My Project

Sources of Data:
Secondary Data:
The secondary data is collected from the following sources:
 Projects sanctioned by KSFC.
 KSFC news.
 Annual reports.
 KSFC website.
 Broachers of loan schemes.
 Records and manuals of KSFC.
Analysis of Secondary Data:

The secondary data is collected from the above sources and analyzed using different tools
and techniques. The case study was analyzed using projected profitability statement, Debt-Equity
ratio, Debt-Service Coverage ration, Projected Cash Flow Statement, Break-Even Analysis,
Sensitivity analysis, Internal rate of Return method and Net Present Value Method.
Tools and Techniques used for Data Analysis:

The tools and techniques used are as follows
 Projected Profitability Statement.
 Debt-Equity Ratio.
 Debt-Service Coverage Ratio.
 Projected Cash Flow Statement.
 Break-Even Analysis.
 Sensitivity Analysis.
 Internal Rate of Return Method.
ANALYSIS AND INTERPRETATION OF CASE STUDY
METHODOLOGY OF DATA COLLECTION
Project at a glance
1. a) Name of the applicant : “X”HANDLOOMS Pvt. Ltd.

b) Unit code : 14595
2. Address:
a) Office : NO.266, 4TH PHASE
HILL INDL., AREA, OPP. VIJAYA
Bangalore – 560 010.
TELEPHONE NO: 411226764
E-mail ID:
Web address:
,b) Factory : SY,NO.22/2 & 52/2, NEAR NAVODAYA

SCHOOL,KAMALA HOBLI, BALLAPUR-561
203
Bangalore – 560 010.
3. Constitution : Private Sector Limited Company
4. A) Type of Industry : textiles Industry

B) Size of industry : industry sectors
5. Line of activity
A) Existing : textiles
B) Proposed : textiles
6. Capacity :
A) Installed : 9964
B) Maximum operating : 75.00 %
7. Main Raw-materials : Polyester, nylon, acrylic & cotton yarn
8. End use of the finalized

Products : textiles
.
9. sales turnover in normal year :rs. 7473 lacks

:
10. project cost and funding pattern

Cost of project
Sl no project detalils amount (lachs)
1. Building cost : 280.00

2. plant & machinery Indigenous (new) : 1,010.00
3. deposits : 22.00
4. int. during Imp1 : 48.00
5.additional working capital margin : 130.00
Total cost of project : 1,490.00
Means of finances
Debt
Sl no means of finances details amount (lakhs)

1. term loans from KSFC :900.00
sum : :900.00
Equity
Sl no means of finances details amount (lakhs)
1.Equity share capital :472.00

2. Intrest free u.s loans from promoters :118.00
Sum :590.00
Means of finances – Total :1,490.00
Note on cost of project and means of finance :
1. As the company is going for major expansion, provision is made for deposists,
Interest during implemenion and working capital margin.
2.The company is eligible for subsidy under TUF scheme . this is not provided in the
means of finance as per the prevailing norms.
12) . Financial and profitabilty minimum actually
Prescribed provided
a) Promoter’s contribution : 22. 50% 31.68%
b) Debt equtiy ratio-project : 2.00 : 1.00 1.53 : 1.00

c) Debt equtiy ratio – overall : 2.00 : 1.00 1.07 : 1.00
d) Debt service coverage ratio : 1.50 : 1.00 1.70 : 1.00
e) Security margin : 25.00% 30.23%
f) Overall security margin : 25.00% 45.06%
g) Return on capital after
taxation in normal year of
maximum operating : 10.20%
h) Margin of profit on sales

before taxation in normal
year of maximum operating : 5.20%
i) Internal rate of return : 25.34%

j) Break even point
i) As a percentage of installed
Capacity : 47.51%
13) . a) Repayment period : 5 year excluding a moratorium period of

15 months
b) implemention period : 9 months
14). a) exployment potential :
i) Existing : 70 persons
ii) proposed : 35 persons
b)capital investment : _
15). a) power requirement :
i) Exsisting : 500.00 KVA
ii) proposed : 500.00 KVA
b) requirement of power
per peson employed : 57.14 KVA
16). Statistical information :
a) Are the promoters

Local entreprenuers : YES
b) Promoters belong to : GENERAL
c) Scheme under which the

Loan is recommended : general loan scheme
d) Location of the unit : banglore rural ,

e) Has soft loan /seed _
f) Is the loan sought for
Establishing /modernisation
Of an expantion loan
17). a) loan amount applied : Rs 11,90,00,000
b) loan amount recommended

for : Rs. 9,00,00,000
18) government clearances

Required and obtained : wheether whether
required obtained
a) Letter of intent or
Registration (PRC) : NO NO
b) Proof of having filed
Memorandum of information _ _
With sia ,govt.of india : NO NA
c) Land allotment / purchase : YES YES
d) Building plan appsroval : YES NO
e) Power sanction : YES NO
f) Import licece/ c.g clearance : NO NA
g) COLLABORATION APPROVAL: NO NA
h) INCOME TAX CLEARANCE

CERTIFICATE : NO NA
i) NO OBJECTION LETTER FROM

POLLUTION CONTROL : YES NO
BOARD
j) Establishment licence from local

Authority : YES NO
19. OTHER INFORMATION :
a) DATE OF RECEIPT OF
APPLICATION : 27- JUL -2011
b) Date OF SITE / EXISTING : 25 –JUL - 2011

UNIT INSPECION
c) DATE OF RECEIP OF : 29 – JUL- 2011

COMPLETE INFORMATION
d) DATE OF SUBMISSION OF
THE PROPOSAL TO THE
SANCTIONING AUTHORITY/ : 01 – AUG - 2011
e) Time taken for PROCESSING

THE LOAN : 05 DAYS
f) Appraisal team : somashekarappa

Ravi Shankar
Ananth R
Board /E.C. : E.C.
g) NAME OF OTHER
PARTICIPATING
INSTITUTION : N.A.
h) NAME OF THE LEAD BANK :
i) NAME OF THE BANKERS : SYNDICATE BANK

BWSSB BRANCH
AVENUE ROAD
BANGLORE
20. QUANTUM OF NRI INVESTMENT

IN THE PROJECT : _
21. a) PRIORITY OF THE INDUSTRY : INDUSTRY – MEDIUM

ENTERPRISES
b) IS THE PROJECT BASICALLY

ELIGIBLE FOR REFIRANCES : NO
SENSITIVITY ANALYSIS OF THE CASE STUDY
To maintain identity, the name of project and applicants has changed. The following
tables 1 to 5 shows the original figures as calculated by credit department of KSFC based on
certain assumptions.
Instoled capacity . Rs.9964 lakhs

No. of Shifts 3.00
No. of working days 300.00
TABLE-1.PROJECTED PROFITABILITY STATEMENT
Years I II III IV V
Capacity Utilisation (%) 65 70 75 75 75
Sales 6476.60 6974. 80 7473.00 7473.00 7473.00
Raw Materials 4533.62 4882.36 5231.10 5231.10 5231.10

Consumables 388.60 418.49 448.38 448.38 448.38
Power, Fuel, Water 180.31 193.58 206.85 206.85 206.85
Salary and wages 140.00 154.00 169.40 186.34 204.97
Admn and misc exps 125.00 137.50 151.25 166.38 183.02
Depreciation 255.71 220.32 189.95 163.86 141.45

Repairs and Maintenance 50.00 55.00 60.50 66.55 73.21
Int on term loan 144.00 118.40 92.80 64.00 32.00
Selling expenses 161.92 174.37 186.83 186.83 186.83
Other expences 129.53 139.50 149.46 149.46 149.46
Interest on WC 171.55 184.62 197.73 197.73 197.73
Cost of Production 6280.24 6678.14 7084.25 7067.48 7055.00
Profit Before Tax 196.36 296.66 388.75 405.52 418.00
Taxation 65.23 98.55 129.14 124.71 138.86
Profit After Tax 131.13 198.11 259.61 270.81 279.14
TABLE-2. PROJECTED WORKING CAPITAL ESTIMATE
Installed capacity Rs. 9964 lakhs

No. of Shifts 3.00
Working capital estimte
As per Tendon Committee Norms

(Rs. In lakhs)
Stocking
Items Period I II III
(month)
Raw materials and consumables 2.00 820.37 883.48 946.58
Work in progress & finished goods 0.25 127.19 135.20 143.38
Bills receivables 1.50 809.58 871.85 934.13
Working expenses 1.00 65.56 71.16 77.02
Total current assest 1822.70 1961.69 2101.11
Less: creditors 0.50 188.90 203.43 217.96
Net current assest 1633.80 1758.26 1883.15
Less: working capital margin 408.45 439.57 470.79
Working capital facility from banks 1225.35 1318.69 1412.36
TABLE-3.PROJECTED DEBT SERVICE COVERAGE RATIO

No. of Shifts 3.00
(Rs. In lakhs)
years I II III IV V
131.13 198.11 259.61 270.81 279.14
Profit after tax
Interest on term loan 144.00 118.40 92.80 64.00 32.00
255.71 220.32 189.95 163.86 141.45
Depreciation
Corporeation own fund 160.00 160.00 180.00 200.00 200.00
T L Bank 19.07 19.07 0.00 0.00 0.00
Loans repaid total 530.84 536.83 542.36 498.67 452.59
TL- DLATP 30.00 30.00 30.00 29.15 0.00

Intrest on term loan 144.00 118.40 92.80 64.00 32.00
Total 353.07 327.47 302.80 293.15 232.00
DSCR 1.50 1.64 1.79 1.70 1.95
Combined DSCR 1.70%
TABLE-4. PROJECTED CASH FLOW STATEMENT
No. of Shifts 3.00 ,No. of working days 300.00 (Rs. In lakhs)
Years 1 2 3 4 5
Sources of funds
196.36 296.66 388.75 405.52 418.00
Profit before tax
255.71 220.32 189.95 163.86 149.45
Depreciation
Share capital 472.00
Term loan(KSFC) 900.00
Intrest free U/S loan 118.00
Creditors 188.90 203.43 217.96
Working capital loan 1225.35 39.34 39.67
Total 1490.00 1866.32 813.75 890.33 569.38 559.45
Disposition of funds
Preliminary Pre-op exps, 70.00
Interest during imp etc..
Capital expenses 1290.00
Current assets 1633.80 124.46 124.89
Loan repaid:
TL: KSFC (prop) 160.00 160.00 180.00 200.00 200.00
TL : Bank 19.07 19.07 0.00 0.00 0.00

30.00 30.00 30.00 29.15 0.00
TL-DIATP
65.23 98.55 129.14 134.71 138.86
Taxation
Dividends
Total 1360.00 1908.10 432.08 464.03 363.86 338.86
Opening balance 0.00 130.00 88.22 469.89 896.19 1101.71
Nett surplus 130.00 41.78 38.67 426.30 205.52 220.59
Clearing balance 130.00 88.22 469.89 896.19 1101.71 1322.30

ASSUMPTIONS MADE FOR ASSESSING PROFITABILITY OF M/S ABC
RUBBERS PVT. LTD. BANGALORE.
1. This is an existing profit line making company. With the propose expansion the installed
capacity of the unit is estimated at RS .9964.00lacks per annum. It is assumed that there will be
increase in sales to the extent of 60 % with the proposed expansion
.2. The unit works for 300 days in a year with 3 s of 8 hrs per day.
3. The unit is assumed to achieve 65%, 70% and75% of the installed capacity during the 1st, 2nd
& 3rd year respectively and maintain at the level thereafter.
4. Rawmaterials are estimated at 70% of the turnover.
5. Consumables are estimated at 60% of the turnover.
6. Wages and salaries amount to RS. 140.00 lack during 1st year and increased by 10% from the
2nd onwards.
7. Administreative and miscellaneous expenses rate estimated at RS .125.00 lacks during the 1st
year and increased by 10% from the 2nd year onwards
8. Depresiation has been calculated at 15% on plant and machinery, 10% on building;
9. Expenses on repairs and maintenances have been provided at RS. 50.00 lacks during the 1st
year and increased by 10% from the 2nd years onwards.
10. Other mfg, expenses rate assumed at 2% of the sale turnover.
11. Income tax has been calculated as applicable.
TABLE-5. PROJECTED BREAK EVEN ANALYSIS
Based on the optimum capacity of 75.0% of installed capacity achieved in the 3rd year of
operation.
Fixed Costs
(Rs. In lakhs)
Power, water etc, 7.80
Salary and wages 169.40
Administrative exps 151.25
Depreciation 189.95
Repairs and maintenance 60.50
Interest on term loan 92.80
Total 671.70
Variable Costs
Raw materials 5231.10
Consumables 448.38
Selling expenses 186.83
Interest on working capital 197.73
Other mfg expenses 149.46
TOTAL 6412.55
Sales 7473.00
Contribution 1060.45
BEP in terms of installed capacity 47.51%
BEP in terms of sales 4733.48
Cash even break even point 34.07%
TABLE-6. PROJECTED INTERNAL RATE OF RETURN.

No. of Shifts 3.00
(Rs.Inlakhs)
Gross Profit
Inventori interes depreciati Net cash
years fixed total before total
es t on flow
assets tax
0 1425.00 1425.00 -1425.00
1 1633.80 1633.80 196.36 315.55 255.71 767.62 -866.18
2 124.46 124.46 296.66 303.02 220.32 820.00 695.54
3 124.89 124.89 388.75 290.53 189.95 869.23 744.34
4 0.00 405.52 261.73 163.86 831.11 831.11
5 418.00 229.73 141.45 789.18 789.18
6 423.15 197.73 122.18 743.06 743.06
197.73
7 388.99 105.61 692.33 692.33
197.73
8 347.44 197.73 91.35 636.52 636.52
9 298.34 197.73 79.07 575.14 575.14
10 241.40 197.73 68.48 507.61 507.61
11 241.40 197.73 59.36 498.49 498.49
12 241.40 197.73 51.49 490.62 490.62
13 241.40 197.73 44.70 483.83 483.83
14 241.40 197.73 38.84 477.97 477.97
15 241.40 197.73 33.77 472.90 472.90
IRR= 25.34%
SENSITIVITY ANALYSIS
Sensitivity Analysis was not done in any of the cases sanctioned by KSFC. In real life
such an assumptions would be dangerous and unrealistic enhances after applying sensitivity
analysis are shown as follows.
Situation 1
The sales realization at 100% capacity utilization has been estimated by assuming sales
decreased from 9964.00 lakhs to 9777.59 Lakhs, i.e. Turnover decreased by 186.41 Lakhs.
The following has been reworked for the above revised situation 1.
 Profitability Statement.
 Working capital estimate.
 Debt-service coverage ratio.
 Cash flow statement.
 Break even point.
 Internal rate of return.
Table 1.1: Revised Profitability Statement
(Rs. In lakhs)
Years I II III IV V
Sales 6355.43 6844.31 7333.19 7333.19 7333.19
Raw Materials 4448.80 4791.02 5133.23 5133.23 5133.23
Consumables 381.33 410.66 439.99 439.99 439.99
Power, Fuel, Water 177.95 191.64 205.33 205.33 205.33
Salary and wages 140.00 154.00 169.40 186.34 204.97
Depreciation 255.71 220.32 189.95 163.86 141.45
Repairs and Maintenance 50.00 55.00 60.50 66.55 73.21
Int on term loan 144.00 118.40 92.80 64.00 32.00
Other expenses 127.11 136.89 416.66 416.66 416.66
Interest on WC 171.55 184.62 917.73 917.73 917.73
Taxation 58.00 90.14 120.00 125.33 129.41
Profit After Tax 117.09 183.01 243.02 254.46 262.82
Analysis :
In the 1st, 2nd , 3rd, 4th,5th years when the turnover is 9964.00 lakhs, the company earns
profit of Rs.131.13,198.11,259.61,270.81, & 279.14 lakhs respectively and when it is assumed
that the turnover is 9777.59 lakhs the company again earns a profit of
Rs.117.09,183.01,243.02,254.46, & 262.82 lakhs respectively .
Inference :
From the above table it is clear that the profit after tax of project decreased after
sensitivity analysis, Even though the company is earning profits every year, the profit after tax
has decreased drastically compared to the original case.
Table 1.2 Revised working capital estimate
As per Tandon Committee Norms (Method-I)
(Rs. In lakhs)
Stocking
(month)
Total current assets 1807.35 1945.15 2083.40
Less: creditors 0.50 188.90 203.43 217.96
Net current assets 1618.45 11741.73 1865.44
Analysis:
In the 1st, 2nd, 3rd, 4th, & 5th when the turnover is Rs. 9964.00 lakhs the company
requires working capital facility of Rs.1225.35,1318.69, & 1412.36 lakhs respectively from bank
and when it is assumed that the turnover is only 9777.59 lakhs p.a. then company will required
working capital facility of Rs.1213.84,8806.3 & 1399.1lakhs respectively from bank to carry out
its day to day operations.
Inference:-
From the above table it is clear that, there is no much difference in the working capital
facility required from bank. The decrease in turnover does not have much impact on working
capital requirement of the company.
Table 1.3 : Revised DEBT Service Coverage Ratio.
(Rs. In lakhs)
years I II III IV V
Profit after tax 117.09 183.01 243.02 204.46 262.82
255.71 220.32 189.95 163.86 141.45
Depreciation
Total 516.8 521.73 525.77 432.32 436.27
corporeation 160 160 180 200 200
Loan repaid: 19.07 00 00
TL bank 19.07 00
Tc-dlatp 30 30 30 29.15 00
Interest on term loan 144 118.40 92.80 64.00 32.00
Total 353.07 327.47 302.80 293.15 232.00
DSCR 1.46 1.59 1.74 1.47 1.88
Combined DSCR 1.63%
Analysis:-
When the turnover in Rs.9964.00 lakhs per year the Combined Debt Service Coverage
Ratio is given by 1.70% and when it is assumed that the turnover is only 9777.59 lakhs then the
Combined Debt Services Coverage Ratio is given by 1.63%.
Inference:-
From the above table it is clear that the Combined DSCR declared drastically. The Ratio
should be generally in the range of 1.5 to 2. The arrange DSCR ranging between 1.5:1 and 2:1 is
accepted as reasonable. DSCR for projects below 1.5:1 will be accepted in extremely deserved
cases. The DSCR indicates the ability of the project to service the debts during the currency of
the loan. It shows that the company cannot repay the debts during the Early years of its
operation.
Table 1.4. Revised Cash flow Statement:
(Rs. In lakhs)
years I II III IV V
Sources of funds
Profit before tax 175.09 273.15 363.02 379.79 392.27
255.71 220.32 189.95 163.86 141.45
Depreciation
Share capital 472
Term loan 900
creditors 188.90 203.43 217.96
U/S loan 118
Total 1490 1833.54 8289.36 8178.13 543.65 533.72
Preliminary Pre-op exps, 70
Interest during imp etc..
Capital expenses 1290
Current assets 1618.45 123.28 123.71
Loan repaid: 19.07 00.00
TL(TC-Bank) 19.07
Corporeation own fund 160.00 160.00 180.00 200.00 200.00
58.00 90.14 120.001 125.33 129.45
Taxation
Dividends 00.00 00.00 00.00 00.00 00.00
TL-DIATT 30.00 30.00 30.00 29.15 00.00
Total 1360 1885.52 422.49 453.71 354.48 329.45
Opening balance 00.00 130.00 181.98 8048.85 15773.27 15962.44
Nett surplus 130.00 51.98 7866.87 7724.42 189.17 204.27
Clearing balance 130.00 181.98 8048.85 15773.27 15962.44 16166.71
Analysis:-
In the 1st, 2nd, 3rd, 4th, & 5th when the turnover is 9964.00 Lakhs the company will
have a Closing Balance of Rs.88.22, 469.89, 896.19, 1101.71 &1322.3 lakhs respectively and
when it is assumed that the turnover is 9777.59 Lakhs P.A. the Company will have a closing
balance of Rs.181.98, 8048.85, 15773.29, 15962.44 & 16166.71 lakhs respectively.
Inference:-
From the above table it is clear that after sensitivity analysis the opening balance, net
surplus and closing balance of the company has decreased from the original value. it is vertical
largely. Hence by one funding any project the corporation must carry out sensitivity analysis and
identify more sensitive element and measures should be taken to control the sensitive element.
Table 1.5: Revised Break Even Analysis.
Based on optimum capacity of 75.0% of installed capacity achieved in the 3rd year of
operation.
(Rs. In lakhs)
Fixed Costs
Depreciation 189.95
Interest on U/S loan
Total 671.7
Variable Costs
Consumables 439.99
Power, water etc,. 205.33
Other expences 146.66
Total 6306.27
Sales 7333.19
Total variable cost 6306.27
Contribution 1026.92
Analysis:-
When the turnover p.a. is Rs. 9964.00 Lakhs then the company will achieve a sales of
Rs.7473.00 Lakhs in 3rd year of its operation and the break even point becomes 47.51% when
turnover is 9777.59 lakhs p.a. then the company will achieve only a sales of RS.7333.19 lakhs in
the 3rd year of its operation and the break even point becomes 49.06%.
Inference:-
The Break Even Point (BEP) is the point at which the unit neither Earns Profit nor incurs
loss. The cost as production is just recovered at the BEP. From the above table it is clear that the
company must utilize a capacity more than that of BEP. to avoid losses. Hence the corporation
must carry out BEP analysis to know viability of the project.
Table 1.6 Revised Internal Rate of Return.
(Rs. In lakhs)
year Capital Inventor Profit interest deprecia total Nett cash
s outlay ies total before tion flow
tax
0 1425.00 1425.00 1425.00
1 1618.45 1618.45 175.09 144.00 125.71 574.8 1043.65
2 123.28 123.28 273.15 118.40 220.32 611.87 488.59
3 123.71 123.71 363.02 92.80 189.95 645.77 522.06
4 00.00 379.79 64.00 163.86 607.65 607.65
5 00.00 392.27 32.00 141.45 565.72 565.72
6 00.00 392.27 32.00 122.18 546.45 546.45
7 00.00 392.27 32.00 105.61 529.88 529.88
8 00.00 392.27 32.00 91.35 515.62 515.62
9 00.00 392.27 32.00 79.07 503.34 503.34
10 00.00 392.27 32.00 68.48 492.75 492.75
11 00.00 392.27 32.00 59.36 483.63 483.63
12 00.00 392.27 32.00 51.49 475.76 475.76.
13 00.00 392.27 32.00 44.70 469.42 469.42
14 00.00 392.27 32.00 38.84 463.56 463.56
15 00.00 392.27 32.00 33.77 458.49 458.49
IRR=
Analysis:-
When turnover p.a.is Rs.9964.00 Lakhs, then the company will have a IRR of Rs.
25.34% and when the turnover p.a. is Rs.9777.59 Lakhs, then the company will have IRR of
……%.
Inferance:-
From the above table it is clear that the project generates IRR greater than cost of capital.
The NPV value is positive at the cut-off rate and it indicates that the investment in the project
gives profit greater than the cost of capital. Hence the proposal can be accepted for financing.
Situation 2
The consumables are estimated at 0.6% on the sales turnover by assuming an increase of
0.10% in consumables after applying sensitivity analysis the following have been reworked for
the above revised situation 2.
Table 1.7 Revised Profitability Statement
Years I II III IV V
Sales 6476.60 6974.80 7473.00 7473.0 7473.00
0
Raw Materials 4533.62 4882.36 5231.10 5231.1 5231.10
0
Consumables 647.66 697.48 747.3 747.3 747.3
Power, Fuel, Water 180.31 193.58 206.85 206.85 206.85
Salary and wages 140.00 154 169.40 186.34 204.97
Depreciation 255.71 220.32 189.95 163.86 141.45
Repairs and Maintenance 50.00 55 60.50 66.55 73.21
Int on term loan 144.00 118.40 92.80 64 32
Other expences 129.53 139.50 149.46 149.46 149.46
Interest on WC 171.55 184.62 197.73 197.73 197.73
Taxation 20.70 5.83 29.64 35.18 39.30
Profit After Tax 42.00 11.84 60.19 71.42 79.78
Analysis:-
th
In the 1st, 2nd, 3rd, 4 & 5th when consumables are estimated at 0.06% on the Sales
turnover, the company will earn a profit after tax of Rs.131.13,198.11,259.61,270.81 &
279.14 Lakhs and when it is assumed that consumables are estimated at 0.10% on the sales
turnover, company will earn a profit after tax of Rs.42.00, 11.84 , 60.19, 71.42 & 79.78 Lakhs
respectively.
Inference:-
From the above table it is clear that the profit after tax of project decreased drastically
after sensitivity analysis. Even through the company is earning projects , the profit after tax has
decreased drastically, compared to the original case the increase in consumables decrease the
profits of the hospital. Even though profits are decreased the company can generally cash to meet
its repayment schedule. Hence increase in consumables is not sensitive to change.
Table 1.8 Revised Working Capital Estimate
(Rs. In lakhs)
Stocking
(month)
Total working capital required 2344.03 2523.13 2702.65
Less: creditors 0.50 188.90 203.43 217.96
Balance working capital assistance 2155.13 2319.7 2484.69
(net current assest)
Note:- As per Tender Committee Norms (method-I) 25% of total current Assets should be
financed from long-term sources, which is considered as margin money for working capital and
included in the cost of project while considering long term requirements of funds.
Anaysis :
In the 1st, 2nd, 3rd, when consumables are estimated at 0.06% on the sales turnover, the
company will require a working capital facility of Rs.1225.35, 1318.69, & 1412.36 lakhs
respectively from banks and when it is assumed that consumables are estimated at 0.10% on the
sales turnover, the company will require a working capital facility of Rs.1616.35, 1739.77, &
1863.52 lakhs respectively from bank to carry out its day to day operations.
Inference:
From the above table it is clear that, there is a difference in the working capital facility
required from bank. The increase in consumption of consumables increased by the working
capital requirements of the company.
Table 1.9: Revised DEBT service coverage ratio
(Rs. In lakhs)
years I II III IV V
Profit after tax 42.00 11.84 60.19 71.42 79.78
255.71 220.32 189.95 163.86 141.45
Depreciation
Total 441.71 350.56 342.94 299.28 253.23
Amount available
Loan repaid:
TL: KSFC (proposed) 160.00 160.00 180.00 200.00 200.00
TL: KSFC (DPL) 30.00 30.00 30.00 29.15 00.00
Total 353.07 327.47 302.80 293.15 232.00
DSCR 1.25 1.07 1.13 1.02 1.09
Combined DSCR 1.11%
Analysis :
When consumables are estimated at 0.06% on the sales turnover, the company will have
a combined debt service coverage ratio of 1.70% and when it is assumed that consumables are
estimated at 0.10% on the sales turnover, then company will have a combined DSCR of 1.11%.
Inference :
From the above table it is cleare that the combined DSCR decreased. This ratio should
be generally in the range of 1.5 to 2. The average DSCR ranging between 1.5 to 2 and 2:1 is
accepted as reasonable. DSCR for projects below 1.5:1 will be accepted in extremely deserving
eases. The DSCR indicates the ability of the project to service the debts during the currency of
the loan. Since DSCR of the company lies between 1&2, the project generates sufficient cash to
repay its debts.
Table 1.10 : Revised Cash Flow Statement Analysis :(Rs. In lakhs)
years I II III IV V
Sources of funds
62.7 17.67 89.83 106.6 119.08
Profit before tax
255.71 220.32 189.95 163.86 141.45
Depreciation
Share capital 472.00
Term loan 900.00
U/S loan 118.00
Creditors 188.90 203.43 217.96
Total 1490.00 2123.66 564.84 621.49 270.46 260.53
Preliminary Pre-op exps,
Interest during imp etc.. 70.00
Capital expenses 1290.00
Current assets 1618.45 123.28 123.71
Loan repaid:
TL: KSFC (prop) 19.07 19.07 00.00 00.00 00.00 00.00
TL : KSFC (DPL) 160.00 160.00 180.00 200.00 200.00
20.70 5.83 29.64 35.18 39.30
Taxation
Dividends 00.00 00.00 00.00 00.00 00.00 00.00
Total 1360.00 1818.22 308.18 333.35 235.18 239.3
Opening balance 00.00 130.00 435.44 692.1 980.24 1015.52
Net surplus 130.00 305.44 256.66 288.14 35.28 21.23
Closing balance 130.00 435.44 692.1 980.24 1015.52 1036.75
Analysis:
In the 1st, 2nd, 3rd, 4th,& 5th year when consumables are estimated at 0.06% on the
sales turnover, the company will have a closing balance of Rs 88.22, 469.89, 896.19 ,1101.71, &
1322.30 lakhs respectively and when it is assumed that consumables are estimated at 0.10% on
the sales turnover, the company will have a closing balance of Rs.435.44, 692.1, 980.24,
1015.52,& 1036.75 respectively.
Inference :
From the above table it is clear that after sensitivity analysis the opening balance, net
surplus and closing balance of the company has decreased from the original volume. It does not
affect the operations of the company to a large extent. Hence the increase in consumption of
consumables is not sensitive to changes.
Table 1.11: Revised Break even analysis
Based on optimum capacity of 75.0% of installed capacity achieved in the 3rd year of
operation.
(Rs. In lakhs)
Fixed Costs Amount
Depreciation 189.95
Interest on U/S loan 0.00
Total 671.7
Variable Costs
Consumables 747,3
Power, water etc,. 206.85
Other expences 149.46
Total 6701.84
Sales 7473.00
Total variable cost 6701.84
Contribution 771.16
Analysis :
When consumables are estimated at 0.06% on the sales turn over, than the company will
achieve sales of Rs.7473.00 lakhs in the 3rd year of its operation and the break-even point
becomes47.51% . When it is assumed that consumables are estimated at 0.10% on the sales
turnover then the company will achieve sales of Rs. 7473.00 in the 3rd year of its operation and
the break-even point becomes 65.33%
Inference :
The break-even point (BEP) as the point at which the unit neither earns profit nor incurs
losses. The cost of production is just recovered at the BEP. From the above table it is clear that
the company’s sales remained some even after increase in consumption of consumables and the
change in BEP is negligible. Hence the increase in consumables does not affect the cash
generation capacity of the company. Thus consumables are not sensitive to changes.
Table: 1.12 Revised Internal Rate of Return
(Rs. In lakhs)
years Capital Inventorie Profit interes depreci total Nett
outlay s total before t ation cash
tax flow
0 1425.00 1425.00 1425
1 1618.45 1618.45 62.7 144.00 255.71 462.41 1156.04
2 123.28 123.28 17.67 118.40 220.32 356.39 233.11
3 123.71 123.71 89.83 92.80 189.95 372.58 248.87
4 106.6 64.00 163.86 334.46 334.46
5 119.00 32.00 141.45 292.45 292.45
6 32.00 122.18 273.18 273.18
7 32.00 105.61 256.61 256.61
8 32.00 91.35 242.35 242.35
9 32.00 79.07 230.07 230.07
10 32.00 68.48 219.48 219.48
11 32.00 59.36 210.36 210.36
12 32.00 51.49 202.49 202.49
13 32.00 44.70 195.7 195.7
14 32.00 38.84 189.84 189.84
15 32.00 33.77 184.77 184.77
IRR=
Analysis :
When consumables are estimated at 0.06% on the sales turnover, then the company will
have an IRR of 25.34% and when consumables are estimated at 0.10% on the sales turnover,
then the company will have IRR of 44.63%.
Inference :
IRR is that rate of return at which he total present value of cash outflows is equal to total
present value of cash inflows. The project generates IRR greater than cost of capital & NPV is
positive at the cut off rate. It indicates that the investment in the project generates profits greater
than the cost of capital and hence the proposal can be accepted for financing.
SUGGESTIONS
After analyzing secondary data, it is clearly visible that the corporation is facing severe
competition from domestic and foreign commercial banks and other financial institutions. The
following points are put forward for effective working of credit department at Head Office.
1) KSFC plays an important role in the development of small scale industries in Karnataka
State. Hence it should concentrate more on development of backward and rural areas.
2) KSFC have to implement networking techniques like PERT and CPM to calculate
implementation period of the proposed large project.
3) KSFC appraisal department have to adopt sensitivity analysis for effective appraisal of
the project.
4) The appraisal department should identify sensitivity analysis and precautions should be
taken to control that variable in order to avoid losses.
5) KSFC’s major competitors are commercial banks, to compete with them the KSFC
should Introduce different loan schemes with low interest rates and undertake awareness
campaigns to promote this schemes.
6) The interest rates charged in some schemes should be reduced.
7) The implementation of the projects according to time schedule specified is necessary to
avoid losses to the corporations. Hence effective measures should be taken to implement
project within specified time.
8) Legal department should carefully appraise the documents provided by prospective
entrepreneurs to avoid defaulters.
9) KSFC has to focus its attention on innovative projects to cope with the changing business
conditions.
10) KSFC should undertake measures for careful and thorough appraisal of projects from
Technical, Marketing, Financial, Economic, Legal and Managerial angles.
11) The recovery department at KSFC should follow strict policies and a term of repayment
is necessary.
12) The estimation of profitability, working capital requirements, cash flows, debt service
coverage ratio etc. should be realistic in order to avoid defaults in repayment schedule of
loans.
13) A frequent policy review regarding quantum of loan and terms of repayment is necessary.
14) The corporation should take severe legal actions on defaulters in order to prevent or
reduce such cases in future.
15) The corporation has to keep track of activities in its assisted units and provide managerial
guidance to them.
The corporation can concentrate on the above mentioned few suggestions to improve its
project appraisal procedures and to make KSFC as one of the pioneer term loan lending
institution in the Karnataka state.
Findings:
 The Credit department at head office carryout appraisal of project on the technical
feasibility, marketability, financial liability, economic contribution and managerial
competence to know the viability of project.
 The appraisal department is not using sensitivity analysis and Net present value methods
to appraise the proposed projects.
 The appraisal department is also not using the networking techniques like PERT & CPM
to calculate the implementation period.
CONCLUSION
As part of the curriculum, this project report has been prepared with the objective of
understanding the project appraisal procedures of KSFC. KSFC is continuously striving to
provide better services to its customers.
While appraising a project the Corporation is following the aspects like:
 Technical Appraisal
 Marketing Appraisal
 Financial Appraisal
 Economic Appraisal
 Legal Appraisal
 Managerial Appraisal
For the purpose of appraising, KSFC has a separate department. The major work of this
department is to scrutinize the applications received from the entrepreneurs considering all the
above aspects in the projects of entrepreneurs. This department consists of efficient, hard
working and technical personnel and these personnel are specialized in the areas like finance,
law, engineering, etc.
While appraising the projects KSFC comes across various problems like non co-operation
from the promoters and various other pressures. In spite of all these problems, KSFC has been
doing its work very honestly and hopes to continue the same.
KSFC has completed 52 years services. KSFC has helped the small entrepreneurs to
overcome the financial difficulties for starting of new industries.
KSFC has 29 branches spread all over Karnataka extending financial services to small-scale
sector, rural artisans, tiny sector, women entrepreneurs and disadvantaged
groups of society. KSFC has been main term loan lending institution in most of the districts
of Karnataka for the first generation entrepreneurs.
The Corporation has been providing financial assistance to entrepreneurs belonging to
different castes under different schemes. Since its inception the Corporation has contributed
significantly for the growth of small-scale industry and development of backward areas in the
state.
The Corporation must concentrate on unique and innovative projects in order to complete with
large domestic and foreign banks. The Corporation should encourage first generation
entrepreneurs with new ideas to start up new ventures. The Corporation must guide the new
entrepreneurs and help them to promote their products or services.
The Corporation must follow modern methods of a appraisal and keep track of loans
sanctioned. The appraisal department must study the background of the entrepreneurs before
sanctioning any loan.
The Corporation is identifying defaulters and following severe legal methods to punish

My Project

Hochgeladen von

Dokumentinformationen

Originalbeschreibung:

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

My Project

Hochgeladen von

Copyright:

Verfügbare Formate

Sources of Data:

Analysis of Secondary Data:

Tools and Techniques used for Data Analysis:

1. a) Name of the applicant : “X”HANDLOOMS Pvt. Ltd.

,b) Factory : SY,NO.22/2 & 52/2, NEAR NAVODAYA

3. Constitution : Private Sector Limited Company

4. A) Type of Industry : textiles Industry

8. End use of the finalized

9. sales turnover in normal year :rs. 7473 lacks

10. project cost and funding pattern

1. Building cost : 280.00

Total cost of project : 1,490.00

Sl no means of finances details amount (lakhs)

Sl no means of finances details amount (lakhs)

1.Equity share capital :472.00

Means of finances – Total :1,490.00

Note on cost of project and means of finance :

a) Promoter’s contribution : 22. 50% 31.68%

b) Debt equtiy ratio-project : 2.00 : 1.00 1.53 : 1.00

h) Margin of profit on sales

i) Internal rate of return : 25.34%

13) . a) Repayment period : 5 year excluding a moratorium period of

14). a) exployment potential :

i) Exsisting : 500.00 KVA

ii) proposed : 500.00 KVA

16). Statistical information :

a) Are the promoters

b) Promoters belong to : GENERAL

c) Scheme under which the

d) Location of the unit : banglore rural ,

17). a) loan amount applied : Rs 11,90,00,000

b) loan amount recommended

18) government clearances

c) Land allotment / purchase : YES YES

d) Building plan appsroval : YES NO

e) Power sanction : YES NO

f) Import licece/ c.g clearance : NO NA

h) INCOME TAX CLEARANCE

i) NO OBJECTION LETTER FROM

j) Establishment licence from local

19. OTHER INFORMATION :

b) Date OF SITE / EXISTING : 25 –JUL - 2011

c) DATE OF RECEIP OF : 29 – JUL- 2011

e) Time taken for PROCESSING

f) Appraisal team : somashekarappa

h) NAME OF THE LEAD BANK :

i) NAME OF THE BANKERS : SYNDICATE BANK

20. QUANTUM OF NRI INVESTMENT

21. a) PRIORITY OF THE INDUSTRY : INDUSTRY – MEDIUM

b) IS THE PROJECT BASICALLY

Instoled capacity . Rs.9964 lakhs

Raw Materials 4533.62 4882.36 5231.10 5231.10 5231.10

Depreciation 255.71 220.32 189.95 163.86 141.45

Installed capacity Rs. 9964 lakhs

As per Tendon Committee Norms

Installed capacity Rs. 9964 lakhs

TL- DLATP 30.00 30.00 30.00 29.15 0.00

Installed capacity Rs. 9964 lakhs

No. of Shifts 3.00 ,No. of working days 300.00 (Rs. In lakhs)

Share capital 472.00

Term loan(KSFC) 900.00

Intrest free U/S loan 118.00

Creditors 188.90 203.43 217.96