A REPORT

ON
CASHFLOW BASED FINANCING FOR
MSME’s
(Summer Internship Proposal for SIDBI (Direct Credit Vertical || DCV)
Masters of Business Administration Batch 2018-2020

By
VIVEK V
PGP18257
Under the guidance of Mr. S. Ganesh, Assistant General Manager
Direct Credit Vertical
SIDBI Tower
15, Ashok Marg
Lucknow – 226001,

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 Acknowledgments

The internship opportunity I had with Small Industries Development Bank of India was a
great chance for learning and professional development. Hence, I consider myself very
fortunate as I got an opportunity to be a part of it. I am also grateful for getting a chance to
meet professionals who led me through this internship period.

I would like to use this opportunity to express my deepest gratitude to Mr. Rajendra Prasad,
Deputy General Manager who suggested this interesting topic to work on.

I express my deepest thanks to Mr. S. Ganesh, Assistant General Manager, for his pristine
mentorship and guidance during the course of my internship. I choose this moment to
acknowledge his contribution despite his extraordinarily occupied schedule.

I thank each and everyone who had a say in my project work and despite being extraordinarily
busy with their duties took out time to hear, guide and keep me on the correct path allowing
me to carry out my project at their esteemed organization.

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 Table of contents

1) Preface Page 4

2) About the Company Page 5

3) Introduction Page 6-10

4) Objective Page 11

5) Methodology Page12

6) Analysis Page 13-28

7) Field Survey Page 28 - 30

8)Research Design Page 31-38

9) Findings and Conclusion Page 39

10) Limitations and Future Scope Page 40

11) References Page 41

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 Preface

This report is prepared to fulfil the requirement of the MBA program of Indian Institute of
Management, Kashipur on “Cash Flow Based Financing for MSME’s”

I have chosen this project to analyse the Cashflow statements of Companies and come up
with metrics to gauge their Credit Worthiness. It will also include a market survey to
understand the market sentiment regarding their credit appraisal by their lenders and
understand their requirements to come up with a product.

This study has been done by collecting primary data from the existing customers of SIDBI and
other entities falling under MSME category.

To analyse the financial parameters from the cashflow statements of MSME’s, companies
listed in BSE MSME segment were chosen and their reports were used. The data required for
this calculation were obtained by secondary research.

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 About the Company
Small Industries Development Bank of India (SIDBI) set up on 2nd April 1990 under an Act
of Indian Parliament, acts as the Principal Financial Institution for Promotion, Financing and
Development of the Micro, Small and Medium Enterprise (MSME) sector as well as for co-
ordination of functions of institutions engaged in similar activities.

The MSME sector, the focused business domain for SIDBI, has been an important pillar of
the Indian Economy, contributing up to 33% in the country’s Gross Value Added (GVA) as
per FY 2014-15, with 51 million enterprises providing employment to over 117 million
Indians. Over the years, SIDBI has been working towards the sustainable development of
MSME sector, pioneering efforts that have manifested in creation of economic wealth, its
distribution for an egalitarian society while preserving the ecological wealth of the country.
These include the innovative Credit Plus model, where credit is supplemented with advisory
and mentoring facilities to MSMEs. Some of SIDBI’s other revolutionary initiatives include
the MFI-led Microfinance movement in India that has nurtured and strengthened more than
100 MFIs and facilitated creation of universal bank/SFBs, introducing a culture of energy
efficient and sustainable finance for the MSME sector, introducing Venture Capital, Risk
Capital, Reverse Factoring and other innovative facilities that have been later adopted by
various public and private players in the country.

Today, through a motivated and focused approach towards resolving both financial and non-
financial hurdles of the rising number of MSMEs, SIDBI has undertaken a series of structural
initiatives and strategic interventions that will help make the MSME sector a strong and
vibrant sector.

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3. MSME Sector in India
MSME- an abbreviation of Micro, Small & Medium enterprises- is the pillar of economic
growth in many developed, and developing countries in the world. Often rightly termed as
“the engine of growth” for India, MSME has played a prominent role in the development of
the country in terms of creating employment opportunities-MSME has employed more
than 50 million people, scaling manufacturing capabilities, curtailing regional disparities,
balancing the distribution of wealth, and contributing to the GDP-MSME sector forms 8% of
GDP. Though India is still facing infrastructural problems, lack of proper market linkages, and
challenges in terms of flow of institutional credit, it has seen a tremendous growth in this
sector.

The advantage of this sector is it requires less investment, thus creating employment on a
large scale, and reducing the employment and underemployment problems. Moreover, this
sector has survived almost all threats emerging out of still completion from both domestic
and international market.

Importance of MSME ACT 2006:

With the introduction of the MSME Act in the year 2006, the service sector that was not yet
included in this sector was included in the definition of the Micro, Small & Medium sized
Enterprises making a historic change to this Act, thus leveraging the scope of the sector
even now government simplified the MSME Registration Online with the paperless work.

The contribution of MSME to other sectors has been immensely instrumental. It is the biggest
employer after agriculture sector, despite the fact that agriculture sector’s contribution to
GDP is less than MSME. While it contributes about 45% to manufacturing sector, and perhaps
40% to Exports, it forms the highest share of Employment sector in India, contributing around
69% to it.

Let us take a look at some of the key importance of this sector in the development of India
both in terms of economic, and social development:

1. Creates large scale employment:

Since the enterprises falling in this sector require low capital to start the business, it creates
huge employment opportunities for many unemployed youths. India produces about 1.2
million graduates per year, of the total number about 0.8 million are engineers. And, there is
no economy in the world that can provide jobs to so many fresh graduates in one year. MSME
is the boon for many of this fresh manpower.

2. Economic stability in terms of Growth and leverage Exports:

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MSME is a significant growth driver in India, with it contributing to the tune of 8% to GDP. As
mentioned in the table, Exports sector in India constitutes about 40% of contribution from
MSME alone. Looking at the kind of contribution of MSME to manufacturing, exports and
employment, other sectors are also benefitting from MSME. MNCs today are buying semi-
finished, and auxiliary products from small enterprises, for example, buying of clutches, and
brakes by automobile companies. It helps create a linkage between MSME and big companies
even after the implementation of the GST 40% MSME sector also applied GST
Registration which increase the government revenue by 11%.

3. Encourages Inclusive Growth:

About 50% of wealth in India in owned by just 100 people which is due to unequal distribution
of wealth. Inclusive growth is on top of the agenda of Ministry for Medium, and Small, and
Medium sized enterprises for several years. While poverty and deprivation are a deterrent to
the development of India, including marginalized sections of society is a key challenge lying
before the Ministry of MSME.

4. Cheap Labour and minimum overhead:

In large scale organizations, one of the key challenges is to retain the human resource through
an effective human resource management professional manager. But in case of an MSME,
the requirement of labor is less, and it does not need a highly skilled laborer. Hence, the
indirect expenses incurred by the owner is also low.

5. Simple Management Structure for Enterprises:

MSMEs do not require a huge capital to start. With limited resources available within the
control of the owner, decision-making becomes easy and efficient. As in case of a large
corporation wherein a specialist is required for every departmental functioning because of
complex organizational structure, a small enterprise does not need to hire an external
specialist for its management. The owner himself/herself can manage it. Therefore, it can be
run single-handedly.

6. Plays an important role in making “Make in India” possible:

Post the inception of ‘Make in India’, a signature initiative by the prime minister of India, the
process of incorporating a new business has been made easy. Since the MSME is the backbone
in making this dream a possibility, the government has directed the financial institution to
lend more credit to enterprises in MSME sector.

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INTRODUCTION TO THE TOPIC

Micro Small and Medium scale Enterprises financing is shifting the mindset of Financial
Institutions (FIs) from their current focus on collateral-based lending to a cash flow-based
approach. Banks and Financial Institutions generally see MSMEs as “high risk” for lending as
they don’t have a proper Credit Score, Capital Structure etc. Thus, they incorporate higher
levels of security for lending to this segment in their policy and procedures. There is a great
asymmetry in the expected securities from the Banks to the securities a MSME can actually
manage. MSMEs typically do not have immovable assets that can be used as collateral and
eventually Banks treating them as High-Risk Financing.

Cashflow based lending is an approach that can assist the Financial Institutions in their lending
to MSMEs. A typical scenario that occurs in MSME banking is when a MSME receives an order
that requires the MSME to supply goods in a certain period of time. Given that the project
has just arrived, the MSME will typically need cash to produce or acquire these products/
Order. This sudden need for cash may necessitate that the SME seek assistance from a
Financial Institution (FI). Typically, in such a scenario, the FI will ask for a provision in the form
of some kind of tangible collateral. Registering this collateral before the disbursement of
funds can take place is often a lengthy process. During these delays the MSME is at risk of
losing good business opportunities and revenues. Eventually, when the loan is disbursed the
MSME may be tempted to divert the funds to other things that will not necessarily assist or
generate income for the business. If this is the case, the SME owner is at of risk of being unable
to repay the loan. Although banks already appreciate the profitability of MSME finance, there
remains a lack of knowledge and skills in providing sufficient and different forms of lending to
SMEs.

Through building awareness of the benefits of cashflow based lending for growing businesses,
these challenges can be incrementally overcome. The strongest argument to help bankers
make this shift in their thinking is the profitability of the SME loan portfolio.

Asset Based Lending

Asset Based Lending is the business of lending to the borrowers with their Assets secured. In
most developing countries, SME lending in traditional banks is backed by properties. When a
business owner applies for a loan one of the first question the borrower will hear is “What
type of security do you have?” In loan processing short-term assets such as account
receivables, inventory or machinery and equipment are not really considered applicable types
of assets as security.

Interest rates for asset-based loans are generally on the lower sides than rates on unsecured
loans or lines of credit since the lender can recoup the losses in case of a default. However,
the interest rates charged vary widely depending on the applicant's credit history, cash flow,
and length of time doing business.

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Cashflow Based Lending

Cashflow based lending is a lending technique based on and backed by the MSME’s cash flow;
as opposed to asset-based lending where the loan is secured by the MSME’s assets. The
primary difference between these two types of lending mechanisms is that in asset-based
lending the income as a source of repayment is of secondary importance; the loan amount is
usually based on the value of the property or asset being offered as collateral and not the
capability of the business to generate cash. Additionally, the term of the loan and the mode
of repayment are not based on the borrower’s cash flows. Usually, these are short term,
single-payment loans. The best example of this type of lending is pawnshop lending, where
the loan amount is based on the value of the item being pawned.

For cashflow based loans, the loan amount is based on the MSME’s actual revenue generation
and capacity to repay. Furthermore, the repayment schedule is based on the timing of the
MSME’s cash inflows. For this loan, collateral can be taken however it is not the primary
consideration for the loan.

One of the advantages for cashflow based lending is that loan size, terms and repayment
mode are all based on the MSME’s actual cash generation and hence the risk of default due
to diversion of funds is reduced. It’s important to note, cashflow based lending is best suited
for short-term working capital loans because these types of assets are a generating source of
repayment, together with profit.

Asset Based Lending vs Cashflow Based Lending

In most developing countries, MSME lending in traditional banks is backed by properties.

When a business owner applies for a loan one of the first question will hear is “What type of
security do you have?” In loan processing short-term assets such as account receivables,
inventory or machinery and equipment are not really considered applicable types of assets as
security. Cashflow based lending is better suited for SMEs as it is based on the expected
income of the company. Its credit rating and collateral is either not required or based on
movable short-term assets such as inventory, floating debenture, debtors etc. Admittedly,
most SMEs are not able to provide reliable financial reports and projections to the banks, and
if they are the reports may be fictitious generated only for the purpose of obtaining the loan
and also, they may have very poor or no credit references. These challenges present a major
problem for banks when considering cash flow lending. Many FIs issue asset-based loans
when they cannot validate the borrower’s financial statements and where credit rating is not
available. The major weakness for this type of lending is that fixed assets cannot support the
repayment of the facility. In developing economies, a major weakness in asset based lending
is that FIs are focused on mainly evaluating the value of the asset. This presents a problem as
fixed assets cannot repay a facility. This focus does not take into account the ability to repay
and hence can be of much higher risk both for the FIs in relation to reinforcing higher
provisions and bad debts; and for the SME in relation to the risk of going out of business. In a

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cashflow based loan, the documented cash flow and credit rating of the business applicant
plays a key role in determining how much or if a business can borrow in the first place.
However as noted earlier, this is precisely the type of information that many SMEs are unable
to supply in support of their applications for funds. In order to have more reliable financial
data to assess the capability of the SME to meet the obligations of any loan, banks need to
change behaviour from requesting financial reports, that may be inaccurate and/or fictitious,
to training staff so that they are able to collect the necessary information and construct a
reliable financial statement.

Cashflow based lending for MSME’S

As a small business owner, the challenges to growing a business are many. Small business
owners are faced with issues on a continuous basis that can sometimes hinder their very core
of functioning. To add to their woes, the complications in obtaining capital that they need to
operate and evolve a sustainable business is another story.

But what many are not aware of is that there is much promise in lending to the small-business
market in India. And because SMEs classically do not have fixed holdings that can be used as
collateral, cashflow based borrowing makes sense as the ideal approach for banks to lend to
SMEs. This is true for a vast majority of the SME sector in India that prefer cash flow-based
loans to asset-based loans to expand their business.

SMEs are vital to our economic growth, and because they help generate employment, they
are also significant contributors to overall output. For SMEs in India, cashflow based lending
makes better sense can be based on the expected income from the business. The most potent
rationale that can aid bankers to transform their opinion towards cashflow based lending is
the profitability that can be gained from the SME loan investments.

There is a need to change the traditional mindset of collateral-based lending techniques to

SMEs. And for this to happen it is imperative to understand the SME segment and the way
they operate their businesses.

Every small business enterprise is required to present documented cash flow and its credit
rating, when applying for a loan, in order to determine its borrowing capacity. But, this is
precisely where SMEs struggle and falter. Many a small business in India are unable to profile
themselves better, be it through loan applications, or organised and audited balanced
statements or even long-term business plans. Because they are unable to supply the requisite
data to support their fund application, they shy away from asset-based loans. Most banks are
considering cashflow based lending and are eagerly eyeing it as a new opportunity to build
relationships.

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4. Objective

The objective of the work is to develop a product to assess the credit worthiness of a MSME
based on their cashflow. To develop this product, we need to understand the requirements
from the customers and their cyclicality in their cashflow. We should also asses their financial
strength based on their cashflow. This can be done by analysing the chosen metrics from the
cashflow statement of the entities. From this analysis we will be able to develop a product
based on cashflow of MSMEs.

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5. Methodology

This study has both qualitative and quantitative study of the factors affecting Cashflow based
financing for MSMEs. For qualitative study, a questionnaire was floated to the existing
customers of SIDBI Lucknow BO and their responses were recorded. Based on their responses,
insights were drawn on the customer requirements from a Cashflow based financing product.
The number of MSMEs participated in the survey were 5 and they were mainly based out of
Lucknow.

The questionnaire floated was of 17 questions and had both objective and subjective queries.
It mainly focussed on the Cashflow cyclicality of the entity and their sources of funding during
a lean period.

The quantitative part includes the analysis of metrics, ratios from which the credit risk of an
entity could be analysed. Five such ratios were identified and analysed. Finally, standards
were set depending on the Industry they were part of. The ratios are as follows:

 Net profit/ Net operating cashflow

 Net operating cash flow/ Interest Expenses (Cashflow interest cover ratio)
 Net operating cashflow/ (Interest +CPLTD) (Financing payments cover ratio)
CPLTD=Current Portion of Long-Term Debt
 Total bank debt / Net operating cashflow (Debt payout ratio)
 Total long-term debt/Net operating cashflow (Long term debt payout ratio)

Projections of critical factors affecting the cashflow of the MSME were made to analyse the
projected financial wealth of the entity. The factors to be projected are as follows:

 Sales Growth
 Sales, General and Administrative expenses
 Changes in account payables
 Changes in account receivables
 Change in inventory turnover
 (Cost of goods sold/Sales) as a percentage

The annual percentage change in the above-mentioned ratios are calculated and the optimum
percentage is reported which could be used as a metric in assessing the cashflow based credit
worthiness of a company.

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6. Analysis

6.1 Selection of Companies

The above-mentioned ratios and projections were analysed for a chosen 15 companies from
different sectors like Manufacturing, Construction, Food Processing and Services sector. They
are all listed in BSE SME IPO and the companies chosen were from locations PAN India.

In the budget speech, the Honourable Finance Minister, announced that the startups and
SMEs can get listed on the bourses without IPO. Accordingly, SEBI has made the provision in
ICDR guideline by introducing Chapter XC whereby listing on the Exchange made possible
without bringing Initial Public Offer (IPO). SEBI has notified the same on 8th October 2013 and
also issued a detailed circular on 24th October, 2013. The benefits of listing on ITP are as
follows:

 Facilitate capital raising by small and medium enterprises including start-up companies
which are in their early stages of growth
 Provide easier entry and exit options for informed investors like angel investors, VCFs and
PEs etc., to and from such companies.
 Provide better visibility and wider investor base
 Relaxed compliance and cost-effective listing
 Tax benefits to long term Investors

The Eligibility Criteria for the company desirous of listing are as follows:

Regulatory Criteria:

 The company, its promoter, group company or director does not appear in the wilful
defaulters list of Reserve Bank of India as maintained by Credit Information Bureau (India)
Limited (CIBIL).
 There is no winding up petition against the company that has been admitted by a
competent court.
 The company, group companies or subsidiaries have not been referred to the Board for
Industrial and Financial Reconstruction within a period of five years prior to the date of
application for listing.
 No regulatory action has been taken against the company, its promoter or director, by
the Board, Reserve Bank of India, Insurance Regulatory and Development Authority or
Ministry of Corporate Affairs within a period of five years prior to the date of application
for listing.

Financial Criteria:

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 The paid-up capital of the company has not exceeded 25 crore rupees in any of the
previous financial years.
 The company has at least one full year’s audited financial statements, for the
immediately preceding financial year at the time of making listing application.
 The company has not completed a period of more than 10 years after incorporation and
its revenues have not exceeded 100 crore rupees in any of the previous financial years
 At least one of the following criteria:

1. At least one alternative investment fund, venture capital fund or other category of
investors/lenders approved by the Board has invested a minimum amount of 50 lakh
rupees in equity shares of the company.

2. At least one angel investor who is a member of an association/group of angel investors

which fulfils the criteria laid down by the recognized stock exchange, has invested a
minimum amount of 50 lakh rupees in the equity shares of the company through such
association/group.

3. The company has received finance from a scheduled bank for its project financing or
working capital requirements and a period of 3 years has elapsed from the date of such
financing and the funds so received have been fully utilized.

4. A registered merchant banker has exercised due diligence and has invested not less
than 50 lakh rupees in equity shares of the company which shall be locked in for a period
of three years from the date of listing.

5. A qualified institutional buyer has invested not less than 50 lakh rupees in the equity
shares of the company which shall be locked in for a period of three years from the date
of listing.

6. A specialized international multilateral agency or domestic agency or a public financial

institution as defined under section 4 A of the Companies Act, 1956 has invested in the
equity capital of the company.

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6.2 List of Companies analysed

Company Name Sector/Industry Total Assets on Revenue

March 31st 2018 Generated in
(in rs) 2017-18 (in rs)

Chemcrux Enterprises
Limited Manufacturing Sector 26,78,97,718 31,75,99,087
Oceanic Foods Manufacturing Sector,
Limited Food Processing 43,18,24,505 81,62,95,495
Artemis Electrical
Limited Manufacturing Sector 19,69,07,068 47,23,20,652
Tasty Dairy
Specialities Manufacturing Sector,
Limited Food Processing 104,49,04,794 3,323,081,181
Ashok Metacast
Limited Manufacturing Sector 27,27,16,186 19,17,65,479
Jhandewalas Food Manufacturing Sector,
Limited Food Processing 901,371,151 1,779,709,012
Kranti Industries
Limited Manufacturing Sector 40,32,54,769 42,19,75,460
RajnishWellness Healthcare Services
Limited Sector 17,60,33,308 28,64,86,944
Relstruct Buildcom Construction and Real
Limited Estate Sector 62,78,79,988 72,01,916
7NR Retail
Limited Retailer 121,57,60,000 102,52,60,000
Shivag Granito
Limited Trading 26,23,00,450 207,442,455
IRIS Solutions
Limited Services sector 74,95,79,407 35,33,03,013
GG Industries
Limited Manufacturing Sector 14,26,87,802 22,42,61,062
Sashjit Infrastructures Construction and Real
Limited Estate Sector 266,673,635 459,603,346
Jinaams Apparel Manufacturing Sector,
Limited Clothing 140,79,67,507 154,22,92,882

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6.3 Parameters:
Company Name Sales Growth SGA Percentage
(Average) Expenses/Sales Increase or
(Average) Decrease
COGS/Sales
(Average)
Chemcrux Enterprises 14.06% 11.00% -13.08%
Limited
Oceanic Foods 4.14% 5.69% -4.24%
Limited
Artemis Electrical 4.18% -1.13% -5.10%
Limited
Tasty Dairy Specialities 38.98% 32.08% 3.08%
Limited
Ashok Metacast 19364.61% 22649.71% -
Limited
Jhandewalas Food 19.71% 19.37% 1.58%
Limited
Kranti Industries 73.27% 11.00% 16.63%
Limited
RajnishWellness 8.70% 2.73% -13.44%
Limited
Relstruct Buildcom 181.8% 157.91% -
Limited
7NR Retail -23.27% -8.37% -
Limited
Shivag Granito 289.7% 247.44% 37.16%
Limited
IRIS Solutions 28.47% 6% -
Limited
GG Industries 206.19% 187% -77.35
Limited
Sashjit Infrastructures 79.50% 82% 17.44
Limited
Jinaams Apparel 13.24% 9% 87.88%
Limited

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Sales Growth

Sales growth is a metric which measures the ability to generate sales and increase their
revenue over a fixed period of time. It is an indicator of the entity’s decision-making process,
influence customers and develop the business in a given socio-economical condition. Reason
for sales growth are as follows:

 Increase Penetration in Existing Markets

 New Products Line Extensions

 New Client Segments

 New Channels of Distribution

 New Services

To arrive at the percent sales growth from one financial period to another, you'll first need
the ratio's equation so that you know which figures from the income statement to plug in.

The equation is: (Current Period Net Sales - Prior Period Net Sales) / Prior Period Net Sales *
100.
Net sales is equal to gross, or total, sales revenue minus discounts, customer returns and
allowances for damaged and defective merchandise.

Things to Consider
A single percent sales growth figure has limited usefulness if other relevant factors, such as
the industry a company operates in, the sales growth of competitors and even trends of
decreasing rates of growth are ignored. For example, one company's 5 percent sales growth
may initially seem admirable, but when compared to a competitor's 6 percent growth
between the same two fiscal periods, 5 percent may start to seem average. And despite a
company's consistent growth, a decrease in the rate of growth over a number of fiscal periods
may offer deeper insight into a company's future strength.
From the set of 15 companies, the sales growth of the 33rd percentile value can be taken as a
minimum standard. The sales growth standard comes out to be 13.24% and companies
achieving sales growth of more than 13.24% can clear the credit risk in this parameter.

(Cost of goods sold/Sales) as a percentage

The Cost of Goods sold as a percentage to Sales is an indicator of Profit Margin, Efficient
production methods, Market dominance of an entity. If this percentage goes down, it is an
indication that company is doing well. Percentage change of this ratio is calculated over three
years.

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Again the 33rd percentile value can be taken as a minimum standard and this comes out to be
-4.24%. Any entity, if they can cut down this by 4.24% annually should be able to clear credit
risk on this parameter.

Percentage Change in SGA Expenses/Sales ratio

Selling Expenses in SG&A

Selling expenses can be broken down into direct and indirect costs associated with the selling
of a product. Direct expenses only occur when the product is sold and include shipping
supplies, delivery charges and sales commissions. Indirect expenses are the costs that occur
throughout the manufacturing process and after the product is finished. An item does not
have to be sold in order for an indirect expense to be incurred. This can be considered money
spent to earn sales. Indirect expenses include product advertising and marketing, telephone
bills, travel costs and the salaries of sales personnel.

General and Administrative Expenses

G&A expenses are referred to as the overhead of the company. These are the costs a
company must incur to open the doors each day. G&A costs are more fixed than selling costs
because they include rent or mortgage on buildings, utilities and insurance. G&A costs also
include salaries of all non-sales personnel.

The 33rd percentile in change in SGA expenses comes out to be 6% in two consecutive financial
years.

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6.4 Percentage Increase or Decrease Account Receivables, Payables and Inventory Turnover

Company Name Percentage Increase Percentage Increase Percentage

or Decrease or Decrease Increase or
Acc.Payables Acc.Receivables Decrease
Inventory
Turnover
Chemcrux Enterprises 324.33% 214.63% -54.79%
Limited
Oceanic Foods -163.40% -170.24% -2551.63%
Limited
Artemis Electrical 4461.98% -12.53% -33.70%
Limited
Tasty Dairy -207.95% -64.19% 182.05%
Specialities
Limited
Ashok Metacast -24551.68% 7771.94% _
Limited
Jhandewalas Food -1865.80% 71173.55% 196.12%
Limited
Kranti Industries -5.30% 78.00% -24.14%
Limited
RajnishWellness -2.59% 368.53% -236.38%
Limited
Relstruct Buildcom -100.78% 42.18% -4.78%
Limited
7NR Retail 102.69% -214.92% 950.95%
Limited
Shivag Granito 13.22% -11.40% -13.88%
Limited
IRIS Solutions -32.47% _ _
Limited
GG Industries 101.65% 379.73% 14.13%
Limited
Sashjit Infrastructures 252.40% -64.75% -25.32%
Limited
Jinaams Apparel 54.21% 16.67% 37.76%
Limited

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Percentage Increase or Decrease Account Payables

Accounts payable (AP) is an accounting entry that represents a company's obligation to pay
off a short-term debt to its creditors or suppliers. It appears on the balance sheet under
the current liabilities. Another common usage of AP refers to a business department or
division that is responsible for making payments owed by the company to suppliers and other
creditors.

Accounts Payable

Understanding Accounts Payable (AP)

Accounts payable are debits that must be paid off within a given period to avoid default. For
example, at the corporate level, AP refers to short-term debt payments to suppliers. The
payable is essentially a short-term IOU from the business to another business or entity.

How to Record Accounts Payable

To record accounts payable, the accountant or bookkeeper credits the accounts payable
account when she gets the bill or invoice. Then, when she pays the bill, she debits accounts
payable.

For example, imagine a business gets a $500 invoice for office supplies. When the AP
department receives the invoice, it records a $500 debit in the accounts payable field and a
$500 credit to office supply expense. As a result, if anyone looks at the balance in the accounts
payable category, they will see the total amount the business owes all of its vendors and
short-term lenders. The company then writes a check to pay the bill, so the accountant enters
a $500 debit to the checking account and enters a credit for $500 in the accounts payable
column.

Accounts Payable and Long-Term Debts

Accounts payable are a type of short-term debt. Other short-term business debts include
expenses such as payroll costs, business income taxes, and short-term loans. In contrast, long-
term debts include lease payments, retirement benefits, individual notes payable, and a range
of other debts repaid over a longer term.

Accounts Payable vs. Trade Payables

Although some people use the phrases "accounts payable" and "trade payables"
interchangeably, the phrases refer to similar but slightly different things. Trade payables
constitute the money a company owes the vendors for inventory-related goods, such
as business supplies or materials that are part of the inventory. Accounts payable include all
the short-term debts or obligations.

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For example, if a restaurant owes money to a food or beverage company, those items are part
of the inventory, and thus part of its trade payables. Meanwhile, obligations to other
companies, such as the company that cleans the restaurant staff uniforms, falls into the
accounts payable category. Some accounting methods roll both of these categories into the
accounts payable category.

Accounts Payable vs. Accounts Receivable

Accounts receivable and accounts payable are essentially opposites. Accounts payable is the
money a company owes its vendors, while accounts receivable is the money that is owed to
a company. If a company has a bill in its accounts payable department, the company it owes
the funds to categorizes that same bill under accounts receivable.

Percentage Increase or Decrease Account Receivables

Accounts receivable is the balance of money due to a firm for goods or services delivered or
used but not yet paid for by customers. Said another way, account receivable are amounts of
money owed by customers to another entity for goods or services delivered or used on
credit but not yet paid for by clients.

Accounts receivable refers to the outstanding invoices a company has or the money clients
owe the company. The phrase refers to accounts a business has a right to receive because it
has delivered a product or service. Accounts receivable, or receivables represent a line of
credit extended by a company and normally have terms that require payments due within a
relatively short time period, ranging from a few days to a fiscal or calendar year.

Accounts Receivable
Understanding Accounts Receivable (AR)
Companies record accounts receivable as assets on their balance sheets since there is a legal
obligation for the customer to pay the debt. Furthermore, accounts receivable are current
assets, meaning the account balance is due from the debtor in one year or less. If a company
has receivables, this means it has made a sale on credit but has yet to collect the money from
the purchaser. Essentially, the company has accepted a short-term IOU from its client.

How Businesses Have Accounts Receivable

Most companies operate by allowing a portion of their sales to be on credit. Sometimes,
businesses offer this credit to frequent or special customers receive periodic invoices. The
practice allows customers to avoid the hassle of physically making payments as each
transaction occurs. In other cases, businesses routinely offer all of their clients the ability to
pay after receiving the service. For example, electric companies typically bill their clients after
the clients received the electricity. While the electricity company waits for its customers to
pay their bills, the company considers unpaid invoices a part of its accounts receivable.

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Importance of Accounts Receivable
Accounts receivable is an important aspect of a businesses' fundamental analysis. Accounts
receivables are current assets so they are a measure of a company's liquidity or ability to
cover short-term obligations without additional cash flows. Fundamental analysts often
evaluate accounts receivable in the context of turnover, which they call accounts receivable
turnover ratio, which measures the number of times a company has collected on its accounts
receivable balance during an accounting period. Further analysis would include days sales
outstanding analysis, which measures the average collection period for a firm's receivables
balance over a specified period.

Difference Between Accounts Receivables and Accounts Payable

When a company owes debts to its suppliers or other parties, these are accounts payable.
Accounts payable are the opposite of accounts receivable. To illustrate, imagine Company A
cleans Company B's carpets and sends a bill for the services. Company B owes the money, so
it records the invoice in its accounts payable column. Company A is waiting to receive the
money, so it records the bill in its accounts receivable column.

Percentage Increase or Decrease Inventory Turnover

Inventory turnover measures how fast a company sells inventory and how analysts compare
it to industry averages. Low turnover implies weak sales and possibly excess inventory, also
known as overstocking. It may indicate a problem with the goods being offered for sale or be
a result of too little marketing.

A high ratio implies either strong sales or insufficient inventory. The former is desirable while
the latter could lead to lost business. Sometimes a low inventory turnover rate is a good thing,
such as when prices are expected to rise (inventory pre-positioned to meet fast-rising
demand) or when shortages are anticipated.

The speed at which a company can sell inventory is a critical measure of business
performance. Retailers that move inventory out faster tend to outperform. The longer an item
is held, the higher its holding cost will be, and the less reason consumers will have to return
to shop for new items.

Limitations of Using Inventory Turnover

When comparing or projecting inventory turnover one must compare similar products and
businesses. For example, automobile turnover at a car dealer may turn over far slower than
fast-moving consumer goods sold by a supermarket. Trying to manipulate inventory turnover
with discounts or closeouts is another consideration, as it can significantly cut into return on
investment and profitability.

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 6.5 Ratios to be projected

Net profit/Net operating cashflow

Net operating income is the revenues recognized in a reporting period, less

the expenses recognized in the same period. This amount is generally calculated using
the accrual basis of accounting, under which expenses are recognized at the same time
as the revenues to which they relate. This basis of accounting calls for the use of
expense accruals to accelerate the recognition of expenses that have not yet been paid,
as well as the use of prepaid expenses to defer the recognition of costs that have not yet
been consumed. In addition, sales are recognized as they are earned, rather than when
the associated amounts of cash payments from customers are received. The result is a
net income figure that does not reflect the amount of cash actually consumed or
generated in a period.

Net cash flow is the net change in the amount of cash that a business generates or loses
during a reporting period, and is usually measured as of the end of the last day in a
reporting period. Net cash flow is calculated by determining changes in ending cash
balances from period to period, and is not impacted by the accrual basis of accounting.

Given these descriptions of net income and net cash flow, the key differences between
net income and net cash flow are:

 Expense accruals: Expenses are included in the calculation of net income for which no
cash payments may have yet been made.
 Prepaid expenses: Cash payments for costs incurred may be recorded as assets instead
of expenses, since they have not yet been consumed.
 Deferred revenues: Revenues are excluded from the calculation of net income, because
they have not yet been earned, even though the related cash may have already been
received (perhaps as a customer deposit).
 Sales on credit: Revenues are included in the calculation of net income, because they
have been earned, even though the related cash receipts may not yet have been
received.

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 Company Name 2017-18 2016-17 Percentage
Increase or
Decrease
Chemcrux Enterprises
Limited 1.64 2.05 -20.10%
Oceanic Foods
Limited 0.29 0.45 -34.50%
Artemis Electrical
Limited 3.76 2.55 47.52%
Tasty Dairy
Specialities
Limited -0.82 0.98 -183.51%
Ashok Metacast
Limited 0.002 -0.001 -260.45%
Jhandewalas Food
Limited -0.25 0.76 -134.01%
Kranti Industries
Limited 0.18 -0.17 -207.68%
RajnishWellness
Limited -1.12 -0.56 -98.35%
Relstruct Buildcom
Limited -0.01 -0.007 134.88%
7NR Retail
Limited -0.02 0.60 -103.78%
Shivag Granito
Limited -0.13 0.06 -300.58%
IRIS Solutions
Limited 1.57 -3.07 151.15%
GG Industries
Limited -0.60 -0.83 27.37%
Sashjit Infrastructures
Limited 7.87 1.11 609.29%
Jinaams Apparel
Limited 3.29 14.01 -76.45%

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Net Profit /Net Operating cash flow ratio is an indicator of the quality of the income
earned. The quality of earnings refers to the amount of earnings attributable to higher sales
or lower costs, rather than artificial profits created by accounting anomalies or tricks such as
inflation of inventories or changing depreciation or inventory methodology.

If the ratio improves over years, it is a sign that the quality of the earnings is impro ving.
So, in this analysis we have observed the percentage change of this years.

When the average percentage change in this ratio is calculated it comes out to be -30%
and the 33 rd percentile value comes out to be -134.01%. This percentage decrease in the
ratio might be because of the increase in the net operating cashflow of the companies
though a conclusive analysis hasn’t been done in this research.

Cash Flow Interest Coverage

It usually not abbreviated. It is a term that indicates the enterprise’s ability to pay interest
from generated cash flow. The indicator is derived from the interest coverage ratio, in which
the profit is replaced by cash flow.

The multiple you get from this ratio will show you the company’s ability to make the interest
payments on its entire debt load. A highly leveraged company will have a low multiple. A
company with a strong balance sheet will have a high multiple. If the interest coverage is
less than 1, the company has a high risk of default.

Formula Used: Net Operating Cashflow/Interest Expenses

The average percentage change in this ratio for two consecutive years comes out to be
100.8% wherein the 33rd percentile is 23.84%. We can notice an increasing trend in this ratio
which also implies that companies generally tend to increase their cashflow interest
coverage ratio.

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 Company Name 2017-18 2016-17 Percentage
Increase or
Decrease
Chemcrux Enterprises
Limited 7.91 3.96 99.54%
Oceanic Foods
Limited 208.34 44.52 367.91%
Artemis Electrical
Limited - - -
Tasty Dairy
Specialities
Limited -88.04 54.81 -260.62%
Ashok Metacast
Limited - - -
Jhandewalas Food
Limited 262.07 -107.17 344.54%
Kranti Industries
Limited 2.25 1.82 23.84%
RajnishWellness
Limited - - -
Relstruct Buildcom
Limited - - -
7NR Retail
Limited -38.76 8.08 -579.46%
Shivag Granito
Limited -42.82 -922.99 95.36%
IRIS Solutions
Limited -15.05 49.48 -130.43%
GG Industries
Limited -8.90 0 -
Sashjit Infrastructures
Limited 1.11 1.10 1.32%
Jinaams Apparel
Limited 0.38 0.03 1046.97%

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Financing Payments Cover Ratio

Company Name 2017-18 2016-17 Percentage

Increase or
Decrease
Chemcrux Enterprises
Limited 1.57 0.69 127.86%
Oceanic Foods
Limited 8.44 15.40 -45.17%
Artemis Electrical
Limited 0.48 1.44 -66.80%
Tasty Dairy
Specialities
Limited -0.28 0.14 -299.36%
Ashok Metacast
Limited - - -
Jhandewalas Food
Limited -0.57 0.17 -437.30%
Kranti Industries
Limited 0.61 0.51 20.02%
RajnishWellness
Limited -1.82 -1.17 -56.20%
Relstruct Buildcom
Limited -14.15 -1.49 843.16%
7NR Retail
Limited -3.81 0.69 -645.86%
Shivag Granito
Limited -0.82 -3.35 75.33%
IRIS Solutions
Limited -0.48 0.68 -170.83%
GG Industries
Limited -1.08 -0.17 504.81%
Sashjit Infrastructures
Limited 0.05 0.23 77.63%
Jinaams Apparel
Limited 0.06 0.005 1009.29%

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Indicates the company’s ability to repay debt on current Cashflow performance basis. It can
also be called as the debt payout ratio. The higher it is, the better the company’s credit
worthiness.

Formula Used: Net Operating cashflow/ (Interest + CPLTD)

CPLTD: Current Part of Long-term Debt

The average percentage change in this ratio for two consecutive financial years comes out to
be 60.89%. Again, we can notice an increasing trend here and it is evident that companies try
to improve this ratio to better their credit worthiness.

Long-term Debt Payout Ratio

Long-term debt consists of loans and financial obligations lasting over one year. Long-term
debt for a company would include any financing or leasing obligations that are to come due
after a 12-month period. Long-term debt also applies to governments as nations can also have
long-term debt.

Formula used: Long-term Debt/Net operating cashflow

This ratio gives an idea about the company’s investment on long term and useful assets. Fixed
Assets are really important for a business as they are the main component of the net worth
of a company. From the analysis we have made, it has been found that the 33 rd percentile
value had -20.38% decrease in this ratio. It should be because the company is paying back its
long-term debts or increasing the size of its cashflow. Either way the company is improving is
reducing the risk for its lenders.

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 Company Name 2017-18 2016-17 Percentage
Increase or
Decrease
Chemcrux Enterprises
Limited 0.71 0.66 6.78%
Oceanic Foods
Limited 2.75 2.35 14.78%
Artemis Electrical
Limited 0.54 0.42 29.45%
Tasty Dairy
Specialities
Limited -0.46 0.67 -168.35%
Ashok Metacast
Limited - - -
Jhandewalas Food
Limited -0.50 0.94 -152.86%
Kranti Industries
Limited 2.12 2.67 -20.38%
RajnishWellness
Limited -0.63 -0.78 19.61%
Relstruct Buildcom
Limited -1.09 -1.27 16.19%
7NR Retail
Limited - - -
Shivag Granito
Limited -2.67 -0.80 230.25%
IRIS Solutions
Limited -2.03 2.61 -177.78%
GG Industries
Limited -0.01 -1.67 99.11%
Sashjit Infrastructures
Limited 2.16 0 -
Jinaams Apparel
Limited 10.20 77.52 -86.83%

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7. Field Survey

Field survey was done to get an idea about the market sentiment about their cashflow and
lenders using them to assess their creditworthiness. It was also done to analyse their
seasonality which in turn will affect the cyclicality in their cashflow.

7.1 Questionnaire

A Questionnaire is a structured form, either written or printed, consists of a formalized set of

questions designed to collect information on some subject or subjects from one or more
respondents. In other words, a data collection technique wherein the respondents are asked
to give answers to the series of questions, written or verbal, about a pertinent topic is called
as a questionnaire.

The questionnaire floated to the company had 20 question, where it included both subjective
and objective questions. The survey was done by visiting the firms and interacting with the
managerial level representatives from accounts or finance department of the companies. It
covered one company from each sector which includes Manufacturing Industry, Hospitality
Industry, Food Processing Industry, Logistics and Services Industry.

The questionnaire floated is given below:

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 Questionnaire

1. How long does it take to achieve positive cash flow? (To set moratorium)
*Less than 12 months *12-18 months
*18-24 months *Greater than 24 months
If it’s possible, please specify __________

2. Is there a seasonality in your business? To assess cyclicality in cashflow

*Yes *No

3. Do you find any difficulties in managing funds in a Lean Period?

*Yes *No

4. What are the sources of funding for operations during a Lean Period?
*Personal Savings *Family, Friends
*Bank Loan *Informal Funding

5. Any major change in your industry in the recent past (say last 2 – 3 years)?
*Yes *No

6. If Yes, What kind of a change? Brief details thereof…

*Technological *Market Sentiment
*Legal/Regulations *Others (Pls specify)
Brief:

7. In the last 2 – 3 years, what percentage of your profits were invested back in your
business? Plough back ratio
*NIL *0-10%
*11-20% *Greater than 20%

8. Projected percentage Increase in sales in the upcoming years?

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 9. Current Number of Customers? Year on Year increase in percentage terms (last 2-3
years)

10. Percentage of Projects dropped or Customers lost during last 2 FYs

11. Did the product portfolio increase in the last few years? Say last 2-3 years?

12. Average credit period enjoyed by your entity (in days)

*Less than 30 days *30-45 days
*45-60 days *60-90 days
If its higher, please specify __________

13. Average period taken to realise payment against your sales (in days)
*Less than 30 days *30-45 days
*45-60 days *60-90 days
If its higher, please specify __________

14. Expenditure towards Repairs & maintenance as a %age of turnover during the last 2
FYs..

15. What is the percentage increase/decrease in the size of the inventory held in the last
2 FYs..

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 16. What is the percentage increase/decrease in the inventory turnover days in the last
2 FYs..

17.

Sources of cash Uses of Cash

Cash operating profit after Y/N Increase in working Y/N

tax investment
Decrease in working Y/N Purchasing fixed assets Y/N
investment
Sale of Fixed Assets Y/N Repayment of Y/N
debt/dividend
Increase in Debt Y/N Net loss of operations Y/N

Increase in Equity Y/N

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7.2 Areas of Focus in the survey:

1) Seasonality in the Business

Seasonality occurs for many reasons. Holidays are usually good times for merchants, who get
sales boosts at the time of major festivals and during extended weekends. Seasonality occurs
because of the climate fluctuations also. Sometimes seasonality occurs because of the
weather conditions, where rainy season drive the sale of certain goods and some other in
summer. The factors getting affected because of this seasonality are:

Cash flow: Without the consistent incoming revenue that the company experience in its peak
time, its cash flow will be much smaller. The company needs to have sufficient cash flow to
get through the slow season and still have enough to keep everything running when business
picks up again. To do this, the company might start considering scaling back on expenses like
marketing and advertising to keep up with other more ongoing overhead necessities.

Hiring: An entity needs to be weary of going on a hiring rampage during its good times. Just
because it has a lot of work and money to spend on new employees at one point of the year
doesn’t mean it will have the means to keep covering 10 new salaries later this year.

Inventory: If it is a product-based business the company should consider its inventory. It’s
easy to see the demand during peak times and expect it will always need that much inventory
on hand. The problem is the company might overspend and have too much product in its
down time which hurts the company’s cash flow. Or vice versa, the forecast during its low
time and then don’t have enough inventory to keep up with the demand in its peak time.

2) Product Portfolio, Sales Growth and Risk diversion

Product portfolios are an important element of financial analysis because it provides context
and granularity to a firm and its primary operations. Investors can distinguish between long-
term value stocks and short term growth opportunities. Portfolio analysis of a firm's product
offerings also allows investors to nail down specific drivers of financial performance, which is
necessary for effective modelling.

The various components of a portfolio also face different market dynamics and can contribute
inconsistently to the bottom line. A firm's market share can vary among the parts of its
offering, with more dominant products generally requiring different strategies than high-

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growth portions of the portfolio. A shifting sales mix can have significant consequences for
the bottom line when margins vary across the portfolio.

Companies often re-brand or restructure underperforming and unprofitable products, a

strategy that requires portfolio analysis. Products that contribute the most income are
generally the most important for short-term financial analysis, and alterations to these
flagship elements of the portfolio impact performance more substantially. Apple, Inc., is
known for offering several electronic devices, but the iPhone is the most important driver of
top line and bottom-line results. The smartphone contributed over 62% of total company
sales as of June 2018, meaning its performance is more meaningful than that of the laptops,
the iPad or the App Store.

3) Plough Back Ratio:

The plough back ratio is a fundamental analysis ratio that measures how much earnings are
retained after dividends are paid out. It is most often referred to as the retention ratio. The
opposite metric, measuring how much in dividends are paid out as a percentage of earnings,
is known as the payout ratio.

The plough back ratio is an indicator of how much profit is retained in a business rather than
paid out to investors. Younger businesses tend to have higher plowback ratios. These faster-
growing companies are more focused on business development. More mature businesses are
not as reliant on reinvesting profit to expand operations. The ratio is 100% for companies that
do not pay dividends, and is zero for companies that pay out their entire net income as
dividends.

KEY TAKEAWAYS

 The plough back ratio is a fundamental analysis ratio that measures how much
earnings are retained after dividends are paid out - it is an indicator of how much
profit is retained in a business rather than paid out to investors.
 Higher retention ratios indicate management’s belief of high growth periods and
favourable business economic conditions. Lower plowback ratio computations
indicate a wariness in future business growth opportunities or satisfaction in current
cash holdings.
 It is most often referred to as the retention rate or ratio.
 The ratio is 100% for companies that do not pay dividends, and is zero for companies
that pay out their entire net income as dividends.
Use of the plough back ratio is most useful when comparing companies within the same
industry. Different markets require different utilization of profits. For example, it is not
uncommon for technology companies to have a plowback ratio of 1 (that is, 100%). This
indicates that no dividends are issued, and all profits are retained for business growth.

35 | P a g e
The plough back ratio represents the portion of retained earnings that could potentially be
dividends. Higher retention ratios indicate management’s belief of high growth periods and
favorable business economic conditions. Lower plowback ratio computations indicate a
wariness in future business growth opportunities or satisfaction in current cash holdings.

4) Changes occurred in the Industry

It is very crucial because they change the revenue generated, profit margin and the overall
performance of a company. The change could be technical, market sentiment, trend change,
any government regulations or legal changes etc.

5) Trend in customers increase or decrease

This would measure the satisfaction level of the customers of company which in turn is a
measurement of the company’s management. If the company is able to meet the customer
needs and market requirements, at the same time capitalize on all the opportunities its
customer base would keep on increasing irrespective of the individual portfolio size.

Reasons why customers leave:

1. 1% pass away
2. 3% move
3. 14% are lured by a competitor
4. 14% are turned away by product or service dissatisfaction
5. 68% leave because of poor attitude or indifference on the part of the service provided

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7.3 Recordings from the survey

Sashi Cables Limited- Manufacturing sector

Seasonality Product Portfolio Plough Back Customer retaining
Sales remains Remains the same. Very high plough back Remains the same.
constant ratio, 100% Depends on the contract
throughout a and the bidding quote
year except a dip
in the month of
April.

Mahesh Namkeen Limited- Processed Food, Manufacturing

Seasonality Product Portfolio Plough Back Customer retaining
Sales remains Remains the same. 10%-15% 10% increase
constant
throughout a
year except a dip
in the month of
April.

Grand City Hospitality Limited- Hospitality Industry

Seasonality Product Portfolio Plough Back Customer retaining
Increased Remains the same NA 50% occupancy, above the
occupancy during industry average in the
muhurat (months last 4 months
with more)
season and also
during winter
season

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 Namakkal Logistics India Pvt Ltd- Logistics sector
Seasonality Product Portfolio Plough Back Customer retaining
Sales remains 1 new service 25% Increase in the customer
constant offered base by 18%-20% in the
throughout a last years
year except a dip
in the month of
April.

Edutech – Service sector

Seasonality Product Portfolio Plough Back Customer retaining
Very high sales 1 new course added. 60% 6% Annual sales growth.
(enrolment) in NEET coaching as it
the month of was mandatory to
April-June. get in to medical

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8. Findings and Conclusion:

A total of 6 parameters and 4 ratios were identified from the cashflow. A trend was
identified from the pool of 15 companies, Average values and 33rd percentile values were
noted which could be possibly used as a metric to asses credit worthiness of a company
from the data available from the cashflow.

Ratios

Cashflow interest cover ratio = 23.84% Average value

Net profit/ Net operating cashflow= -30% Average value

Financing payments cover ratio= 60.89% Average value

Long term debt payout ratio= -20.38% Average value

Parameters

Sales Growth = 13.24%

SGA Expenses/Sales= -4.24%.

Percentage Increase or Decrease COGS/Sales= 6%

Survey

 Seasonality is a factor which the lenders have to consider while scheduling the
repayment of the dues. It is observed that businesses hit a low in the month of March-
April as it is the close of a financial year.
 Increasing the product portfolio will result in the diversion of risk which in turn will
decrease the risk for a lender.
 Moratorium could be set till the companies achieve a positive cashflow in each of the
Products/Products for which they have borrowed money. Till then they only interest
could be paid by the borrowers.

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9. Limitations of the study

The sample size of the MSME’s considered for the cashflow statement analysis was very less
to be conclusive about the parameters arrived. The companies were also limited to very few
sectors namely Manufacturing, Food Processing, Infrastructure and 1 service sector company.
If the number of Companies and the sectors they belong are wider, these parameters arrived
will give a broader picture and will make more sense.

The entities participated in the survey were again limited and were not from pan Indian
locality.

If these limitations were bettered, we can come up with a more apt lending mechanism
for MSME’s based on their Cashflow statement.

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10. References

a) Piyush Tiwari and S.M. Fahad “Microfinance Institutions in India”, Pg.

1-36

b) Venkata N. A., Anup Singh and Trevor Mugwang’a “Breaking the

Barriers: Market Expansion through Individual Lending”, Microsave
Pg. 19-22

c) Timothy Jury “Cashflow analysis and forecasting: The definitive guide

to understand and use the published data in the cashflow statement.

d) Ashik Hussain “A textbook of business finance” Pg. 215-229

e) Sandeep Panikkal, Venkata N.A. and T.V.S. Ravi Kumar “Risks and
Challenges in Individual Lending”, Microsave Pg. 27-30

f) Trevor Mugwang’a and David Cracknell “Microfinance Institutions and

Salary Based Consumer Lending”, Microsave Pg. 31-34

g) Annual Reports of the analyzed companies published in their official

websites

h) SIDBI and DCV internal database

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