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TERM LOAN
Term Loans are those debts which have a
fixed term for repayment, as opposed to a loan that is payable on demand.
CLASSIFICATIONS:
Term Loans are broadly classified in three categories :
SHORT TERM LOAN Loans repayable three years and above and upto five years : MEDIUM TERM LOAN Loans repayable beyond five years : LONG TERM LOAN
size of project/ Plant & Process Technology is New/ proven , adequate, chance of obsolescence etc.? Demand for finished goods- adequate / growing / declining? Cost of project estimates are realistic ? Means of finance sources identified? Profitability projections Realistic / adequate to meet debt obligations? Project Risk Mitigations available?
MANAGERIAL COMPETENCE
Background of the promoter- Experience, entrepreneurial talent Composition and quality of the board of directors and Key
Management Personnel Market Reports from existing clients Existing Borrowing Arrangements Also check web site : www.mca.gov.in Borrowing History RBI Defaulter list, CIBIL Site, Dun & Bradstreet Reports, Specific Approval List (SAL) of ECGC, Reports from existing Bankers, Statement of accounts Capacity to bring in the required margin money annual reports of last three years , net worth statement of promoters & guarantors Sister / associated concerns Balance sheets Others
CRIS-INFAC annual Reports contain details of various types of industries viz., Cement, Steel, Fertilizer, Textiles, Road, Port , Power and about 40 other industries It contains details of manufacturing process, finished goods, demand forecast , players profile etc. Study of the above will help the analyst to assess technical feasibility In addition to the above TEV report of the project to be studied thoroughly for the following : Location Proximity to the source of raw materials/ labor/ market, transportation facilities, provision for future expansion, free hold or Lease hold. For example : Steel manufacturing unit near iron ore mines, Cement factory near lime stone mines/ market (clinker unit near limestone mines and grinding unit near markets), Auto spare parts ( near auto manufacture hubs) etc. Size of the project economical. For example sugar : minimum 5000 TCD per day as per Tuteja Committee Report
DEMAND ANALYSIS
Validation/ acceptance of financial projections to be done after study of following : Demand for the product Gap between supply and demand Export demand Assured Demand PPA for power projects, Annuity for Road projects , captive utilisation, Long Term Contracts etc. Import Substitute
as against 65% in 2008-09, due to an increase in foreign tourist arrivals and business related travel. Average Room Rates (ARRs) on the other hand remained around 20% lower than peak level of Rs.8000.00 in 2007-08, mainly due to 13% increase in supply This resulted in sluggishness in Revenue Available Per Room (RevPARs) With increasing room demand hotel revenues across destinations will increase by a CAGR of 13%. This growth will be mainly driven by increase in ORs as increase in competition will continue to hamper ARRs.
Pre-operative expenses
Provision for contingencies Margin money for Working capital
Term Loan
Unsecured Loan
Capital Goods (EPCG) Scheme Other Fixed Assets Furniture & Fixture, Office equipments etc.
incorporation but before Commencement of commercial operations) : Interest during construction ( cross check with ROI recommended & TL drawal Schedule) Cost of trial run
Means of Finance :
Promoters Contribution/Equity/Reserves &
Surplus Government Subsidy Preference Shares Debentures Unsecured Loans from Partners/Directors/ friends & relatives Bank Term Loan
Implementation Schedule
Company to submit phase wise implementation schedule
As per RBI Guidelines, For all projects financed by the
FIs/ banks after 28th May, 2002, the date of completion of the project should be clearly spelt out at the time of financial closure of the project. as NPA if it fails to commence commercial operations within six months from the original DCCO, even if is regular as per record of recovery, unless it is restructured and becomes eligible for classification as 'standard asset' . The period is two years fro infrastructure projects
APPROVALS
LAND : Proper title deeds are available for mortgage, Tax
receipts, Conversion of land for Commercial/Industrial use, permission for mortgage in case of lease land, period of lease as per agreement etc.
Environmental Clearance
Raw Material linkage- Coal , iron ore , lime stone etc. Construction/Building approval plan NOC from Pollution Control Board Approval from other authorities as applicable forest
clearance, aviation, water, fire, sewerage etc
DSCR (Contd.)
In case of CRE proposals , DSCR is not
calculated. Repayment is assessed based on cash flow.
Sensitivity Analysis :
To have an idea about the impact of the
following on the projected DSCR :
Decrease in capacity utilisation Decrease in sales price Increase in raw material cost Increase in Rate of interest A combination of any two or more of the above
land & other infrastructures/logistics as also to ensure progress of work with own fund.
formalities including execution of Hypothecation Agreement/ Term Loan Agreement, Agreement with Guarantors (wherever applicable), Execution of Promissory Notes for the Term Loan etc.
and other fixed assets as far as practicable. In cases where direct payment is not possible, payment is made through the borrower.
Payment
of Power, Road, Bridge, Port, Industrial Projects like Steel, Aluminum, Engineering , Automobile etc. which are financed by a consortium of Banks & TLIs , the process of loan documentation is completed by Lenders Legal Counsel who are appointed by the consortium. Contd..
Schedule submitted by the borrower, satisfactory report of progress of project by Lenders Engineers who are appointed by the Consortium, periodic unit-visit by Consortium members etc.
In case of the said large projects, funds are disbursed through an Escrow Account/Trust & Retention Account (TRA) maintained with any consortium-member Bank as approved by the consortium.
Such Bank, on receipt of loan proceeds from all consortium members as per schedule of drawal, releases the fund to the appropriate agencies and wherever needed directly to the borrower for onward expenditure as per terms of project.
DSCR New Projects Min DSCR 1.10 & Average DSCR 1.30 Expansion Projects Min DSCR 1.10 for standalone project & 1.20 for company as a whole Average DSCR 1.30 contd
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