INDIAN INSTITUTE OF MANAGEMENT KOZHIKODE

Post Graduate Program in Finance

Term Loan Analysis

Harsh Jadhav
25/275

Commercial Bank Management

S No. Particulars Details
1. Name of the borrower Anuradha Industries Limited
2. Sector (Private/Public) Private
3. Constitution Limited Company
4. Nature of industry Cranes manufacturing
5. Registered office NA
6 Purpose of loan Upgradation of manufacturing facilities

1. Sanction Particulars – Anuradha Industries Limited has existing term loan with the Bharat
Overseas Bank. Loan sanction particulars for the existing loan are as follows –
 Estimated cost and duration to complete the project
  Existing order values and estimated demand in near future
 Current and projected cash flow of company
 Debt service coverage ratio
 Net profit ratio

2. Banking Details

Existing Finance pattern Collateral Based

Name of existing lenders Bharat Overseas Bank
Date of last review by lender NA
Dealing with our bank since Since the corporation of the company

3. Salient Financial Indicators & Analysis

(Rs. In Lakh)
Salient Financial 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
indicators
Revenue 2220 2700 3100 3600 4200 4700
Growth 43.49 21.62 14.81 16.13 16.67 11.9
PAT 60.54 155 181 153.97 154.77 152.36
Net profit ratio 2.73 5.74 5.84 4.28 3.69 3.24
Debt service coverage 2.46 3.60 3.86 3.72 4.73 8.55
ratio

 Anuradha Industries Limited has no default in making repayment of previous loans with
Bharat Overseas Bank.
 AIL has the existing orders of 18.06 Cr which are currently in production and expected
export sales enquires of 200 lakhs. AIL future cash inflow projection are achievable.
 Net profit ratio, debt service coverage ratio and revenue of the company is constantly
growing.
4. Industry Analysis – There are few manufacturers of cranes, and only two businesses in India
produce cranes with greater tonnage. Anuradha industries limited is a lucrative organization.
Other industries are expanding their need for cranes. In addition, export orders are growing,
which reduces per-order expenses and boosts overall income. The projected income from
operations in the next years is feasible.

5. Proposal - Anuradha Industries limited Proposed a 100 million dollar term loan for the rapid
upgrade of industrial facilities. The anticipated total cost of the upgrade is 140 lakhs.
(Rs. In Lakh)
Promoter’s contribution 40
Bank finance 100
Total 140
6. Assessment of term loan
 Brief description of the project – Anuradha Industries Limited Plans to upgrade its
manufacturing facility immediately to cater the increased demand of higher tonnage
cranes.
 Cost- Total estimated cost of the upgradation is 140 lakhs
 Loan requirement – AIL required the finance of 100 lakh
 Duration of upgradation – 2 Months
 Need of the project – To cater the increased demand of higher tonnage cranes and to
fulfil export orders.

7. Repayment schedule for term loan -

Term loan Total period No of installment Instalment amount Date of repayment
100 Lakh 60 Months 57 2,38,015 Last working day
of the month

8. Security details – Anuradha Industries Limited has existing loan with the bank and AIL has
offed the collateral of Rs.463.67 Lakh. The existing loan will be fully paid off by the year
2008 hence AIL in not offering any collateral for new term loan.

9. Credit Rating Summary –

Credit Rating B+
Report B+ rating gives the go ahead for the new proposal of term loan

10. Pricing of the loan

 Existing loan - Existing term loan Cost the company at 12 % per annum.
 New term loan – AIL secures B+ rating hence new term loan of 100 lakh will cost the
same at 12 percent per annum.

Credit rating B+
Interest rate 12%
Payment charges Standard charges applicable
Processing fee NA

11. Conduct of the Account – Anuradha Industries limited has existing term loam with the
bank. There is no payment default in repayment of existing loan.

12. Risk Assessment

 AIL also has the existing loan for which company has offered the collateral of Rs 463.67
lakh. Existing loan will be paid off by 2008.
 AIL proposing addition loan amount of Rs 100 Lakh for which new collateral amount is
not provided.
13. Policy Compliance
Parameters Requirements AIL Compliance
Credit rating Not lower than B B+ Complied
Industry Manufacturing, No bar Manufacturing Complied
Credit report by Positive Positive, Complied
previous lander AIL has the existing term
loan with the same bank.
Average DSCR 4.13 or above 4.49 Complied
Collateral 100% 463.67 (for existing loan, Complied
remaining 80 lakh, )

14. Opinions and Suggestions

 The goal of this project is to meet the growing need for more enormous cranes.
 Anuradha Industries Limited's B+ grade shows the company's finances are in good
shape.
 Anuradha Industries Limited is making money, the Net profit ratio and the Debt
service coverage ratio are going up, and the company can pay back the debt over the
long term. Since Anuradha Industries Limited has met all policy conditions, a 100
million rupee loan should be given.