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Commercial Bank Management

Interim Report

Sector: FMCG
Company: Hindustan Unilever Limited

Submitted To: Prof. D N Panigrahi

Submitted By:
Pakala Kalyani (2013184)
Pankaj Ruplani (2013189)
Priyanka Doshi (2013212)
Utsav Dubey (2013311)

The objective of the project is to determine from a lenders perspective if it is advisable
for a potential lender to take exposure to that sector and company or to gradually
decrease the exposure to that sector and eventually exit it.
To be able to recommend, we are going to carry out relevant financial and ratio analysis
for the company that are appropriate to our sector in particular from the perspective of
a lender.
First of all, we need to know few things about the company:
Can the loan generate enough income for repayment and if the client will repay the
Is the company eligible for the loan according to the criteria?
The creditworthiness of the company
Apart from gathering answers about the above mentioned queries, we are also going to
conduct a financial and ratio analysis which would involve the following:
Balance Sheet Analysis It would indicate the financial status of the business, the
impact of loan on business over time and also aid in calculating the important ratios.
Profit & Loss Statement Analysis It indicates the profitability of the business and
helps in assessment of the financial details about the production, marketing and
distribution processes.
Business Plan Evaluation Monitoring the objectives set by the company and
evaluating the project in terms of the factors that will determine its success.
Cash Flow Analysis It helps both the company and the lender understand when the
money is needed and when it can be repaid. It also helps the lender know the cash
flows arising from the operating, investing and financing activities of the company.
Collaterals If the business has enough assets to cover the loan in case the
organization is unable to repay the loan.
Therefore, the main focus of the lender should be on three Rs:
Risk The amount of risk involved in issuance of the loan
Return The profit or income earned by the company from the loan
Repayment The repayment capability of the company

Alongside, we also will calculate some of the key ratios to measure the different risk,
return and repayment aspects of the company.
Debt-Equity Ratio = (Total Liabilities + Loan Amount)/Net Equity
It compares the current debts of the company and the proposed loan amount with
respect to the net equity of the business. Helps in determining the appropriate loan
Return on Investment = Net Income/Total Investment
It indicates the return or profitability of the company. Is the return enough to cover
the loan principal amount, interest costs and still be profitable for the company.
Working Capital Turnover = Sales/Working Capital
It determines if the business requires more working capital and how effectively the
company is deploying its working capital to generate sales.
Profit Margin = Net Income/Net Sales
It indicates the profit margin that the company earns out of the sales made. Here, we
will also analyse the future trend by trying to estimate if the profit margin will increase
due to the loan.

A detailed and thorough analysis of the above mentioned financial aspects of the
company will help us understand if the company should be issued a loan and if it should
be, then what should be the size of the loan.