AB Presentation final.pptx

7/29/2019 AB Presentation final.pptx

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By

Boda .V .V Santosh Kumar


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Presented by Boda.V.V.Santosh Kumar, RollNo.51 , PGDM-FM, Under the

guidance of MR.G. Uma Maheswara Rao (senior manager) & Mr. Subbarao

Peteti (EX-ED of Punjab & Sind bank and Professor of ITM-IFM)


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Objective of the study

To understand Micro, Small and Medium enterprises.

To study the Credit Appraisal for working capital finance ofMSMEs.

To understand the role of banks in the financing of MSMEs.

To understand the importance of products offered by the bank formeeting the needs of MSMEs.

To understand the rationale behind various guidelines observed byAndhra Bank.


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OVERVIEW ABOUT MSME

Introduction

MSME Development Act 2006

Products Offered by the Bank to MSMEs

Two types of Enterprises

Manufacturing

Service


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Manufacturing Enterprises Service Enterprises

Micro Upto Rs.25lakhs Upto Rs.10 lakhsSmall

More than Rs. 25lakhs & upto 5crores More than Rs.10lakhs& up to 2crores

MediumMore than Rs.5crores & up

to Rs.10croresMore than Rs.2crores &

up to Rs.5crores

Investment in Plant and Machinery/equipment(Excluding Land and Buildings)


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CASE STUDY

Name of the Unit : XYZ Brands Ltd.

Line of Activity : Plain Gold Jewellery trading & manufactured on Job

basis.

Name of the Product : Diamonds and Jewellery

Facility : Open cash credit

Present Preference : Renewal of OCC limits from 20cr to 45cr.

Security : Hypothecation of stocks, book debts onPari-passu basis with member banks for

Consortium.


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Assessment of Limits

For Open Cash Credit Methods

Turn Over method

Inventory method

MPBF system

Cash Budget system


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Working Capital Details

Rs.in.Crores

Current Assets 31-3-11 Current Liabilities 31-3-11

Cash and Bank balance 3.59 Short term Borrowings

Fixed deposits with bank 20.20 (From Bank) 46.64

Receivables 231.96 Sundry Creditors 197.24

Finished Goods 87.00 Advances 0.54 Advances recoverable 9.53 Provision for Taxes 16.99

Advances to Income tax 13.73 Other statutory liabilities 1.37

Other current assets 0.08 Other current Liabilities 0.36

Total Current Assets 366.09 Total Current Liabilities 263.14

Net Working Capital : 366.09

263.14 = 102.95 Working Capital Gap : Current AssetsCurrent Liabilities(Excl Bank

Borrowings)

Working Capital Gap : 366.09216.5 = 149.59

Current Ratio : 366.09/263.14 = 1.39


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Assessment of Working Capital

Requirements under MPBF

Particulars 31.03.2011 Total Current Liabilities 263.14

Total Current Assets 366.09

(-)Excluding Exports Receivables -

Actual Current Assets 366.09

Minimum Stipulated NWC (A)

(@ 25% of C.A Excl Exports Receivables) 91.52

Actual NWC (C.AC.L) (B) 102.95

Working Capital Gap (C) 149.59 (D) item (C - A) 58.07

(E) item (CB) 46.64

(F) from the above two items which

ever is low 46.64

Rs. In Crores


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Financial Indicators

Particulars 31-3-2009(Audited)

31-3-2010

(Audited)31-3-2011

(Audited)Net Sales

PAT

Fixed Assets

Current Ratio

TOL/TNW

Actual Net Working Capital

EPS(Rs.5 as on

31.3.2011)

615.26

2.62

2.78

1.65

4.79

80.52

3.14

912.20

8.05

2.47

1.54

4.79

88.14

9.64

1341.10

22.07

2.21

1.39

4.60

102.95

13.21

(Rs.in crores)


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Credit Risk Assessment

CRS for Fund Based Limits of Rs.5.00lacs & above but less than

Rs.50lacs.

CRAS for Borrowal accounts with exposures of Rs.50.00lacs &

above and upto Rs.5.00crores.

CRRM for Borrowal Accounts with exposures of above Rs.5.00

crores. A separate CRRM Rating model for MSME borrowers with

exposures of above RS.5.00crores and above.


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Risk Rating Scale Under CRRM

Marks Secured Credit Rating Description5.40 to 6.00 A++ Exceptionally high position of

(90% & Above) strength.

4.90 to 5.39 A+ A high degree of strength among

(80% to 90%) the peers.

4.20 to 4.89 A A moderate degree of strength

(70% to 80%)

3.60 to 4.19 B++ A moderate strength with stable

(60% to 70%) out look.

3.00 to 3.59 B+ A moderate strength with marginal

(50% to 60%) negative out look.

2.40 to 2.99

(40% to 50%) B Weakness on a parameter to

comparison peers. Unstable out look


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Spread Applicable Under CRRM

Rating Applicable Spread

A++ -1.00

A+ -0.50

A -0.50

B++ NIL

B+ 0.50

B +1.00

C +1.00

Crediting Rating : B++


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Finding of the Study

The credit risk assessment of XYZ Ltd has resulted in grading

the unit as B++, which implies that the unit is moderate and is

capable of repaying the loan amount.

The XYZ Company is eligible for the credit limit up to

Rs.46.64crores so that the bank is enhancing their limit from

20crores to 45 crores based on the MPBF method.


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THANK YOU

AB Presentation final.pptx

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