project appraisal pnb

8/16/2019 PROJECT APPRAISAL PNB

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Credit Appraisal & Risk Rating.

Summer Internship Project Report

On

Project Appraisal & Credit Rating at Punjab National Bank

By

Ravi Jaiswal

A0101910168

MBA Class of 2 !2

Under the Supervision of

Mr" #oges$ Me$raAssistant Professor

%epart ent of 'inance

In P rti ! "u!fi!!ment of the Re#uirements for the $e%ree of & ster of Business Administr tion

At

AM()# B*+(N,++ +C-../AM()# *N(0,R+()# *))AR PRA%,+-

+,C).R !21 N.(%A 3 2 !4 4 *))AR PRA%,+- (N%(A2 !!

Amity Business School, Noida. Page 0


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%,C/ARA)(.N

'it!e of Project Report( Project Appr is ! ) *redit R tin% t Punj + , tion ! B n-

I dec! re

. /'h t the or- presented for ssessment in this Summer Internship Report is my

o n th t it h s not previous!y +een presented for nother ssessment nd th t my

de+ts .for ords d t r%uments nd ide s/ h ve +een ppropri te!y c-no !ed%ed

.+/'h t the or- conforms to the %uide!ines for present tion nd sty!e set out in the

re!ev nt document tion2

$ te( 3Au%ust34011

R vi 5 is !

A0101910168

&BA *! ss of 4014



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C,R)('(CA),

I Prof" #oges$ Me$ra here+y certify th t Ravi Jaiswal student of & sters

Of Business Administr tion t Amity Business Schoo! Amity University

Utt r Pr desh h s comp!eted the Project Report on 5PR.J,C) APPRA(+A/ AN%CR,%() RA)(N67 under my %uid nce2

o%esh &ehrAsst2 Professor

$ep rtment of "in nce



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AC8N.9/,%6,M,N)

7very or- invo!ves efforts nd inputs of v rious -inds nd peop!e2 I m th n-fu! to

!! those peop!e ho h ve +een he!pfu! enou%h to me to the e tent of their +ein%

instrument ! in the comp!etion nd ccomp!ishment of the project entit!ed Credit

Appraisal and Risk Rating t Punj + , tion ! B n-:2 ;o!- t 2

I sincere!y c-no !ed%e ith deep sense of %r titude to my project %uide nd mentor

Mr" Anirban Pal Manager :'inancial Anal;st< PNB /arge Corporate Branc$

and Mr" #oges$ Me$ra +ir :'inance %epart ent< for enh ncin% my underst ndin%

of the su+ject nd en +!in% me to ppreci te finer nu nces of the su+ject2

I ou!d !so !i-e to e press my deepest %r titude to Mr"Naren %utta +enior

anager Circle .ffice 8olkata ) Mr" Biswajit 8aul :Manager -R< s he found

me credi+!e enou%h to or- for P,B nd se!ected me for ch !!en%in% project2

< st!y I ou!d !so !i-e to th n-s the entire *redit $ep rtment for their he!p nd

%uid nce ithout hich the comp!etion of this project ou!d h ve +een e treme!y

difficu!t2

Ravi JaiswalA ! !=! !>?

&BA in "in nce ) & r-etin%

Amity Business Schoo!

Amity University ,oid



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,@,C*)(0, +*MMAR#



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'his project s undert -en t the Punj + , tion ! B n- < r%e *orpor te Br nch

;o!- t t the *redit $ep rtment2 "in nci ! re#uirements for Project "in nce nd

=or-in% * pit ! purposes re t -en c re of t the *redit $ep rtment2 *omp nies th t

intend to see- credit f ci!ities ppro ch the + n-2 Prim ri!y credit is re#uired for

fo!!o in% purposes(

2 =or-in% c pit ! fin nce

+2 'erm !o n for me% projects

Project "in ncin% discip!ine inc!udes underst ndin% the r tion !e for project

fin ncin% ho to prep re the fin nci ! p! n ssess the ris-s desi%n the fin ncin%

mi nd r ise the funds2 In ddition one must underst nd some project fin ncin% p! ns h ve succeeded hi!e others h ve f i!ed2 A -no !ed%e3+ se is re#uired

re% rdin% the desi%n of contr ctu ! rr n%ements to support project fin ncin%> issues

for the host %overnment !e%is! tive provisions pu+!ic?priv te infr structure

p rtnerships pu+!ic?priv te fin ncin% structures> credit re#uirements of !enders nd

ho to determine the project@s +orro in% c p city> ho to n !y e c sh f!o

projections nd use them to me sure e pected r tes of return> t nd ccountin%

consider tions> nd n !ytic ! techni#ues to v !id te the project@s fe si+i!ity

Project fin nce is different from tr dition ! forms of fin nce +ec use the credit ris-

ssoci ted ith the +orro er is not s import nt s in n ordin ry !o n tr ns ction>

h t is most import nt is the identific tion n !ysis !!oc tion nd m n %ement of

every ris- ssoci ted ith the project2

'he purpose of this project is to e p! in in +rief nd %ener ! y the m nner in

hich ris-s re ppro ched +y fin nciers in project fin nce tr ns ction2 Such ris-

minimi tion !ies t the he rt of project fin nce2 7fficient m n %ement of credit

portfo!io is of utmost import nce s it h s tremendous imp ct on the B n-s ssets

#u !ity ) profit +i!ity2 'he on%oin% fin nci ! reforms h ve no dou+t provided

unp r !!e! opportunities to + n-s for %ro th +ut h ve simu!t neous!y e posed them

to v rious ris-s hich need to +e effective!y m n %ed2

'he concept of *redit & n %ement is under%oin% r dic ! ch n%es2 *redit Ris- in !!

e posures c !!s for precise me surin% nd monitorin% for t -in% considered creditdecisions ith suit +!e ris- miti% nts ris- premium etc2 *redit portfo!io shou!d +e



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e!! diversified in v rious promisin% sectors ith c utious ppro ch to +e dopted

in ris-y se%ments2 A!so !endin% continues to +e prim ry function in + n-in%2 In the

!i+er !i ed Indi n economy c!iente!e h ve ide choice2 7 tern ! *ommerci !

Borro in%s nd the domestic c pit ! m r-ets compete ith + n-s2 In nother

dimension ret i! !endin%3 +oth person ! dv nces nd S&7 dv nces3 competes ith

corpor te !endin% for funds nd for hum n resources2 But !endin% +y n ture c nnot +e

n %%ressive se!!in% ctivity disre% rdin% the ris-s invo!ved2 B n- h s to +e

competitive ithout compromisin% on the + sic inte%rity of !endin%2 'he #u !ity of

the B n- s credit portfo!io h s direct nd deep imp ct on the B n- s profit +i!ity2

'he study h s +een conducted ith the purpose of %ettin% in3depth -no !ed%e +out

the credit ppr is ! nd credit ris- m n %ement procedure in the or% ni tion for the+ove s id first t o purposes2



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)AB/, .' C.N),N)+

C$apter ! (ntroduction""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""

(ntroduction to Banking +ector and PNB """"""""""""""""""""""""""""""""""""""""""!4

C$apter 2 Researc$ Met$odolog;""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""4

C$apter 4 /iterature Review""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""42

C$apter %ata Anal;sis and 'indings

ProjectDCredit Appraisal""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""4>

Credit Risk Manage ent"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""12

Post +anction +upervision & 'ollow up of /oan"""""""""""""""""""""""""""""1=

PNBEs /oan Polic;""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""">4

C$apter 1 Conclusions and Reco endation""""""""""""""""""""""""""""""""""""""""""""""""""""">=

Conclusions"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""

'indings"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""

Reco endation"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""F4

/i itations"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""

Reference"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""

APP,N%(@ CA+, +)*%#""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""F>



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142 Import ) 7 port of Iron Ore Pe!!ets 22222222222222222222222222222222222222222222222222222221F2 $omestic Pricin% Of Iron Ore Pe!!ets 222222222222222222222222222222222222222222222222222221D2 Imp!ement tion Schedu!e 22222222222222222222222222222222222222222222222222222222222222



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C-AP),R3 !

(N)R.%*C)(.N

*orpor te credit ppr is ! is fund ment ! +usiness pr ctice hich ssesses the

potenti !ities of corpor tion in terms of fin nci ! c p +i!ities to honour de+ts nd

other securities2 A critic ! ro!e of credit r tin% is in its very + sic essence to ensure

th t the +orro er h s %ood potenti ! to rep y de+ts nd s such determine the !eve! of

confidence !ender h s ith the +orro er2 Ide !!y sever ! instrument ! fund ment !s

re used to ssess the credit orthiness of corpor te credit ppr is ! nd they inc!ude

mon%st others fin nci ! history of corpor tion its ssets nd !i +i!ities nd its

projected future perform nce2

Scho! rs %ener !!y %rees th t the methodo!o%ies used +y credit r tin% comp nies

inf!uences to ! r%e e tent the credit sphere ith such fund ment !s such s !o n

perform nce credit orthiness nd %ener !!y economic perform nce comin% into

comp!e interp! y phenomenon hich %re t!y inf!uences the %ener ! perform nce

of n tion ! nd to n e tent the %!o+ ! economy2 =ithout vi +!e nd effective credit

ppr is ! fr me or- ch nces re th t there i!! +e credit crunch nd %ener !



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economic turmoi! such s the one +ein% itnessed in the US nd !! over the %!o+e2 In

f ct the current crises +ein% itnessed in the United St tes is p rt!y s resu!t of

in de#u te r tin% methods used +y the credit r tin% %encies2

'o effective!y underst nd the su+ject m tter it is necess ry indeed m nd tory th t the

methods used +y credit r tin% comp nies +e investi% ted n undert -in% th t i!!

he!p in sheddin% more !i%ht to the c uses of the current crisis2

Before %oin% further it is necess ry to underst nd the need nd + sic fr me or- of the

project2 'herefore this ch pter provides n introduction to the topic o+jective of the

project re sons for se!ectin% the project nd the + sic structure nd fr me or- ho

the project proceeds2

Reasons for selecting the project

=henever n individu ! or comp ny uses credit th t me ns they re +orro in%

money th t they promise to rep y ith in pre3decided period2 In order to ssess the

rep yin% c p +i!ity i2e2 to ev !u te their credit orthiness + n-s use v rious

techni#ues th t differ ith the different types of credit f ci!ities provided +y the + n-2In the current scen rio here it is seen th t +i% comp nies nd fin nci ! institutions

h ve +een + n-rupted just +ec use of credit def u!t so *redit Appr is ! h s +ecome

n import nt spect in the + n-in% sector nd is % inin% prime import nce2

It is the incident of credit def u!ts th t h s %iven rise to the fin nci ! crisis of 40083092

But in Indi the credit def u!t is comp r tive!y !ess th t other countries such s US2

One of the re sons !e din% to this m y +e %ood ppr is ! techni#ues used +y + n-s

nd fin nci ! institutions in Indi 2 7ventu !!y the import nce of this project is m in!y

to underst nd the credit ppr is ! techni#ues used +y the + n-s ith speci ! reference

to Punj + , tion ! B n-2

Objective of the project

'o study +ro d contours of m n %ement of credit the !o n po!icy credit ppr is ! for

+usiness units i2e2 for or-in% c pit ! !o n or 'erm


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'o uti!i e the +ove !e rnin% nd ppr ise the credit orthiness or% ni tions those

ppro ch PU,5AB ,A'IO,A< BA,; for credit2 'his ou!d ent i! undert -in% of

the fo!!o in% procedures(

i2 & n %ement 7v !u tion

ii2 Business ? Industry 7v !u tion

iii2 'echnic ! 7v !u tion

iv2


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(N)R.%*C)(.N ). BAN8(N6 +,C).R AN% PNB

A snaps$ot of t$e banking industr;

'he ! st dec de h s seen m ny positive deve!opments in the Indi n + n-in% sector2

'he %ro th in the Indi n B n-in% Industry h s +een more #u !it tive th n #u ntit tive

nd it is e pected to rem in the s me in the comin% ye rs2 B sed on the projections

m de in the JIndi Hision 4040J prep red +y the P! nnin% *ommission the report

forec sts th t the p ce of e p nsion in the + ! nce3sheets of + n-s is !i-e!y todece!er te2 'he tot ! ssets of !! schedu!ed commerci ! + n-s +y end3& rch 4010 is

estim ted t Rs D0 90 000 crores2 'h t i!! comprise +out 6E per cent of G$P t

current m r-et prices s comp red to 6C per cent in 400430F2 B n- ssets re e pected

to %ro t n nnu ! composite r te of 1F2D per cent durin% the rest of the dec de s

% inst the %ro th r te of 162C per cent th t e isted +et een 199D39E nd 400430F2 It

is e pected th t there i!! +e ! r%e dditions to the c pit ! + se nd reserves on the

!i +i!ity side2



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'he Indi n B n-in% Industry c n +e c te%ori ed into non3schedu!ed + n-s nd

schedu!ed + n-s2 Schedu!ed + n-s constitute of commerci ! + n-s nd co3oper tive

+ n-s2 'here re +out 6C 000 +r nches of Schedu!ed + n-s spre d cross Indi 2 As

f r s the present scen rio is concerned the B n-in% Industry in Indi is %oin% throu%h

tr nsition ! ph se2

'he Pu+!ic Sector B n-s .PSBs/ hich re the + se of the B n-in% sector in Indi

ccount for more th n C8 per cent of the tot ! + n-in% industry ssets2 Unfortun te!y

they re +urdened ith e cessive ,on Performin% ssets .,PAs/ m ssive m npo er

nd ! c- of modern techno!o%y2 On the other h nd the Priv te Sector B n-s re

m -in% tremendous pro%ress2 'hey re !e ders in Internet + n-in% mo+i!e + n-in%

phone + n-in% A'&s2 As f r s forei%n + n-s re concerned they re !i-e!y tosucceed in the Indi n B n-in% Industry2 *urrent!y + n-in% in Indi is %ener !!y f ir!y

m ture in terms of supp!y product r n%e nd re ch3even thou%h re chin% rur ! Indi

sti!! rem ins ch !!en%e for the priv te sector nd forei%n + n-s2

In terms of #u !ity of ssets nd c pit ! de#u cy Indi n + n-s re considered to h ve

c!e n stron% nd tr nsp rent + ! nce sheets re! tive to other + n-s in comp r +!e

economies in its re%ion2 'he Reserve B n- of Indi is n utonomous +ody ith

minim ! pressure from the %overnment2 'he st ted po!icy of the B n- on the Indi n

Rupee is to m n %e vo! ti!ity +ut ithout ny fi ed e ch n%e r te3 nd this h s most!y

+een true2 =ith the %ro th in the Indi n economy e pected to +e stron% for #uite

some time3especi !!y in its services sector3the dem nd for + n-in% services especi !!y

ret i! + n-in% mort% %es nd investment services re e pected to +e stron%2 One m y

!so e pect &)As t -eovers nd sset s !es2

In & rch 4006 the Reserve B n- of Indi !!o ed = r+ur% Pincus to incre se its

st -e in ;ot - & hindr B n- . priv te sector + n-/ to 10K2 'his is the first time n

investor h s +een !!o ed to ho!d more th n EK in priv te sector + n- since the RBI

nnounced norms in 400E th t ny st -e e ceedin% EK in the priv te sector + n-s

ou!d need to +e vetted +y them2

*urrent!y Indi h s 88 schedu!ed commerci ! + n-s .S*Bs/ 3 48 pu+!ic sector + n-s

.th t is ith the Government of Indi ho!din% st -e/ 49 priv te + n-s .these do not

h ve %overnment st -e> they m y +e pu+!ic!y !isted nd tr ded on stoc- e ch n%es/nd F1 forei%n + n-s2 'hey h ve com+ined net or- of over EF 000 +r nches nd



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1C 000 A'&s2 Accordin% to report +y I*RA


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After the second ph se of fin nci ! sector reforms nd !i+er !i tion of the sector in

the e r!y nineties the Pu+!ic Sector B n-s .PSB/ s found it e treme!y difficu!t to

comp!ete ith the ne priv te sector + n-s nd the forei%n + n-s2 'he ne priv te

sector + n-s first m de their ppe r nce fter the %uide!ines permittin% them ere

issued in 5 nu ry 199F2 7i%ht ne priv te sector + n-s re present!y in oper tion2

'his + n-s due to their ! te st rt h ve ccess to st te3of3the3 rt techno!o%y hich in

turn he!ps them to s ve on m npo er costs nd provide +etter services2

$urin% the ye r 4000 the St te B n- of Indi .SBI/ nd its C ssoci tes ccounted for

4EK sh re in deposits nd 4821K sh re in credit2 'he 40 n tion !i ed + n-s

ccounted for EF2EK of the deposits nd DC2EK of credit durin% the s me period2 'he

sh re of forei%n + n-s . num+erin% D4 / re%ion ! rur ! + n-s nd other schedu!edcommerci ! + n-s ccounted for E2CK F29K nd 1424K respective!y in deposits nd

82D1K F21DK nd 1428EK respective!y in credit durin% the ye r 40002

Classification of banking (ndustr;

'he Indi n + n-in% industry hich is %overned +y the B n-in% Re%u! tion Act of

Indi 19D9 c n +e +ro d!y c! ssified into t o m jor c te%ories non3schedu!ed + n-s

nd schedu!ed + n-s2 Schedu!ed + n-s comprise commerci ! + n-s nd the co3

oper tive + n-s2 In terms of o nership commerci ! + n-s c n +e further %rouped into

n tion !i ed + n-s the St te B n- of Indi nd its %roup + n-s re%ion ! rur ! + n-s

nd priv te sector + n-s .the o!d ? ne domestic nd forei%n/2 'hese + n-s h ve over

6C 000 +r nches spre d cross the country2 'he Indi n + n-in% industry is mi of

the pu+!ic sector priv te sector nd forei%n + n-s2 'he priv te sector + n-s re % in

spi!t into o!d + n-s nd ne + n-s2

Banking +;ste in (ndia

Reserve bank of (ndia :Controlling Aut$orit;<



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!" Rivalr; a ong eGisting fir s=ith the process of !i+er !i tion competition mon% the e istin% + n-s h s

incre sed2 7 ch + n- is comin% up ith ne products to ttr ct the customers nd

t i!or m de !o ns re provided2 'he #u !ity of services provided +y + n-s h s

improved dr stic !!y2

2" Potential ,ntrants

Previous!y the $eve!opment "in nci ! Institutions m in!y provided project fin nce

nd deve!opment ctivities2 But they no entered into ret i! + n-in% hich h s

resu!ted into stiff competition mon% the e itin% p! yers2

F2 )$reats fro +ubstitutes

B n-s f ce thre ts from ,on3B n-in% "in nci ! *omp nies2 ,B"*s offer hi%her

r te of interest2

D2 Bargaining Power of Bu;ers

*orpor te c n r ise their funds throu%h prim ry m r-et or +y issue of G$Rs "**Bs2

As resu!t they h ve hi%her + r% inin% po er2 7ven in the c se of person ! fin nce

the +uyers h ve hi%h + r% inin% po er2 'his is m in!y +ec use of competition2

1" Bargaining Power of +uppliers


(3)

Threat fromsubstitute is high dueto competition "!om

*+,s and insu!ancecompanies as the% o-e!a hi h !ate o" inte!est


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=ith the dvent of ne fin nci ! instruments providin% hi%her r te of returns to the

investors the investments in deposits is not %ro in% in ph sed m nner2 'he

supp!iers dem nd hi%her return for the investments2

.verall Anal;sis

'he -ey issue is ho c n + n-s !ever %e their stren%ths to h ve +etter future2 Since

the v i! +i!ity of funds is more nd dep!oyment of funds is !ess + n-s shou!d evo!ve

ne products nd services to the customers2 'here shou!d +e r tion ! thin-in% in

s nctionin% !o ns hich i!! +rin% do n the ,PAs2 As there is e pected reviv ! in

the Indi n economy B n-s h ve m jor ro!e to p! y2 "undin% corpor te t !o cost

of c pit ! is speci ! re#uisite2

+9.) ANA/#+(+ .' BAN8(N6 (N%*+)R#

'he + n-in% sector is !so t -en s pro y for the economy s ho!e2 'he

perform nce of + n- shou!d therefore ref!ect 'rends in the Indi n 7conomy:2 $ue

to the reforms in the fin nci ! sector + n-in% industry h s ch n%ed dr stic !!y ith

the opportunities to the or- ith ne ccountin% st nd rds ne entr nts nd

inform tion techno!o%y2 'he dere%u! tion of the interest r te p rticip tion of + n-s in

project fin ncin% h s ch n%ed in the environment of + n-s2

'he perform nce of + n-in% industry is done throu%h S=O' An !ysis2 It m in!y

he!ps to -no the stren%ths nd =e -ness of the industry nd to improve i!! +e

-no n throu%h convertin% the opportunities into stren%ths2 It !so he!ps for the

competitive environment mon% the + n-s2



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/ +)R,N6)-+

!" Availabilit; of 'unds

'here re seven ! -h crore roth of deposits v i! +!e in the + n-in% system2 Bec useof the recession in the economy nd vo! ti!ity in c pit ! m r-ets consumers prefer to

deposit their money in + n-s2 'his is m in!y +ec use of !i#uidity for investors2

2" Banking network

After n tion !i tion + n-s h ve e p nded their +r nches in the country hich h s

he!ped + n-s +ui!d ! r%e net or-s in the rur ! nd ur+ n re s2 Priv te + n-s !!o ed

to oper te +ut they m in!y concentr te in metropo!is2

4" /arge Custo er Base

'his is m in!y ttri+uted to the ! r%e net or- of the + n-in% sector2 $epositers in

rur ! re s prefer + n-s +ec use of the f i!ure of the ,B"*s2

" /ow Cost of Capital

*orpor te prefers +orro in% money from + n-s +ec use of !o cost of c pit !2

&idd!e income peop!e ho nt money for person ! fin ncin% c n !oo- to + n-s s

they offer t very !o r tes of interests2 *onsumer credit forms the m jor source of fin ncin% +y + n-s2

+/ 9,A8N,++

!" /oan %eplo; ent

Bec use of the recession in the economy the + n-s h ve id!e resources to the tune of

F2F ! -h crores2 *orpor te !endin% h s reduced dr stic !!y

2" Powerful *nions

, tion !i tion of + n-s h d positive outcome in he!pin% the Indi n 7conomy s

ho!e2 But this h d !so proved detriment ! in the form of stron% unions hich h ve

m jor inf!uence in decision3m -in%2 'hey re % inst utom tion2

4" Priorit; +ector /ending

'o up!ift the society priority sector !endin% s +rou%ht in durin% n tion !i tion2

'his is %ood for the economy +ut + n-s h ve f i!ed to m n %e the sset #u !ity nd



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'here is hu%e investment of househo!d s vin%s2 'he investments in ,B"*s deposits

* pit ! & r-et Instruments nd &utu ! "unds re incre sin%2 ,orm !!y these

instruments offer +etter return to investors2

2" C$ange in t$e 6overn ent Polic;

'he ch n%e in the %overnment po!icy h s proved to +e thre t to the + n-in% sector2

4" (nflation

'he interest r tes %o do n ith f !! in inf! tion2 'hus the investors i!! shift his

investments to the other profit +!e sectors2

" Recession

$ue to the recession in the +usiness cyc!e the economy functions poor!y nd this h s proved to +e thre t to the + n-in% sector2 'he m r-et oriented economy nd

%!o+ !i tion h s resu!ted into competition for m r-et sh re2 'he spre d in the

+ n-in% sector is very n rro 2 'o meet the competition the + n-s h s to %ro t

f ster r tes nd reduce the overhe ds2 'hey c n introduce the ne products nd

deve!op the e istin% services2

P*NJAB NA)(.NA/ BAN8

P*NJAB NA)(.NA/ BAN8 (N A 6/ANC,

unjab National Bank . PNB< was est +!ished in 189E in An r- !i

+ r t < hore undivided Indi Punj + , tion ! B n- .P,B/ h s the

distinction of +ein% the first Indi n + n- to h ve +een st rted so!e!y

ith Indi n c pit !2 'he + n- s n tion !i ed in 5u!y 1969 !on% ith

1F other + n-s2 "rom its modest +e%innin% the + n- h s %ro n in si e nd st ture to

+ecome front3!ine + n-in% institution in Indi t present2 'od y the B n- is the

second ! r%est %overnment3o ned commerci ! + n- in Indi ith +out E01C

+r nches nd 6E circ!e offices cross C6D cities2 It serves over 60 mi!!ion customers2

P Amity Business School, Noida. Page 22


24/110


'he + n- h s +een r n-ed 4D8th +i%%est + n- in the or!d +y the Bankers Almanac


25/110


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• Soft ! unch of *orpor te *redit * rd ith *orpor te


27/110


" 4010311 ith F9216K sh re of *ASA to domestic deposits the B n- chieved

net profit of Rs DDFF crore2 B n- h s stron% c pit ! + se ith c pit ! de#u cy r tio

of 142D4K s on & r 11 s per B se! II ith 'ier I nd 'ier II c pit ! r tio t 82DDK

nd F298K respective!y2 As on & rch 11 the B n- h s the Gross nd ,et ,PA r tio

of 12C9K nd 028EK respective!y2 $urin% the " 4010311 its r tio of Priority Sector

*redit to Adjusted ,et B n- *redit t D026CK ) A%ricu!ture *redit to Adjusted ,et

B n- *redit t 192F0K s !so hi%her th n the stipu! ted re#uirement of D0K ) 18K

respective!y2

'he perform nce hi%h!i%hts of the + n- in terms of +usiness nd profit re sho n

+e!o (

PARA&7'7R &AR O8 &AR 09 &AR 10 &AR 11 *AGR OP7RA'I,GPRO"I' D006 E690 CF46 90E6 46216

,7' PRO"I' 40D9 F091 F90E D0FF 192C6$7POSI'S 166DEC 409C60 4D9FF0 F14899 4421DA$HA,*7S 119E04 1EDC0F 186601 4D410C 4E21D'O'A< BUSI,7SS 48E9EC F6DD6F DFE9F1 EEE00E 4F2D0

(n crore

R,C,N) A9AR%+ AN% ACC./A%,+• Received Go!d trophy of S*OP7 &eritorious A rd for Best & n %ed B n-

"in nci ! Institution or Insur nce *omp ny for the ye r 4009310 +y St ndin%

*onference of Pu+!ic 7nterprises from the president of Indi 2

• P,B djud%ed s 'op Indi n *omp ny under B n-s: * te%ory +y $un nd

Br dstreet Ro!t *orpor te A rd 40102



28/110

-ead .ffice

C Bhi-h ji * m P! ce ,e$e!hi3110066

Circle Office

Branches


• Go!den Pe coc- *orpor te Soci ! Responsi+i!ity A rd 4011: +y Institute of

$irectors2

• Best *orpor te Soci ! Responsi+i!ity Pr ctice A rd 4011 +y Bom+ y Stoc-

7 ch n%e for second ye r in ro 2• B&< &unj ! A rd for 7 ce!!ence in


29/110

*h irm n

78ecutive $irector

Gener ! & n %er .G&/

$eputy G&

Assist nt G&

*hief & n %er

Senior & n %er

& n %er

Officers

Su+ordin te c!er-s


-(,RARC-#

Board of Directors

• +$"8"R" 8a at$ (3 e h s +een ppointed s ch irm n nd m n %in%

director of Punj + , tion ! B n- +y Govt2 Of Indi 2• +$" M"0")anksale 3 ,Gecutive %irector• +$" Rakes$ set$i 3 ,Gecutive %irector• + t" Ravneet 8aur 3 Govt2 of Indi ,ominee $irector • +$ri Jasbir +ing$ 3 Reserve B n- of Indi ,ominee $irector • +$ri 0inod 8unar Mis$ra 3 Part3ti e non3official %irector• +$ri )rib$uwan Nat$ C$aturvedi 3 +$are -older %irector• +$ri 6 R +undaravadivel 3 +$are -older %irector• +$ri %evinder 8u ar +ingla +$are -older %irector• +$" M P +ing$ 3 9ork en , plo;ees %irector +$" Pradeep 8u ar 3 .fficer %irector



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C-AP),R3 2



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R,+,ARC- M,)-.%./.6#

'he methodo!o%y +ein% used invo!ves t o + sic sources of inform tion prim rysources nd second ry source2

Pri ar; sources of (nfor ation

!" &eetin%s nd discussion ith the *hief & n %er nd the Senior & n %er of

+oth *redit nd *redit Ris- & n %ement $ep rtment2" &eetin%s ith the c!ients

+econdar; sources of (nfor ation

!"


32/110


C-AP),R3 4

/()RA)*R, R,0(,9



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Product Appr is ! And *redit R tin%: h s +ec me n import nt p rt !most !! B n-

nd "in nci ! institute they find it s n effective too!s to h ve credi+!e


34/110


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to m -e h t if n !ysis: +ut O -ford -no the dr + c- of sensitivity n !ysis it

c n on!y n !ysis the imp ct of ch n%e of one v ri +!e to project profit +i!ity +ut not

the interre! tion of the v ri +!e th t is its consider !! other v ri +!e +ein% const nt

nd ch n%e to on!y one v ri +!e2

Rese rch p per F3 *nido 2 in his m nu ! for ev !u tion of industri ! project he

discussed nother method for n !ysin% uncert inty popu! r!y termed s Break ,ven

Anal;sis ccordin% to Unido it is the first step to rd n !ysis of uncert inties under

this me thod n ttempt is m de to rrive t minimum !eve! of production?s !es nd

hich the firm c n run ithout jeop rdi in% its fin nci ! vi +i!ity2

Rese rch p per D3('AC su+mitted p per in 5une 4008 discussin% +out the Project

Appr is ! Usin% $iscounted * sh "!o nd su%%ested different princip ! for the

process + sic !!y it emph sise on the opportunity cost of c pit ! simp!ified s time

v !ue of money its e p! in th t project ith mu!tip!e inf!o nd outf!o of c sh over

period of time c n +e n !ysed +y its net present v !ue.,PH/ the discountin% r te

t -en for the c !cu! tion of the ,PH shou!d ref!ect the system tic ris- of the project

nd not of n or% ni tion Sometime it is not possi+!e to distin%uish +et een the

system tic ris- nd unsystem tic ris- nd the re#uired discountin% " ctor re not

v i! +!e even then it is e sy to n !y e the project +y determine the IRR of the

project ith its respective c sh f!o

Rese rch p per E3 Bri n ne!son ,ovem+er 4009 he his rese rch p per t mornin%

st r credit r tin% methodo!o%y he divide the r tin% into t o p rt +usiness Ris- nd

"in nci ! Ris- in fin nci ! ris- * sh "!o *ushion r tio is fund ment ! indic tor

of firm@s future fin nci ! he !th nd is -ey component of the &ornin%st r *redit

R tin%2 'he me sure reve !s ho m ny times comp ny@s intern ! c sh %ener tion

p!us tot ! e cess !i#uid c sh i!! cover its de+t3!i-e contr ctu ! commitments over the

ne t E ye rs hi!e in the +usiness ris- f ctor inc!udes *ountry .10K ei%ht %e/ nd

*omp ny Ris- .90K ei%ht %e/ *ountry Ris- is e tern ! ris- hich inc!udes

Po!itic ! !e% ! ris- nd interest r te etc here the scorin% is %iven from 1 to 4E here

4E +ein% the +est In +usiness ris- scorin% re %iven from 1 to 10 here 10 +ein% the

!o ris- scorin% re done on Annu ! Revenue Product nd customer

concentr tion.$iversific tion/ Ste rdship Gr de for tr nsp rency in comp ny nd*yc!ic !ity of Oper tions for economic sensitivity2



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>"! (N)R.%*C)(.N

7ffectiveness of *redit & n %ement in the + n- is hi%h!i%hted +y the #u !ity of its

!o n portfo!io2 7very B n- is strivin% h rd to ensure th t its credit portfo!io is he !thy

nd th t ,on Performin% Assets re -ept t !o est possi+!e !eve! s +oth of these

f ctors h ve direct imp ct on its profit +i!ity2 In the present scen rio efficient project

ppr is ! h s ssumed %re t import nce s it c n chec- nd prevent induction of

e - ccounts to our !o n portfo!io2 A!! possi+!e steps need to +e t -en to stren%then

pre s nction ppr is ! s ! ys Prevention is +etter th n *ure:2 =ith the openin% up

of the economy r pid ch n%es re t -in% p! ce in the techno!o%y nd fin nci ! sector

e posin% + n-s to %re ter ris-s hich c n +e +ro d!y c! ssified s under(

(N%*+)R# R(+8

Government re%u! tions nd po!icies v i! +i!ity of infr structure f ci!ities Industry

R tin% Industry Scen rio ) Out!oo- 'echno!o%y Up %r d tion v i! +i!ity of inputs

product o+so!escence etc2



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B*+(N,++ R(+8

Oper tin% efficiency competition f ced from the units en% %ed in simi! r products

dem nd nd supp!y position cost of ! +our cost of r m teri ! nd other inputs

pricin% of product surp!us v i! +!e m r-etin% etc

MANA6,M,N) R(+8

B c-%round inte%rity nd m r-et st ndin%? reput tion of promoters or% ni tion !

set up nd m n %ement hier rchy e pertise?competence of persons ho!din% -ey

position in the or% ni tion de!e% tion nd decentr !i tion of uthority chievement

of t r%ets tr c- record in e ecution of project de+t rep yment industry re! tions etc2

'(NANC(A/ R(+8

"in nci ! stren%th?st ndin% of the promoters re!i +i!ity nd re son +!eness of

projections p st fin nci ! perform nce re!i +i!ity of oper tion ! d t nd fin nci !

r tios de#u cy of provisionin% for + d de+ts #u !ifyin% rem r-s of

uditors?inspectors etc2

In !i%ht of the fore%oin% ris-s the + n-s ppr is ! methodo!o%y shou!d -eep p ce ith

ever ch n%in% economic environment2 'he ppr is ! system ims to determine the

credit needs?re#uirements of the +orro er t -in% into ccount the fin nci ! resources

of the c!ient2 'he end o+jective of the ppr is ! system is to ensure th t there is no

under 3 fin ncin% or over 3 fin ncin%2

"o!!o in% re the spects hich need to +e scrutini ed nd n !y ed hi!e

ppr isin%(

>"2 MAR8,) ANA/#+(+ :%,MAN% AN% P.),N)(A/<

'he m r-et dem nd nd potenti ! is to +e e mined for e ch product item nd its

v ri nts?su+stitutes +y t -in% into ccount the se!!in% price of the products to +e

m r-eted vis3 3vis prices of the competin% products?su+stitutes discount structure

rr n%ement m de for fter s !e service competitors@ st tus nd their !eve! of

oper tion ith re% rd to production nd products nd distri+ution ch nne!s +ein% used

etc2 *ritic ! n !ysis is re#uired re% rdin% si e of the m r-et for the product.s/ +oth

!oc ! nd e port + sed on the present nd e pected future dem nd in re! tion to



39/110


supp!y position of simi! r products nd v i! +i!ity of the other su+stitutes s !so

consumer preferences pr ctices ttitudes re#uirements etc2 "urther the +uy3+ c-

rr n%ements under the forei%n co!! +or tion if ny nd inf!uence of Government

po!icies !so needs to +e considered for projectin% the dem nd2 *ompetition from

imported %oods Government Import Po!icy nd Import duty structure !so need to +e

ev !u ted2

>"4 ),C-N(CA/ A+P,C)

In dyn mic m r-et the product its v ri nts nd the product3mi proposed to +e

m nuf ctured in terms of its #u !ity #u ntity v !ue pp!ic tion nd current

t ste?trend re#uires thorou%h investi% tion2

(" /ocation and +ite

B sed on the ssessment of f ctors of production m r-ets Govt2 po!icies nd other

f ctors


40/110


hether these re of proven techno!o%y s to its perform nce2 'he techno!o%y used

shou!d +e ! test nd cost effective en +!in% the unit to compete in the m r-et2

Purch se of reconditioned?o!d m chinery is to +e de !t in terms of ! id do n

%uide!ines2 *omp ti+i!ity of p! nt nd m chinery p rticu! r!y in respect of imported

techno!o%y ith #u !ity of r m teri ! is to +e -ept in vie 2 A!so p! nt nd

m chinery nd other e#uipments needed for v rious uti!ity services their supp!y

position specific tion price nd perform nce s !so supp!iers@ credenti !s nd in

c se of co!! +or tion co!! +or tors@ present nd future support re#uires critic !

n !ysis2 P! nt c p city nd the concept of economic si e h s m jor +e rin% on the

present nd future p! ns of the entrepreneur.s/ nd shou!d +e re! ted to the v i! +i!ity

of r m teri ! product dem nd product price nd techno!o%y2

'he se!ected process of m nuf cturin% indic tin% the de#u cy v i! +i!ity nd

suit +i!ity of techno!o%y to +e used !on% ith p! nt c p city m nuf cturin% process

needs to studied in det i! ith c p cities t v rious st %es of production +ein% such

th t it f ci!it tes optimum uti!i tion nd ensures future e p nsion? de+ott!enec-in%

s nd hen re#uired2 It is !so to +e ensured th t rr n%ements re m de for

inspection t intermedi te?fin ! st %es of production for ensurin% #u !ity of %oods on

successfu! commencement of production nd comp!etion herever re#uired2

>" '(NANC(A/ A+P,C)

'he spects hich need to +e n !y ed under this he d shou!d inc!ude cost of project

me ns of fin ncin% cost of production +re -3even n !ysis fin nci ! st tements s

!so profit +i!ity?funds f!o projections fin nci ! r tios sensitivity n !ysis hich

re discussed s under(

!" Cost of Project & Means of 'inancing

i2 'he m jor cost components of ny project re ! nd nd +ui!din% inc!udin%

tr nsfer re%istr tion nd deve!opment ch r%es s !so p! nt nd m chinery

e#uipment for u i!i ry services inc!udin% tr nsport tion insur nce duty

c!e rin% !o din% nd un!o din% ch r%es etc2 It !so invo!ves consu!t ncy nd

-no 3ho e penses hich re p y +!e to forei%n co!! +or tors or consu!t nts

ho re imp rtin% the technic ! -no 3ho 2 Recurrin% nnu ! roy !ty p yment

is not ref!ected under this he d +ut is ccounted for under the profit +i!ity



41/110


st tements2 "urther pre!imin ry e penses such s cost of incorpor tion of

the *omp ny its re%istr tion prep r tion of fe si+i!ity report m r-et surveys

pre3oper tive e penses !i-e s ! ry tr ve!!in% st rt up e penses mort% %e

e penses incurred +efore commencement of commerci ! production !so form

p rt of cost of project2 A!so inc!uded in it re c pit ! issue e penses hich c n

+e in the form of +ro-er %e commission dvertisement printin% st tionery

etc2 "in !!y provisions for contin%encies to meet ny unforeseen e penses

such s price esc ! tion or ny other e pense hich h ve +een in dvertent!y

omitted !i-e m r%in for or-in% c pit ! re#uirements re#uired to comp!ete the

production cyc!e interest durin% construction period etc2 re !so p rt of

c pit ! cost of project2 It is to +e ensured hi!e ppr isin% the project th t cost

nd v rious estim tes %iven re re !istic nd there is no under?over estim tion2

"urther these cost components shou!d +e supported +y proper #uot tions

specific tions nd justific tions of ! nd m chinery nd -no 3ho e penses

etc2

ii2 Besides B n- s !o n the project cost is norm !!y fin nced +y +rin%in% c pit !

+y the promoters nd sh reho!ders in the form of e#uity de+entures

unsecured !on% term !o ns nd deposits r ised from friends nd re! tives

hich re not rep y +!e ti!! rep yment of B n-@s !o n2 Resources re r ised

for fin ncin% project +y r isin% term !o ns from Institutions?B n-s hich re

rep y +!e over period of time deferred term credits secured from supp!iers

of m chinery hich re rep y +!e in inst !!ments over period of time2 'he

+ove is n i!!ustr tive !ist s the promoters h ve no st rted r isin% funds

throu%h 7uro3issues "orei%n *urrency !o ns premium on c pit ! issues etc2

hich re sometimes comp r tive!y che p me ns of fin nce2 Su+sidies nd

deve!opment !o ns provided +y the *entr !?St te Government in notified

+ c- rd districts to ttr ct entrepreneurs re !so me ns of fin ncin%

project2 It is to +e scert ined th t re#uirement of fin nce h s +een proper!y

tied3up for unhindered imp!ement tion of project2 'he fin ncin% structure

ccepted must +e in conson nce ith %ener !!y ccepted !eve!s !on% ith

de#u te Promoters@ st -e2 'he resourcefu!ness i!!in%ness nd c p city of

promoter to contri+ute the s me h ve !so to +e investi% ted2



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In c se of project fin nce the promoter?+orro er m y +rin% in upfront his

contri+ution .other th n funds to +e provided throu%h intern ! %ener tion/ nd the

+r nches shou!d commence its dis+ursement fter the stipu! ted funds re +rou%ht in

+y the promoter?+orro er2 A condition to this effect shou!d +e stipu! ted +y the

s nctionin% uthority in c se of project fin nce on c se to c se + sis dependin% upon

the resourcefu!ness nd c p city of the promoter to contri+ute the s me2 It shou!d +e

ensured th t t ny point of time the promoter s contri+ution shou!d not +e !ess th n

the proportion te sh re2

2" Profitabilit; +tate ent

'he profit +i!ity st tement hich is !so -no n s QIncome nd 7 penditure

St tement@ is prep red fter considerin% the net s !es fi%ure nd det i!s of direct

costs?e penses re! tin% to r m teri ! %es po er fue! consum +!e stores?sp res

nd other m nuf cturin% e penses to rrive t fi%ure of %ross profit2 'here fter !!

other e penses !i-e s ! ries office e penses p c-in% se!!in%?distri+ution interest

depreci tion nd ny other overhe d e penses nd t es re t -en into ccount to

rrive t the fi%ure of net profit2 'he projections of profit?!oss re prep red for

period coverin% the rep yment of term !o ns2 'he economic ppr is ! inc!udes

scrutini in% !! the items of cost nd e minin% the ssumptions if ny to ensure th t

these re re !istic nd chiev +!e2 'here shou!d not +e ny optimism or pessimism in

or-in% out profit +i!ity projections since even !itt!e ch n%e in the product3mi

from non3remuner tive to remuner tive or vice3vers c n distort the picture2 =hi!e

prep rin% profit +i!ity projections the p st trends of perform nce in n industry nd

other environment ! f ctors inf!uencin% the cost nd revenue items shou!d !so +e

considered o+jective!y2

Gener !!y spe -in% unit m y +e considered s fin nci !!y vi +!e pro%ressive nd

efficient if it is +!e to e rn enou%h profits not on!y to service its de+ts time!y +ut !so

for future deve!opment?%ro th2

4" Break3,ven Anal;sis

An !ysis of +re -3even point of +usiness enterprise ou!d he!p in -no in% the !eve!

of output nd s !es t hich the +usiness enterprise just +re -s even i2e2 there is

neither profit nor !oss2 A +usiness e rns profit if it oper tes t !eve! hi%her th n the



43/110


+re -3even !eve! or +re -3even point2 If on the other h nd production is +e!o this

!eve! the +usiness ou!d incur !oss2 'he +re -3even point in n !%e+r ic e#u tion

c n +e put s under(

BR7A;37H7,POI,'

.HO


44/110


Is the +usiness !i-e!y to f ce !i#uidity pro+!emsT

Balance +$eet Projections

'he fin nci ! ppr is ! !so inc!udes study of projected + ! nce sheet hich %ives the

position of ssets nd !i +i!ities of unit t p rticu! r future d te2 In other ords

the st tement he!ps to n !y e s to h t n enterprise o ns nd h t it o es t

p rticu! r point of time2

An ppr is ! of the projected + ! nce sheet d t of the unit ou!d +e concerned ith

hether the projections re re !istic !oo-in% to v rious spects re! tin% to the s me

industry2

'inancial Ratios

=hi!e n !y in% the fin nci ! spects of project it ou!d +e dvis +!e to n !y e the

import nt fin nci ! r tios over period of time s it m y te!! us !ot +out unit@s

!i#uidity position m n %ements@ st -e in the +usiness c p city to service the de+ts

etc2 'he fin nci ! r tios hich re considered import nt re discussed s under(

1 $7B'37 UI' RA'IO

DEBT (Term Liabilities) EQUITY (Share capital, free

reserve, premi m !n share,"evel!pment rebate reserve,

tec# After a"$ stin% l!ssbalance)

RBI h s dvised th t the + n-s in their o n interest shou!d h ve c!e r po!icy du!y

pproved +y +o rd re% rdin% $e+t37#uity R tio .$7R/ nd the infusion of

e#uity?funds +y promoter shou!d +e such th t the stipu! ted !ever of $7R is



45/110


46/110


MidDs all projects ,o distinction forv rious industries?se%ments for thec te%ory s projectsfin ncin% norm !!yf !!s under ! r%e

project c te%ory

4200(1 *irc!e e ds m y re! upto42E0(1 3G7. O/ m y re!

upto F200(137$?*&$ m y re! upto D200(1

3&* to h ve fu!! po ers

• &'r!$ect ith capital c!st !f s# *++ cr!re ab!ve• && ela-ati!n in "esire" level !f DE pt! +#.+ ma/ be permitte" in cases

inv!lvin% latest techn!l!%/

4

$7B' S7RHI*7*OH7RAG7

RA'IO

,7' PRO"I' .A"'7R 'AL/ W I,'7R7S' O" '7

I,'7R7S' O" '7R&


47/110


'his r tio %ives the vie of +orro er s c pit ! structure if the r tio sho s risin%

trends its me ns the +orro er is re!yin% more on his o n funds nd !ess on outside

funds nd vice3vers

DPRO"I' SA their interpret tion ho ever h s to +e m de ith refrence

to over !! tendencies nd p r meter in re! tion to the project2

C

I,'7R,A< RA'7 O" R7'UR,

.IRR/

,7' PR7S7,' HA


48/110


IRR is th t r te of discount hich m -es the discounted v !ue of the net c sh f!o

from project just e#u ! to the mount hich h s to +e invested to o+t in th t net

c sh f!o 2 In other ords IRR is th t r te of discount hich %ives the project n ,PHe#u !s to ero nd cost +enefit r tio e#u !s to one2

+ensitivit; Anal;sis

=hi!e prep rin% nd ppr isin% projects cert in ssumptions re m de in respect of

cert in critic !?sensitive v ri +!es !i-e se!!in% price?cost price per unit of production

product3mi p! nt c p city uti!i tion s !es etc2 hich re ssi%ned QHA"1 MANA6,M,N) & .R6AN(HA)(.N ANA/#+(+

Appr is ! of project ou!d not +e comp!ete ti!! it thro s enou%h !i%ht on the person.s/

+ehind the project i2e2 m n %ement nd or% ni tion of the unit2 It is seen th t some

projects m y f i! not +ec use these re not vi +!e +ut +ec use of the ineffectiveness of

the m n %ement nd the or% ni tion in contro!!in% v rious functions !i-e production

m r-etin% fin nce personne! etc2 'he ppr is ! report shou!d hi%h!i%ht the stren%ths

nd e -nesses of the m n %ement +y commentin% on the + c-%round

#u !ific tions e perience nd c p +i!ity of the promoter -ey m n %ement personne!



49/110


nd effectiveness of the intern ! contro! systems re! tion ith ! +or or-in%

conditions %e structure nd the other ssi%ned essenti ! functions2 In c se the

promoter.s/ h ve interest in other concerns s Proprietor or P rtner or $irector the

ppr is ! report shou!d !so comment on their perform nce in such concerns2

A +usiness is more vu!ner +!e if decision m -in% in !! the function ! re s rests ith

p rticu! r person in other ords Qone m n sho @2 "urther the m n %ement nd the

or% ni tion shou!d +e conducive to the si e nd type of +usiness2 In c se it is not so

it shou!d +e ensured th t profession ! m n %ers re inducted to stren%then the

or% ni tion2

>"> APPRA(+A/ .' PR.J,C) 3 A C-,C8 /(+)

An indic tive !ist of issues hich need to +e !oo-ed into hi!e ppr isin% project is

%iven +e!o (

>">"! MAR8,)(N6

12 Re son +!e dem nd projections -eepin% in vie the si e of the m r-et

consumption !eve! supp!y position e port potenti ! import su+stitute etc2

42 *ompetitors@ st tus nd their !eve! of oper tion ith re% rd to production nd

s !es2

F2 'echno!o%y dv ncement?"orei%n *o!! +or tor@s St tus?Buy3+ c- rr n%ements

etc2

D2 & r-etin% po!icies in pr ctice for promotion of product.s/ nd distri+ution

ch nne!s +ein% used2 7 penses on m r-etin% re done so s to popu! ri e the

product2



50/110


E2 ">"2 ),C-N(CA/

12 Product nd its !ife cyc!e product3mi nd their pp!ic tion2

42 ">"4 '(NANC(A/

12 'ot ! project cost nd ho it is +ein% funded?fin nced2

42 *ontin%encies nd inf! tion du!y f ctored in project cost2

F2 Profit +i!ity projections + sed on re !istic c p city uti!i tion nd s !es forec st

ith proper justific tion2 Unre !istic? m+itious s !es projections ithout reference

to p st perform nce nd justific tion to +e voided2



51/110


D2 Bre -3even n !ysis fund f!o nd c sh f!o projections2

E2 B ! nce sheet projections shou!d +e re !istic nd + sed on ! test v i! +!e d t 2

'he components of fin nci ! r tios shou!d +e su+jected to c!ose scrutiny2

62 Aspect of support of p rent comp ny herever pp!ic +!e m y +e t -en into

ccount2

>">" MANA6,R(A/

12 "in nci ! st ndin% nd resourcefu!ness of the m n %ement2

42 u !ific tions nd e perience of the promoters nd -ey m n %ement personne!2

F2 Underst ndin% of the project in !! of its spects 3fin ncin% p ttern technic !

-no !ed%e nd m r-etin% pro%r mm tic2

D2 Intern ! contro! systems de!e% tion of de#u te po ers nd entrustin%

responsi+i!ity t v rious !eve!s2

E2 Other enterprises if ny herein the promoters h ve the interest nd ho these

re functionin%2

>">"1 ,C.N.M(C

12 Imp ct on incre se in !eve! of s vin%s nd income distri+ution in society nd

st nd rd of !ivin%2

42 Project contri+ution to rds cre tion nd r te of incre se of emp!oyment

opportunity chievin% se!f sufficiency etc2

F2 Project contri+ution to the deve!opment of the re%ion its imp ct on

environment nd po!!ution contro!

C.NC/*+(.N



52/110


'o jud%e hether the project is vi +!e i2e2 it c n %ener te de#u te surp!us for

servicin% its de+ts ithin re son +!e period of time nd sti!! !eft ith some funds for

future deve!opment2 'his invo!ves t -in% n over3 !! vie to n !yse the stren%ths nd

e -nesses of the project2 It shou!d !so +e n !ysed to see hether the m n %ement

nd or% nis tion c n prove effective for successfu! imp!ement tion of the project2

CR,%() R(+8 MANA6,M,N)



53/110


F"! Credit Risk

*redit ris- me ns the possi+i!ity of !oss ssoci ted ith diminution in the credit#u !ity of +orro ers2 In + n- s portfo!io !osses stem from outri%ht def u!t due to

in +i!ity or un i!!in%ness of customer or counter p rty to meet commitments in

re! tion to !endin% tr din% sett!ement nd other fin nci ! tr ns ctions2

C24CR,%() R(+8 MANA6,M,N) +#+),M (N PNB

A comprehensive credit ris- m n %ement system hich is in p! ce in the + n-

encomp sses the fo!!o in% processes(

Identific tion of *redit Ris-

&e surement of *redit Ris-

Gr din% of *redit Ris-

Reportin% nd n !ysis of r tin% re! ted d t

*ontro! of *redit Ris-



54/110


CR,%() R(+8 (%,N)('(CA)(.N

In order to t -e informed credit decisions it is necess ry to identify the re s of credit

risin e ch +orro er s e!! s e ch industry2 Ris- & n %ement $ivision O in

coordin tion ith other O divisions invo!ved in dis+urs ! of credit nd !so the ris-

m n %ement dep rtments of v rious on ! offices identifies these ris-s re s nd

deve!ops necess ry too!s nd processes to me sure nd monitor the ris-2

CR,%() R(+8 M,A+*R,M,N)

In order to me sure the credit risin + n-s portfo!io the + n- h s deve!oped the

fo!!o in% mode!s(

CR,%() R(+8 RA)(N6

M.%,/

).)A/ /(M()

'R.M PNB+A/,+


55/110


credit ris- invo!ved in them2 Inputs to the mode!s re the fin nci ! m n %ement

+usiness nd conduct of ccount industry inform tion2 'he ev !u tion of +orro er

is done +y ssessment on v rious o+jective?su+jective p r meters2 'he mode!

ev !u tes the credit ris- r tin% of +orro er on sc !e of AAA to $ ith AAA

indic tin% minimum ris- nd $ indic tin% m imum ris-2

'he credit ris-3r tin% mode!s incorpor te therein !! possi+!e ris- f ctors hich re

import nt for determinin% the credit #u !ity? r tin% of +orro er2 'hese ris-s cou!d

+e(

Intern ! nd specific to the comp ny

Associ ted ith the industry in hich the comp ny is oper tin% or

Associ ted ith the entire economy nd c n inf!uence the rep yment c p city nd?

or i!!in%ness of the comp ny2

,valuation et$odolog; under rating odels

'he scores re ssi%ned to e ch of the p r meters on sc !e of 0 to D ith 0 +ein%

very poor nd D +ein% e ce!!ent2 'he scorin% of some of these p r meters is su+jective

hi!e for some others it is done on the + sis of pre3defined o+jective criteri 2

'he scores %iven to the individu ! p r meters mu!tip!ied +y !!oc ted ei%hts re

then %%re% ted nd composite score for the comp ny is rrived t in percent %e

terms2 i%her the score o+t ined +y comp ny the +etter is its credit r tin%2 =ei%hts

h ve +een ssi%ned to different p r meters + sed on their import nce2 =ei%hts

ssi%ned to different p r meters h ve +een !o ded in the soft re2 After

!!oc tin%?ev !u tin% scores to !! the p r meters the %%re% te score is c !cu! ted

nd disp! yed +y the soft re2

'he over !! percent %e score o+t ined is then tr ns! ted into r tin% on sc !e from

AAA to $ ccordin% to pre3defined r n%e of scores2



56/110


=herever p rticu! r p r meter is not pp!ic +!e no score shou!d +e %iven nd the

p r meter shou!d +e m de ,ot App!ic +!e 2"or mu!ti3division ! comp nies hich

re invo!ved in more th n one industri ! ctivity ev !u tion shou!d +e done sep r te!y

for e ch +usiness2 o ever the m n %ement ev !u tion conduct of ccount nd

fin nci ! ev !u tion i!! +e done on common + sis2 In such c ses for the +usiness

section e ch +usiness shou!d +e ev !u ted nd scored sep r te!y t -in% into ccount

the different industri ! ctivity invo!ved2

'he mode!s provided for do n %r d tion of the r tin% of the +orro er +y one notch

on the + sic of ny cruci ! f ctor comin% to the notice fter the d te of udited + ! nce

sheet .on hich r tin% is done/ nd hich m y ffect the oper tin% efficiency

?vi +i!ity of the unit su+st nti !!y such s(

I2 Poorer perform nce to current ye r s comp red to B ! nce Sheet fi%ure2II2 A+sence of i!!in%ness?c p +i!ity of the promoter to rep y the de+t s per

%reed term nd condition2III2 Su+st nti ! imp irment in the v !ue of ssets . inc!udin% +!oc- ssets?


57/110


industry r tin% re upd ted in the soft re t R&$ O 2 the industry for hich the

R&$ O not provided score sh !! +e ssi%ned neutr ! industry r tin%2

6RA%(N6 .' B.RR.9,R+ *N%,R )-, RA)(N6 +#+),M

In order to provide st nd rd definition nd +enchm r-s under the credit ris- r tin%

system fo!!o in% m tri h s +een dopted in !! the ris- r tin% mode!s2

RA)(N6CA),6.R#

%,+CR(P)(.N +C.R,

.B)A(N,% :K<

6RA%(N69()-(N RA)(N6

CA),6.R# P,B3AAA &inimum ris- A+ove 80200 P,B3 AAA

P,B3AA & r%in ! ris- CC2E0 to 80200 P,B3 AAWC42E0 to CC2E0 P,B3 AAC0200 to C42E0 P,B3 AA3

P,B3A &odest ris- 6C2E0 to C0200 P,B3 AW642E0 to 6C2E0 P,B3 A60200 to 642E0 P,B3 A3

P,B3BB Aver %e ris- EC2E0 to 60200 P,B3 BBWE42E0 to EC2E0 P,B3 BBE0200 to E42E0 P,B3 BB3

P,B3B & r%in !ccept +!e ris-

DC2E0 to E0200 P,B3 BWD42E0 to DC2E0 P,B3 BD0200 to D42E0 P,B3 B3

P,B3* i%h ris- F0200 to D0200 P,B3 *P,B3$ * ution +e!o F0200 P,B3 $

+#+),M '.R A++(6NM,N) & APPRA(+A/ .' RA)(N6

'he process of r tin% nd vettin% is s under(

/.AN+ANC)(.N(N

6A*)-.R()#

CR,%() R(+8 RA)(N6 A*)-.R()# 0,))(N6DC.N'(RM(N6 A*)-.R()#

O 12 *R&$ in consu!t tion ith +r nches *G&?G& .R&$/ O



58/110


42 < r%e corpor te +r nches nd identified +r nches

*irc!e Office

127


59/110


iii2Ris- B sed Pricin%

vi2Portfo!io & n %ement

v2


60/110


61/110


i2 'o -eep tch on the project durin% imp!ement tion st %e so th t time ) cost

overruns do not occure2

ii2 'o ensure th t the funds re!e sed re uti!i ed for the purpose for hich these h ve

+een provided nd there is no diversion of such funds2

iii2 'o ev !u te oper tion ! nd fin nci ! resu!ts such s production s !es profit?!oss

f!o of funds etc2 nd comp rin% these ith the projections?estim tes %iven +y the

+orro er t the time of s nction of credit f ci!ities2

iv2 'o ensure th t the terms nd conditions s stipu! ted in the s nction h ve +een

comp!ied ith2

v2 'o monitor oper tions in the ccount p rticu! r!y c sh credit f ci!ities hich

indic te he !th of the ccount2

vi2 'o o+t in m r-et report on the +orro er to % ther inform tion !i-e

reput tion?fin nci ! st ndin% etc2

vii2 'o detect si%n !s nd symptoms of sic-ness or deterior tion t -in% p! ce in

conduct?perform nce of the ccount2

viii2 'o ensure th t the unit@s m n %ement nd or% ni tion ! set3up is effective2

i 2 'o -eep chec- on spects !i-e ccumu! tion of st tutory !i +i!ities creditors

de+tors r 3m teri ! stoc-s3in3process finished %oods etc2

2 'o ensure ch r%in% of pp!ic +!e r te of interest?pen ! interest? commitment ch r%es

s per + n-@s %uide!ines2

42 System of supervision ) monitorin% of credit s ! id do n +y the B n- needs to +emeticu!ous!y fo!!o ed +y the +r nches?contro!!in% offices hich inter !i covers the

fo!!o in%(

i2 Conve;ing of sanction

After the !o n is s nctioned Br nch shou!d communic te the term nd

condition of s nction to the +orro er in !etter s per dr ft v i! +!e t

AnneGure ! cont inin% therein the det i!s of f ci!ities s nctioned nd

respective term nd condition 'he +orro er?s i!! convey his?their ccept nce



62/110


of the term nd condition s dr ft !etter v i! +!e t AnneGure (( 2 In c se of

comp ny necess ry reso!ution uthorisin% the si%nin% offici !.s/ to %ive such

!etter +eside e ecution of document +e o+t ined nd -ept on record2

ii" PR.'(/, .' B.RR.9,R+

Br nch shou!d m int in profi!e n me of e ch +orro er sep r te!y specific !!y

mentionin% comp!ete n me cont ct ddress te!ephone no2 ctivity of

+orro er ssets of +orro er %u r ntors nd other o+!i% tion det i! of

prim ry nd co!! ter ! security s per form t v i! +!e sAnneGure ((( 2 'he

profi!e shou!d +e upd ted re%u! r!y on #u rter!y + sis2

iii" MA(N),NANC, .' /.AN %.C*M,N) '(/,

In order to m int in s fety of !o n document the +r nch shou!d ensure proper

p %in% of !! !o n document2 'he p %e no2 shou!d +e !e%i+!y ritten on upper

ri%ht side of e ch p per?document nd the fi!e shou!d +e -ept in order!y

m nner2 'he document fi!e shou!d +e -ept in fire proof s fe nd under proper

custody of the !o n Inch r%e?Incum+ent Inch r%e2

iv" PR,0,N)(0, M.N().R(N6 +#+),M :PM+<

PM+ is monitorin% too! consistin% of num+er of si%n !s?indic tors for

ev !u tin% the he !th of +orro ! ccount on continuous + sis2 It ssi%ns

numeric ! score to e ch si%n ! nd c pture the conduct of n ccount + sed on

p st 1 ye r in sin%!e numeric ! v !e c !!edPM+ indeG score 2

v" L*A),R/# R,0(,9 +-,,)

Revie sheet is #u rter!y st tement prep red +y the +r nch nd su+mitted to

the s nctionin% uthority2 Prim ry responsi+i!ity for scrutiny?processin% of

u rter!y revie sheets . RS/ rest ith the s nctionin% uthority it en +!e the

s nctionin% uthority to form n opinion +out the position of the +orro !

ccount nd oper tion ! perform nce of the unit2

vi" L*A),R/# M.N().R(N6 +#+),M :LM+<



63/110


B n- h s prescri+ed the &S system for monitorin% perform nce of +i%

+orro ! ccounts enjoyin% %%re% te or-in% c pit ! f ci!ity of Rs2 1 crore

nd +ove .fund + sed nd non3fund + sed/ from the + n-in% system2 &S

inc!udes the su+mission of d t in n prescri+ed form ts dependin% upon the

economic ctivity of the +orro er?s

vii" (nspection and P$;sical 0erification of stocks +tock Audit

Stoc- udit inc!udes physic ! verific tion of stoc- stores ) sp res nd

correctness of their v !u tion ev !u tin% the sundry de+tor nd creditor

po!icies of the +orro er in respect of procurement of r m teri ! ndv !u tion of inventories commentin% on re%istr tion of ch r%e nd insur nce

of stoc-s or ny other spect re! tin% to stoc- hich h s +e rin% on + n-

fin nce2 Stoc- Audit is to +e conducted Annu !!y from n pproved firm of

*h rted ccount ncy2

PNBEs /.AN P./(C#



64/110


="! .BJ,C)(0,

'he *redit & n %ement ) Ris- Po!icy of the + n- t the m cro !eve! is n

em+odiment of the B n- s ppro ch to underst nd me sure nd m n %e the credit

ris- nd ims t ensurin% sust ined %ro th of he !thy !o n portfo!io hi!e dispensin%

the credit nd m n %in% the ris-2 'his ou!d ent i! reducin% e posures in hi%h ris-

re s emph si in% more on the promisin% industries ? productive sectors? se%ments of

the economy optimi in% the return +y stri-in% + ! nce +et een the ris- nd the return

on ssets nd strivin% to rds m int inin%?improvin% m r-et sh re2

="2 BA+(C ),N,)+ .' )-, P./(C#

• A!! !o n f ci!ities considered on!y fter o+t inin% !o n pp!ic tion from the

+orro er nd compi! tion of *onfidenti ! Report on them nd the %u r ntor2

'he +orro ers shou!d h ve the desired + c-%round e perience?e pertise to

run their +usiness successfu!!y



65/110


• Project for hich the fin nce is %r nted shou!d +e technic !!y fe si+!e nd

economic !!y?commerci !!y vi +!e i2e2 it shou!d +e +!e to %ener te enou%h

surp!uses so s to service the de+ts ithin re son +!e period of time2

• *ost of the project nd me ns of fin ncin% the s me shou!d +e proper!y

ssessed nd tied up2 Both under3fin ncin% nd over3 fin ncin% c n h ve n

dverse imp ct on the successfu! imp!ement tion of the project2

• Borro ers shou!d +e fin nci !!y sound enjoy %ood m r-et reput tion nd

must h ve their st -e in the +usiness i2e2 they shou!d possess de#u te !i#uid

resources to contri+ute to the m r%in re#uirements2•


66/110


Cas$ Budget +;ste

* sh Bud%et System sh !! +e fo!!o ed in Su% r 'e Service Sector nd "i!m

Production ccounts2 It i!! +e our ende vour to introduce the s me se!ective!y

in other re s !so2

2" )er /oan

In c se of infr structure?me% projects proper ppr is ! i!! +e m de +y

uti!i in% the services of speci !i ed ? 'echnic ! officers2

'he term !o ns ith rem inin% m turity period of +ove E ye rs sh !! not

e ceed E0K of the term deposits ith rem inin% m turity period of +ove E

ye rs fter t -in% into ccount the rene ! of term deposits s per the p st

trend2

92DCR,%() APPRA(+A/ PR.C,++ A) PNB

'lowc$art

Su+mission of Project Report !on% iththe Re#uest


67/110


68/110


62 Re son +!eness of estim tes?projection in re% rd to s !es ch r%e +!e current ssets

current !i +i!ities .other th n + n- +orro in%s/ nd net or-in% c pit !

C2 *! ssific tion of current ssets nd current !i +i!ities in conformity ith the

%uide!ines issued +y the Reserve B n-? O2

82 & inten nce of minimum current r tio of 12FF(1 .7 cept here re! tion is

permitted s in the c se of sic-? e - units di mond e porters etc2/2

92 An undert -in% +y the +orro er to su+mit his nnu ! ccounts prompt!y2 "urther

nnu ! revie is c rried out re%u! r!y +y the + n- even here enh ncement in credit

!imits is not invo!ved

102 Provisions of "orei%n 7 ch n%e & n %ement Act 4000 ."7&A/ herever

pp!ic +!e re comp!ied ith

112 In respect of industries here norms re! tin% to inventory nd receiv +!es h ve

+een ! id do n +y Reserve B n-? O credit !imits shou!d +e determined in

ccord nce ith such norms nd in other c ses in tune ith p st trends2

142 In c ses here devi tions from norms?p st trends re rr nted it shou!d +e

ensured th t these re justified nd specific comments in this +eh !f re incorpor ted

in the notes p! ced +efore the competent uthority for s nction2

1F2 Specific %uide!ines issued +y RBI? O for s nctionin% credit !imits for fin ncin%

cert in specific ctivities such s di mond e ports !e sin% nd hire3purch se te

su% r nd computer soft re industries i!! continue to +e in force2



69/110


C-AP),R3 1

C.NC/*+(.N & R,C.MM,N%A)(.N+



70/110


1"! C.NC/*+(.N

'he 'r inin% t P,B % ve hu%e !e rnin% e perience to me nd h s he!ped to

enh nce my -no !ed%e2 $urin% the tr inin% I !e rnt ho the theoretic ! fin nci !

n !ysis spects re used in pr ctice durin% the or-in% c pit ! fin nce nd term !o n

ssessment2 I h ve re !i ed durin% my project th t credit n !yst must o n mu!ti3discip!in ry t !ents !i-e fin nci ! technic ! s e!! s !e% ! -no 3ho 2

'he credit ppr is ! for +usiness !o ns h s +een devised in system tic y2 It is

process of ppr isin% the credit orthiness of !o n pp!ic nts2 'hus it e treme!y

import nt for the !ender + n- to ssess the ris- ssoci ted ith credit> there+y ensure

the security for the funds deposited +y the depositors2 'here re c!e r %uide!ines on

ho the credit n !yst or !endin% officer h s to n !y e !o n propos !2 It inc!udes

ph se3 ise n !ysis hich consists of 6 ph ses(

12 "in nci ! st tement n !ysis

42 =or-in% c pit ! nd its ssessment techni#ues

F2 'echno 7conomic "e si+i!ity An !ysis

D2 *redit ris- ssessment

E2 $ocument tion



71/110


62


72/110


1"2 '(N%(N6+

After comp!etin% the entire project t Punj + , tion ! B n- the fo!!o in% -ey

findin%s s mentioned +e!o ere o+served2

• At Punj + , tion ! B n- *irc!e Office the priority to ppr ise propos ! s

%iven ne over the e istin% c!ients presentin% propos !s for rene ! of !o n2• R tin%s s +ein% performed t P,B re done once ye r2 'herefore the

r tin%s do not t -e into ccount short term dr stic ch n%es !i-e price !eve!

ch n%es2• 'he ris- r tin% mode! is not f!e i+!e> the present ris- r tin% mode! does not

h ve ny mech nism to prioriti e cert in sectors of the economy2 'here re

cert in sector in the economy here ris- spre d is !o nd cert in sectors

here spre d of ris- is hi%h !i-e re ! est te2 A!so there re cert in

infr structur ! projects hich need to +e prioriti ed2• 'he BP


73/110


n immedi te need for the + n-in% sector to focus on credit nd fin nce

re#uirements of S&7s2

1"4 R,C.MM,N%A)(.N+

'he *redit $ep rtment t P,B < r%e *orpor te Office ;o!- t or-s t its fu!!

potenti ! nd the st ff is hi%h!y e perienced nd h s very stron% intuitive sense2

Over !! *urrent Appr is ! System is %ood +ut the fo!!o in% su%%estion c n +e t -en

c re off s there is ! ys ch nce of improvement2

• $irect Inter ction ith the c!ients shou!d +e improved2• 'he !o n processin% time shou!d +e reduced2• 'he documents re#uired for processin% the !o n shou!d +e reduced2• 'he + n- shou!d comp!ete!y e!imin te the fi!e system nd %o computeri tion

t every st %e s this removes p per or- nd cre tes tr nsp rency in the

system2• 'he + n- shou!d or- on st nd rdi in% the processes nd systems their

fo!!o 2• * re must +e t -en to ensure th t the jud%ment in ppr is ! process does not

depend on one sin%!e person nd sin%!e f ctor2• &onth!y &onitorin% system shou!d +e fo!!o ed inste d of u rter!y

&onitorin% System s document re +ein% su+mitted e!ectronic !!y



74/110


1" /(M()A)(.N


75/110


R,'R,NC,++

Researc$ Paper

• Shy m Sund r Gupt Project Appr is ! nd Inte%r ted Project R tin% of

'herm ! Po er Project t Po er "in nce *orpor tion


76/110


&2 2;h n ) P2;25 in "in nci ! & n %ement "ifth 7dition

.http(??+oo-s2%oo%!e2co2in?+oo-sT

idX,9HFDr=7OGc*)printsecXfrontcoverYvXonep %e)#)fXf !se /

I2&2P ndey "in nci ! & n %ement

S nj y &undr S njeev ni =or-in% * pit ! m n %ement Si th 7dition

Goo%!e +oo-s 2+oo-2%oo%!e2co2in

APP,N%(@

Case +tud;


http://books.google.co.in/books?id=N9V34rWEOGcC&printsec=frontcover#v=onepage&q&f=falsehttp://books.google.co.in/books?id=N9V34rWEOGcC&printsec=frontcover#v=onepage&q&f=falsehttp://www.book.google.co.in/http://books.google.co.in/books?id=N9V34rWEOGcC&printsec=frontcover#v=onepage&q&f=falsehttp://books.google.co.in/books?id=N9V34rWEOGcC&printsec=frontcover#v=onepage&q&f=falsehttp://www.book.google.co.in/


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! B.RR.9,RE+ PR.'(/,

6roup na e ABC 6roupCo pan; na e MDs ABC Metaliks /i ited :ABC<Address of Regd"DCorporate

.ffice

Pre lata 4= +$akespeare sarani 8olkata3

F !FConstitution%ate of incorporation 4! +t Januar; 2(ndustr;D+ector +teel and ce ent anufactures in secondar;

sectorBusiness Activit; :Product< Manufacturer of Pig (ron sponge (ron+tage 'orward and backward integration

BAC86R.*N%

&?s AB* &et !i-s


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'he Group h s recent!y +een pproved Iron ore nd m n% nese mines in the st te of

& dhy Pr desh2 'his h s further encour %ed the comp ny to set up Benefic tion

p! nt of c p city 1 mi!!ion 'on nd Pe!!etis tion p! nt of 600000 'PA t e istin% site

of Go-u!pur2

B.AR% .' %(R,C).R+

, me ;ey responsi+i!ity A%e u !ific tion 7 perience

&r2 S jj n;um r P t ri2

Over !! m n %ementE8

B che!or ofscience

&ore th n F0 yr2e perience in stee! industry

&r2 S nj y;um r P t ri2

"in nce productionnd m r-etin% of

spon%e iron )cement

F4 B che!or ofcommerce

&ore th n 10 yre perience in m r-etin% ofspon%e Iron ) *ement

&rs2 Bh % ti$evi p t ri2

EE1E ye rs of e perience in%ener ! m n %ement iththe %roup comp nies2

Project Cost

%escription 2 ! 3!! 2 !!3!2 2 !23!4 )otal< nd 462D0 3 3 462D0< nd$eve!opment

F82E0 3 3 F82E0

Bui!din% ) *ivi!

*onstruction

1C0210 48F2E0 11F2D0 E6C200

P! nt nd& chinery

3 E0F D11 91D

&isce!! neous"i ed Assets

3 1FE 110 4DE

Pre!imin ry7 penses

10 E9 F0 99

& r%in &oney 3 3 FC9 FC9I$* 3 DE 1C6 441*ontin%ency 3 E0 F6 86

)otal F1 !!12 !4 ! 21F?.In mi!!ions/



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'he tot ! project cost is estim ted t Rs2 4EC8 mi!!ion2 It is estim ted th t e penditure

i!! +e spre d over F ye r2 'he me n for fin nce of the project re provided +e!o 2

Mean of finance

%escription 2 ! 3!! 2 !!3!2 2 !23!4 )otal7#uity CE 164 641 8E8


80/110


+een ssoci ted ith this +usiness for ! st 10 ye rs nd !oo-s fter comp nies

"in nce production nd m r-etin% of spon%e iron ) cement2 e is ctive

director of the comp ny2

• &rs2 *BA %ed EE ye rs =?o of AB*2 She h s !so +een ssoci ted ith the

+usiness for ! st "ifteen ye rs nd Present!y $irector in the comp ny2

4" Lualit; of Manage ent :(ncluding Corporate 6overnance< (

& n %ement of the comp ny is e!! e perienced nd h ve more th n F0 ye r

e perience in the Stee! Industry2

" Marketing

'he *omp ny is ISO certified ith s-i!!ed m r-etin% str te%y +y &R2 S nj y

;um r P t ri ho h s n e perience of 10 ye rs in the fie!d of m r-etin% for

Spon%e Iron nd *ement2

1" Client s diversification eGpansion oderniOation progra (

AB* is current!y on for rd inte%r tion str te%y2 'he comp ny h s ro!!ed

out projects of settin% up Stee! Sme!tin% shop for m nuf cturin% Bi!!ets

ducti!e Iron Pipe f ci!ity nd ro!!in% mi!! for m nuf cturin% '&' + rs2 In

order to h ve competitive +enefit the comp ny h s !so ro!!ed out + c- rd

inte%r tion p! n hich ims t reducin% the m nuf cturin% cost2

'he Group h s recent!y +een

pproved Iron ore nd m n% nese mines in the st te of & dhy Pr desh2 'his

h s further encour %ed the comp ny to set up Benefic tion p! nt of c p city

1 mi!!ion 'on nd Pe!!etis tion p! nt of 600000 'PA t e istin% site of

Go-u!pur ith v i! +i!ity of 40 cre ! nd for e ch project hich is E -m y

from n tion hi%h y., 6/



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2"22"4 B*+(N,++ ,0A/*A)(.N

2"2"! Co ents on industr; scenario and industr; outlook

(ndustr; +tructure

'he Indi n stee! industry is +ro d!y divided into t o distinct producer %roups(

Pri ar; +teel Producer :(+P3 (ntegrated +teel Producer< +econdar; +teel Producer"

(+PEs inc!udes ! r%e stee! producers ith hi%h !eve! of + c- rd inte%r tion2

ISPs h ve f ci!ities ri%ht from the iron ore.r & teri !/ minin% st %e to the

stee! production st %e2

+econdar; producers essenti !!y h ve mini stee! p! nts nd emp!oy ,lectric

Arc 'urnace :,A'< or (nduction 'urnace :('< route hich use scr p nd

spon%e iron or mi of +oth s r m teri ! to produce stee!2 'his %roup !so

consists of processors nd re3ro!!ers of stee! products2

A!thou%h there re FE00 v rieties of re%u! r nd speci ! stee! v i! +!e stee!

producer c n +e +ro d!y c! ssified into t o + sic types ccordin% to their

sh pes vi 2 f! ts nd !on%s2 A!! finished stee! products re m de from semi3

finished stee! th t s comes into form of s! +s +i!!ets nd +!ooms2



82/110


0alue c$ain

Stee! h s ide pp!ic tion into d y to d y !ife 2 v rious -ey industries !i-e

construction tr nsport communic tion %ricu!ture nd ener%y c nnot sust in

ithout stee! its uses dv nce techno!o%y to produce ri%ht stee! for ide !

re#uirement2

(ndustr; outlook


*a!sngles

,hannels

:c!ap

,oatedsheets

:eamless

tu#e@

/!on !e @ Pellet /!on !e @ Pellet

,oating

,astsPipe,old

olling,asting .u#eBot !olling

/ngots@ ,ontinuous caste! @ C

+@/nduction*asic ;%gen

:c!ap :ponge /!on*last

Pig

':a

pipes

, ,

B , :c!ap

*illets*loom/ngots

+e!!o


83/110


6/.BA/

'he consu!t nt note th t the iron c n +e economic !!y +e produced +y convertin% iron

ore into +ri#uettes concentr tes pellets or sinter2 In the %!o+ ! m r-et +out2 K of

iron ore re converted into pe!!ets2

%.M,+)(C

Indi n iron ore re f ir!y rich in ferrous content . +out E8K/2 o ever Indi n iron ore

is +ritt!e in m ture nd hence h d tendency of +re -in% do n into fines durin% the

m -in% process2 It is noted th t t present K of ore mined in Indi n mines re in

form of !umps nd + ! nce 60K re fines2 'hese fines re further used to m nuf cture

pe!!ets or sinter for economic ! production of iron2

Iron Ore

Global Scenario

$urin% 4009 %!o+ ! dem nd of iron ore .!umps pe!!ets nd sinter/ s estim ted t

+out 1891 mi!!ion ton2 $em nd for iron ore %ro t compound nnu ! %ro th r te

.*AGR/ of ="14K per annu " =hi!e the dem nd on 400E s 1F1D mi!!ion ton per

nnum nd thus the future m r-et of the iron ore is projected to +e 4408 mi!!ion ton

+y 401E nd 4E14 mi!!ion ton +y 40402



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2020201920182017201620152014201320122011201020092008200720062005

2500

2000

1500

1000

500

0

year

D e m a n

d o

f i r o n o r e

( m i l l i o n t o n

)

1341

1497

16341722

1891 19411991 2043

2097 21522208

2266 2325 2386

24482512

SOUR*7( IISI .Brusse!s/ 5P* ABAR7

Actu ! $em nd

Projected $em nd

6lobal +uppl;

$urin% 4009 %!o+ ! crude ore deposit ere estim ted to +e 160F00 mi!!ion ton

of hich D8K is estim ted to +e iron content2 'he !e ders in %!o+ ! iron ore

distri+ution re(

Sr2 no *ountry Reserve .mi!!ion ton/1 U-r ine F0 000

4 Russi 4E 000F *hin 44 000D Austr !i 40 000E Br i! 16 0006 ; -hst n 8 F00C Indi C 0008 USA 6 9009 Hene ue! D 000

10 S eden F E0011 Ir n 4 E0014 * n d 1 C001F Others 1F D00



85/110


Source( United St tes Geo!o%ic ! Survey 4010

$urin% 4009 United St tes Geo!o%ic ! Survey 4010 estim ted *hin to +e

! r%est producer of Iron ore ith production of 900 mi!!ion ton2 'he other top

producers re(

+erial no" Countr; Production : illion ton"<1 *hin 9004 Br i! F80F Austr !i FC0D Indi 460E Russi 8E6 U-r ine E6C South Afric EF8 Ir n FF9 * n d 4C

10 United St tes 4611 ; -hst n 4114 S eden 181F Hene ue! 161D & urit ni 111E Other *ountries E9

)otal 9orld 2 4!1

Source( United St tes Geo!o%ic ! Survey 4010

6/.BA/ %,MAN% +*PP/# 6AP

B sed on +ove d t it is noted th t(

• $em nd supp!y scen rio of iron ore ppe rs to +e + ! nce nd thus there

is enou%h scope for every m nuf cture2• &oreover it is un!i-e!y th t there i!! +e concern over supp!y of iron

ore s minin% is prim ri!y dependent of dem nd2



86/110


6/.BA/ PR(C,+

B sed on the n !ysis of second ry inform tion the iron ore prices re(

.A!! "i%ure in USM per $ry &etric 'on Units/

Source( B!oom+er% * n ccord Ad ms 7stim tes nd && estim tes/

'he price of Iron ore fines nd !umps %re t *AGR of 48K nd 4CK respective!y

$urin% 400E34009 from the second ry d t n !ysis nd fi%ure it is noted th t %!o+ !

prices of iron ore fines iron ore !umps nd iron ore pe!!ets re dependent on3

• Spot prices of Iron?Stee! product• "utures prices of Iron?Stee! product• ' es nd po!icies ithin the iron ore producin% countries

A!so ye r 4010 h s +een si%nific nt s the prices incre ses r pid!y due to e cess

dem nd from Southe st Asi n countries2

%.M,+)(C +C,NAR(.

%.M,+)(C %,MAN%

$omestic $em nd of iron ore .!umps pe!!ets nd sinter/ stood t ED mi!!ion ton

durin% the ye r 400E the dem nd for iron ore h s since then %ro n t *AGR of 48K

per nnum to re ch 1D6 mi!!ion ton durin% the ye r 40092

Source( Stee! st tistic ! e r Boo-

%.M,+)(C +*PP/#



87/110


88/110


89/110


%.M,+)(C +C,NAR(.

%.M,+)(C %,MAN%

• It is noted th t pe!!ets re su+stitute for iron ore !umps2 $em nd trendfor pe!!ets i!! +e simi! r to dem nd trends of domestic iron ore2

• In Indi the iron ore produced is +ritt!e in n ture nd hence 60K of it is

in form of fines2 'his iron ore fines re then used for production of

pe!!ets or used in sinter p! nt t inte%r ted stee! p! nt.ISP/• Present!y in Indi n !most !! iron nd stee! m nuf cturers re uti!i in%

iron ore !umps for stee! m -in%2 'his is due to f ct th t #u !ity iron ore

is re di!y v i! +!e from Indi s mines hence these m nuf cturer prefer !umps to pe!!ets

• Some of those ho uses pe!!ets h ve c ptive pe!!eti tion c p cities nd

hence re not purch sin% pe!!ets from open m r-ets• o ever the short %es of iron ore pe!!ets re imported +y fe of the

m nuf cturer2 As pe!!ets is che per then iron ore it forms s ! tent

dem nd for pe!!ets in domestic m r-et2

%o estic +uppl;

'i!! the recent times iron ore fines ere considered residu ! ste resu!tin% from

minin% oper tion ith !ess economic ! v !ue +ut the conversion of fines into pe!!ets

m de it re !i e its +etter v !ue Indi is net e porter

project appraisal pnb

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