be charged on the Same as explained above
unutilized amount being
under 50% in the month
and at 0.10% of the
unutilized
facility
amount. The said fee was
waived till March 2011.
Factoring Charges
0.25% per invoice subject 0.20% per invoice subject
to minimum INR 500 per to minimum INR 450 per
invoice
invoice
Debtor Assessment fee
INR 2000 per debtor
Nil
Contravention Fees
0.10 % of o/s invoice Same
amount value (Charged
on instances of goods
damaged , return )
Overdue Interest
Nil
2.00% of the o/s value
Security
and PG of Champalal G Same
Documentation
Parekh and Prakash H
Parekh along with CA
certified
Net
worth
statement and latest IT
returns of each Personal
Guarantors
DPN
DPN
Transaction backed PDC Transaction backed PDC
Factoring Agreement
Factoring Agreement
19)
Product parameters as per the New Credit policy 2011-12 (Silent
Factoring)
Particulars
Minimum Net worth
Stipulated Parameters
INR 20 Cr
Max TOL/TNW
6:1
Compliance
Complied- Net worth as
at March 2010 is above
INR 80 Cr
Complied Has remained
1.1:1
Min 3 years
At least for 2 years
All the parameters as per Credit Manual 2011-12 for Silent Factoring is
Complied with.
We proposed silent platform as all the debtors are blue chip companies
wherein PIL is not in position to get NOA or Escrow account. The basic details
of the debtors is given under Para 6.
20)
Jubiliant
Industries Limited
Lifelong Meditech
Limited
Rashtriya
Chemicals
&
Fertilizers Limited
Sanghi Industries
Limited
8
9
10
11
12
13
14
Shree
Ganesh The enterprise is a co-operative Sugar Factory
Khand
Udyog registered under the Co-operative Sugar Societies
Sahakari Mandali Act-1961 (Regd. No. SE-42, dt.22-04-1985). The
Limited
plants installed in production unit have the capacity
of 4200 TCD owing to the same, around 3000 to
3200 MT of Sugarcanes is crushed per day with
capacity utilization of around 120%. Shree Ganesh
Khand Udyog Sahkari Mandli Limited was
founded in the year 1985 in Gujarat, India. The
Company is a manufacturer and exporter of diverse
range of Agricultural and other products. All the
affairs of the company are managed under the
guidance of Mr. Banesinh S. Dodia, the managing
director.
Tata
Chemical Listed on BSE , A TATA Group Company
Limited
Ultratech Cement Listed on BSE. Birla Group Company
Limited
Triveni
Listed on BSE. Caters in the areas of sugar, turbines,
Engineering
& gears & gearboxes and water & wastewater
Industries limited treatment. One of the leading sugar manufacturers in
India and also the market leaders in engineering
businesses, having a global footprint.
Elite Polytrade
Trading Firm in Ahmedabad. All KYC and financial
details will be produced.
Dwarikesh Sugar Listed on BSE. Dwarikesh Sugar Industries Limited
Industries Limited is an integrated conglomerate, primarily engaged in
manufacture of sugar and allied products
Ankur Chemfood ANKUR CHEMFOOD PRODUCTS (GUJ.) LTD is
Products (Gujarat) INDIA's leading salt company engaged in
Limited
manufacturing, marketing & exporting of Triple
Refined Free Flow Iodised and Industrial salt,
situated at Chopadava village near Kandla Port,
Gujarat. The company belongs to a reputed group
having stake in diversified industries, with group
turnover of more than $50 m.
Bajaj Salt Private Products manufacturing and exporting, industrial &
Limited
edible salt
15
16
17
18
19
Indo
Brine An ISO-9001 certified company catering to the
Industries Limited worldwide market with the Kohinoor, INDO
brand of refined free flow iodized salt and various
grades of industrial salt
Shree
Ram Shreeram Chemfood Private Limited established
Chemfood Product in 2008 with an aim to manufacturing and supplying
Pvt. Ltd
all types of edible and industrial salt that matches the
international quality and standards
Laxmi Chemfood Manufacturer of Tripple Refined Free Flow Iodised
Product Pvt. Ltd.
Salt, High Purity Industrial PVD Salt, Low Sodium
Iodised Salt, Double Fortified Salt, Iodised Salt with
Iron, Water Softener Table Salt,
Kutch Brine Chem Trading Firm in Gandhidham. All KYC and financial
Industries
details will be produced.
Maxroth
Trading Firm in Ahmedabad. All KYC and financial
Chemicals
details will be produced
1) Max cap on the overall FIU Limit will be kept at INR 15.00 Cr.
2) The entire proposed facility is under silent platform wherein the client i.e.
PIL will provide us the remittance proof along with the payment made to
us.
21)
INR 15.00 Cr
Discount
rate
Factoring
charges
Facility setup
charges
13.25%
p.a.
0.20 % per
invoice or
Flat 450 per
Invoice
23) Security
Security PDC and others
Personal Guarantee
No
24)
ANNEXURE
IFCI FACTORS LTD
BALANCE SHEET AS AT MARCH 31, 2011
Schedule
SOURCES OF FUNDS
Rs.
Rs.
Shareholder funds
Share Capital
79,35,77,000
79,35,77,000
43,20,13,769
29,55,61,815
1,22,55,90,769
1,08,91,38,815
7,07,70,93,855
1,91,96,33,278
Loan Funds
Secured Loans
Unsecured Loans
4
50,00,00,000
7,57,70,93,855
1,91,96,33,278
8,80,26,84,624
3,00,87,72,093
1,98,97,775
2,16,01,856
1,19,92,777
1,48,13,202
79,04,998
67,88,654
2,00,000
3,39,299
TOTAL
APPLICATION OF FUNDS
Fixed Assets
Gross Block
1,83,16,975
94,70,833
18,00,00,000
Current
Assets,
Advances
Loans
and
Current Assets
Sundry Debtors
Liabilities
3,84,49,31,297
24,38,31,374
1,66,68,122
2,61,53,24,368
66,00,824
10,53,13,10,881
3,86,82,00,243
1,82,13,97,141
85,99,49,926
11,36,51,089
1,60,77,010
1,93,50,48,230
87,60,26,936
8,59,62,62,651
2,99,21,73,307
8,80,26,84,624
3,00,87,72,093
Less:
current
Provisions
7,67,21,55,139
and
10
Current Liabilities
Provisions
Rs.
Rs.
79,93,95,889
31,14,61,934
16,77,032
49,28,679
80,10,72,921
31,63,90,613
3,68,70,480
2,47,28,103
3,41,94,158
2,45,17,063
36,77,34,415
8,16,36,390
18,15,901
9,99,983
44,06,14,954
13,18,81,539
36,04,57,967
18,45,09,074
Income
Income from operations
11
Other Income
12
TOTAL
Expenditure
Personnel Expenses
13
14
Financial charges
15
Depreciation
TOTAL
Profit Before Provisions & Write off
2,66,52,962
(14,49,997)
Provisions:
-standard Assets
2,75,79,558
1,47,04,442
48,42,570
77,98,253
30,28,32,864
16,20,06,379
11,06,65,000
6,44,10,500
(88,46,142)
(83,27,010)
20,10,14,006
10,59,22,889
12,46,30,333
3,98,92,022
32,56,44,339
14,58,14,911
forward
from
2,11,84,578
Proposed Dividend
5,55,50,390
90,11,662
12,46,30,333
A.
CASH
ACTIVITIES
FLOW
FROM
Rs.
Rs.
OPERATING
16,20,06,379
18,15,901
9,99,983
Adjustment for:
Depreciation/Amortization
Unclaimed Balances written back
-
(4,21,497)
Bad Debts
2,66,52,972
(14,49,997)
2,75,79,558
1,47,04,442
48,42,570
77,98,253
93,336
2,54,221
6,97,921
4,42,921
(9,49,698)
36,57,38,323
18,55,32,925
5,15,74,60,577
1,66,91,90,357
(3,85,72,69,387
)
(2,50,56,15,010
)
96,14,47,215
60,91,82,261
(2,61,43,94,050
)
(20,86,933)
1,29,82,678
(3,96,22,534)
(9,99,59,138)
(7,02,12,296)
(8,69,76,460)
(10,98,34,830)
(27,92,946)
(46,50,929))
(18,00,00,000)
1,82,658
9,49,698
FROM
(18,26,10,288)
(37,01,231)
FINANCISING
50,00,00,000
(32,50,000)
49,67,50,000
22,71,63,252
(11,35,36,061)
1,66,68,122
13,02,04,183
24,38,31,374
1,66,68,122