SUMMER PROJECT REPORT: 2010

WORKING &PROJECT FINANCING : MPFC

Submitted by:

Ishan Trivedi

CERTIFICATE

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Submitted by:

Ishan Trivedi

ACKNOWLEDGEMENT

“The satisfaction Euphoria that accompany the successful completion of any work would be incomplete unless we mention the name of the persons, who made it possible, whose constant guidance and encouragement served as a beckon of light and crowned our efforts with success”

I consider it a privilege to express through the pages of this report, a few words of gratitude and respect to those who guided and inspired in the completion of this project.

I am deeply indebted to Shri A K Sinha for mentoring me throughout the internship in this esteemed organization. For their timely suggestions & valuable guidance. I want to thank Shri. R.G. Dwivedi (General Manager – MPFC, H.O. Indore) and Shri. P.K. Sinha (Manager – Systems).

I cannot do away without thanking few more individuals who educated us in their respective field of expertise and otherwise:

Shri Mukesh Gupta (Manager) Shri S.S. Agnihotri (Dy. General Manager, RRC) Shri R.K. Jain (Accounts) Shri A.K. Sinha (Manager, Legal) Smt. Geeta Agrawal (Recovery & Follow-Up) Shri Bhartesh Jain (Manager, Recovery & Follow-Up)

Last but not the least I would also thank all my co-interns and friends for the constructive and fruitful discussions and knowledge sharing.

1. INTRODUCTION

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Madhya Pradesh financial corporation is the premier institute of the state engaged in providing financial assistance and related services to small/medium size industries and it was incorporated under State Financial Corporation Act 1951(act 63 of 1951) in1955and also registered as category 1 merchant bankers and Securities Exchange Board of India (SEBI) since 1996, set up a separate merchant banking division in the name of the MPFC Capital Market Division. MPFC works under the control of board of directors, consisting of representatives from State Government, Small Industrial Development Bank of India, RBI, Scheduled Bank, Insurance Company, Cooperative Bank and Shareholders. However fee based services can be extended to units located in any part of the country. In the definition of industry almost every type of manufacturing or process activity related operations are covered. In addition, MPFC also provides assistance to activities in the service sector also approved by Industrial Development Bank of India (IDBI).

As per provision of the “State Financial Corporation Act 1951”, MPFC can grantAssistance to only that concern that’s paid up capital and free reserves taken togetherDo not exceed rupees 20 crores. This limit is not applicable to non fund activities.

MPFC is well knit organization with head quarter at Indore, and also have tonal andBranch network at 20 districts.

Initially the corporation was established with the objective of providing financial assistance to Small Scale Industries but at present 68% of the corporation’s funds assist industrial projects, 20% of the funds are invested in service sector and 12% in infrastructure

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SECTOR WISE SANCTION OF LOAN

Loan

IndustrialServicesInfrastructure

PERFORMANCE IN DIFFERENT AREAS

2007-08 2008-090

50

100

150

200

250

sanctiondisbursementrecovery

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SIZE WISE SANCTION OF LOAN

Size wise sanction of loan in MPFC up to 100 lakh is 67% and above 100 lakh is 33%

loan

upto 100 lacabove 100 lac

MANAGEMENT STRUCTURE OF MPFC

Management 

(1) the general superintendence, direction and management of affairs and business of the Financial Corporation shall vest in a Board of directors which may exercise all powers and do all such acts and things, as may be exercised or done by the Financial Corporation and are not by this Act expressly directed or required to be done by the Financial Corporation in general meeting. 

(2) The Board may direct that any power exercisable by it under this Act shall also be exercisable in such cases and subject such conditions, if any, as may be specified by it, by chairman, managing director or the whole-time director. 

Board of Directors

The Board of directors shall consist of the following, namely:- 

(a) a director to be nominated as chairman under sub-section (1) of section 15;  (b) two directors nominated by the State Government of whom one director shall be a person who has special knowledge of or experience in small-scale industries:  Provided that in the case of a joint Financial Corporation, the number of directors shall be

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such as the State governments of the participating States may, by agreement among themselves, think fit to nominate each participating State Government nominating not more than two directors:  Provided further that in the case of a Joint Financial Corporation, the director, who shall have special knowledge of, or experience in, small-scale industries, shall be nominated by that participating State which, according to the terms of agreement between the participating States, is entitled to make such nomination;  (c) two directors nominated by the Small Industries Bank;  (d) two directors nominated in the prescribed manner by the parties mentioned in clause (c) of sub-section (3) of section 4;  (e) such number of directors elected, in the prescribed manner, by shareholders, other than those mentioned in clauses (a), (b) and (c) of sub-section (3) of section 4, whose names are entered on the register of shareholders of the Financial Corporation, ninety days before the date of the meeting in which such election takes place on the following basis, namely:-  (I) where the total amount of issued equity share capital held by such shareholders is ten per cent. Or less of the total issued equity capital, two directors; (ii) where the total amount of issued equity share capital held by such shareholders more than ten per cent. But less than twenty-five per cent. Of total issued equity capital, three directors; 

(iii) Where the total amount of issued equity share capital held by such shareholders is twenty-five per cent or more of total issued equity capital, four directors; and 

(iv) where the total amount of issued equity share capital held by equity shareholders referred to in this clause does not permit election of all the four directors, the Board shall co-opt such number of directors as is required to make up the staid number who shall retire in equal number on the assumption of charge by the elected directors in the order of their co-option; 

(f) a managing director appointed in accordance with the provisions of sub-section (1) of section 17:  Provided that on the first constitution of the Board, the directors referred to in clause (d) shall be nominated by the State Government and directors so nominated shall, for the purpose of this Act, be deemed to be elected directors

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ORGANISATIONAL CHART

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BOARD OF DIRECTOR

CHAIRMAN DIRECTOR MANAGING DIRECTORGENERAL MANAGE

RDEPUTY G.M.MANA

GER

BRACH NETWORK AND FIELD OFFICE STRUCTURE OF MPFC

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FIELD OFFICE

SS

INDORE-1INDORE-

2

BHOPAL

DEWASJABALPU

RDELHIGWALIO

R

UJJAIN

SATNA

RATLAM

BUISNESS

DIVISON CENTRE

INDORE URBAN -1

INDORE URBAN-2

HARDAKHANDW

ASENDHWA

SAGAR

KATNI

SHAHDOL

REWA

CAPITAL STRUCTURE OF MPFC

Refinance from SIDBI Share Capital from Sate Government Loan in Lieu of Share Capital Subscription of Bonds to financial institution such as Nationalized Bank, LIC,

Cooperative Society, APEX Banks.

THE CORPORATION OFFERS:1. Financial assistance by sanction of Term Loans to New, Tiny, Small and Medium Enterprises and Services Sector for acquiring fixed assets like land, building, plant & machinery and other miscellaneous assets.2. Sanction of Term Loans to existing industrial concerns and services sector units For expansion or modernization or diversification.3. Sanction of Working Capital Term Loans to meet working capital requirements ofIndustrial or service enterprises under special schemes.

FINANCIAL ASSISTANCE – LIMITS OF ACCOMMODATION:Category Maximum LoanI. Proprietary or Partnership Rs.200.00 lakhsII. Corporate bodies (both private & public limited) Rs.500.00 lakhs

In respect of existing units operating successfully, maximum limit can be extended up toRs.400.00 lakhs for category (I) and Rs.1000.00 lakhs for category (II).

In respect of category (II) the financial assistance can be sanctioned provided the paid up capital and free reserves do not exceed Rs. 3000.00 lakhs.

If the requirements of the funds for a project are substantial and cannot be extendedBy the Corporation alone, then the requirement of loan of such projects can be met inConsortium with other financial institutions.

ACTIVITIES FINANCED BY THE CORPORATION: • General Loans for setting up new tiny, small and medium scale enterprises and service sector units.• Hotels/Restaurants.• Tourism related facilities (Amusement parks, Convention centers, restaurants, Travel & Transport, Tourist service agencies, Mobile canteen /catering),

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.....

• Hospitals/Nursing Homes.• Acquiring Electro Medical Equipment, setting up of Medical Stores.• Transport Loans (SRTOs) & acquisition of private vehicles, construction and Purchase of commercial complex and Development of Residential Colonies.• Development /maintenance and construction of roads.• Qualified Professionals (Management, Accounting, Medical Professionals, Architects & Engineers, Veterinary clinics)

2. OBJECTIVE

The main objectives of MPFC are- Industrial development of the state.

Providing financial assistance to the micro, small and medium scale industries, service sector and infrastructure development projects.

Socio-economic development of the state.

The corporation offers financial assistance by sanction of term loans to new, tiny, small and medium enterprises and service sector for acquiring fixed assets like land, building, plant and machinery and other miscellaneous assets. It also offers sanction of term loans o existing industrial concerns and services sector units for expansion or modernization or diversification. Apart from this the corporation also offers sanction of Working Capital Medium Term Loan to meet Working Capital requirements of industrial or service enterprises under special schemes.

3. HISTORYMPFC – Establishment, Growth, Challenges

1. Year 1955-56 MPFC came into existence in Madhya Bharat Period of infancy

Selection of right people for the right job successfully established the procedures, probably with hardly half a dozen of employees on its roll. No financial institution existed in other regions of the newly formed state of Madhya Pradesh – Renamed “MPFC”. Renowned industrialist Chairman of the corporation for

about ten years. Later replaced by an ex-officer (financial secretary) continues with an exception of two years in seventies.

2. Year 1957-60 Conservative approach

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Conscious of safety of public money and one should be – Selective financing mostly in Madhya Bharat region may be a surprise to the present generation in the corporation that notice under section 30 of state financial corporation’s act, 1951 (SFC act) served even for a single default on a renowned industrial house – Format of notice continued to be used for years

3. Year 1961-64 Activities and facilities publishedPeriodical press conferences – Extensive touring and financial assistance extended to other regions (Chhattisgarh and Mahakaushal) Liberal financing to provide impetus to set up industries in a state considered to be industrially backward – Positive response resulted in paucity of funds – Had to augment resources through Bonds, guaranteed by the State Government for the first time, position as per an editorial in a daily reversed SFC act amended.

4. Year 1965 onwards General ‘Sickness’ already entered in field of industry – considerable amount lock up in corporate sector – this sector took advantage of reference to BIFR putting a brake on the recovery. Organized consortium meetings, seminars for rehabilitation of ailing units, References to BIFR hardly served any purpose. Procedures in BIFR time consuming targets oriented financing and availability more and more incentives including subsidy always have a drawback – Selective financing close and effective monitoring including regular interaction with borrowers, critical analysis of working results warranted. One cannot ignore the security aspect also even in a development banking, personnel responsible for appraising the projects and release of funds should invariably be part of recovery and rehabilitation cells. One cannot be perfect and bound to err -: An adage: ‘To err is human. He alone can improve and become perfect who realizes his own mistake and is particular in correcting them’.

The corporation is proud of having always a dynamic leadership with new dimensions brining its activities comparable to any financial institution with good governance. More than 10,000 units have been established. Around 5 lacs people have been given direct employment. Indirect employment has changed the Madhya Pradesh state.

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4. Key Functions of MPFC

1. SANCTION:-

Every institution when they are created they are bonded within some rules and regulations whether by any law or constitutional clauses. This binding is necessary to the extent that it is not adopting a rigid attitude. When there exists a proper balance between the rigidity and flexibility, then only the motive of establishing an institution becomes successful. Thus, MPFC operates within the criteria fixed by the clause defined under sections of the State Financial Corporations Act 1951.

Basic tasks involved in sanction are submission of application form along with all the required documentation. The process of documentation happens during as well as post disbursement (details are attached in the Appendices).

1) Loan application form- The form must be filled and duly signed by the borrower, along with the documents which are given in the check list. The form is submitted by the borrower along with application fees for registration of their case for example - copy of Partnership Deed, MoA, and Estimation of Civil/Technical Engineer.

2) Registration of Loan Case- The concerned authorities go through the rules and regulations/ procedure prescribed and request of the borrower is registered as Case.

3) Bank Opinion- in order to check the credit worthiness of the company, MPFC issues a confidential letter to the bank for their opinion about the borrower as well as guarantor.

4) Verification of the property- MPFC verifies the property/registry which the borrower mortgages to the organization. Scrutiny of the security offered by the borrower is performed in the form of confidential search by the registrar through whom MPFC finds out the charges created in favour of other institute.

Terms & Condition are discussed further in detail in this report.

2. DISBURSEMENT:-

Disbursement is the stage where actually funds are at stake, hence it is very vital that before disbursement all required formalities are completed with all the terms & conditions well defined, documented, and executed. Before considering disbursement the Company has to provide sufficient certified details of implementation already taken place.

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During disbursement it is checked that all conditions agreed upon in the sanction process are fulfilled. Disbursement process essentially includes photographs of site, certified summary of accounts and technical manager’s report.

3. RECOVERY : -

The recovery includes all those efforts made to recover the amount in the form of instalment against interest and principle amount due. The amount paid by the borrower is deposited in the preference of other charges, Penalty charges, Arrears of interest, Principle amount. The payment of interest & principle are normally kept separate to avoid the burden on the borrower. In case of multiple loans, the amount received shall be appropriated first towards the loan overdue having

Power delegation

The authorities to sanction the loan by the concerned officer are:

OFFICER SANCTION POWER

Asst. Branch Manager Up to Rs. 5.00 Lacs

Dy. Manager Up to Rs. 10.00 Lacs

Manager Up to Rs. 15.00 Lacs

Dy. General manager Up to Rs. 30.00 Lacs

General Manager Above Rs.30.00 LacsUp to Rs. 50.00 Lacs

Managing Director:Term loansAssets Credit Scheme WCMTLROTLShort Term LoanD G Set

Up to Rs. 100.00 LacsUp to Rs. 100.00 LacsUp to Rs. 100.00 LacsUp to Rs. 100.00 LacsUp to Rs. 75.00 LacsUp to Rs. 50.00 Lacs

Loan committee Above Rs. 100.00 LacsUp to Rs. 240.00 Lacs

Board Above Rs.240.00 Lacs

5.SCHEMES

MPFC has been providing financial assistance to industrial units in the state of Madhya Pradesh for the last five decades. It has been extending wide ranging fund and non-fund

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based services. A number of new schemes for providing financial assistance and services to industries, professionals and other business associates have been successfully introduced by the corporation.

Its fund based schemes are available for setting up industrial/business ventures within the state of Madhya Pradesh. Whereas, its non-fund based schemes are available throughout India.

General Loan Limits:

Proprietorship & Partnership: Normal: Rs. 200Lacs Special approval from SIDBI: Rs. 800.00 LacsCompanies: Normal: Rs. 500Lacs Special approval from SIDBI: Rs. 2000.00 LacsCurrently under consideration: Limits to be extended to Rs.1000 Lacs under normal conditions

S No.

Sector Maximum Loan Amount

1 Industrial Sector 60% of the cost of project2 Infrastructure Project 50% of the cost of project (excluding land cost)3 Service Sector 70% of the cost of project

Application fees for all schemes:

(1) 0.05% of the loan amount – Registration of loan proposal(2)0.20% of the loan amount – before issue of sanction letter(3) Upfront Fee to be charged at the time of first disbursement:

Term Loan Scheme – 1.00% Small Loan Scheme – 0.50% Short Term Loan Scheme – 0.25%

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SCHEMES

Fund based schemes Non fund based schemes

FUND BASED SCHEMES

TERM LOAN

EQUIPMENT FINANCE

ASSET CREDIT

SHORT TERM LOAN

WORKING CAPITAL

ELECTRO-MEDICAL EQUIPMENTS

HOSPITAL FINANCE

FINANCE FOR PROFESSIONALS

H P PORTFOLIO MANAGEMENT

LOAN REPLENISHMENT

D G SET FINANCE

SCHEME FOR FINANCING MISCELLANEOUS FIXED ASSETS

SCHEME FOR MEDICAL PROFESSIONALS

LIQUID FUND SCHEME

COMPOSITE LOAN

COMMERCIAL COMPLEX

NON FUND BASED SCHEMES

CREDIT SYNDICATION

CORPORATE ADVISORY SERVICES

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FINANCIAL SCHEMES

a- PROJECT FINANCE-The financial assistance is provided to new industrial units for creation of fixed assets, such as land, factory building, plant and machinery, electrical installation etc. and for modernization, diversification, expansion and/or replacement of equipments etc. to existing units. Provided to- Hotels, Service industries, R & D, Nursing Homes, Diagnostic Centers, Cold Storage, Restaurant, Marriage Garden, Tourism related activities and setting up for various facilities for industries.For Period- 5-8 years

b- EQUIPMENT FINANCE- Existing industrial concerns operating for 2 years earning profit and/or declaring dividends during the preceding 2 years and regular with FIs/Banks can avail financial assistance to acquire capital goods/equipments (imported or indigenous), even when it’s not a part of the complete project.Maximum assistance- up to 75% of the cost of the equipment with a ceiling of Rs. 90 lacs per proposal.Overall debt equity ratio- should not be more than 2:1

c- ASSET CREDIT-The scheme similar to Equipment Finance scheme considers financing up to 100% of the cost of equipments in deserving cases. The company should be in profitable operation for at least two years having good track record with Banks/FIs. Maximum assistance- 100%Overall debt equity ratio- 1:1

d- SHORT TERM FINANCE-This scheme has been designed to meet the short term requirement of funds for working capital purposes due to peak season needs or for fulfillment of specific order/job enhancement of working capital limits pending up to Bank etc. It is provided to concerns which are in the profit for the last 4 years, having working capital limits sanctioned by any other commercial bank, having regular account with MPFC /Other financial institution. The minimum assistance under the scheme is Rs. 2.00 lacs and maximum Rs. 100.00 lacs. The debt equity ratio should not be more than 1:1 and current ratio should not be less than 1.5:1. Repayment should be done within 12 months.

e- LOAN REPLENISHMENT:Assistance is available for the purpose of purchase of further machineries and extension of factory building for the existing line of activity. It is provided only to

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MPFC's existing profit making borrowers with good track record of repayment (at least 3 installments paid in time). The limit of assistance is up to the extent of loan already repaid by them till the date of application. Minimum loan is Rs. 2.50 lacs and maximum loan is Rs. 75.00 lacs. Repayment should be done within 5 years.

f- CREDIT LINKED CAPITAL SUBSIDY FOR SSI:The Credit Linked Capital Subsidy Scheme (CLCSS) aims to facilitate technology up gradation of SSI units in the specified products/ sub-sectors by providing 12% capital subsidy for induction of proven technologies approved under it. CLCSS would cover the following products/ sub sectors in the SSI:

Leather and leather products, Food processing, Information technology, Drugs and pharmaceuticals, Auto parts and components, Electronic industry, Glass and ceramic items, Dyes and intermediates, Toys, Tires, Hand tools, Bicycle parts, Foundries - ferrous and cast iron, Stone industry.

The list of products/ sub sectors may be expanded with the approval of the Governing and Technology Approval Board (GTAB). The scheme will be in operation for a period of five years from October 1, 2000 to September 30, 2005, or till the time sanctions of capital subsidy by the Nodal Agency reach Rs 600 Crores, whichever is earlier. The 12% capital subsidy support would be limited to the loan amount indicated below:

(Rs. in lacs)

Investment in Plant & Machinery *

Max. Ceiling of loan eligible for support **

Maximum subsidyavailable

Up to 10 lacs 8.00 0.96

10 lacs to 25 lacs 20.00 2.40

Above 25 lacs 40.00 4.80

* (the purchase price will be considered) ** (the eligible subsidy would be calculated on the actual loan amount or maximum ceiling on loan eligible for subsidy, whichever is lower)

Promoters' contribution, security, debt-equity ratio, upfront fee, etc. will be applicable as per existing norms.

Entrepreneurs availing credit linked capital subsidy for technology up gradation shall not avail any other benefit including Interest Subsidy, under any other scheme of the Central Government. If it is found that capital subsidy from the Government has been availed on the basis of any false information, the industrial unit shall be liable to refund the subsidy availed, along with interest.

g- WORKING CAPITAL MEDIUM TERM LOAN:

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Term Loan is provided under this scheme to part finance long term/medium term working capital requirements of the industrial units. It is provided to industries having last 3 years profitable operations and proven track record with institution/bank. MPFC borrowers whose fixed assets are mortgaged with MPFC and those who are not MPFC borrowers but intend to offer all their existing fixed assets by way of mortgage as primary security can also avail assistance under the scheme. Minimum loan of Rs. 2.50 lacs and maximum loan of Rs. 500.00 lacs may be provided under this scheme. Repayment should be done within 3-5 years. The prevailing annual interest rate is 14.00% payable quarterly. A penalty @2% p.a. is levied in case default for the period and amount of default.

h- TERM LOAN: -Term loan is provided for the purpose of creation of fixed assets (such as land, factory building, plant and machinery, electrical etc.), for setting up of new unit and for modernization, diversification, expansion, and/or replacement of equipments in existing units. Finance is provided to new industrial units. It is also provided to Hotels, Service

Industries, Transportation, and R&D activities. The maximum limit of assistance to non- corporate sector is Rs. 200.00 lacs and for corporate sector it is Rs. 500.00 lacs. Period of assistance depends upon merits of the case ranging between 5-8 years.

The prevailing annual interest rate structure is as follows:

Interest Rate StructureTerm Loan Scheme Interest Rate Rebate Effective Rate

on Timely Repayment

Up to Rs. 50,000 10.00 % - 10.00 %Above Rs. 50,000 & Up to Rs. 2.00 Lacs

12.00 % 0.50 % 11.50 %

Above Rs. 2.00 & Up to Rs. 25.00 Lacs

14.00 % 0.50 % 13.50 %

Above Rs. 25.00 & Up to Rs. 200.00 Lacs*Industrial Units

14.00 % 1.00 % 13.00 %

Above Rs. 200.00 14.00 % 1.00 % 13.00 %

A penalty @2% p.a. is levied in case default for the period and amount of default.

i- COMMERCIAL COMPLEX

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The scheme is for providing financial assistance for construction of commercial complex including show rooms and sales outlets. Loan will be given for purchase of land and construction of commercial complex within the State of M.P. Sale of shops, show room or any portion of complex shall be permissible with the prior approval of the Corporation. The proceeds shall be deposited in the loan account of the borrower as per terms of agreement. The min cost of project should be Rs 10.00 lacs. The promoter is required to contribute 50% of total cost of project. In case of companies, net worth should not exceed Rs. 30.00 Crores. MPFC will hold the first charge by mortgaging assets i.e. land & building, shop premises, saleable part of complex. The loan should be repaid in 5 years, including a maximum of 2 years moratorium. Interest shall be 15.75% p.a. payable quarterly. A penalty @2% p.a. is levied in case default for the period and amount of default.

j- CREDIT SYNDICATION: -

Services for credit syndication with other financial institutions/banks/finance companies in respect of term loans/lease finance/working capital etc. are provided.

6. PROCESS OF PROJECT FINANCING

1 Submission of application form.2 Documents required before sanction.3 Cost of project and means of financing.4 Project appraisal.5 Sanction of project with terms and conditions.6 Documents required after sanction of project7 Disbursement of sanctioned loan amount.8 recovery and follow-up.

Submission of application form The application form contains the following necessary information-

Basic information about the proprietor, partners, directors, promoters, guarantors including educational qualification, complete bio data & other information.

Nature of industry & product required knowing the area of operation, market share, product performance, product quality, pricing strategies, marketing policies etc.

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Financial position of concern, which include the last 3 years performance of the firm in the market with its profitability & position of asset & liabilities. Cost of project & means of finance.

Utilities regarding infrastructure facilities, Technological management, Security granted for the loan, declaration by proprietors, director, partners &

other related persons with complete hierarchy

0.25 % of the Term Loan applied for, subject to minimum of Rs.1000 Application fee has to be deposited along with the application form

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Documents required before sanction

Sino ParticularsA General

Application FormProcessing feesDetailed project feasibility report covering technical, economical, & financial aspects

B About the PromotersForm duly filled and signed by the promoter with photoKYC Form duly filled and signed by the promoter with photoKYC Documents:

- Identity proof viz. voter ID / PAN Card/ Driving License- Proof of Residence viz. Electricity / Telephone Bill

Copies of Income Tax Returns for last 3 yearsNet worth statement duly certified by C.A.Details of Bank A/Cs (Personal) viz. copies of passbook

C About the applicant concern / company(I) In case of Partnership Firm

Copy of Partnership DeedFirm’s Registration CertificateApplication form to be signed by all the partners with seal

(ii) In case of CompaniesMemo & Articles of Association (Certified Copy)Incorporation CertificateCopy of Board resolution for availing loan from MPFC along with authorization for MD/Director for negotiationsDetails of concerns in which the directors are interested and Nature of interestCertificate of commencement of business (in case of Public Limited Company)List of existing and proposed shareholders, their relationship with promoters and their amount of investment.

(iii) In case of Hindu Undivided Family (HUF)Genealogical tree of the family the correctness of which is sworn to be true before a magistrate.Consent in writing for taking loan from MPFC signed by all major members of HUF (above 18 years of age).The application form should be signed by the “KARTA” of HUF

D. Past Performance – Existing UnitsAudited balance sheet & working results for 3 yearsDetails about existing track record with Bank / FIs viz. assistance availed, present outstanding, Bank’s opinionName and address of the Bankers

E. Details of Associate ConcernsAudited balance sheet & working results for 3 yearsDetails about existing track record with Bank / FIs viz. assistance availed, present outstanding, Bank’s opinion

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Name and address of the BankersF. Details about the Project

Copies of the title deed / allotment order / lease deed of the land.Site Plan / Map duly approved by competent authorityLand diversion order in case of freehold landBlueprint and detailed layout of the existing as well as proposed constructionDetailed Civil Estimated for proposed constructionComparative Quotations and catalogues for machinery / electrical items (from three suppliers).Technical knowhow. Marketing agreement.Necessary application / approval for Working Capital of collateral security offered / to be offered to the bank for w.c. limits sanctioned / to be sanctioned.Arrangement for procurement of critical raw material comparative quotations (from three suppliers)

G. Statutory Approvals / Permissions / RegistrationsMSME Registration CertificatePermission from Pollution Department for Air and Water discharge.Permission from Department of Tourism in case of Hotel ProjectsPermission from Drug Controller in case of Pharmaceuticals unitAny other permission required specific to the project

H. Details of additional SecurityCopy of title deedsValuation of property by Chartered EngineerPhotograph of PropertyConsent from the owner for mortgage of the property in favor of the Corporation

I. OthersCopy of letter if reference addressed by the promoters to their bankers personal as well as concern firm / company for disclosing the information required by MPFCSource of contribution to the capital of the concern which the promoters are intended to makeCIBIL Status & AML compliancesCredit Rating (If Applicable)

Cost of project and means of financing:-(A) Cost of project: Finance requirement of any project can be sub divided into two

categories, namely(a) Finance needed for creating the assets(b) Finance needed for raw material and day-to-day working as well as extending

credit facilities on the sale of goods.

The first category would need resources, which will be required to be deployed for a considerably long period before they are earned back as cash. On the other hand, in the case of second category, the deployment of resources will be for a considerably short period. Accordingly, the finance requirements in both the categories will be

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classified as long term, short-term finance, the long-term finance is generally known as “term loan”, and the short-term finance is generally known as “working capital”.

The term finance is the money required for financing the creation of fixed assets in terms of-

(1) Land and site development- the items of cost covered here are cost of land including conveyance charges, premium payable on leasehold land and conveyance charges, cost of leveling and development, cost of laying approach roads and internal roads,. Cost of fencing compound walls, cost of gates.

(2) Building and civil works- these includes factory building for the main plant and equipments, factory building for auxiliary services, administrative building, go downs, warehouses, and open yard facilities, misc. non factory building, quarters for essential staff, silos, tanks, wells, chest, basin, cisterns, hopers, bins, garages, sewers, drainage civil engineering works, architect fees etc.

(3) Plant and machinery – the major cost item in most of the projects, this covers imported machinery, indigenous machinery, machinery stores, spares, and foundation and installation charges.

(4) Technical knowhow, engineering fees- the technical knowhow and engineering fees payable to foreign/Indian collaborators is indicated here. Recurring annual royalty payment is not shown here, but included in the profitability statements.

(5) Misc. fixed assets— these include furniture, office machinery and equipment, misc. tools and equipment, cars, trucks, railway siding, equipment for power, laboratory equipment, workshop equipment, firefighting equipment, effluent collection misc. fixed assets.

(6) Preliminary and capital issue expenses – the items included are brokerage and commission on capital issue, expenses on company floatation and cost of preparing project report and conducting market surveys etc.

(7) Pre-operative expenses— these expenses incurred on the following till the date of commencement production: establishment, rent, rates and taxes, travelling expenses, misc. expenses, interest and commitment charges on borrowing insurance, mortgage expenses, interest on deferred payments, start-up expenses.

(8) Provision for contingencies – this represents a provision to meet any unforeseen expenses or expenses ignored inadvertently from the estimates. This provision is not meant for meeting price escalation, which can be anticipated at the time of estimating the project cost.

(9) Margin money for working capital – a certain part of working capital requirement representing the margin money for working capital finance by commercial banks and certain items are not supported by commercial banks. This part naturally is included in the cost of protect under the head “margin money for working capital”. To figure out the margin money for working capital the requirement on the following items is estimated indigenous raw material, consumable stores, wages and salaries, cost of fuel, light and power, taxes, insurance, rent, cost of repairs, maintenance, packing and sales expenses, stock of finished goods at cost excluding depreciation, stock of WIP, o/s debtors, other items of working capital.

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REVISED COST OF PROJECT

S No.

Particulars As appraised

Inc./Dec. due to addition

Overruns Revised estimated cost of project

1 Land & site development

- - - -

2 Building & civil work - - - -

3 P&M - - - -

4 Misc. fixed asset - - - -

5 Technical knowhow fees

- - - -

6 Interest during construction

- - - -

7 Preliminary expenses - - - -

8 Preoperative expenses - - - -

9 Margin money for W.C. - - - -

TOTAL A B C D

Means of finance Equity /paid up capital Preference capital Secured debenture Term loan Deferred credit Capital subsidy and development loan Unsecured loan and deposit

Equity Capital—this is the contribution made by the owners of business, the equity shareholders, who enjoys the rewards and bear the risks of ownership. However, their liability is limited to their capital contribution. From the point of view of the issuing firm, equity capital offers two important advantages: it represents permanent capital, and it does not involve any fixed obligation for payment of dividends.

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Preference capital – a hybrid form of financing, preference capital partakes some characteristics of equity capital and some attributes of debt capital. It is similar to equity because preference dividend like equity dividend is not a tax-deductible payment. It resembles debt capital because the rate of preference dividend is fixed. Typically when preference dividend is skipped it is payable in future because of the cumulative future associated with most preference issues. The high cost associated with it and the near fixity of preference dividend payments renders preference capital somewhat unattractive in general as a source of finance.

Secured debentures— they are protected by a charge on the properties of the issuing company. While the secured debentures of a well-established company may have appeal to investors, secured debentures of a new company do not evoke interest in investing public.

Term loan – term loans, which represent secured borrowings, are presently the most important source of finance for new project. They carry a fixed rate of interest and are repayable over a period of 6-10 years in equal annual or semi-annual installments. Banks, Madhya Pradesh financial institutions and all India term lending financial institutions provide term loan. Banks and state level institutions and all India term lending normally provide term loan to project having lesser cost. If the cost is much higher than above then it is financed by all India institutions and state level financial institutions, but not by commercial banks. For larger protects all India financial institutions provide bulk of term finance MPFC as schemes offered previously.

Deferred credits— many a time the suppliers of machinery provide deferred credit facility under which payment for the purchase of machinery can be made over a period. The interest rate on deferred credit and the period of payment vary rather widely.

Capital subsidy and Development loans/ sales tax loans – central govt. provides capital subsidy to industries set up in notified backward districts. Many state govt. or state development agencies also provide development loans/sales tax loans. They provide this facility for districts, which are considered backward districts by the central government.

Unsecured loans and deposits – unsecured loans are typically provided by the promoter to fill the gap between the promoter’s contribution requited by financial institutions and the equity capital subscribed to by the promoters. These loans are subsidiary to the institutional loans. The rate of interest chargeable on these loans is less than the rate of interest on the institutional loans.

PROPOSED MEANS OF FINANCING

As appraised Funds raised as on date of overrun

Revised means of financing

A. Capital promoters capital / Public issue

- - -

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B. Investment subsidy - - -C. Term loan - - -

7. PROJECT APPRAISAL

There are various schemes under which the corporation provides financial assistance that is term loan to new & existing units/setup/clients and other loans only to existing units. MPFC appraises a project from all the aspects like- Marketing, Technical, Managerial and Financial. This is to ensure the viability and feasibility of the project before disbursement. Till the time of sanctioning the corporation’s funds are not at the stake but as soon as the first disbursement is done, the funds get stuck, thus before the disbursement it ensures the working and estimations in all the possible domains. In order to safeguard its interest and principal amount the corporation would like to be confident of the returns attached with the project. For the same, MPFC can advice on choosing the right mix of means of finance. It can help the borrower in assessing the working capital requirement, repayments schedule of the term loans and evaluation of the IRR and BEP.

The project appraisal is supported by the details of the borrowers obtained by the application forms and other documents mentioned above. Some of the important aspects are-

Promoters’ background Particulars of the project Cost of the project Means of financing Marketing and Selling arrangements Profitability and working results Economic consideration

The whole process of project appraisal is divided in 5 components-

.1- Marketing Appraisal- Many entrepreneurs do not give much heed to marketability of the proposed product. In most of the cases proponents do not give proved, sufficient, credible and authentic information and often end up giving vague remarks like- “market is good and demand is plenty”. In order to have proper appraisal of demand forecast made by the borrowers the lending institutions require information regarding demand, supply distribution, pricing and external forces.

Demand- Product uses consumers, actual consumption, likely consumption in future and export prospects.

Supply- Production Capacity, actual production, capacity utilization imports and likely future capacity.

Distribution- Channels of distribution involves the cost of distribution and mode of transport.

Pricing- Domestic and international price trends, control on prices, duties and taxes. External forces- Government policies regarding industrialization, export, imports,

foreign collaboration, plan outlay etc.

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Existing entrepreneurs may put hurdles for new entrant by reducing their prices thus the lending institutions should keep in mind all these factors and the proponent should be in position to face and get through such initial problems.

2- Technical Appraisal- The major portion of the time is devoted for this section, as it’s the backbone of the project appraisal. The ignorance in this component may result in the failure of the project as Technical Appraisal is done to ensure all technical aspects relevant to the successful commissioning. It balances the requirement and acquiring of the technical inputs like- raw material, manpower, engineering facilities etc. It ensures that the necessary physical facilities required for production would be available and the best possible alternative is selected to procure them. The important issues considered in this appraisal are-

Location of the unit should have transport, communication and other infrastructure facilities. If the unit is labor intensive, it should not face problems in acquiring labor.

Proximity to the raw material is essential to consider as if the raw material requirement is bulky and difficult to transport, it is better to locate the plant near the source of raw material.

List of Suppliers and their quotes in order to establish the availability of the raw material, equipments and other inputs.

Appropriate choice of the machine, equipment and the supplier according to manufacturing process and size of the unit.

The sufficient building and civil work to accommodate the future plant and machinery

Area of the land used to build up the required new infrastructure and the quality of material used for the same.

The availability of raw material should be from more than one source. Proponent should have knowledge of alternate sources of raw material.

Selecting the optimal scale of operation. Size of the plant or its capacity with respect to output, input or number of

machines. Existing set of plant and machinery together with the installed capacity. Enough places for treatment of effluents and disposal of waste. Procurement of required licenses and statutory requirements.

3- Financial Appraisal- The decision of sanctioning and disbursement is highly based on the financial soundness of the project. The detailed feasibility study is carried out to find that the objectives of the project are achieved successfully. The main objectives of any project are-

To generate adequate profit and cash to recover capital outlay. To give regular returns to the owner of capital. To enable retention of adequate profit in business for future growth.

Various financial aspects such as realistic cost estimates, right source of financing, preparation of projected financial statements based on realistic estimates as well as proper financial evaluation through most scientific financial methods and techniques is covered in this component. The major heads of these aspects are-

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a- Capital Cost Estimation- It covers the following- The cost of capital assets like Land and Building, Plant and Machinery, SFF,

electric installations, vehicles, equipments and other tangible assets and intangible assets like- Patents, Goodwill etc. which are of permanent use in business.

Preliminary expenditure to be allocated to various assets on proportionate basis. This should be estimated on the basis of volume of business, project time schedule, manpower and its training requirements and administrative set up during project execution. Fee for collaboration, consultancy, technical know-how etc are to be estimated on the basis of technical analysis of the project.

Initial working capital such as inventory, debtors etc for starting commercial activities.

Other incremental costs attributable to utilization of existing facilities, if any. Minus the expected cash inflow from sale of old assets, if any due to

replacement.

These Cost estimations would be helpful only if the basis of cost estimations should be realistic and should be based on latest budgetary quotations, prevailing market rates, taxes and duties. The market survey should be analyzed carefully to get the realistic estimate. Charges like registration fees, legal fees etc should not be omitted and should be added to the respective asset. Also, the important points such as technical scope of the project, detailed technical specifications of machine tools, state of technology, sources of supply of tools- both imported and indigenous, delivery commitments etc. should be critically analyzed to make realistic assessment of funds required. To make it more realistic and less risky the cost of project should also include Provision for Contingency. The Project costs are mere estimates based on certain assumptions, which may go wrong for various reasons and uncertainty attached, therefore it is essential that capital outlay must includes adequate provision for contingency depending upon factors like- gestation period, delay in foreign supply, domestic and international price conditions, requirements of Foreign Currency and risks of fluctuations, changes in taxes and duties etc. To estimate this amount the corporation considers part experience and knowledge of business world.

b- Determining Capital Structure-

Various sources for financing a project are-

Equity Share Capital Preference Share Capital Long Term Loans (including Foreign Currency Loans) from financial

institutions/banks Debentures/ Bonds Public Deposit Cash Subsidy Internal Accruals/Promoters’ Contribution

The balanced or optimum capital structure is planned by analyzing the following factors-

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Cost of financing that is cost of capital, cost of borrowed capital, cost of ordinary share capital, cost of retained internal accruals and the weighted average cost of capital.

Risk involved (for example- borrowing adds risk to business in terms of fixed obligations that is regular and timely payment of interest and liquidity of project)

Management Policy Profitability and Liquidity of existing products (that is not to accept any Project

which returns less that existing rate of return of the company) Prescribed Debt Equity ratio, if any Statutory requirements (like- Industrial License Company Law Requirements,

Term Loan Conditions etc.)

c- Projected Financial Statements- Apart from providing the meaningful analysis and performance of the company, financial statements are also required for the purpose of raising capital from different sources. These statements include-

Projected Income Statements Projected Cash Flow Statements Projected Cash Balance Sheet Projected Fund Flow Statements Other Statements such as Working Capital, Income Tax, Value-added etc.

d- Evaluation- Some of the important methods of financial evaluation are- Return on Investment Pay-Back period Discounted Cash Flow Techniques like- Net present value method and Internal

rate of return Sensitivity analysis.

4- Managerial Appraisal- A financially sound and technically feasible project also fails if it is not backed up by the capable and efficient personnel. Thus MPFC evaluates the management as a part of its appraisal.

Background of the Promoters/ Partners/ Directors Relationship among the Partners or Promoters and Directors. Net Worth of the business held by them. Partners’/Directors’ Qualification and experience in same line of industry. Details of the personnel hired.

APPRAISAL OF A TERM LOAN PROPOSAL

Since the main objective of Madhya Pradesh financial corporation is to promote entrepreneurship and small and medium scale industries in the state, MPFC adopted much liberalized policy regarding appraisal of a loan proposal. It used to finance at very low margin as 10% with Debt equity ratio as high as 3:1 or 4:1. But know due to large percentage of NPA’s these norms are tightened and appraisal is done totally security based. The main parameters used for appraisal of a loan proposal are: -

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BREAK-EVEN POINT: - It must be comfortably low to the capacity utilization and providing safety margin acceptable to the market condition.

PAYBACK PERIOD: - It most is comfortably below five years.

INTERNAL RATE OF RETURN (IRR): - For calculating IRR, cash flow after tax + Interest paid to the MPFC as inflow. Hence it must be comfortably above the rate of interest charge by the corporation.

DEBT SERVICE COVERAGE RATIO (DSCR): - This is considered as most important parameter for appraising a loan proposal. I observed that if a loan proposal is fulfilling this parameter is also used to fulfil all parameters used by MPFC. This ratio must be two (average of five year is considered).

DEBT – EQUITY RATIO: - This ratio must be 1:1.

SECURITY DEBT RATIO: - This ratio must be more than two times.

CASH FLOW ANALYSIS: - Cash flow must be sufficient enough to the need of directors and business requirement after deducting interest payment and loan payment.

ANALYSIS OF OLD BALANCE SHEET AND PROFIT AND LOSS ACCOUNT if the borrower is applying for expansion and modernization. This is for getting helping in future forecasting.SESITIVITY ANALYSIS: - Project must earn enough return to bear the sensitivity of the market conditions and cost.CREADIT ANALYSIS: - Credit analysis is done for borrowers on the basis of different parameters and rate of interest are adjusted according to that. Since there are different type of factors that affects existing units and newly established units, hence different type of model used for rating different type of units. On the basis of fast experiences, MPFC has realized that parameters/attributes in normal cases are not applicable in construction cases. Therefore, revised credit rating model constructed for this. All types of credit rating models are given below.

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Sanction of loan with terms and conditions

Every institution when they are created they are bonded within some rules and regulations whether by any law or constitutional clauses. This binding is necessary to the extent that it is not adopting a rigid attitude. Somewhere it is obvious that the rules and regulations have to maintain some extent of rigidity so that infringement could be avoided, but that does not mean that there should be no scope for flexibility. When there exists a proper balance between the rigidity and flexibility, then only the motive of establishing an institution becomes successful. Thus, MPFC operates within the criteria fixed by the clause defined under sections of the State Financial Corporations Act 1951.

BASIC TERMS AND CONDITION:

ELIGIBILITY

MPFC grants assistance to "Industrial Concerns" as defined in clause (c) of section 2 of "State Financial Corporations Act. 1951", which are located in the state of Madhya Pradesh. However free based service can be extended to units located in any part of the country. In the definition, almost every type of manufacturing and/or process activity and related operations are covered. In addition to it, MPFC also provides assistance to activities in the service sector, as approved by the Industrial Development Bank of India (IDBI). As per the provisions of the "State Financial Corporation Act. 1951", MPFC can grant assistance to only those concerns whose paid-up capital and fee reserves taken together do not exceed Rs. 30.00 crores. This limit is not applicable to non- fund based activities. Subject to the limits prescribed under the various schemes, MPFC's total exposure to a single concern under all the schemes taken together shall not exceed Rs. 200.00 lacs in case of partnership and proprietary concerns, and Rs. 500.00 lacs in case of corporate entities.

SECURITY

MPFC grants loan against security only. The primary security for the loan is usually a first charge on land, building, plant and machinery etc. acquired/proposed to be acquired. In case of loan under consortium arrangements, pari-passu charge is accepted along with the other participating institutions.

Generally MPFC takes collateral security of land and/or building of the borrower or any third party in addition to primary security. MPFC also has a floating charge on all the remaining assets of the borrower, subject to the charge in favor of the bankers for working capital.

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REPAYMENT PERIOD

The period of repayment of loan is decided on the merits of each case, which generally ranges between 5 to 8 years.

The principal amount of loan is payable normally in quarterly installments with an initial moratorium period of 3 months to four years depending upon the size of the project & stage of the implementation. Interest is also normally charged on quarterly basis and the months of payment of interest & principal are kept different to even out the liability of the borrowers.

PROMOTER'S CONTRIBUTION

The minimum promoter’s contribution envisaged in the project is worked out on the basis of Debt-Equity norm and the security margin norm applicable at the time of sanction of the loan. The debt equity ratio is the ratio of loan component and the equity contribution in the total project cost. The maximum amount of assistance shall be lower of the two amounts worked out on the basis of Debt-Equity norm and the security margin norm. The normal lending norm for debt- equity is 1.5:1; however in some specific schemes this norm may be flexible.

The entire promoter's contribution envisaged in the project is desired to be raised by way of capital before first disbursement of the loan installment. However in case the promoters are short of own capital, some amount may be raised as unsecured loans in the form of quasi-capital. The quantum is ascertained during the appraisal of loan proposal.

INSURANCE

The assets offered, as a security of the loan should be kept insured for their full value during the currency of the loan. The risk normally covered under the insurance are those relating to fire, riots etc., and the specific risks attributable to a specific project which the corporation may specify.

The insurance policy should be taken in the joint names of the corporation and the borrower - with the usual mortgage clause. The first insurance policy and the subsequent renewals of the same should be sent to MPFC as soon as they are in effect. In case the same is not sent in time. MPFC has a right to get the same insured on the cost & risk of the borrower unit.

MARGINMargin is the difference between the value of assets offered as prime security and the amount of loan.The margins prescribed for loans under various categories are as under:

Category Backward

Districts

Other Districts

Small Scale Industries 20% 25%Medium Scale Industries 25% 40%

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Hotel Industry 50% 50%Tiny Sector 10% 15%Composite Loan NIL NIL

Documentation required after sanction of loan:

Sino ParticularsA. Legal compliances

Title Search Report by approved legal advisor & Sub-RegistrarPaper Publication for Prime & Additional SecurityCertificate from Law Officer for completion of all Legal formalities

B. Technical CompliancesValuation Report from Technical Officer for Investment in the project & verification of assets created at siteValuation of additional security(s) as per CGLComments of Technical Officer regarding deviations in the approved scheme (if any)Verification of Performa Invoice (if applicable)Comments of Technical Officers in case there is difference between investments claimed by the borrower and his valuation.

C. FinancialCA Certificate regarding investment in the project & promoter’s contributionMoney Receipt duly discharged by the BankInsurance cover note on fixed assets of the unitSanction of power from MPSEBSanction of Working Capital by the BankPermission / NOC from MP Pollution Control BoardReview of Project cost & means of financePhotographs of assets created at siteReceipt of charge registration certificate (in case of companies).

REQUIREMENT OF DOCUMENTS/ TITLE DEEDS-:

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CHECK LIST-

1- Loan acceptance letter2- Undertaking of Directors and Guarantors regarding conditions of sanction and no case

of economic offense is pending against them.3- Undertaking regarding special conditions.4- Two photograph of all executants.5- In case of existing unit C.A. Certificate is regarding regular payment of ESI, PF, and

Sales Tax, MPEB clearance certificate or photocopy of challan regarding up-to date payments.

6- Income Tax clearance certificate of Directors of the Company/Partners of the firm/proprietor.

a- In case of Leasehold Land-

1- All original lease deeds of land offered in primary security.2- Search report from the Sub- Registrar for last 20 years.3- Permission to assign leasehold rights of land from MPAKVN/ DIC/ IDA/ Municipal

Corporation etc. in favor of the MPFC.4- No dues Certificate regarding payment of up to date lease premium/Lease rent etc.5- Copy of approved map of factory building from competent authority. Municipal

Corporation/Panchayat whichever is applicable.

b- In case of Freehold Land-

1- All original sale deed/title deeds offered in prime security.2- Search report from the Sub-Registrar for last 20 years.3- Certified copy of P.II Chars/ Panchshala for last 20 years. 4- Certified copy of “Kist band Khatauni” for last 20 years.5- Certified copy of diversion order passed by SDO (diversion) concern U/s 172 (I) of

MPLR code 1959.6- No dues certificate regarding up to date payment of diversion Premium/rent etc.7- Original Bhu adhikar avam rin pustika bhag I and II.8- Copy of Naksh Aksh prepared by Patwari.9- Municipal record (if property is suited Municipal Limit)10- Copy of Site plan and construction plan duly approved by Municipal

Corporation/competent authority.

c- In case of Partnership Firm-

1- Copy of partnership deed.2- Firm’s Registration Certificate.3- Income tax clearance certificate of Partners/Firm and Guarantors.4- Sales Tax, PF and ESI clearance certificate and payment of MPEB dues in case of

existing units.

d- Case of Company-

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1- Memorandum and Articles of Association of Company duly certified by Director.2- C.A. Certificate regarding capital structure of Company.3- C.A. Certificate regarding charges verification from the record of registrar of

companies concern.4- Certified copy of board resolution regarding execution of documents in affixation of

common seal of the company.5- Certified copy of resolution U/s 293 1(a) and U/s 293 (d) of the Company’s Acct in

case of public limited company.6- Certificate U/s 149 of Company’s Act regarding commencement of business (in case

of public limited company)7- Income Tax Clearance certificate of Directors of the company and Guarantors.8- Sales Tax, PF and ESI clearance certificate and payment of MPEB due in case of

existing units.

e- Additional security-

9- All original Sales Deed/ Lease Deed/ Vasiyatnama, Gift Deed, Partition Deed, Title Deeds.

10- Search report of Sub-Registrar concern for last 20 years.11- Copy of approved map of property offered in additional security.12- Apartment deed duly registered M.P. Swamitva Prakoshtha Adhiniyam 2000 (if the

property is of multi-storey/ flats/ shops etc.)13- Copy of power of attorney if deeds are executed through power of attorney holder.14- Copy of municipal records- Tax payment receipts from Municipal Corporation (If the

property is in the Municipal Limits)

Disbursement :

Following are the compliance that borrower must fulfill before starting disbursement process:

Financial Tie-up if necessary. Initial investment conditions must be fulfilled. Sanction of required power load from MPEB. NOC from M. P. pollution control board. SSI registration. DGTD registration. Execution of Technical Know-how agreement. Condition regarding availability of raw materials and fuel etc. Charge registration certificate (in case of companies).

Non – Encumbrance certificate for the balance period.Above mentioned conditions are subjected to relaxation under special circumstances.While Disbursement following requisites are to be taken care:

Application for disbursement duly filled in along with details of expenditure incurred of land, building and machinery etc. in the prescribed proforma.

Latest Trail Balance duly certified by the Chartered Accountant.

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Advance money receipt duly sighed by the Proprietor/All the partners/authorized directors and authenticated by the Banker of the borrower.

Insurance cover notes regarding comprehensive insurance of the properties on which disbursement in desired (in joint name of borrower & MPFC)

Sanction letter of working capital from Bank. Certificate of registration of charge with the RoC (in case of companies) Sanction letter from MPSEB for power. Any paper/document in compliance of special terms and conditions of

sanction letter.

.

Recovery & Follow Up:

INSTALLMENT: In general the installments of interest & principal fall due for payment on quarterly basis. The months of payments of interest & principal are normally kept separate to avoid burden on the borrower. The due dates of payments are specified in the loan documents.

The payments made by the borrowers are appropriated in the following order: firstly towards other charges, followed by arrears of interest, and lastly towards principal. In case of multiple loans, the amount received shall be appropriated first towards loan over dues having lower rate of interest.

REPAYMENT

The borrowers are expected to be well aware about the due dates for payment of installments. However, to facilitate them. It is a usual practice of the corporation to issue demands for such payments well in advance.

In case due to postal delay or any other reason, the demand is not received by the borrowers, they should contact the concerned field office and deposit the amount well in time to avoid penal interest and other consequences of default.

It may be noted that non-receipt of demand notice cannot be taken as an excuse for default.

The payment of the dues can be made at the field office or at head office but as far as possible the payment should be made at the concerned field office only.

RESCHEDULEMENT

In case the party fails to pay the dues to the corporation in time, due to some genuine reason, the related facts & circumstances should be informed to the field office with full details.

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Depending upon merits of the case, postponement of some particular dues, for some period, may be allowed; or the facility of the reschedulement of the entire outstanding may be granted.

However, grant of such facilities is solely at the discretion of the corporation. It is necessary that the borrower should remain in regular touch and continue to keep the field office informed of the progress and working of the concern at regular intervals.

REVIVAL OF SICK UNITS

In case, assisted units turnout to be sick and the promoters are very keen and ready to revive the unit, the corporation extends a helping hand for revival of such units - strictly on merits of each case, and if the corporation feels that the operations of such a unit can still be made viable.

The benefits, which may be passed on in such cases, generally include reschedulement of loan accounts, funding of overdue interest, grant of loan for balancing equipments, approval for change in the management, recommendation to other financial institutions, Bank,Govt. etc.

PENALTY

Penal interest is charged in case of default. This interest is over and above the contracted rate.

TAKEOVER AND SALE OF UNITS

In case the default becomes a chronic & persisting feature or the corporation feels that the dues are willfully not being paid, or the management is unable to run the units, the corporation is constrained to take painful decision of acquiring the assets U/S 29 of the SFC'S Act, 1951 and dispose them off by auction/sale to recover the outstanding dues.

In case the sale proceeds of the assets are less as compared to the outstanding, the corporation is free to initiate legal proceeding to recover the balance amount from promoters/guarantors personally.

The Government of Madhya Pradesh has also conferred the powers of Tahsildar on the Dy.General Managers of MPFC.

This has been done for the limited purpose of recovery of MPFC dues as arrears of land revenue to the extent of issuing Revenue Recovery Certificate (RRC) under the provisions of the M.P.Land Revenue Code, 1959 and the Madhya Pradesh Lok Dhan (Shodhya Rashiyon Ki Vasuli) Adhiniyam, 1987. RRC's are also being issued in favor of officers at Collect orate and Collect orate Officers are recovering the MPFC dues - as dues of Land Revenue, from the defaulting borrowers and their guarantors.

CHANGE IN MANAGEMENT

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It is one of the usual conditions for grant of loan that the change in the constitution and or management should not be done by the concern.

However if it becomes necessary in the interest of the project, a written request should be made to the concerned field office and the desired change may be affected only if the approval of the request is granted in writing.

SECOND CHARGE

On the request of the regular borrowers, the corporation usually permits second charge on fixed assets in favor of the Bankers.

DEFAULT REVIEW COMMITTEE

Defaulting borrowers are reviewed by the corporation both at field offices and at Head Office.

Default review committee (DRC) at Zonal level considers the cases for reschedulement of loan account, granting of rebate, issue of legal notice, takeover of the unit, change in management, disposal of units, etc.

The zonal level DRC considers cases having sanction amount less than Rs. 20.00 lacs, while those having a higher sanction amount are dealt with by H.O.

STANDING COMMITTEE

Cases of disposal of taken over units where assistance originally sanctioned is above Rs. 5.00 lacs, are considered by the standing committee (SC), and constituted in the Head Office of the corporation.

The units are disposed off after giving news papers advertisement, calling offers from intending purchasers and subsequent negotiations.

8. SWOT ANALYSIS AT MPFC

STRENGTHS :

Large coverage area : The Madhya Pradesh financial corporation has its coverage area in all over Madhya Pradesh with its 22 branches and zonal offices for the work operation and trying to provide the best services to its existing and new clients.

Helpful in providing small scale industries:-The main objective of Madhya Pradesh financial corporation is to provide better services through various schemes of financial assistance to small-scale industries and time-to-time

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proper guidance from experience people so that they can achieve their task of higher profitability and a good quality product easily.

Objective of corporation:-The corporation formed under the SFC’s (small financial corporation) act, is established particularly with a view to support small scale and medium scale industries in the state of Madhya Pradesh. It serves both manufacturing as well as service industries in the state.

Milestone for industrial development:-As during the year the corporation sanctioned financial assistance for Rs. 10702 lakhs and almost 75% of it as disbursement, this will bring growth and development for small and medium scale industries to cope up with the situation and to reach in the market with their latest technology and innovation ideas through which they can survive into this competitive world.

Facilities with financial assistance:-The Madhya Pradesh financial corporation is providing various facilities and services related to financial assistance. This attracts new clients and encourages existing clients, as well as the new projects to be financed in association with financial assistance for the projects they were going to implement

WEAKNESS:

Lack of innovative ideas. Lengthy and rigid process for financial assistance. Ineffective follow up and recovery. Obsolete technique of keeping the records. The corporation is still practicing the

technique of keeping the record in files. Comparatively high rate of interest. More legal formalities. Poor security and verification of documents submitted. Lack of human resource training. Not using latest techniques, not yet fully computerized. Lack of advertising and promotional policies. Limited resources. The corporation is incurring losses.

OPPURTUNITIES:

Effective use: the Madhya Pradesh financial corporation can make effective use of its human resource to build a good and healthy relationship with the clients and makes its staff more productive and efficient with proper training and development.

The Madhya Pradesh financial corporation can go for financing large-scale industries in the state of Madhya Pradesh.

The higher rates of interests are attractive so if the rates are lowered the corporation can make better use of market opportunities and create business out of it.

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If the process of financing a project were made easier the borrower, can make use of proper disbursement by the corporation to implement the project and can save time involved in the project so that he can deposit the dues of the corporation in time and can take benefit of it.

THREATS:

Increasing competition with other financial corporations. Still using the obsolete technique of record keeping, which increases the chances

of stakes and loss of records. Promotional policies should be revising to make people aware of its policies and

services.

PROBLEMS FACED BY MPFC

In strictly technical terms, the corporation Balance Sheet might be carried forward losses. However, the losses, so reflected, are not operational in nature. The corporation results in key performance areas also underline the confidence enjoyed by it from the entrepreneur class in general. This fact is confirmed by the fact that the corporation has been consistently posting incremental gains in its main functions i.e. promotion of industrialization and effective plough-back through strong recovery structure built up over the year.

The quantum of loss on account of stringent provisioning norms, made effective from 1.4.2002, following guidelines received from SIDBI, is not MPFC – specific but is a ground reality with all SFCs and Financial Institutions in the country

The Corporation was offered a Relief Package towards refinance outstanding by IDBI as well as SIDBI carrying 12% p.a. and 11%p.a. interest rates, respectively. The Corporation has requested both the institutions to convert their outstanding into Preferential Capital, for which no decision has been taken so far. The Corporation, in order to have the actual liability ascertained until decided favorably, had to provide for a substantial amount towards provision for interest towards Relief Package outstanding. The Gupta Committee recommendations are yet to be implemented and IDBI/SIDBI are being repeatedly requested to give concessions on the interest. The said amount shall remain as a provision and if the concessions are provided, the losses shall get reduced to that extent.

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Besides above, other factors such as acute industrial recession and depressed market conditions and high cost of borrowing are eating into the margins available to the Corporation.

In brief, a large portion of the carried-forward losses are attributable to the reasons beyond the control of the Corporation. The losses can be wiped-off, given support from the State Govt. & Creditors mentioned in the following paras.

MPFC is one of the 18 SFCs functioning in the country and its plight is not much different from that of other SFCs. Despite a consistently good performance in the key operational areas viz; sanctions, disbursements, recovery ( appreciated by none other than IDBI in their last two years reports), and an excellent record of regular payments to its creditors in the last 10 years, the circumstances are hardly propitious for its survival, what to speak of growth.

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8. CASE STUDY

To consider the sanction of a Term Loan of Rs. 46.00 Lacs and WCMTL of Rs. 15.00Lacs (composite Rs. 61.00 Lacs) to M/s Sona Industries for the expansion of their existing unit for Manufacturing of BOPP Self Adhesive Tapes at Plot no. D-2, Sector –DIND. Area, Sanwar road, Indore(M.P).

PROJECT AT A GLANCE

1 Name of the unit : M/s SONA INDUSTRIES, INDORE

2 Location : Plot no. D-2,sector-D, Industrial Area, Sanwer road,indore

3 Constitution :A Proprietorship firm

4 Name of proprietor: Shri Rajesh Maheshwari

5 Cost of project :Rs.104.27lacs

6 Completion of project : 3 month

7 Projected turnover :1st year 2nd year 3rd year 4th year 150 lac 187.50 225

9 Net profit after tax :7.78lac 11.00 14.90 15.10

10 Breakeven point :35.47%

Product Units Capacity being installed

Production Utilization Basedon double shift &working300 days in a

Sales price/box

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BOPP self adhesive tape

Boxes of 72 rolls of 2” per box

25000 boxes 1st year 40%2nd year 50%3rd year 60%

60% in the 3rd year onward

1500

The Project is:

1. A new project2. The Proprietor is first time seeking financial assistance from MPFC3. The products are well established the market.4. S.S.I Unit5. The additional security worth Rs. 15.00 lacs in the form of fixed assets/FDR offered.6. Adequate built in security.

Total cost of projectItems IN LAKHS

Means of finance

1. IntroductoryM/S Sona Industries Indore is proprietorship concern of Shri Rajesh MaheshwariEngaged in manufacturing of BOPP (Bi Oriented poly Propelyne) self adhesive tapeAt Indore for the last 5 Year. The unit has been working in a rented premise and afterWitnessing market growth, the proprietor decided to expand the unit in its ownedPremises. In this respect the concern has purchased an industrial property which isLocated at plot no D-2, Sector –d, Industrial Area, Sanwer Road, Indore.

2. Proposal in BriefThe concern has moved existing set up to newly purchased industrial premises andProposes to expand the capacity for manufacturing of BOPP self adhesive tape from to

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Land factory shed 50.00 Site development &repairs 2.50Plant and machines 21.25 Misc. Fixed Assets 0 .50 Provision for contingency 4.42 Pre-operative expenses 25.13 Working capital 108.10 TOTAL 211.90

Items In lakhsProprietor capitalTerm loan from MPFCWCTML from MPFCUnsecured loan

25561522.01

Total 108.01

2500 boxes per annum. Total cost of scheme is estimated at Rs 28.00 laces, U/S loanRs. 13.50 lacs and financial assistance of Rs. 61.00 lacs sought from the corporationUnder ‘Single Window Scheme’.

3. Promoter and ManagementThe proprietor Shri Rajesh Maheshwari S/o Shri Maheshchandra Maheshwari agedabout 36 year is commerce graduate and hails from Vidisha . He belongs to agriculturistFamily and has been engaged in BOPP self adhesive tape business since the year 2002.Subsequently in the year 2004 he acquired an ongoing tape unit situated in a rentedpremises and managed it successfully. His financial worth is 34.08 lacs. He is incometax payer and returns have been filed up to 2008-09.

Details about the project2007-08 – Turnover was 83.35 lacs2006-07 – Turnover was 50.58 lacs2006-05 - Turnover was 8.66 lacs

4.Working capital The total requirement of working capital on the basis of second year of its working has been estimated at Rs. 24.80 lacs. The detailed calculations of working capital requirement of the proposed scheme are given below:-

Particulars Period Margin (%) Total (Rs. In lacs)Raw Material 20 days 25% 9.30Finished goods 15 days 25% 7.70Sundry debtors 20 days 25% 12.50Working expenses Total 29.50Less: sundry creditors

10 days (4.70)

Other current liabilities

(-)

NET WORKING CAPITAL

24.08

5.Profitability EstimatesThe concern has estimated following turnover and profit for first five years of its working after providing interest depreciation and taxes.

particularsCapacity utilization

40% 50% 60% 60% 60%

Turnover 150.00 187.50 225.00 225.00 225.00Profit before depreciation, interest and tax

34 24.77 28.59 27.29 26.63

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Interest 8.37 7.80 8.58 5.40 4.14Depreciation 4.30 4.30 4.30 4.30 4.30Profit after tax

8.81 12.67 15.71 17.5 18.19

Cash profit 13.11 1697 20.01 21.89 22.49

6.RepaymentKeeping in view the liquidity position based on the estimated profit & projected cash flow ,the proposed loan is too repaid in eight years in 28 quarterly instalments with six months off period as per schedule given below:

First instalment of Rs.100000/- 1.00 lacsNext 03 instalments of Rs.200000/- 6.00Next 24 instalment of Rs.225000/- 54.00Total 61.00

MPFC’s prior experienceThe corporation’s experience of financing in packaging industries in general is satisfactory.

1- Calculation of working capital requirement

particulars Holding period

margin First year Second year Third year

(A) Current assetsRaw material 20 25% 7.47 9.33 11.20Work in process 0 25% 0.00 0.00 0.00Sundry creditors 20 30% 10.00 12.50 15.00

consumables 0 25% 0.00 0.00 0.00

Finished goods 14 25% 5.78 7.24 8.68

Sundry expenses 1 25% 0.14 0.52 0.62

Total(A) 23.66 24.59 35.50

(B) Current liabilitiesSundry creditors 10 30% 3.98 4.73 5.66

Total (B) 3.98 4.73 5.66

Total (A-B) 19.49 24.86 29.84

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Calculation of Break Even PointS.No Particular Amount Rs. In LakhsI Job Work Receipt 225.00

II Total Variable Cost1. Raw Material 168.002. Power 3.273. Wages 10.694. Direct Expenses 3.365. Consumables 0.256. Interest on WCMTL 1.137. Depreciation 4.30 191.00III Net Surplus (I - II) 34.00

IV Total Fixed Cost1. Admin. & Comm. Salary 0.002. Admin. Overhead 4.803. Interest on Term Loan 4.89 9.69

V Break Even Point 28.50%For Installed Capacity

VI Break Even Point 17.10%For Capacity

7. Calculation of Debt Service Coverage Ratio Amt. in LakhsParticulars I II III IV V VI VII VIII

Profit after Tax 9.56 12.99 17.5 17.83 18.29 18.97 19.51 19.65Interest on Term loan 5.52 5.40 4.89 4.29 3.60 2.64 1.68 1.26

Interest on WCTML 1.78 1.49 1.13 0.77 0.41 0.07 0.00

Depreciation 4.30 4.30 4.30 4.30

TOTAL (A) 21.16 24.18 27.82 27.19 26.60 25.98 25.49 25.21

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Interest on Term loan 5.52 5.40 4.89 4.29 3.60 2.64 1.68 1.26

Interest on WCTML 1.78 1.49 1.13 0.77 0.41 0.07 0.00 0.00

Instalment of Term Loan & 1.50 7.00 8.00 8.00 11.00 9.50 8.00 8.00 WCMTL

TOTAL (B) 8.80 13.89 14.02 13.06 15.01 12.21 9.68 9.26

D.S.C.R (A/B) 2.40 1.74 1.98 2.08 1.77 2.13 2.63 2.72

Average DSCR 2.18

Credit rating chartS.No. Parameters Full

MarksUnit’s Score

Financial & Operational Risk ParametersA Static Ratios1 Projected DER 3 32 DSCR of the Project 5 43 Terms of repayment 3 14 Arrangement of Working Capital 5 55 Arrangement of Utilities (Power ETC) 3 16 Payment of Statutory dues 3 1

Sub Total 22 15B Risk Mitigation1 Value of Collateral Securities 5 32 Nature of Collateral Securities 5 43 PC Margins 5 14 Default ratio in the Portfolio 8 55 Solvency of the Promoters 4 1

Sub Total 27 14Aggregate financial & operational Risk Score 49 29

Qualitative Risk FactorsC Business Risk Parameters1 Technology 4 32 Compliance of environment regulations 4 43 User / Product Profile 2 14 Market Network 4 25 Location of the unit 2 2Aggregate Business Risk Score 16 12D Industry Risk Parameters1 Competition 2 1.5

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2 Industry Outlook (In Industry Cycle) 4 33 Regulatory Risk 2 2Aggregate Industry Risk Score 8 6.5E Management Risk Factors1 Integrity 5 32 Track Record 3 23 Management Competence & Expertise 5 34 Experience in the Industry 5 55 Payment Record 4 26 Length of relationship 5 0Aggregate Management Risk Score 27 15

Total Score of the Unit 100 62.5Credit Rating Awarded

Project Report for Term loan of

MANUFACTURING UNIT

( M/S PRASHANTI ENGENIRING )

I got an opportunity to prepare a project report of Rs.150.00lacs under MPFC terms and conditions for a proprietorship firm M/S PRASHANTI ENGENIRING

CONTENTS :-

Project at a glance

Promoters and activities of the firm

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Purpose of loan

Cost of project

Securities

Re-payment schedule (dates and installments)

Annexure

PROJECT AT A GLANCE

1. Name of promoter : Shri Manoj Gala ,Shri Narayan Dhanotiya

2. Address : Plot no 60,Industrial area -1 Pithampur

3. Constitution : Private Limited

4. Nature of business : Manufacturing concern

5. Debt / Equity ratio : 1.50: 1

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6. Promoters contribution : 40%

7. D.S.C.R :1.95 (8 year average)

8. Name & address of bankers : Dena Bank, Sukhliya branch, INDORE

9. Size of the unit. : Small-scale business.

10. Amount of term loan

Recommended : Rs.150.00 lace.

For sanction.

PROMOTERS AND ACTIVITIES OF THE FIRM

Promoters of the firm Shri manoj gala & Shri Narshing dhanotiya are well qualified engineers and have work experience of over 10 years in the same field. The company promoted by them proposes to manufacture automobile components, material handling, hydraulic cylinders & power packs, tooling jigs & fixtures, special purposes machineries. Apart from these the company proposes to do job work for M/s EICHER motors ltd., Larson & turbo ltd. ,Force motors ltd. Hindustan motors ltd.etc.

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PURPOSE OF LOAN

Promoters of PRASHANTI Eng.ltd require a term loan of Rs 150.00 lacs for setting up a new unit for manufacturing of automobile component at pithampur.

COST OF PROJECT

1. Land: - The co had purchased land & building of M/s Technomech Eng.( INDIA ) through MPFC in the year 1993 .

2. Site Development: Rs.9.00 lac A provision of Rs 9.00 lac has been made in the scheme towards site development which includes site leveling, interval & approach road bore well, boundary wall etc.

3. Factory building: Rs 91.00 lac the co. proposes to consult main production shed, office building, D.G. set rooms security office etc. The total area of construction will be to 1774.35 sq mtrs costing of Rs. 91 lacs has been made.

4. Plant & Mach.: Rs 105.00 lac The main plant & mach comprises CNC machines, Drilling machines, fabrication equipments etc. The total cost of plant & mach. Including taxes, erection, installation &electrical comes to Rs 105.00 lacs.

5. Misc. fixed asset: Rs. 2.50 lac A provision of 2.50 lacs is made towards misc. assets viz. furniture & computer.

6. Preliminary & pre-operative expenses : Rs .15.00 A provision of 15.00 lacs had been made in the scheme to take care of expenses during implementation of the project including interest during implementation period ,deposits & expenditure on legal documentation ,stamp duty etc.

7. Provisions for contingency: Rs 15.00 lac Rs. 15.00 lac has been provided for purposes of contingencies to take care of cost escalation.

8. Margin money for working capital :Rs 12.50 lacs

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SECURITY

1. Primary security: - First charge by way of English / equitable mortgage of Land & buildings, plant & mach., furniture & furniture &fixtures of the company.

2. Additional security: - The co. shall offer additional security worth Rs 10.00 lacs in the form of fixed assets.

PERSONAL GUARANTEE

The loan shall be personally guaranteed by following personal for repayment of Principal & interest:-

1. Mrs. Sudha Dhanotiya w/o Shri Narsingh Dhanotiya, promoter of the above firm.2. Mrs. Kalpana Gala W/o Shri Manoj Gala, promoter of the above firm

3. Mr. Manoj Gala S/o Mr. Kalyanji Gala

4. Mr. Narsingh Dhanotiya S/o Mr. Badrilal Dhanotiya

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RE – PAYMENT SCHEDULE

PRINCIPAL AMOUNT

YEAR 1ST 2ND 3RD 4TH 5TH 6TH 7TH 8TH

AMOUNT 0.00 8.00 16.00 20.00 20.00 24.00 28.00 34.00

INTEREST

YEAR QUATER

AMT. INST.

BAL. INT.@13% YEARLY TOTAL

1ST 1ST

2ND

3RD

150

150

150

-

-

-

150

150

150

4.88

4.88

4.88

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4TH 150 - 150 4.88 19.50

2ND 1ST

2ND

3RD

4TH

150

150

150

146

4.00

4.00

150

150

146

142

4.88

4.88

4.88

4.75 8.00 19.37

3RD 1ST

2ND

3RD

4TH

142

138

134

130

4.00

4.00

4.00

4.00

138

134

130

126

4.62

4.49

4.36

4.23 16.00 17.68

4TH 1ST

2ND

3RD

4TH

126

121

116

111

5.00

5.00

5.00

5.00

121

116

111

106

4.10

3.93

3.77

3.61 20.00 15.41

5TH 1ST

2ND

3RD

4TH

106

101

96

91

5.00

5.00

5.00

5.00

101

96

91

86

3.45

3.28

3.12

2.96 20.00 12.51

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6TH 1ST

2ND

3RD

4TH

86

80

74

68

6.00

6.00

6.00

6.00

80

74

68

62

2.80

2.60

2.41

2.21 24.00 10.01

7TH 1ST

2ND

3RD

4TH

62

55

48

41

7.00

7.00

7.00

7.00

55

48

41

34

2.02

1.79

1.56

1.33

28.00 6.70

8TH 1ST

2ND

3RD

4TH

34

26

18

9

8.00

8.00

9.00

9.00

26

18

9

0.00

1.11

.85

.59

.29 34.00

2.83

TOTAL 150 150 104.29

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ANNEXURE

LIST OF ANNEXURE:-

COST OF PROJECT

DEBT SERVICE COVERAGE RATIO

PROJECTED CASH FLOW STATEMENT

PROJECTED BALANCE SHEET

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ANNEXURE –A

COST OF PROJECT

(Amount in lacs)

Particulars Amount

Land 0.00

Building &Site Development 107.23

Plant & Machinery 112.59

Miscellaneous Assets . 2.68Pre –operative Expenses -Contingencies 15.00Margin money for Working capital 12.50

Total 250.00

Means of finance

Particulars Amount

Share Capital (Including Share Premium) 64.00

Unsecured loan (Quasi equity) 36.00

Term Loan from MPFC 150.00

Total 250.00

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ANNEXURE – B

DEBT SERVICE COVERAGE RATIO

Particular 1 st

Year2 nd

Year3 rd

Year4 th

Year5 th

Year6 th

Year7 th

Year8 th

Year

Net Profit After Tax

32.82 38.51 47.71 59.05 57.05 56.37 55.42 55.14

Add: Depreciation 9.46 9.46 9.46 9.46 9.46 9.46 9.46 9.46

Interest on Term Loan

19.50 19.37 17.68 15.41 12.81 10.01 6.70 2.83

TOTAL A 61.78 67.34 74.85 83.91 79.31 75.84 71.58 67.42

Interest on term loan

19.50 19.37 17.68 15.41 12.81 10.01 6.70 2.83

Repayment of term loan

- 8.00 16.00 20.00 20.00 24.00 28.00 34.00

TOTAL B 19.50 27.37 33.68 35.41 32.81 34.01 34.70 36.83

D.S.C.R.(A/B) 3.17 2.46 2.22 2.37 2.42 2.23 2.06 1.83

AVERAGE RATIO

1.95

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ANNEXURE – C

PROJECTED CASH FLOW STATEMENT

Particulars Const 1 2 3 4 5 6 7 8

SOURCES OFFUND

1 N.P. after tax with int.

0.00 56.24 61.78 69.29 78.37 73.76 70.28 66.03 61.88

2. Add :Depreciation

0.00 9.46 9.46 9.46 9.46 9.46 9.46 9.46 9.46

3. Increase in share capital

64.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

4 Increase in long term borrowing

150.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

5 Increase in u/s loan /deposit

36.000.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00

6 Increase in current

liabilities

0.006.84

.31 1.14 1.18 0.00 0.00 0.00 0.00

7 Increase in other liabilities

0.000.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00

8 Increase in Bank borrowing

0.00 30.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL 250.00 102.54 71.55 79.89 89.01 83.22 79.74 75.49 71.34

USES OF FUNDS

1 Increase in 237.50 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

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capital Expenditure

2 Increase in Current assets

0.00 49.34 12.07 9.07

10.06

0.00 0.00 0.00 0.00

3 Decrease in term loan-existing

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

4 Decrease in term loan-proposed

0.00 0.00 8.00 16.00 20.00 20.00 24.00 28.00 34.00

5 Decrease in bank loan

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

6 Interest 0.00 23.40 23.27 21.58 19.31 16.71 13.91 10.60 6.73

TOTAL DEPOSITION

237.50 72.74 43.34 46.65 49.37 36.71 37.91 38.60 40.73

Opening balance 0.00 12.50 42.30 70.50 103.74 143.39 189.90 231.73 268.62

Net Surplus (A- B)

12.50 29.80 28.21 33.24 39.64 46.51 41.83 36.89 30.61

Closing Balance 12.50 42.30 70.50 103.74 143.39 189.90 231.73 268.82 299.23

ANNEXURE – D

BALANCE SHEET AS AT 31/03/09

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Particular Amount Amount

As at 31/0/09 As at 31/3/08

Sources of fund

Share Capital 13040 130400

Reserve &Surplus 322242 306715

Unsecured Loan 2165161 896049

Total 2615161 1333164

Application of funds

Fixed Assets 693617 693617

CURRENT ASSETS

Cash &Bank balance 59593 82535

Loans Advances &deposits

1304489 44489

TOTAL 13064082 127024

Less current liabilities 95984 98857

Net current assets 1268098 28167

Preliminary expenses 2500 2500

Pre operative expenses 653588 608880

TOTAL 2617803 133164

Annexure :1

MPFC Performance Appraisal Format

CIBIL Status-

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KYC Status-

Factory Location-

Registered Office-

Constitution-

Application received on

Information completed by Promoters on

ZO Appraisal completed on

HO Appraisal completed on

Loan applied (Rs. in Lacs)

Loan appraised (Rs. in Lacs)

For HOLC consideration (Rs. in Lacs)

Activity:-

Products Unit Registered Capacity

Installed Capacity

Utilization based on 2 shifts 300 days

Sale Price

PROJECT HIGHLIGHTS-

PROJECT COST-

Particulars Applied by the party

Appraised by the Corporation

Security Cover

Utilization of loan

SIDBI MPFC Total

Land (leasehold)Site DevelopmentFactory BuildingPlant & MachineryMiscellaneous Fixed AssetsPreliminary and Pre operative ExpensesContingenciesWorking Capital Margin MoneyTotal

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FINANCIAL PARAMETERS-

RISK RATING SCORE : Promoters’ Contribution : Appraised By Means of

FinanceDebt-Equity Ratio : Technical Financial (Rs. in Lacs)Security Margin :Return on own Capital :Return on Capital Emp. :Break Even Point (Ins.Cap):Repayment :Moratorium : Instalment :Employment :Interest Rate :Rebate :Credit Rating Rebate :Penal Interest : TOTAL

Auditors:-

Bankers:-

Architects:-

Main Plant Supplier:-

Technical Know How Supplier:-

1- Introduction2- Proposal in Brief

a- Companyb- Land Owners

3- Promoters and Management4- Guarantors5- Past Performance and Financial Position6- Details about the Projecti- Landii- Factory and Buildingiii- Plant and Machineryiv- Electric Installation and Generator Setv- Preliminary and Pre-operative Expensesvi- Contingencies7- Details about-

a) The activityb) Manufacturing Processc) Market Scenario

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d) Pollution and Effluent Disposal8- Cost of Construction9- Sales Price (Per unit)10- Marketing Arrangements11- Arrangement of Utilitiesa) Raw Materialb) Powerc) Waterd) Men power12- Profitability Estimates

I YEAR II YEAR III YEAR IV YEAR V YEARCapacity UtilizationTurnoverPBDITInterest DepreciationProfit after TaxCash Profit

13- Repayment-

Year I Year II Year

III Year

IV Year

V Year

VI Year

VII Year

VIII Year

TOTAL

Amount in Lacs

14- Debt equity Ratio-

Equity Amount Debt AmountShare capital Term Loan-MPFCReserves and Surplus

Term Loan-Others

Unsecured Loans Debt Equity Ratio

15- Security Scenario-

Security Amount Debt Amount Prime Security Term Loan-MPFC

Term Loan-OthersTotal

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16- Capital Structure of the Company-17- Technical Feasibility18- Implementation Schedule and Present status of the Project

S.no. Project Work Period in months1 Preliminary and Promotional Work2 Acquisition of Land and Site development3 Construction of Building and Structure4 Design and Engineering of equipment/ air

conditioning arrangements5 Order and procurement of equipment6 Electrical installments7 Furnishing8 Power Connection9 Possession to tenants

Opening to Public

19- MPFC’s prior experience- 20- Board assumptions underlying profitability estimates

Sr. No. Parameters Assumptions1 Total Construction area2 Capacity Utilization (in %)3 Raw materials-

Consumables-Packing Material-

4 Rental Income5 Salary and Wages6 Power and Fuel7 Repairs and Maintenance8 Depreciation9 Interest on Term Loan10 Interest on Working Capital11 Others

21- Recommendation22- Signed by Deputy GM and GM

Enclosures

1- Details of Profitability estimates- Annexure A2- Cash Flow estimates- Annexure BDraft resolution-

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Security- First Legal Mortgage/Legal MortgageMarginUtilizationInterestGuaranteeRepaymentCapitalUnsecured LoansThe loans shall be released after- (conditions)Other Conditions

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