Credit Appraisal

1. Credit Ratios:
The following key financial parameters may inter-alia be considered as a benchmark
while sanctioning credit proposals:
Sectors TOL/ATNW Current Average
Ratio DSCR
Hotel, Restaurant, Tourism <=4.00 >=1.10 >=1.20
Iron & Steel <=3.00 >=1.10 >=1.20
Manufacturing
Logistics <=3.00 >=1.10 >=1.20
FMCG <=3.00 >=1.10 >=1.20
Aviation <=5.75 >=0.50 ------
Automobile <=4.00 >=1.10 >=1.20
Plastic Product Manufacturing <=3.00 >=1.10 >=1.20
Logistics <=3.00 >=1.10 >=1.20
Chemicals <=3.00 >=1.10 >=1.20
Mining <=3.00 >=1.10 >=1.20
Textiles <=3.50 >=1.10 >=1.20
Commercial <=9.75 >=1.10 >=1.20
Others not specified above <=4.75 >=1.10 >=1.20
NOTES:
1. The above ratios are applicable where aggregate existing exposure to lending
institutions collectively exceeds Rs. 25 crs.
2. The above threshold ratios are applicable for operating companies based on latest audited
balance sheet.
3. In case of operating companies with no existing/proposed term loan from our bank, the
threshold of Average DSCR will be tested on DSCR based on the latest audited balance sheet.
4. In case of Non-Operating company including project companies, thresholds for DSCR shall
only be applicable.
5. The ratios are not applicable to NBFCs.
6. Compliance to the above ratios to be distinctly captured in the proposal note in a tabular
form as under:
Key Ratios Threshold Actual (FY_____) Comments
TOL/ATNW
Current Ratio
Avg. DSCR

Case Study 1:
XYZ Company Ltd.
Balance sheet as at 31st March, 2021
As at 31st March, 2021
Equities And Liabilities
Shareholder's Fund:
Share Capital 2,00,000.00
Reserves and Surplus 11,224.92 2,11,224.92
Non-Current Liabilities
Long term Borrowings 1,86,450.00
Other long term Borrowings -------- 1,86,450.00
Current Liabilities
Short term Borrowings 45,461.64
Trades Payables
Total outstanding dues of MSME 46,606.95
Total outstanding dues of creditors other 1,52,107.01 1,98,713.96
than MSME
Other Current Liabilities 31,619.60
Short Term Provisions 1,120.01 2,76,915.21
TOTAL 6,74,590.13
asset
Non-Current asset
Property, Plant and Equipments 1,33,817.58
Tangible Assets 1,981.67 1,35,799.25
deferred Tax Assets 1,785.34
Long term loan and advances 35,991.09 1,73,575.68
Current Assets
Inventories 3,88,312.86
Trade Receivables 14,068.08
Cash and Cash Equivalents 85,368.34
Short term loan and advances 13,129.84
Other Current Assets 135.33 5,01,014.45
TOTAL 6,74,590.13

Statement of Profit and Loss for thr period 31/03/2020 to 31/03/2021

Income
Revenue from Operations 3,90,410.00
Other Income 14,034.82
Total Revenue 4,04,444.83
Expenses
Purchase of Stock-in-trade 6,64,688.16
Change in Inventory (3,88,312.86)
Employee Benefit Expense 32,689.06
Finance Cost 10,960.90
Depreciation And Amortisation 12,294.92
Expense
Other Expenses 57,082.06 3,89,402.23
Total Expenses 3,89,402.23
Profit Before Tax 15,042.59
Tax Expenses:
Current Tax 5,603.02
deferred Tax (1,785.34) 3,817.67
Profit for the Year 11,224.92
Earning per Share (Face value Rs.10)
basic 0.81
Diluted 0.81

Cash Flow Statement for the year ended 31st March, 2021
A. Cash Flow from Operating Activity 15,042.59
Adjustments for:
Depreciation 12,294.92
Finance Cost 10,960.90 23,255.82
Operating profit/(loss) before working capital changes 38,298.41
Adjustment for (increase)/decrease in operating assets:
Trade Receivables, loans, advances and other assets
Inventories (63,324.33)
Adjustment for increase/(decrease) in operating liabilities: (3,88,312.86)
Trades payable and other liabilities

2,30,333.56 (2,21,303.62)
Cash Generated from operations (1,83,005.21)
B. Cash Flow from Investing Activities
Investments in Bank Deposites (16,000.00)
Purchase of property, plant and equipment, Intangible etc. (1,48,094.17)
Net Cash used in Investing Activity (1,64,094.17)
C. Cash flow from Financing Activities
Proceeds from issue of share capital 2,00,000.00
Proceeds from short term borrowings 45,461.64
Proceeds from non-current borrowings 1,86,450.00
Interest Paid (10,960.90)
Net Cash from Financing Activities 4,20,950.74
Net Increase in Cash and Cash Equivalents 69,368.34
Opening Cash and Cash Equivalents -------
Closing Cash and Cash Equivalents 69,368.34

Notes:
1. The above cash flow statements has been prepared under "Indirect Method" as set out in
accounting Standards - 3 "Cash Flow Statements".
2. Cash and Cash Equivalents
Cash and Cash Equivalents as above 69,368.34
Other Bank Balances 16,000.00
Cash and Bank Balances ______________
85,368.34
Notes to Financial Statements as at and for the year ended 31st March 2021:
1. Coporate Informations:
XYZ Ltd. company is a public limited company domiciled in West Bengal, India and incoporated
on 11th Feburary 2020 vide under the provisions of Companies Act 2013. The Company s into
the business of trading of Readymade Garments.
The company has entered the Business Transfer Agreement wherein XYZ retails transferred the
whole garment trading business by way of sum sale with effect from 1st December 2020.
2. Significant Accounting Policies
A) Basics of accounting and preparation of financial statements
 To prepare financial statements in accordance with accounting standards in INDIA. A summary
of important accounting policies is set out below. The financial statements have also been
prepared in accordance with relevant presentational requirements of Companies Act, 2013.
B) Baics of accounting and principles of financial staements
To prepare financial statements in accordance with the historical cost conevntion menthod by
revaluation of certain fixed assests as and when undertaken.
All assets and liabilities have been classified as current or non-current as per company's normal
operating cycle and other criteria set out in thr Schedule III of the Companies Act, 2013 based
on the nature of producs and the time between acquisition of assets for processing and their
realisation in cash and cash equivalents.
C) Usage of Estimates
The preparation of financial statemts in conformity with Indian GAAP requires the management
to make the estimates and assumptions considered in the reported amounts of assets and
liabilities (including contingent liabilities) and the reported income and expenses during the
year. The management believes that the estimates used in preparation of financial statements
are prudent and reasonable. Future results could differ due to these estimates and the
differences between the actual results and estimates are recognised in the periods in which the
results are known/ materialised.
D) Revenue Recognition
Incomes are recognised and accounted on actual basis. Revenue from Operations include sale
of goods which is recognised on transfer of significant risks and rewards of ownership to the
customers and when no significat uncertainity exists regarding realisation of the consideration
and stated at net of GST returns, trade discounts and rebates.
Interest income and othe income are recognised on time proportion basis.
Revenue from services are recognised as they are rendered based on arrangments with
customers.
E) Borrowing Cost
Borrowing cost includes interest. Such costs dirctly attributes to the acquisition, construction or
production of an asset that necessairly takes a substantial period of time to get ready for its
intended use or sale are capitalised as part of the cost of the respectie asset. All other
borrowing costs are expensed in the period that they occur.
E) Borrowing Cost
Borrowings cost includes interest. Such costs directly attribuate to the aquisition, construction
or production of an asset that necessarily takes a substantial period of time to get ready for its
intended use or sale are capitalised as part of the cost of the respective asset. All other
borrowing costs are expensed in the period that they occur.
F) Property, Plant and Equipment (PPE)
Tangible Assets:
PPE are stated at their cost of acquisition, net of availed taxes, less accumilated depreciation
and impairment loss, if any. All costs, including financing costs, relating to the acquisition and
installation of assets and bringing it to its working condition for its intended use are capitalised.
Subsequent expendiature related to an item of PPE is added to its book value only if it increases
the future benifits from the existing asset beyond its previously assessed standard of
performance. All other expenses on existing PPE, including day to day repair and maintenance
expendiature and cost of replacing parts, are charged to the Statement of profit and loss for the
period during which such expenses are incurred. Gains or losses arising from derecognition of
PPE are measured as the difference between the et disposal proceeds and the carrying amount
of the asset and are recognized in the Statemet of profit and loss when the asset is de-
recognised.
Intangible Asset:
Intangible asset that is computer software is stated at their cost of acquisition amortization and
impairment loss, if any thereon. An intangible assets is recognised where it is probable that
future economic benefits attributable to the asset will flow to the enterprise and where its cost
can be realibly measured. Intangible assets are amortised on a straight line basis over the
estimated useful life.
Capital Work in Progress:
Capital work in progress has been stated at cost.
G) Inventory:
Inventories are stated at lower of cost and net realsible value. The cost is calculated on
weighted average method. Cost comprises expendiature incurred in the normal course of
business in bringing such inventories to their present location and condition and includes,
where applicable, appropriate overheads based on normal level of activity. Net realisable value
is the estimated for completion and sale.
Obsolete, slow moving and defective inventories are identified from time to time and, where
necessary, a provision is made for such inventories.
H) Employee Beneits
The short term employee benefits are recognised as an expense at the undiscounted amount in
the profit and loss account of the year in which the related service is rendered.
I) Cash Flow Statements
The cash flow statement is preapred by the indirect method set out in AS-3 on Cash Flow
Statements and present the cash flows from operating investing and financing activities of the
Company.
Cash and cash equivalents presented in the cash flow statement consists of cash in hand and
demand deposites with bank.
J) Earnings per share
 Basics earnings per share is calculated by dividing the net profit or loss for the period
attributated to equity shareholders by the weighted average number of equity shares
outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period
attributed to equity shareholders and the weighted average number of shares outstanding
during the period are adjusted for the effects of all dilutive potential equity shares.
K) Taxes on income
Current tax is the amount of tax payable on the taxable income for the year as determined in
accordance with the provisions of the Income Tax Act, 1961.
deferred tax is recognised on timing differences between the taxable incone and the accounting
income that originates in one period and are capable of reversal in one or more subsequent
periods. deferred tax is measured using the tax rates and tax laws enacted or unabsorbed
depreciation and carry forward of losses are recognised only if there is virtual certainity that
there will be sufficient future taxable income avilable to realise such assets.
Current and deffered tax relating to items directly recognised in equity and not in statement of
profit and loss.
M) Provisions and contigencies
A provision is recognised when the company has a present obligation as a result of past events
and it is probable that an outflow of resources will be required to settle the obligation in
respect of which a reliable estimates can be made. Provisions are not discounted to their
present value and are determined based on the best estimate required to settle the obligation
at the balance sheet date. These are reviewed at each balance sheet date and adjusted to
reflect the current best estimates. Contingent liabilities are disclosed in the Notes.
Balance Sheet as at 31st March 2022
Equity and Liability
Shareholder's Fund
Share capital 2,000.00
Reserves and Surplus 630.05 2,630.05
Non-Current Liabilities
Long term borrowings 2082.40
deferred Tax Liabilities (net) 24.30 2,106.70
Current Liabilities
Short term Borrowings 1,043.83
Trade Payables
Total outstanding dues of MSMEs 1460.37 1,921.70
Other Current Liabilities 524.35
Short Term Provisions 22.97 3,512.85
Total 8,249.60
Assets
Non-Current Assets
Property, Plant, Equipment and Intangible
Assets 2,043.12
Tangible Assets 28.89
Intangible Assets 44.70
Capital work-in-progress
deferred Tax Assets 437.36
Other Non-Current Assets 2,554.07
Current Assets
Ineventories 4,775.07
Trade Receivables 241.99
Cash and Cash equivalents 485.72
Short Term Loans and Advances 189.21
Other Current Assets 3.54 5,695.53
Total 8,249.60

Statement of Profit and Loss for the year ended 31st March 2022
Income
Revenue from Operations 13,221.74
Other Income 19.59
Total Revenue 13,241.33
Expenses
Purchase of Stock-in-Trade 9,610.48
Change in Inventory of Stock-in-Trade (891.94)
Employees Benefit Expenses 1,397.45
Finance Cost 241.78
Depreciation and Amortisation Expenses 91.51
Other Expenses 2,106.79
Total Expenses 12,556.07
Profit Before Tax
Tax Expenses:
Current Tax 125.72
Earlier Tax (0.41)
deferred Tax 42.16
Profit for the year 517.79

Earning per Share (Face Value @ Rs.10)

Basic 2.59
Diluted 2.59

Cash Flow Statement for the year ended 31st March 2022
A. Cash Flow from Operating Activities
Net profit/(loss) before tax 685.26
Adjustment for:
Depreciation 91.51
Finance Cost 241.78 333.29
Operating profit/(loss) before working capital 1,018.55
changes
Adjustment for (increase)/decrease in operating
assets:
Trade receivables, loans, advances and other assets (238.86)
Inventories (891.94)
Adjustments for increase/(decrease) in operating
liabilities: 142.71 (988.09)
Trade Payables and other liabilities
Cash generated from operations 30.46
Income tax paid (113.52)
Net cash used in Operating Activities (83.06)
B. Cash Flow from Investing Activities
Investment in bank deposits (original maturity more (143.12)
than 3 months)
Purchase of property, plant and equipment & (850.24)
Intangibles etc. (993.36)
Net Cash used in Investing Activities
C. Cash Flow from financing activities
Proceed from issue of share capital
Proceeds from short-term borrowings 374.21
Proceeds from non-current borrowings 432.90
Interest Paid (241.78)
Net Cash from Financing Activities 565.33
Net Increase In Cash and Cash Equivalents (511.09)
Opening Cash and Cash Equivalents 693.69
Closing Cash and Cash Equivalents 182.60

Balance Sheet as at March 31, 2023

Particulars Note
Assets
Non-current assets
Property, plant and equipment 2,549.35
Right of use-assets 5,399.53
Capital work-in-progress 59.15
Goodwill 4.29
Other Intangible Assets 27.96
Financial Assets 205.56
Deferred Tax Assets (Net) 123.90
Other Assets 44.91 8414.65
Current Assets
Inventories 5,907.96
Financial Assets
Trade Receivables 4.11
Cash and Cash Equivalents 841.14
Bank Balances 402.94
Other Financial Assets 7.39
Total Assets 15,906.27
Equity and Liability
Equity
Equity Share Capital 2,500.00
Other Equity 1,456.88
Total Equity 3,956.88
Liabilities
Non-Current Liability
Financial Liabilities
Borrowings 142.52
Lease Liabilities 5,331.03
Provisions 23.03
Total (note : The debt to equity ratio is >1) 5,496.58
Current Liabilities
Financial Liabilities
Borrowings 2,131.37
Lease Liabilities 580.85
Trade Payables
Total Outstanding of MSME 1,428.38
Total Outstanding of Creditors 1,838.85
Other Financial Liabilites 362.49
Provisions 0.08
Tax Liabilities 35.03
Other Current Liabilities 75.76
Total Liabilities 11,949.39
Total Equity and liablities 15,906.27

Statement of Profit and Loss for the year ended March 31, 2023
Particulars Note No. Amount
Income
Revenue from Operations 18,600.87
Other Income 85.02
Total Income 18,685.89
Expenses
Purcahse of stock-in-trade 13,033.11
Change in inventories of stock-in-trade (1,132.89)
Employees benefits expenses 1,862.24
Finance Cost 793.80
Depreciation 1,037.20
Other expenses 1,722.60
Total Expenses 17,286.06
Profit/(Loss) before Tax 1,399.83
Tax Expenses
Current Tax 410.73
Income tax for earlier years 1.10
Deferred tax (67.70)
Total Tax Expenses 344.13
Profit/(Loss) for the year from operations 1,055.70
Re-measurement gain/(loss) on defined benefit plants 1.04
Income tax relating to item above
(0.26)
Other comprehensive income/(loss) for the year 0.78
Total Comprehensive income/(loss) for the year 1,056.48
Earnings per Equity share
Basic 5.27
Diluted 5.27

Cash Flow Statement for the year ended March 31, 2023
Particulars
A. Cash flow from Operating Activities
Profit/(loss) before tax 1,399.75
Adjustment for:
Depreciation and amortization expenses 1,037.19
Finance Costs 793.88
(Profit)/Loss on sale of assets 16.94
Rent Conession on Lease Rentals (1.45)
Interests Income on Income Tax Refund
Interest Income on Fixed Deposits (15.45)
Interest Income on Fair Valuation on Security Deposits (11.08)
(Profit)/Loss on Sale of Investments -----
Excess Liabilities written back (9.75)
Reclassification of acturial gain/(loss) 15.52
Operating Profit Before Working Capital Changes 3,225.55
Adjustment for changes in working capital:
(Increase)/Decrease in Financial Assets (12.40)
(Increase)/Decrease in Other Assets (27.19)
(Increase)/Decrease in Inventories (1,132.89)
(Increase)/Decrease in Trade Receivables 236.99
(Decrease)/Increase in Trade Payables 1,461.78
(Decrease)/Increase in Other Financial Liabilty (229.79)
(Decrease)/Increase in Other Liability 22.28
(Decrease)/Increase in Provisions 13.49
Cash generated from Operations 3,557.82
Taxes Paid (Net of Refuds) (407.00)
Net Cash from Operating Activities (A) 3,150.82
B. Cash flow from Investing Activities
Assets
Profit from Sale of Investments (790.12)
Net Proceeds from/(Investments) in Terms deposits
Proceeds from assets (99.82)
Interest Income on Fixed Deposits 15.45
Net cash (used in)/ from Investing Activities (B) (874.49)
C. Cash Flow from Financing Activities:
(Net of share issue expenses) 496.25
Repayment of Long term borrowings (net) 6.52
Proceeds of short term borrowings (net) (858.85)
Payment of Interest on lease liability (530.20)
Payment of lease obligation (475.09)
Finance Charges Paid (256.41)
Net Cash (used in)/ from Financing Activities (C) (1,617.79)
Net increase/(decrease) in Cash and Cash Equivalents 658.54
(A+B+C)
Cash and Cash Equivalents at the beginning of the year 182.60
Cash and Cash Equivalents at the end of the year 841.14

Cash flow statement for the year ended March 31, 2023
Notes:
a) The above statement of Cash Flows has been prepared under the 'indirect method' as set out
in Ind AS 7, 'Statement of Cash Flows'.
b) Figures for the previous year have been re-grouped wherever considered necessary.
c) Statement of reconciliation of Financing Activities
Particulars As at 31.02.22 Cash flows Non-Cash As at
Changes 31.03.23
Borrowings- Non Current 136.00 6.52 ----- 142.52
Current Maturities of Long ------ ----- ----- -----
Term Borrowings
Borrowings- Current 2,990.22 -858.85 ----- 2,131.37

Ratio Analysis and its elements

Ratio Numerator Denominator Curren Previou Varianc Reason for
t Year s Year e (in %) Variance
Current Current Current Liabilities 1.16 0.98 18.02% -------
Ratio (in Assets
times)
Debt-equity Total debt= Shareholder's 0.36 1.23 (70.73% Debt equity
ratio (in Total debt Equity ) ratio in
times) (excluding current
lease liability) year has
+ Short term been
borrowings - improved
Cash and cash on account
equivalents of increase
in equity
due to right
issue and
profit and
repayment
of debt.
Debt Earnings for Debt Service= 0.72 1.37 (47.26% Debt
service debt service= Interest and Lease ) service
coverage Net profit Payments+ coverage
ratio (in after taxes+ Principal ratio has
times) Non cash Repayments reduced on
operations account of
expenses like Principal
depreciation Repayment
and s falling due
amortizations during the
+ Interest Fy 2022-23.
Return on Net Profit Average 33.21 10.37% 220.37 The
equity ratio after taxes- Shareholder's % % company
(%) Preference Equity has earned
Dividend (if higher
any) profit as
 compared
to the last
FY mainly
due to
Covid and
increase in
operation
in current
year.
Inventory Cost of goods Average inventory= 2.22 2.00 11.18%
turnover sold OR sales (opening+closing
ratio (in balance/2)
times)
Trade Net credit Average Trade 7.59 4.99 52.19% Increase in
receivables sales= Net Debtors = credit sales
turnover credit sales (Opening+closing/2 and better
ratio (in consists of ) realisation
times) gross credit of trade
sales minus receivables.
sales return.
Trade Net Credit Average Trade 5.13 4.74 8.14%
payables Purchase= Payables
ratio (in Net credit
times) purchase
consists of
gross credit
purchase
minus
purchase
return
Net capital Net sales= Working Capital= 17.89 (135.86) 113.17 The change
turnover Total sales- Working capital % is mainly
ratio (in sales return shall be calculated because
times) as current assets working
minus current capital in
liabilities last FY was
negative.
Net Profit Net profit Net sales= Total 5.68% 1.81% 213.93 The
Ratio (%) after tax sales-sales return % company
has earned
higher
profit as
compared
to the last
FY mainly
due to
decline in
sales in that
year due to
covid and
increase in
operations
in current
year.
Return on Earning Capital Employed = 41.92 18.83% 122.65 The
capital before Tangible Net % % company
employed interest and worth+ Total Debt ha earned
(%) taxes (excluding lease higher
liability)+Deferred profit as
tax liability compared
to the last
FY mainly
due to
decline in
sales in that
year due to
covid and
increase in
operations
in current
year.

Comments on debt to equity ratio for Fy 2023:

1. The ratio for Fy 2022 was 0.36, which then improved to 1.23, hence there is a variance of
(70.73%), and the ratio is in the idealstte