magma fincorp ltd 69
DESCRIPTION
its a report on credit appraisalTRANSCRIPT
MAGMA FINCORP LTD
A Project Report on
“CREDIT APPRAISAL SYSTEM OF COMMERCIAL VEHICLE”
LOCATION –LUCKNOW Submitted by -
Tushar jaiswal
Summer Trainee
CERTIFICATE
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This is to certify that the project report entitled
“CREDIT APPRAISAL SYSTEM OF COMMERCIAL VEHICLE”
With special Reference
MAGMA FINCORP LTD (LUCKNOW)
SUBMITTED TO
“HYDERABAD CENTRAL UNIVERSITY”
For an award of post graduate Degree of master of business administration is an independent research carried out by Mr. Tushar Jaiswal under my guidance during his MBA course. To the best of my knowledge and belief this project report has not been previously submitted for the award of any degree or diploma of this or any other university.
Dr. Mary Jessica Professor V.sita
(Faculty- project Guide) (Dean)
Mohd Moeiz Huda
(Organization –project guide)
DECLARATION OF THE STUDENT
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I, undersigned, hereby declare that the dissertation entitled “credit appraisal System of commercial vehicle in magma fincorp ltd in luck now region “is Genuine and bonafide work
prepared by me and submitted to Hyderabad Central University, for the partial fulfillment of The Master degree in business Administration. The Present work is of original nature and the conclusion drawn therein is based on the data collected by myself.
To the best of my knowledge the matter presented in this dissertation has not been submitted for the award of any degree, diploma or membership either to this or any other institute /university.
ACKNOWLEDGEMENT
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Journey is easier when we travel together. Independence is certainly more important than independence. It will always be my pleasures to thanks those who have helped me in making .This project a life time experience for me. I would like to express my heartiest gratitude to Magma fincorp .Ltd. Giving me and opportunity to work with its branch situated at Hazratganj ,Lucknow , my college and important person associated with this project as without their guidance and hard work I would have never ever have got a chance to have real life experience Of working with a non-banking financial institute of such a great repute and learn practically about the credit appraisal process .
My heartiest Gratitude extends to my guide Dr. Mary Jessica who has helped me in every aspect of my work. I would like to express my profound sense of gratitude to the dean Dr. Prof Sita
The greatest credit goes to the blessing bestowed upon me by Almighty god without whose yearning; I could not have even moved a step forward and to my Parents who are always a constant source of inspiration in all my endeavors.
PREFACE
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Summer training is an integral part of our academic curriculum. During the training a Student get an opportunity to set the practical aspect of theory makes the concept clear. I feel the great pleasure in submitting the piece of work as my summer training project, taken from the Magma Fincorp Ltd. I hope this work will provide me fruitful result in eyes result in the eyes of Reader it is hence expected that creating of this shall benefit the reader in all Aspect.
The project deals with nearly all aspect of NBF’C and the essence of know your Customer Norms .I have tried my best to cover nearly all aspect related to credit Appraisal of Magma Fincorp . Ltd.
The working title of the project is “CREDIT APPRAISAL PROCESS “. It is done in a Very coordinal manner. This research is an attempt to present a report on Account of little practical Knowledge .In my opinion, the readers will be Satisfied with the project in all ways .I guarantee the original work and Authenticity.
TABLE OF CONTENTS
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Chapter No. Particulars Page No.Executive summary 8
1 Introduction to research Design 91.1 Credit appraisal 92.2 Importance of credit appraisal 103.3 scope of study 114.4 Research methodology 124.4.1 Data type (primary ,Secondary) 134.4.2 Method of data collection 144.4.3 technique of research 154.5 Limitation of research 164.6 Case study 17
2 Conceptual Frame work of topic 252.1 Introduction 252.2 Commercial vehicle classification 262.3 Customer categorization 272.4 policy Screen 292.5 Source of generating business 312.6 Competitors 322.7 Sales process 332.8 Major commercial vehicle manufacturers 34
3 Organizational profile 393.1 introduction to organization 393.2 Brief history 403.3 competitors of magma 413.4 vision and mission 423.5 Branches 43
4 Analysis Of data 45
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4.1 Loan appliers to defaulters 454.2 Parameters used for credit appraisal 464.3 5’c s of credit 48
5 Findings 50 6 Summary and suggestion 51
EXECUTIVE SUMMARY
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The last year financial crises have become the main cause for recession which was started in2006 from US and was spread across the world. The world Economy has been majorly affected from the crisis. The securities in stock Exchange have fallen down drastically which has become the root cause of NBF’s of many financial institutions and individuals. The root cause of the Economic and financial crisis is credit default of big companies and individuals which has badly impacted the world economy. So in the present scenario analyzing one’s credit worthiness has become very important for any financial Institution before providing any form of credit facility so that such situation doesn’t arise in near future.
Analysis of the credit worthiness of the borrowers is known as Credit Appraisal. In order to understand the credit appraisal system followed by the NBF’s this project has been conducted. The project has analyzed the credit appraisal procedure with special reference to Magma fincorp which includes knowing about the different credit facilities provide by the NBF’s to its customers, how a loan proposal is being made, what are the formalities that is to be satisfied and most importantly knowing about the various credit appraisal techniques which are different for each type of credit facility.
Before going further it is necessary to understand the need and basic framework of the Project. Therefore this chapter provides an introduction to the topic, Objective of the project, Reasons for selecting the project and the basic Structure and framework how the project Proceeds. In order to understand the Importance of the topic selected an introduction to the overview of the NBF’s, its functions, and present trends and growth in bank credit are required and it is covered in this chapter.
INTRODUCTION TO RESEARCH DESIGN
CREDIT APPRAISAL -
The process by which lender appraises the credit worthiness of the prospective borrower. These normally involve appraising the borrower’s history and establishing the quality and
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Sustainability of the income. The lender satisfies himself of good intensions of the borrower, usually through and interview.
Financial institutions are intermediate between lenders and borrowers. These financial intermediaries collect deposit and disburse it as loan and advance to the individual people, business, commercial, industrial entity. The loan and advance should be given to them who have the certain and predicted cash flow to repay the credit. If the manager fails to analyze the client’s viability of repaying the loan, possibility of default may arise due to the fact.
So the importance of APPRAISAL, in sanctioning the loan, is the key to identify the
borrower’s ability, expertise, efficiency, industrial analysis & business performance.
IMPORTANCE OF CREDIT APPRAISAL:
A loan proposal system is far by heart procedure, which is security given While easily reflect the eligibility of loan procedure viz tenor eligibility E.m.i (equated monthly installment)
The credit appraisal is done for different purpose they are as follow:
1. To know the market of business
2. To know the customer financial assistance and experience
3. To know that whether he is taking the loan from other bank or non-Banking financial institution and whether he is able to paying timely to Pay installment to satisfy their loan amount taken by particular reason.
In short the credit appraisal is important for the purpose of NBF’s and it would not be able to collect the money which is lending to their customers.
Objective of Research
To study the credit appraisal system of commercial vehicle finance.
To study the documentation required for credit appraisal.
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To know the terms and conditions used in commercial vehicles financing.
To identify & suggest the scope for improvement in Credit Appraisal System.
Scope of study
The Credit Appraisal is a holistic exercise which starts from the time a prospective borrower walks into the branch and credit delivery and monitoring culminates in with the objective of Ensuring and maintaining the quality of lending and managing credit risk. The proposal Appraisal is multidimensional and includes –
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MANAGEMENT APPRAISAL
TECHNICAL APPRAISAL
COMME CIAL APPRAISAL
FINANCIAL APPRAISAL
ECONOMIC APPRAISAL
Management Appraisal has received lot of attention these days as it is one of the long term factors affecting the business of the concern. Technical Appraisal emphasizes on the technical feasibility of the venture and also finds out the possible economic life period of the present technology. Commercial Appraisal focuses on the commercial viability of the project .It tries to find matters regarding demand in market, the acceptance of product in market. It also focuses on the presence of other substitutes of the product in the market. The scope of credit structure is incomplete without examination of credit proposal.
RESEARCH METHODOLOGY
Basically research aims at expanding the depth of Knowledge and solution for problem. It Addresses to fundamental questions and also provide s specific Alternative solution for it. Thus the research is carried out for solving the Problems and guiding specific decisions.
There are two possible viewpoints towards a subject of study.
-subjective
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-objective
Objective viewpoints give importance to and lays emphasis on upon the object of the study .It is the object oriented study. On the other hand, in subjective Standpoint, the thought, feeling and prejudices of the investigator are more important.
Objective –
A study in which a subject matter is center of attention and prejudices are given no place .This is known as objective study.
Need of Objectivity-
To make study scientific
In order to arrive
specific conclusion
To achieve representative facts
For verification of objective
For actual study of problem
It aims at discovery of unknown fact
Means of Research-
The research is based on various types of information, which gives knowledge concerning the Problem. Now in order to carry on research successfully, information should be gathered from Proper source .The more valid is the source of information the more reliable will be the information received, which in turn, lead to correct , and reliable conclusion.
Kinds of data –
1. Primary data
Primary data are the actual information, which are received by the researcher for study from the actual field of research .These data are obtained by means of questionnaires and schedules.
Such data are known as primary because the researcher attains them from the field of research
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Directly and first time. For this study I have asked queries to the seniors, also Information by direct interacting with customer.
2. Secondary data
Secondary data are the information, which is attained indirectly. The research Does not attain Himself or directly. Such data are attained generally from Published and unpublished material.
Secondary data are gathered from information collected from individuals and institutions through letters survey documents.
METHOD OF DATA COLLECTION :
1. Direct observation
The chief primary source of information concerning the problem is direct observation. The method requires that the researcher should personally and directly observe the Conditions of his field study. It is the most reliable method for gathering information .In this observation, the observer should be absolutely detached and objective in gathering the information concerning with the problem.
2. QUESTIONNAIRE
Question are includes question concerning different aspect of the Subject of the study .Sometimes question are delivered by hand and other times they are deliver by post . Questionnaires may be the source of information only when the informers are well educated and well prepared to corporate with research work.
3. SHEDULE
Schedule is a particular type of questionnaires .In schedules the researcher records replies. He questions the informer and record the replies in the proper places specified in the schedule. The main advantage of the schedule is that it may be used even in the case of undedicated informer .However it can be used in limited field, as compared to the questionnaire method.
4. Interview In an interview researcher meets people and discusses problems with them. It is Different from schedule. Schedule includes a predetermined form of questions but the Interview has not any definite form or order of questions .The researcher may ask any questions of the basis of his insight into the problem.
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Secondary or documentary sources
The source of information through documents concerning individuals and institutions are known as secondary source. It represents condition and system. It also provide Information of past which is not possible from any other source. To facilitate the study, Secondary data is important to know historical background of the concerning problem.
1. RECORDS :
Record occupies the most important place among public document. Most of the government and non-governmental departments preserve so many types of records constituting keeps a record of important Things.
2. Published data :
Published data include data published by government and non- governmental
Institution from time to time .such institutions conducts periodically survey.
3. Journal and magazine:
Journal and magazine are important public documents include a variety of information, which can usefully utilized in research. Most of the information is reliable. Letter to the editor is published in various magazines and journals are important source of information
Technique of RESEARCH
1. Definition of problem under study: Now the nature of the problem is defined. This will determine the scope of the problem and also its nature and character.
2. Analysis of problem by making a schedule :
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After the problem is defined, we have to analyze the various elements, constituents or factor involved in the problem so that a detailed and systematic list of these may be formulated. It is only when the detailed list of problems is available that the relevant information can be systematically gathered.
3. Determination of scope:
The study of problem is implies systematic investigation in to a limited and well defined subject matter. Before the beginning is imperative to determine the scope of problem.
4. Determination of time limits:
Research requires a considerable amount of money accordingly it is essential to set a time limit for it. The validity of results may vary on account of change of condition so we have to set time limit for it.
5. Determination of survey technique :
Before stating, it should be clear what technique is to be used in research. The choice of technique depends upon the scope and nature of research.
6. Field work:
Having completed the above formalities field workers go to respective Individual to gather information. They have to keep the conveniences of person to be interviewed.
7. Organization of material ,classification and statically analysis : The collected material is organized, classified and statically analyzed..
Limitation of study
Difficulty in collection:
It is difficult to collect more important and confidential personal documents. They are rarely recorded and more seldom preserved .They are generally destroyed after a short time.
Reliability of data :
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It is very difficult to access correctly the reliability of data. There is almost .To
Judge their validity since they are written from subjective view point.
Difficulty to reach definite conclusion:
It is not easily possible to arrive at same conclusion about a problem on the
Basis Collected. The data do not present conditions objectively. Therefore,
Not much reliable information can be secured through the collected data.
Limitation of time sample size ,money:
There is limitation of time so we can’t measure the trends which are very
Slow. Due to lack of money and sample size we can’t have that much
Quality data.
Inadequacy of sufficient material:
There is great dearth of journal and magazines in different areas India to publish data concerning various aspect of problem. Even The data is collected; it is seldom published in time. Thus we can’t Use it for our purpose of research.
i. CASE STUDY
BasicDetails:-
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Name of the applicant : A.B.C
Father’s Name : : A.B.C
Voter id : : GFB3456357
Resident of: :H.No. 706 Nagaliya Akil Azim Nagar
Rampur U.P.
Asset Asked: : Eicher 11.10
Value of Asset: : 8.80 lacs.
Guarantor: : A.B.C
Co-applicant: : A.B.C
Case History:
Mohd. Ismail, the applicant, was asking for an asset Eicher11.10 costing Rs.8.80lacs. The LTV asked was75%, amounting around Rs. 6.80 lacs for the tenure of 4 years.
The asset comes under the category L1X.
The case was booked under FTB-0 Screen.
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Mohd. Ismail, as said, was involved in the business of transportation from last 5 Years. His father was an ETR customer of MFL. Vehicle financed to his father was also an Eicher 11.10, 2009 model. His father was co-applicant in the case.
Guarantor in the case was Mohd. Sabir Ali, who also owns an Eicher 11.10, 2009
Model. He was also an ETR customer of MFL. He was a business friend of proposed hirer.
Status:
Declined (by Credit).
Reason:
Father of the applicant had expired. Vehicle in the name of the applicant’s father needs to be transferred in the name of the applicant.
Although the case of Mohd. Ismail looks sound at first glance, as his father. And guarantor being existing customers of Magma with excellent track record. But when the case is being analyzed and processed further, it is found that the father of applicant has been expired and the vehicle in the name of the father is still running in his name.
We will not consider financing another vehicle to the applicant as FTB-0 customer, until and unless the vehicle in the name of his father is transferred in the name of the applicant. Then only we can finance him considering the total exposure.
ii. Case study :
Basic detail:
Applicant name: A.B.C
Vehicle required: lpt 2518
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Loan amount: 17.5 lacs
Assets cost: 17.5 lacs
L.t.v: 100%
Customer category: cat B profile
Proposed guarantor: A.B.C
Fleet detail-
Finance name model status Tenor e.m.i PD ADChola Lpt1613 closed 32 32 113 25.22Chola Lpt2515 Live 30 12 9 2.67
Case history –
Applicant is a cat b transporter profile – having two assets – lpt 1613 (2007 model) that was closed from chola from chola as PTR reason for ptr is that vehicle met with an accident.
Second vehicle is lpt 2515 that (2009 model) that is running as ETR with chola .Both existing and proposed vehicle deployed on the route – Bazpur to barely Carrying parchoon items/rice, paddy, wheat etc.
STATUS-
Approved (by credit)
REASON-
The cases was approved on the basis of second vehicle which has finance from chola and as an ETR record. And he earns a good amount of money he make25 Trips in month from bazpur to barely so easily he can easily pay the emi and the Case was approved on zonal level.
iii. Case Study :
Basic detail:
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Applicant name: A.B.C
Case type: Refinance
Vehicle: TATA ace
Loan Requirement: 80000
L.t.v: 49.05%
Assets cost- 154000 (as per rpm grid)
Proposed Guarantor- A.B.C
CASE History:
1. Applicant is a driver profile 2. Applicant has heavy transport DL since – 01/04/20083. As per t.v.r applicant had been driving lpt 2515/2518. And
Also has a experienced of driving scv for about 5 months.
4. Temporary for the proposed vehicle had been issued in jan-15 .hence this has been treated as refinance.
5. Proposed vehicle has been used in local mandi – carrying vegetable
And grocery item
6. Two trips rs 300 per trip.7. Vehicle operated within 40 km range 8. Customer is married –wife roped as guarantor
9. Applicant has two sons and 3 daughter eldest son is a spray painter
10. As per t.v.r ph. has bought this vehicle for a cost of 2 lacs.
Status-Rejected (by credit)
Reason-
At the night vehicle is used to transport animal livestock like (cow, buffalo) which is illegal fine up to 1.50 lacs if caught by R.T.O .
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iv. Case study :
Basic Detail: Name of Applicant: A.B.C
Vehicle: Tata Ace
Internal Guarantor: A.B.C
Assets cost: 3, 89,400
Funding loan: 3, 19,308
Emi: 12661
Ltv: 82%
Case history:
1. Proposed hirer is a farmer by profession
2. As per t.v.r family has around 30 bheegha land -15 each in the name
of the father and mother of proposed hirer.
3. Propose vehicle will be attached to milk diary.4. Proposed hirer will monitor the vehicle with the help of driver.
5. Mother of proposed hirer in ‘aanganwadi’ and father of proposed
Hirer works as a security guard in food grain storage facility.
Status:
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APPROVED (by credit)
REASON:
The case was approved as the zonal level as his father was a security guard which was a caution profile)
v. Case study :
BASIC Detail:
Name of applicant: A.B.C
Vehicle type: TATA LPT 1109(Large
Commercial vehicle)
External guarantor: A.B.C
Customer category: cat b profile
Funding amount: 7, 50,000
E.M.I: 2, 80, 29
Tenure: 32 months
L.t.v: 60.42%
CASE HISTORY:
1. Customer is originally a farmer family has around 40 acres of agri land. 2. Involved in distribution of vegetable and menthol oil.
3. Proposed hirer has been in transportation business since
4 years has been associated with local transporter – Mahesh transport.
4. Route – rudrapur to Mumbai .Goods – toffee, chocolate /agro based product.
5. As per reference and proposed guarantors – proposed hirer
6. Is financially very strong – hold immense wealth and agri land.
7. Proposed hirer with is two younger brother, wife’s and kids.
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Status:APPROVED (by credit)
REASON:
Experienced verified by his local transporter friend he said that the proposed hirer is A level transporter which is good Profile and he is financially strong and good reputation in the market on that basis the case was approved.
vi. Case study:
Basic detail:
Applicant name: A.B.C
Company name: A.B.C
Proposed guarantor: A.B.C
Assets required: paver finish Apollo
Asset amount: 23, 16,406
Funding amount: 18, 65,000
E.M.I: 66,010
L.T.V: 77.33
CASE HISTORY:
1. Customer holds a proprietorship of firm under the name of “m/s Kumar trading company “involved in contractual basis road construction.
2. Customer is buying second paver for his fleet 3. Applicant is a grade A contractor
4. As per T.V.R customer has one paver and drum mix plant /and buying the proposed assets to keep it saw reserve in case of any breakdown occurs.
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5. Place of business- Ava’s vikas colony rudrapur.6. Road work near indo Nepal border- between ‘kargilate’ to ‘duligad ‘–
route 12 km stretches.7. Customer has 2 j.c.b that are finance with tata capital financial sevice.
8. Has one drum mix plant of Apollo – DMSO and one semi sensor paver.9. Apart from this customer has 1 tandon roller, 6 static roller, 1 compactor
and 3 tractor – all assets are free.10. Monthly payment he is getting is 1.25 crore from the contract.
STATUS:
Approved (by credit)
REASON:The reason to approve the case was that his income was more than the e.m.i, so he can easily manage the e.m.i and the assets which he has taken previously all are free. So he has a good reputation in the market.
CONCEPTUAL FRAMEWORK OF TOPIC
INTRODUCTION TO COMMERCIAL VEHICLE
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Magma, being a renowned name in finance industry in India, has started CV finance in Northern India, so in Lucknow, around 1999-2000, when it has acquired Consortium Finance, dealing mostly in CV, CAR and CE.Commercial
Vehicle finance is an indispensable part of Magma’s niche segment. With its effective working style and capable work force, today Magma has become a prominent player in Commercial Vehicle Finance.
Our prime focus, in Commercial Vehicle, is on financing first Time buyer and first time users owing 0-5 vehicles. We also Finance big fleet owners and other business under strategic Financing.
The target market of Magma’s commercial vehicle finance constitutes the entire Road Transport industry. The Road Transport industry is defined by the usage of Commercial Vehicles i.e. mechanized movables assets registered with R.T.O. and Utilized for transportation of goods, material, people and for providing transportation services.
Magma has a wide geographical coverage financing the customers within
125k.m. from magma branch office.
At SBU level, Magma’s sales team comprises of State Product Head CV (Mr. Sanjay Bhatnagar in Lucknow), Relationship Managers and executives. Sales team in Commercial Vehicle Finance is very responsible, effective, efficient and well trained (by the efforts of supervisors trying to provide Training and information on every possible aspect). They Believe in creating and maintaining healthy relationship with The customers on the basis of trust and transparency.
COMMERCIAL VEHICLE CLASSIFICATION
Magma finances almost all the commercial vehicles available in the market. The Asset range includes SCV, LCV, M&HCV, Tractor Trailer, SCV pickup etc. It is also Differentiated on the basis of the body of the vehicle, whether it is a bus, car Carrier, container, goods, refrigerated container, scooter carrier, tanker, tip Trailer, tripper etc.
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Major manufacturers of commercial vehicle assets in India are:
. Tata.
. ASHOK Leyland.
. M&M.
.Force motors
. Volvo.
Magma has classified this wide range of commercial vehicles, for all the zones, for facilitating the finance process to make differentiation easier. The classification levels are defined as below:
· L1X.
. L1X.
. L1Y.
.L1Y.
. L2X
. L2Xy
.L2Y
CUSTOMER CATEGORIGATION
The customer type in commercial vehicle market ranges very wide. It includes those who are buying commercial vehicle for the first time to those who already owns fleet of vehicles. We have, in commercial vehicle market, those customers also whose business not that are of
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transportation, but purchasing the asset for servicing their own business. Magma has Defined different stratum of customers, so as to make the categorization and differentiation Easier. We have categorized basically two groups of customers:
1. Retail Category.
a. FTB.
b. Cat B.
c. Cat C.
d. Bus Operators.
2. Strategic Category.
a. Large fleet operators.
b. Freight Booking Companies.
c. CAPTIVE USER CATEGORY.
1. Retail Category:
a. FTB (First Time Buyers):
These are those transport operators who have limited prior experience in Transportation asset usage. This segment includes customers who do not own or own only one commercial vehicle.
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b. CAT B or Small Fleet Operators:
This segment comprise of operators with ownership between two to five
Vehicles having a couple of years’ of experience in operating and maintaining vehicles.
c. CAT C or Medium Fleet Operators:
This segment comprise of operators with ownership between six to nine vehicles with several years’ of experience in operating and maintaining vehicles. These are established operators owing a few assets in the fleet.
d. Bus Operators:
This target segment would comprise of owners and operators of buses with several years’ experience with fleet ownership between one to nine buses. This segment would address route bus operators, stage carriers, contractor operators and tours and travels operators.
2. STRATEGIC CATEGORY
a. Large Fleet Operators:
This target segment comprise of vehicle fleet owners who own ten or more vehicles and are established and seasoned market operators. These operators’ fleet would comprise of several free vehicles.
b. Freight Booking Company (FBCs):
Freight Booking companies have transportation contracts with a large number of principals and are involved in providing transportation service.
c. CAPTIVE USER CATEGORY:
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Captive Users could be buyers of vehicles who will service the debt through cash flows of the existing business and not out of the earnings of the vehicles being procured. Ex- Cement dealer using the asset for distribution purpose.
POLICY SCREENS
Magma has defined policy screens for every customer segment. Brief about different
policy screens is given as under:
1. RETAIL CATEGORY:
A. First Time Buyers Screen (FTB).
This screen explains the customer eligibility and funding norms for FTB’s. This screen
has further categorized this group as FTB-0 and FTB-1.
FTB-0 are the customers who own no CV asset.
FTB-1 are the customers who own one CV asset, with an ETR or GTR.
Tipper Financing Screen.
These screens are applicable for FTB-0 and FTB-1 category of customers in CV. It explains the requirements for tipper financing.
Funding of a tipper body on goods chassis (LPT1613, 1510, 1512, 2515 etc.) is not permissible in the screen.
C. CAT B Small fleet operators Screen.
This screen explains the documentation and requirements for Cat B customers owing two to
Five vehicles, with a couple of years’ experience.
D. CAT C medium fleet operators screen
This is the screen for the customer group of CAT C, owing six to nine vehicles, with at least three years of experience.
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E.CAPTIVE USERS SCREEN.
This screen explains the requirements for financing CV asset to the captive user customers. It further categorizes this segment as Captive 1, Captive 2 and Captive 3 group of customers.
2. TATA ACE SCREEN
This screen defines the requirements for financing Tata Ace. It further categorizes the customer segment as under:
· Customer with prior vehicle ownership of either 3wheeler (goods carrier) or any commercial vehicle.
· Customers with prior experience of driving either 3wheeler (goods carrier) or any commercial vehicle.
· Agri Based (FTU) owing agricultural land/ asset based (FTU) owing house property.
· Own use category / captive w/o financials.
3. TATA MAGIC AND WINGER SCREEN
This screen explains the requirements and parameter for Tata Magic (4-7 seaters) and Tata Winger (7-14 seaters).
4. STRATEGIC CV POLICY SCREEN
This is a special screen for strategic commercial vehicle finance. Under this we have
further categorized the customers as Grade Transporter 3, Grade Transporter 2 and Grade
Transporter 1.
Grade Transporter 3 are the customers who are having more than 10 years of experience in
the business and are owing a fleet of more than 50 vehicles. Grade Transporter 2 are the
customers who are having more than 8 years of experience in the business and are owing a
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fleet of more than 25 vehicles. Grade Transporter 1 is the customers who are having more
than 5 years of experience in the business and owe a fleet of more than 10 vehicles.
SOURCES OF GENERATING BUSINESS :
Magma’s sales personals are very efficient in their working. They use effective market
approaches at their own levels. They target almost all the possible sources for generating
business. They can be categorized as Non-Direct and Direct sources. Some of such sources of
business are given below:
1. Non-Direct:
a. D.S.A.s.
b. Dealers.
2. Direct:
a. Existing ETR customers.
b. CV Body Maker.
c. Transporters.
d. Transport Union Leader.
COMPETITORS
Finance sector is one of the most competitive sectors in the business world. Magma also
Has to compete with ‘n’ number of competitors in order to retain its market share. Major
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Competitors of MFL in today’s scenario, in our region are:
.TATA Finance.
.HDFC.
.L&T Finance.
.Sriram Finance.
.India Bulls.
.Citi corp. finance.
.IndusInd.
.Cholamandalam.
.Other small financers. (Unorganized).
SALES PROCESS
There are various activities that are being performed by sales personals can be alienated
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Recognizing the customer type.
The first most important thing is to recognize the customer as per the classification given in the policy. At this stage we also need to see whether he fits in the policy of the company or belongs to the caution or negative profile as defined by the company as under:
Understanding customer requirements.
A sales personal also needs to understand the requirements of the customer. We have to see what the customer is asking for is possible to provide or not. We see, how much loan he is asking for, what rate of interest he is expecting. Whether the vehicle he is asking is mentioned in the list or not, etc.
Filling application, documentation and filing.
After we find that it is possible to provide the finance to the customer on the vehicle asked, we ask the customer to fill up the application form. We also need to collect all the requisite documents from the customer and have to file them properly for their further processing.
Login the case.
As soon as we get the application filled and collected & filed the documents, we need to get the case login with the operation department for its further processing.
Completing discrepancies.
If operations department find any discrepancies, regarding documents, etc., at the time of login, we need to fulfill then as soon as possible.
Disbursal & Post disbursal activities.
Disbursal and post disbursal activities include: Releasing delivery order. Receiving margin and insurance and RC (with hypothecation of Magma Fincorp Ltd.).Filling agreement, RTO and PDCs/ ECS. Collecting or receiving invoice.
This process is followed in all the cases. Beyond this, special approval requests are been taken like for waiver of interest rates etc. if required and the customer is of good profile or is an ETR customer.
Major commercial vehicle Manufacturers
Introduction
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Commercial Vehicles Industry in India has witnessed speedy growth post-independence and at present is considered as one of the flourishing sector of Indian economy. As per statistics, the expansion in commercial vehicles sales in 2009 stood at 92.6% besides witnessing decline in product prices by 20% in the first quarter assisting the CV industry growth.
The steady development in Commercial Vehicles Industry has led to cut throat rivalry among the various Commercial Vehicles Manufacturers in India. To survive in the competitive market every CV manufacturer is coming up with something new yet affordable to meet the Indian market requirement. A customer can now select among the various commercial vehicle of the markets in reasonable rates.
Major Commercial vehicle Manufacturers in India
The key players in the heavy commercial vehicles sector in India are:
1. Tata motors:
Leading commercial vehicles manufacturer, Tata Motors offers an array of CVs namely, Tata Se 1613, Tata Sk 1613, Tata LPT 1613, etc. The company provides an assortment of other alternatives and modifications for the buyers. The player has an industrial joint venture with the Russian based internationally acknowledged CV manufacture, Volvo. In associated with Volvo, Tata Motors has introduced Volvo FH12-340 and Volvo FH12-420 for its Indian customers.
Tata Motors has the credit of being Indian foremost firm to indigenous automobile, besides manufacturing Luxury Buses, Tractors and Trucks under Commercial vehicle sector.
i. Vehicle - Tata Se 1613
model Cummins 6BTAA 5.9Type Water cooled direct injection turbo charged diesel engineMax enguine 125 HP at 2500 rpmMax torque 410 Nm (41.8 mkg) at 1400-1700 rpmCapacity 5883 ccEmission norms Euro II
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ii. Tata LPT 1613
2. Ashoak Leyland:
Ashok Leyland has always been associated with tie-ups with renowned conglomerates. Since its initiation the sector has manufactured around 375,000 vehicles for its customers giving a tough competition to Tata Motors. The firm has launched vehicles like Hippo Tipper, Cargo 1512, Comet Tipper, Cargo 909, etc. in the market and is incessantly working on enhanced versions and attributes on its commercial vehicles.
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Viking BS - III (Bus) Max. Power: 167 PS @ 2400 rpmMax. Torque: 55 Mkg @ 1500 rpmMax speed: 75 kmph
Lynx BS-II (Bus) Max Power: 120 PS @ 2500 rpmMax Torque: 40 kgm @ 1600 rpmMax Speed: 83 Kmph
3516 H / AL (Tractor) Max Power: 165HP @ 2400 rpm / 160HP @ 2400rpmMax Torque: 550NM @ 1200 - 1600 rpm / 575NM @ 1080 rpm
Beaver Haulage (Special Vehicle)
Max. Power: 238 ps @ 2200 rpmMax. Torque: 95 kgm @ 1300 - 1500 rpmMax speed: 55.8 kmph
Hippo Tipper (Special Vehicle)
Max. Power: 238 ps @ 2200 rpmMax. Torque: 95 kgm @ 1300 - 1500 rpmMax speed: 67 kmph
I. Viking BS (bus)
ii. 3516 H / AL (Tractor)
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3. Eicher:
One of the major commercial vehicles manufacturers, Eicher boasts of its reasonably priced range of trucks and buses. It has introduced a range of Eicher 10.90 and Eicher 10.70 for its domestic customers.
model Specification
Eicher 10.50 (Truck) Direct InjectionMax. Power (DIN) 90 PS / 3200 rpmMax. Torque (DIN) 21.9 kgm / 2100 rpm
Eicher 15.16 (Truck Max. Speed: 84 KmphMax. Torque: 41 Kgm @ 1400 rpmFuel Tank Capacity: 220 Ltr
Eicher Starline (School Bus) Max Power: 70 KW(95 HP) @ 3200 rpm- BSIIMax Torque: 10.50--> 275 Nm (28 Mkg) @ 2100 rpmEngine Displacement: 3298 cc
Eicher Starline Route Permit Bus Max Power: 70 KW(95 HP) @ 3200 rpm-Max Torque: 299.5 Nm (30Mkg) @ 1440 rpm
i.Eicher10.50
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ii. Eicher Starline:
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ORGANISATIONAL PROFILE
INTRODUCTION TO ORGANISATION
Magma, being a renowned name in finance industry in India, , so in Lucknow, around 1999-2000, when it has acquired Consortium Finance, dealing mostly in CV, CAR and CE.
Commercial vehicle finance is an indispensable part of Magma’s niche segment. With its
effective working style and capable work force, today Magma has become a prominent player in Commercial Vehicle Finance.
The size of the customers in the industry depends on the revenues earned through deployment of assets. The revenue earning capacity, and hence the repayment capability of the customers in this segment, is directly dependent on the productive assets’ fleet owned by them.
Magma has a wide geographical coverage financing the customers within 125k.m. from
magma branch office.
At SBU level, Magma’s sales team comprises of State Product Head C (Mr. Sanjay Bhatnagar in Lucknow), Relationship Managers and executives. Sales team in Commercial Vehicle finance is very responsible, effective, efficient and well trained (by the efforts of supervisors trying to provide training and information on every possible aspect). They believe in creating and maintaining healthy relationship with the customers on the basis of trust and transparency.
NON BANKING FINANCIAL COMPANIES (NBF’S)
A financial system, which give access to affordable credit to an extensive section of society , is imperative for sustainable economic growth of company. In India NBF”S typically function is unorganized and under serviced segments of the economy. The NBFc’s business is highly centric with a deep perception of customer needs. NBF”S has stepped in a supplemented the role of bank in selected Market for selected product .NBF’s have demonstrated that they can play a definite long term role in the financial inclusion strategy country. They have succeeded in the mobilization of inactive assets and user of credit because of their innate capability to provide customized services according to the need of client.
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As on 31st march 2006, there were 13,049 NBFC’s of which 434 are permitted to Accept and hold public deposit. Among a sea players, emerged as the Undisputed largest assets financing NBF”s in the country, with a total assets under management of close to rs 7500 crore. Focusing on the new and pre – owned transport vehicle .
Company’s background:
1. Type - public
2. Trade - Bse:24000
NSE: magma
3. Industry- non banking financial institution
4. Founded- 1988
5. Founder- Sanjay Chamria
6. Head quarter – Kolkata ,India
7. Services- car loans/lease, vehicles loan, construction , loans ,
Insurance
8. Number of employees – 7000(2013)
9. Website : magma .co.in
Brief History:
Magma fincorp limited is a Kolkata based non- banking financial company registered with the reserve bank of India as an assets finance company. The company operates 275 branches across 21 states and a union territory and
has a strong presence in a rural and semi- rural India .
Magma fincorp limited (formally known as magma leasing limited) was
Incorporated in 1988 and commenced operation in 1989. in 1992 , the company merged with arm group enterprise to straitened its
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presence and later in 1996 entered retail financing business for vehicles and Construction equipment in the year 2000, with the acquisition of Consortium finance limited, Magma expanded its network across northern India. Infrastructure finance merged with the magma increasing the company’s foot print in southern and western India. in the same year ,the Company formed a joint venture with the international tractor limited to enter Tractor finance business. in 2008 , magma re- banned and renamed itself as Magma fincorp limited.
Competitors of magma
Bajaj finance
Shri ram transport
Sundarm finance
Mahindra and Mahindra finance
Shri ram city
Chola mandalam
Manappuram finance
Vls finance
Shakti finance
Motor and gen finance
Hb stock hold finance
Times Guaranty
Guj lease finance
Lloyds finance
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VISION AND MISSION
To be the most profitable global player with quality and technology leadership in the vehicle finance. Offering the finance solutions to satisfy ultimate customer needs.
To become a market leader in light transport vehicle finance segment, and achieve the status of world Class Company with finance and markets a wide range of financial products to the total satisfaction of customers in the state.
I) Highly returns.
II) Business ethics.
III) Thorough continuous improvement of
I) Total quality service
II) 100% collection
III) Resource productivity
IV) Cost effectivene
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Branches
Magma Office Address
401, Rustomjee Aspree, 4th Floor, IMAX Dome Theatre Road, Off Eastern Express Highway, Everad Nagar, SION (East)
Mumbai, MAHARASHTRA 400022
Phone: 011-46965763 / 022- 67284800
Magma Office Address
5 th Floor, Jaswanti Land mark, Asha Usha Compound, LBS MARG VIKROLI (WEST)
Mumbai, Maharashtra 400079
Phone: 022-30227120
Magma Office Address
Shop No 16, 1st Floor, Mahavir center, Plot No. 77, Sector-17, Vashi
Mumbai, MAHARASHTRA 400703
Phone: 022-27880163
magma Office Address:
1st Floor, Shop No-108, Chandulal J Joshi Complex, Vasant Vihar, Opposite Kalyan Railway Station, Kalyan West
Thane, Maharashtra 421301
Phone: 09819871409, 09819870927, 09819870803, 09819870967
Magma Office Address
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2nd floor, Shop No-9, Pruthvi Corner, Above Mahindra Showroom, GEB Office, Old Jakat Naka, NH-8, Balitha,
Vapi, Gujrat 396191
Phone: 0260-2426844
Magma Office Address
2nd Floor, Plot Number 3, Road Number 3, Challa Estate, KPHB, Kukatpally,
Hyderabad, Andhra Pradesh 500072
Phone: 040-23158658
Magma Office Address
2nd Floor, 204,205 AND 207, Ridhi Siddhi Complex, Madhubani, Udaipur, Rajasthan
UDAIPUR, RAJASTHAN 313001
Phone: 0294-5103082
Magma Office Address
3rd Floor, T-5, "City Centre", Plot No-1, Press Complex, Zone-1, M.P.Nagar, Bhopal-462 011, Madhya Pradesh
BHOPAL, MADHYA PRADESH 462011
Phone: 0755-4218623/4059321/ 4206940/4218625
Magma Office Address
Ground Floor, NH-12, Patan Road,
Jhalawar, Rajasthan 326001
Phone: 07432 - 230140 / 190 / 490
Magma Office Address
1st Floor, Kuldevi Plaza, Near MPSEB,
Chindwara, Madhya Pradesh 480001
Phone: 07162-245253/63
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Magma Office AddressShop-9, Yenepoya Shopping Gallery, near Karnataka Bank, Kodiyal-Vail,
Mangalore, KARNATAKA 575003
Phone: 8244284284 Magma Office Address
Prestige Towers, Near Amoral Circle,Vaishali Nagar,
Jaipur, 302021
Phone: 0141-5197400 – 430
Magma Office Address
Jodhpur Ward, Baster Road,
Dhantari, Chattisgarh 493773
Phone: 07722-236513
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ANALYSIS OF DATA
Loan applies to defaulter:
The following is data of loan appliers and defaulters. The 90% of the customers are able to repay the loans but 10% failed to repay.
Year 2008 2009 2010Loan sanctioned 1236 2150 1614Defaulter 123 215 161
Table 1
1 2 30
500
1000
1500
2000
2500
Loans SanctionedDefaulters
Parameter used for credit appraisal :
parameter DOCUMENT
Technical feasibility Field investigation, Market value of assetsEconomic viability L.T.V (loan to value)Bankability Past month bank statement ,Assets and liabilities of compliment
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1. TECNIACAL FEASIBILITY :
Living standard Decent living standard with some tangibles like T.V. & fridge
will provide assurance to bank regarding your residentialStatus.
Locality Presence of some undesirable elements like local goons orcontroversial areas adversely affects your loan appraisalProcess.
TelephonicVerification
At least one response is need from person to establish theIdentity of the person from contact point of view.
EducationalQualification
Not an essential barrier but essential to understand thecomplex terms & conditions of bank loan.
Political Influence An interesting reference point in the sense that they are oneOf major category of loan defaulters.
References To establish the residential identity of person from humanContact point of view & cross check of their loans.
2.ECONOMIC FEASIBILTY:
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Credit Apprasial
Bankability
Econonic Viability
Technical Feasibility
Installment to income ratio -IIR for salaried cases would be capped at 60% ofNet income in general-Pension Income cases IIR to be restricted to 40%a
Fixed obligation to income ratio
FIOR kept at 55%
Loan to cost ratio LTV amount to 80%
5C’S OF CREDIT:
1. Character:
It refers to the honesty and integrity of the person. Borrowers are not necessarily reliable or honest and the lender must look for evidence of good character, if it exists. Frequently, this can be ascertained during an interview. The lender must, however, be sure to make his own assessment and not rely on the decision of an existing lender, or similarly on a key individual in the company – so called name lendingd.
2. Capacity:
It refers to the actual ability of the borrower to enter into a contract with the lender. It relates to the technical, managerial and financial means. It also refers to how the company monitors and manages its risks and the suitability of the assets in the company to generate sufficient
levels of cash to repay the loan.
3. Capital:
Capital refers to the investment or the stake that the borrower has in the firm. This is important to understand the capability of the individual. It is important for analysis as it determines how well the firm is capitalized and does the borrower has reasonable stake or he
is willing to let it go down the tubes and walk away from the obligations.
4. Collateral:
It analysis other potential sources of repayment of the obligations if these are supported by collateral security. Typically the amount of security required will depend on the type of business enterprise and the circumstances.
5. Condition:
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It discusses the competitive environment of the firm and how well the firm fits in. It also considers any economic event that will affect the repayment ability of the firm and also the purpose for which the loan is required.
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Findings
1. Magma fincorp company limited is one of the most trusted financial Institution in NBFC’s 500000 satisfied customer.
2. The interest rate is lower than other banks non-financial institution Like civic, cholamandalam, sundaram.
3. From the response of the customer is a staff of magma fincorop is cooperative.4. The staff is well qualified and versed with loan system as per the policy of
the company
5. There is a flat rate system in the company which is mainly beneficial to company.
6. From the information customer are satisfied with magma fincorp, 35% are old customer.
7. From the data loan procedure of the company is easy as compared to others.
8. 80% of the customer taken loan from magma only and 20% they have taken from
Other financial institution this shows the loyalty of customer to company.
9. The main competitor of Magma fincorp is cholamandalam.
10. In the company recovery rate is 90%.
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SUGGESTION
1. The company should try for reducing the documentation required for loan.
2. Company should appoint customer relationship manager for better customer
relations.
3. The company should provide door step service to the potential customer.
4. Company should provide special offerings to old customer
5. The loan processing time should be reduced
6. The NBFC’s should be focused more on advertising to increase awareness among the
Public about the service.
7. The NBFC’S should completely eliminate the file system and go computerization at
Every stage as this removes paper work and creates transparency.
8. The NBFC’S should work on standardizing the process and system their follow
9. Care must be taken to ensure that judgment in appraisal process does not depend on one single person and a single factor.
10. Need for improvised method that are on par with international
11. Revising the factor on which appraisal is done to face the ever increasing volatility
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SUMMARY
The credit appraisal of retail assets means to measure all the risk that are covered by credit officer as per the policy and mitigates are matching or not and it also helped me to understand the credit appraisal system. Sometimes credit funded to wrong person then also it will not affect the performance of the company because company gives loan against hypothecation (HP) of vehicle. The loan systems start from verifying and checking the necessary documents, collection the actual cost in terms of monthly installment and end’s with No Objection Certificate (NOC).
In the company the credit manager is the only person who takes care of proposals. The credit Manager should consult the recovery manager that a person is not a default list. If the Customer taking loan twice then credit manager should check his previous record.
In case of NBFC’S strictly follow it’s circular and fulfils all requirement of necessary documents required for different types of NBFC’S so that NBFC’S do not suffer any types of loss
NBFC’S is very much particular about CIBIL report of borrowers in case of each type of lending
NBFC’S lending process in case of retail loan is very much fast after compiling with all the criteria of NBFC’S
The E.M.I is affordable
Pre sanctioned and post sanctioned inspection is essential.
Magma fincorp is the only NBFC’s ,which is continuously upgraded to achieve the
Highest customer satisfaction.
In case of project financing NBFc’s follow lengthy norms to check the feasibility of
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After experiencing a volume growth of over 30% during 2009-10 and 2010-11, the rise domestic CV industry has been on a growth . since then Slowing industrial growth and weakening investment sentiment across sectors had a significant adverse impact on CV demand since the second half of 2011-12. While in 2011-12, the domestic CV industry volumes slowed down to 18.2%, industry volume growth entered into the negative territory in 11m 2012-13, also due to the high base of the last three years. Our interaction with a host of dealers, transporters and financing institutions reflect at an overall pessimistic outlook for the near term.
The current year has been marked by a market share loss for industry leader, Tata Motors, especially in the M&HCV segment as some of the other OEMs have managed to offset the impact of slowdown to an extent with expanding dealership network and wider model offerings. More, specifically, Volvo Eicher JV gained market share on back of increasing acceptability in the heavy-duty trucks segment, while Mahindra also performed better than the industry though on low volumes. Ashok Leyland’s expanding market coverage outside the Southern region also helped in in the favors of the company the impact of slowdown to an extent. Along expected lines, Ashok Leyland-Nissan JV made a good head start in the LCV segment with its first product offering – ‘Dost’. With more models planned for launch and plans.to set-up a Greenfield facility, we expect the JV to build upon its 7-8% market share in the LCV segment.
Having concluded capacity expansion plans over the past couple of years, CV OEMs are currently investing in developing new products, engine technologies and even Pursuing diversification plans in other sectors. Most of the investments plans at present are not associated with capacity expansion and are continuing as per plans. For some of the OEMs, the investment plans are sizeable and in view of weak cash flow generation would require market value or external financing to maintain a stable credit profile. The profitability indicators of industry participants have been under pressure on account of Rising discounts and weak M&HCV sales. OEMs have resorted to production cuts in intervals and cost rationalization measures to withstand the impact of slowdown. In our view, a meaningful recovery in the margins however will be driven by gradual recovery in M&HCV sales accompanied with better pricing power.
LCVs has continued to remain strong both in volume as well as capacity tonnage terms (up 12.5% in 11m 2012-13) during the current fiscal and has also provided some good material is used to the cyclicality that the CV industry is currently witnessing. Our channel check suggest that the demand for LCVs, which is Increasing driven by Small Commercial Vehicles (SCVs) has largely been driven by non-urban markets as improving road network is enabling better connectivity in tier III/IV cities. Notwithstanding the moderation in growth over the past few months, we expect the demand for LCVs to remain rise over the medium-term as it would need to match the extent of capacity added by M&HCVs trucks over the past
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few years. The growth will be led by SCVs, which are increasingly being favored over their three-wheeler counterparts and costlier LCVs on grounds of better power, maneuverability and cost economics. With modest initial investment (~Rs. 1.0 lac is the estimated equity contribution for entry-level trucks); such vehicles offer attractive pay-back and attractive employment opportunities to first-time users (FTUs). Moreover, the demand for smaller vehicles is also gaining preference on back stringent restrictions on entry of heavy-duty trucks and expanding city limits. As these factors support demand for SCVs, we expect growth momentum in the LCV sales to continue and forecast a 13-14% CAGR over FY14-16.
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Magma Office Address
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Prestige ToJaipur, 302021
Phone: 0141-5197400 - 43
Magma Office Address
Prestige Towers, Near
Phone: 0141-5197400 -Phone: 0141-5197400 - 430
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