COMMENTS ON ASSESSMENT OF LIMITS :

a) PROJECTED LEVEL OF SALES:

PARTICULAR SALES (IN LACS)

MAR-05 200.99

MAR-06 600.46

MAR-07 1720.71

MARCH 2008 2097.75

Sales turnover of the firm is showing increasing trend. The firm has achieved sales
turnover of Rs. 2097.75 lacs against projected sales of Rs. 2500.00 lacs i.e. 84%. The
firm has achieved 22% growth in sales from Rs. 1720.71 lacs to Rs. 2097.75 lacs as of
31.03.08. During this fiscal, the firm has projected sales of Rs. 2600.00 lacs. From April
to September 08, the firm has registered sales of Rs. 595.25 lacs, which is slightly
decreased by 3.2% as compared to last year correspondence period sales of Rs. 614.90
lacs. However, it is marginal difference, which can be filled during peak season starting
from October to May. Looking to their last 3 years performance and proposed expansion
of unit, we may consider sales of Rs. 2500.00 lacs during 2008-09 achievable with about
20% growth over the previous year.
b) INVENTORY & RECEIVABLE NORMS

The major raw material of the unit is cotton seeds, soya seeds, etc., which are processed
and converted into oil. These raw materials are purchased from Mandi and Cotton
Ginning & Processing Mills. During last 3 years, the actual stock holding & receivables
level remained as under:

Particulars 2005-06 2006-07 2007-08

Total Inventory 173.22 356.69 447.13

Receivables 91.97 183.25 92.93

Sundry Creditors 108.61 236.61 88.85

The level of stock holding and debtors as of March 2006, March 2007 and March 2008
indicate working capital cycle of peak season of 8 months. In view of the fact that it is a
seasonal unit and the firm is required to make bulk purchases of cotton/soya seeds during
the crop season to ensure regular production/working of the unit, the holding can be
considered reasonable. Looking to the situation, it is required to make Peak Level and
Non-Peak level limits i.e. during the peak season & off-season of the crop.
c) WORKING CAPITAL ASSESSMENT

Based on projected sales of Rs. 2500.00 lacs for 2008-09, the WC requirement of the
party as per turnover method can be worked out as under:

 Projected Sales achievable during 2008-09 : 2500.00

 25% of Sales : 625.00
 5% of sales as margin : 125.00
 Available margin (NWC) : 82.63
o MPBF : 500.00

Further, based on FBF method of assessment, the WC requirement is worked out as

under:

(Rs. in lacs)

MAR-07 MAR-08

Total Current Assets. 581.26 712.49

Less: Current Liabilities 241.90 150.00

(Other than Bank Borrowings)

Working Capital Gap 339.36 571.86

NWC 95.21 157.49

Flexible Bank Balance (FBF) 244.15 414.37

Net Sales 1741.28 2500.00

NWC to TCA % 16% 22%

Flexible Bank Finance to TCA % 42% 58%

 MAR-07 MAR-08

Sundry Creditors to TCA % 40% 21%

Therefore, C.C.(Hyp) limit of Rs. 380.00 lacs as recommended by the branch, can be
considered. However, looking to past trend and seasonal business – crop season from
October to May, it will be justified to renew Peak-Season & Non-Peak Season limits at
25% margin as under:

 Rs. 380.00 lacs – From October to May.

 Rs. 135.00 lacs – From June to September

d) TERM LOAN ASSESSMENT

The firm was sanctioned T/L of Rs. 17.90 lacs for purchase/installation of 6 jumbo
expellers to expand the capacity of the unit in June 2006. Presently they are working with
12 expellers/machines. Also they proposed to sell the oldest six machines within very
short time. Expected sale proceeds of six old machines about Rs. 18.00 lacs will be
utilized for adjustment of existing Term Loan and other long term uses.

The firm has now proposed to construct new building shed and to install advanced
technology 12 new oil expellers alongwith remaining 6 existing expellers out of 12.
Therefore, the firm intend to work with total 18 expellers to increase the production with
improved quality at reduced cost.
 The cost of project & means of finance as per Technical Inspection Report dated 30.09.2008
are as under:

Cost of project Means of funding

Land & Site development owned by the 0.00 Promoter’s contribution 61.00
firm.
Construction cost of shed& building 106.28 Term Loan from Bank 118.80
Electric Installation 14.62
Plant & Machinery 58.52
Misc./Sundry exp. 0.38
TOTAL 179.80 TOTAL 179.80

LAND:

CONSTRUCTION OF BUILDING:

The firm has obtained construction permission from the competent authority. Out of own
contribution, the firm has already started/completed construction of building & civil works as
under:

Particulars Construction area Works completed till

19.09.2008
(In sq.ft.)

Oil Mill Shed 4300 90%

Raw Material godown 4300 90%

Finished material godown 4300 90%

Shed for overhead tank 2800 60%

Platform No.1 10500 25%

Platform No. 2 10500 25%

As per abstract dtd. 21.04.08 & 23.04.08 obtained from M/s abc, Chartered Engineer, xyz city,
estimated construction cost are given as under:

 Oil Mill Shed : Rs. 2589800

 Overhead Water Tank
 Khal Godown Shed
 Sarki Godown Shed
 Cotton Seed drying platform No.1
 Cotton Seed drying platform No.2
TOTAL
: Rs. 917500
: Rs. 2109800
: Rs. 2109800
: Rs. 1450600
: Rs. 1450600
: Rs. 10628100 (Say Rs. 106.28 lacs)

As per certificate of Chartered Engineer, xyz city, the construction works of around Rs.85.75
lacs are already completed. The technical inspecting officials have also confirmed the above
stage of completion. The construction cost is varied from Rs. 150/- to Rs. 600/- depending upon
the works, which is considered reasonable and justified.

ELECTRIC INSTALLATION

Electric installation is mainly consisting of 14 TEFC Motors, 36 pieces Start Delta starter, main
switch, other accessories, etc. These items will cost Rs. 10.20 lacs as per quotation obtained from
Allied Electric Stores, xyz city. Transformer of 500 KVA costing Rs. 4.42 lacs as per quotation
of M.P. Transformer Pvt. Ltd. is to be installed for smooth and adequate supply of power.

PLANT & MACHINERY

The firm has been working with 12 oil expellers with about 100% capacity utilization. To
improve the quality and enhance the capacity, they have decided to purchase 12 new expellers
and install them alongwith existing 6 out of 12 expellers in a new building adjacent to existing
one. Particulars of P&M, cost & manufacturers/suppliers are proposed as under:

(Rs. in lacs)

PARTICULARS Manufacturer/Supplier No. Rate Total Cost

‘Sona’ Oil Expellers M/s xyz 1 12 2.50 30.00

Chainlink convear with M/s xyz 2 1 6.65 6.65

gearbox & chin fitting

Wash Tank 7 ton with 3 1 1.05 1.05

HP Motor

Filter with pump 1 1.65 1.65

Elevator 30’ 1 1.05 1.05

Dicordicator complete 1 7.50 7.50

automatic plants

Underground tank with 1 0.40 0.40

cover & partition

Storage tank 10 0.264 2.64

Motor stand (6 no.), 0.56

foundation bolt (6 no.) &
pipe fitting,

VAT 2.68

Expeller Spare parts Xyz 3 - - 4.34

TOTAL 58.52
12 pieces of are to be purchased from @ Rs. 2.50 lacs each total costing Rs. 30.00 lacs as per
their quotation dated 14.04.2008. Other supporting items like, wash tank, filter, elevator,
dicordicator complete automatic plant, etc. are proposed to be purchased from.

Keeping in view the volume of project, projected misc./sundry expenses of Rs. 0.38 lac are
reasonable. Therefore, total cost of project Rs. 179.80 lacs is acceptable.

The firm has proposed to contribute 40% margin towards construction of building and 25%
margin for plant & machinery.

As per technical report, the firm has acquired 6 new machines, elevator and conveyor and these
machines are installed in new mill shed alongwith 12 old machines. When in near future 6 more
new machines are supplied, old 6 machines will be sent back to the supplier under buyback
arrangement. The other items are also expected to receive very soon. With the installation and
implementation of all the plant & machinery as proposed herein above, the quality and capacity
of the unit are expected to increase. The capacity will be increased from 80000 quintal to 129000
quintals per season i.e. 540 quintals per day for 240 days working in 2 shifts of 12 hrs. During
the current year i.e. 2008-09, capacity utilization is projected at 75% i.e. 90000 quintals with
working of 18 oil expellers (12 new & 6 existing).

The firm has requested for Term Loan of Rs. 130.00 lacs for the above project. But due to
totaling mistake in one quotation and repeatation of some electrical parts & machineries, total
project cost has been assessed at reduced level of Rs. 179.80 lacs instead of Rs.194.63 as per
technical report dated 30.09.2008. Accordingly, the term loan of Rs. 118.80 lacs can be taken for
financial assistance. The loan is proposed in 6 years after moratorium period upto March 2009.
The following details & analysis are given as per the project report submitted by the Society:

PROFITABILITY DETAILS: (Rs. in lacs)

Actual Est. PROJECTED

2007-08
08-09 09-10 10-11 11-12 12-13 13-14 14-15
PARTICULARS
RECEIPTS

Net Sales 2097.75 2600 2725 2850 2975 3100 3225 3300

EXPENDITURE

Raw material 1937.16 2388. 3025

consumption 03 2500 2615 2725 2840 2955

Purchase & 87.95 100.0 103.0 107.0 110.0 110.0

Processing exp 95.00 97.00 0 0 0 0 0

Selling & Admn. 9.69 21.00

Exp. 15.00 16.00 17.00 18.00 19.00 20.00

2034.8 2498. 3156

Total Expenditure 03 2613 2732 2846 2966 3085

Profit Before Dep. 62.95 106.9 117.0 123.0 134.0 139.0 145.0 149.0
Int. & Tax 7 0 0 0 0 0 0

Interest on Proposed
T/L @ 12% 6.19 13.09 10.61 8.16 5.71 3.26

Interest on CC 38.33 40.00 40.00 40.00 40.00 42.00 44.00

Existing T/L 1.91 132 0 0 0 0 0

Intt. to others 10.62 10.50 10.50 10.50 10.50 10.50 10.50

Total Interest 50.86 58.01 63.59 61.11 58.66 58.21 57.76

 Depreciation 4.22 9.70 16.46 15.71 14.14 12.72 11.45

55.08 67.71 80.05 76.82 72.8 70.93 69.21

Profit Before Tax 5.77 12.04 15.95 21.18 30.20 39.07 45.79

Income Tax Provn. -1.25 -1.99 -2.34 -3.11 -4.45 -5.78 -6.78

Profit After Tax 4.52 10.05 13.61 18.07 25.75 33.29 39.01

Interest calculated @ 12% p.a.

As per IC 8088 dtd. 26.08.08 interest rate for food & agro based processing units with
investment in plant & machinery upto Rs. 10.00 crores for the amount of advance above Rs. 1.00
crore with CR-5 will be applicable @ BPLR-1.75% i.e. 12.25% at present.

CALCULATION OF DSCR-

(Rs. in lacs)

Year 08-09 09-10 10-11 11-12 12-13 13-14

PAT 10.05 13.61 18.07 25.75 33.29 39.01

Depreciation 9.70 16.46 15.71 14.14 12.72 11.45

Interest 58.01 63.59 61.11 58.66 58.21 57.76

Sub total (A) 77.76 93.66 94.89 98.55 104.22 108.22

Interest 58.01 63.59 61.11 58.66 58.21 57.76

Installments 0 19.80 19.80 19.80 19.80 19.80

Sub total (B) 58.01 83.39 80.91 78.46 78.01 77.56

DSCR 1.34 1.12 1.17 1.26 1.34 1.39

Average DSCR

e) ASSESSEMENT OF NON-FUND LIMITS

N. A.

f) CONSORTIUM ARRANGEMENT
N. A.

g) ANY OTHER MATTER

CREDIT RATING :

a)

Year Previous yr. Current yr.

Total score obtained 72% 71%

Grade CR-5 CR-5

b)

Parameters Marks obtained

Previous yr. Current yr.

Max. Obtained Max. Obtained

Borrower rating 67 48 46 34

Facility rating 21 16 29 22

Risk Mitigators 5 5 20 12

Business aspects 4 1 5 3

Total Marks with grade 97 70 100 71

As per Rating Model-II, the firm has secured 71% marks, which comes under investment grade
with acceptable risk.

Thus we can see, that in terms of financial assessment this is what is done in a broad scale.
Although banks use many different models and ways to assess a borrower. Another important
thing to keep in mind is that credit appraisal consists of many different kinds of appraisal that is
the borrowers market worth and the like, which are also very crucial part.