REPORT ON CREDIT AUDIT Name of the Branch Name of the Officer conducting Credit Audit Date of Credit Audit

Date of Report No. of days taken NARAYANAGUDA KVSRY & ASSOCIATES CHARTERED ACCOUNTANTS 15/06/2012

(Wherever amounts are furnished, It should be in (Lakhs) PART A : PROFILE OF THE BORROWER I a) Name and address of the borrower M/S PEOPLE COMBINE BENGALURU KNOWLEDGE INSTUTIONS PRIVATE LIMITED #126, Navanirman Nagar, Road No 71, Jubilee Hills, Hyderabad 500033. b) c) d) e) Group Constitution PRIVATE LIMITED COMPANY Private / Public / Joint Sector PRIVATE SECTOR Line of Activity EDUCATIONAL INSTITUTION Name/s of Proprietor / Partners / Directors and their Net worth Mr. T. Naga Prasad 23.94 As on: 31/10/2010 Mr. Y.V.Raja Sekhar Babu 20.84 Names of Guarantors and their Net worth Mr. T. Naga Prasad 23.94 Mr. Y.V. Rajasekhar Babu 20.84 People Combine Educational Initiative 15.74 As on 31/03/2010 People Combine Business Initiatives Ltd 13.65 Oakridge Educational Society -1.83

f)

g)

Details of last sanction / renewal Sanctioning Authority

29/06/2011 Head Office, Credit Division Chennai Board / MC / CMD / ED / GM(HO) / CH / BM

Date of Sanction 29/06/2011 h) Classification of asset: As on: 31/03/2011 i) Credit Rating CRAA+ As on: 2011 II Financing Pattern a) Sole Banking, Multiple Banking or Consortium b) STD / SUB / D1 / D2 / D3 / LA STANDARD

Sole Baking

If Under Consortium NO 1) Name of the Leader Bank 2) Our Banks share as % to total Amount (Rs. in Lakhs) exposure FB : Rs. NFB : Rs. Prudential Exposure Norms (Rs. in lakhs) Fund Based Non-Fund Based 35.45 Existing Compan Group y 12.00 12.00 Proposed Group Compan y 59.51 94.96 Individual Group

III a.

b. Actual Exposure Fund Based Non-Fund Based

Exposure Vs. Risk Weight: Name of the Group

Individual Mitigation Mechanism

Group

IV

Position of the Account as on (Rs. in lakhs)

Sl. No. 1

Facility

Limit

Drawin g Limit

Balance as on 23/06/2012 2000.00

Excess / overdue if any ----

Excess / Overdue since * -----

Margin

TL

3545.00 3545.00

34%

* Number of days remaining overdue be indicated. Interest Income Non Interest Income : :

Conduct of accounts: - Comments on Excess / adhoc permission clearance of the same / overdues with age and comments thereon: V A i. Effectiveness of Credit Appraisal Descriptive comments and Monitoring: - Points to be looked into for appraisals. -- Latest date of assets / liabilities statements obtained from the 31/03/2012 No Changes in Net worth borrowers / guarantors / changes in Net worth -- Adequacy of the value of liquid assets indicated in the statement to Liquid assets as on 31/03/2012 is take care of future capital requirement 3,99,34,632 of the unit in case of private limited company / partnership concern proprietorship concerns has been looked into -- Whether IT / WT assessment orders / returns filed are obtained from the borrowers / guarantors and looked into for any significant variance and incorporated in the appraisal note. -- Whether the name of the partners / proprietor / directors appearing in the defaulter list of ECGC / RBI have been List Not Available commented and does it have any impact on business -- Status of compliance of statutory requirements like obtention of NA clearance from Pollution Board, adhering to Effluent Disposal Norms

ii.

iii.

iv.

v.

vi.

etc. -- Comments on whether sanctions are made by the delegated authority and excess / adhoc if any permitted have approval from the respective authorities.

No Adhoc

A vii.

Contd. Whether the Proprietors / Partners / Directors of borrower entity or their relative is a director in our bank / any other scheduled banks / co-operative bank. If so, whether sanctioned by the Board viii. Take over accounts (If applicable) a. Whether in compliance with the bank policy i.e. -- Bench mark stipulated for take over vis--vis the actual b. -- Availability of status report from the transferor bank / report on quality of the asset and the conduct of the account with them Effectiveness of Credit Appraisal and Monitoring : - Performance Appraisal Evaluation / Comments on Managements efficiency and capability made by the branch Comments / evaluation on Last 2 years performance i.e. -- Estimates vis--vis achievements -- Net Sales -- Operating Profit -- Other Income -- Net Profit after Tax -- Cash Profit -- Installments falling due in the next year If the achievements were below 90% of the estimates, reasons for the same (like, market scenario, unexpected changes industry specific and unit specific etc.)

NO NA No

No

B i. ii. a. b. c. d. e. f g. iii.

2010-2011 21.28 1.89 0.00 1.75 4.27 Nil

2011-2012 26.93 4.05 15.51 1.39 12.67

B iv.

v.

Contd. Abnormal variations if any in estimated / projected performance which have been made in the appraisal memorandum Evaluation on the financial ratios for the last 2 years and comments thereon offered by the branch and the stipulated improvement in the near future. Comments / compliance with reference to the Bench Mark on 2010-2011 -- TOL / TNW -- Current Ratio -- Interest Coverage Ratio -- DSCR -- Turnover Ratio Cash Profit -- Net Profit -- Depreciation -- Non cash expenses charged to P&L. Interlocking of funds in sister / allied concerns if any, have been noticed / commented in the appraisal by the branch and further comments of the credit auditor. Any diversion of short term funds to long term uses within the system also should be commented. Comments on the qualifying remarks of the auditors in the balance sheet and its impact in the ratios / Credit risk made by the branch in the appraisal and further comments of the Credit Auditor 0.54 1.98 -------

No

a. b. c. d. e. f. i. ii. iii. vi.

2011-2012 0.14 1.99 ------12.67 1.39 0.13 ---

NO

vii.

B Contd. viii. Companys dues towards statutory liabilities viz., IT / ST / PF / ESI / Excise duty / Customs Duty ix. Method of Working Capital Assessment (i.e. Turnover Method / STBC Method / Cash Budget Method / MBPF Method) applied x. Comments on adverse features such as non routing the sale proceeds through

MBPF Method

xi.

xii.

the account, overdues, devolvement, frequent excess etc., have been whether brought out in the appraisal memorandum by the branch and comments of the credit auditor thereon Peer group comparison / inter firm comparison made in the appraisal Comments on the areas compared and the quality of comparison Are there proper justification for increased sales (Volume / value) and Profits

All the transactions are not routing through the account

Bank didnt made any peer group Comparison

xiii. Is the profit / profitability projected is in tune with past actual and reasoning for enhanced profit if % of NP to sale is increasing. xiv. Any adverse features (like defaults / overdues / diversion) closure of business units / hiving off etc. xv. Availability of NWC to meet margin requirement stipulated. xvi. Comments on Type of facilities recommended / sanctioned / adequate chargeable current assets available net of margin V B xvii . a. b. xvii i a. b. xix. Contd. Total Time Taken for sanction Date of Branch Proposal Date of Sanction Capital Market Perception

No adverse features

5.5 months for sanction of loan 17/11/2011 29/06/2011

VI i. ii.

-- Company -- Industry Education Institution Obtaining Confidential reports on the borrowers / co-obligants / guarantors / NA associate concerns / Drawees of bills from other Banks etc. wherever required Documentation obtained: -- Whether the loan documents are kept in force Documents are not kept in force -Whether documentation is completed as per terms of sanction including Joint documentation, First Documentation is completed as per terms Charge / second Charge creation, & conditions of Sanction letter.

iii.

obtention of latest search report, Obtention of Valuation certificates for prime and collateral securities -If not, impact on the non availability of the securities due to non compliance of the terms of sanction (i.e. secured terms remaining as unsecured advance) documentation COMMENTS. -- Receipt of approval from the competent authority for non compliance / waiver permitted wherever required -- Adequacy of insurance cover for prime and collateral securities Compliance of Sanction Terms

Market value of Primary & Collateral Security is 31.66 crores

iv.

v.

Insurance isnt Available

VII . i. ii. iii. iv. VII I. i. ii. iii. iv. v. IX i. ii. iii.

NIL

-- List of Terms of sanction not complied with and whether brought to the notice of the competent authorities. -- Reasons therefor -Obtention of approval of the competent authority with date of approval -- Impact on the quality of assets / security / mitigative measures available to the Bank. Compliance of Regulatory / loan NIL policies of the Bank Exposure Norms / Individual group Capital market exposure Norms for lending / Loan Delivery System Bills Culture norms Rate of Interest charged Credit Risk Assessment -- Model Applied Large Corporate -- Latest year for which rating is done Rating is done in the year 2011 SCORE GRADE Comments on evaluation of Financial Risk Industry Risk 5.42 V VII

Business risk 4.12 Factored for credit risk rating of the borrower account as per the

iv.

prescription of the model 7.04 -- Migration of the rating Whether looked into to take appropriate action. Detection of early Warning Signals (effectiveness of monitoring by CMO) -- Regular and timely submission of periodical feed back statements stipulated for review of performance and capturing of warning signals i.e. submission of stock statements, MSOD / QIS / Balance Sheet etc. -- Whether DP is arrived excluding trade creditors / advances from suppliers -- Whether quarterly operative limits are fixed based on QIS II. Quality of review done by the branch i.e. -- Comparing the performance with estimates -- Evaluating the reasons for shortfall in actual performance with justification for continuation of the limits at the existing level in spite of shortfall in the actual performance Identification of warning signals such as -Liquidity constraints due to accumulation of slow moving / non moving stocks / large overdue receivables / doubtful of recovery / failure of buyers to make payments / diversion of funds within the system and outside the system -- Fall in the production / sales -- Labour Problem Contd. -Large sundry creditors disproportionate to production level / estimated -- Other market borrowings raised at high cost without the permission of the Bank -- Overdues with other Banks / F Is if any

III

A i.

NA

a. b. ii. a. b.

iv. a.

NA

b. c. X A d. e. f.

NO NO NO

g. h. v.

-- Frequent excess permitted -- Frequent cheque returns inward and outward -- Whether Identification as SMA is made on timely basis and reported to HO : Credit Department and Credit Risk Management Department Effectiveness of action taken on timely basis for maintaining the quality of the account and inter-action with the promoter / partner / proprietor Comments on the effectiveness of scrutiny of the Book debts / bills discounted and further follow up. For eg. -- Items referred in the bill are relating to the end products which the borrower is manufacturing / dealing for which we have financed -- Price Quoted If below the present market rate, whether the profitability will be affected has been discussed with borrower -- Ageing analysis of Bills / Book Debts -- Effectiveness of scrutiny of the bills to ensure about the genuineness of transaction Follow up with the collecting banker / drawee for realisation without delay. Comments on FX Business handled (if applicable), Overdue PCs, Overdue Post shipment bills, devolved LCs etc. Whether these irregularities are occurring very frequently or as a stray incident. Evaluation done by the branches for the above and action taken. Availability of ECGC cover / Policy / ECGC approval wherever needed. Stock Audit (If applicable): Comments on -- Compliance with the frequency stipulated and actual periodicity -- Quality of stock auditor report Conforming to the proforma suggested by Head Office Covering all aspects

NO NO

This account doesnt fall under SMA list till now NA NIL

vi.

vii.

a.

b.

c. d. e. X B

NIL

C i.

NA

ii.

NA

10

iii. iv.

v.

-- Critical observations of Stock audit inspection regarding working of the unit -- Action of the branch with regard to Any adverse remarks which would deteriorate the DP and the accounting procedure etc. -- Closure of the Audit Report Whether done within the stipulated period. Comments on Consortium working -- Frequency of consortium meeting held vis--vis sanction terms / receipt of minutes and action taken report on the suggestion / decision taken -- Inspection / Checking of securities is being followed or not Give latest date -- Regular submission of DP on periodically done by the leader Indicate latest date. If not received, how the branch is monitoring the actual drawings vis-vis the DP to be furnished. -- Exchange of information among the members whether done regularly Comments on compliance / observations of RBI / Statutory / Concurrent Auditors / Internal Inspection

NA NA

NA

D i.

NA

ii. iii.

iv. v.

11

E i.

Signals of Potential Credit Risk Perceived from day to day banking operations -- Devolvement of LCs / Invocation of Details BGs

Previous Curren Year (Rs. in t Year lakhs) (Rs. in lakhs) LC BG LC B G

No. of LCs / BGs established / issued NIL Amt. No. of LCs / BGs devolved / Invo-ked Amt. ii. Comments Inland Bills / Export Bills Details Previous Curren Year t Year (Rs. in lakhs) (Rs. in lakhs) IB FB IB F B

No. of Bills discoun-ted Amt. NIL No. of Bills returned unpaid Amt. iii. iv. X E v. vi. Comments Irregularities in the account Reporting of irregularities and devolvement of LC bills and obtention of confirmation Contd. Overdues to F Is, Banks & Others and statutory dues Routing of transactions and forex Details business through the account

Previous Year Current (Rs. in lakhs) Year (Rs. in lakhs)

12

Gross Sales Credit Summat ion Forex Busines s as per B/S Forex business as per branch books Comments vii. XI Diversion of short-term funds for longterm uses, if any, noticed in the funds flow statement Qualitative comments on credit skills i.e. any major changes in global scenario / Policy of Government affecting the unit. -- Capability to identify the critical risk factor and to suggest mitigative factors on timely basis -- Knowledge of branch officials on credit appraisal process and conversant with the various policy guidelines of the Bank / RBI -- Analytical ability of the branch officials as seen in the appraisal -- Training given / to be given on credit and Credit Risk Management area. Final Views of the conducting credit audit The potential problem of the run into in the next 1 year / opportunity available to borrower Officer unit may Business bank / NILs

i. ii.

iii. iv.

XII .

13

Signature Name : Designation : Placement : Date :

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