Project Report On

A Study of Credit facilities at Mid-corporate Branch of Central bank of India

(Submitted towards part fulfillment of the requirements for the award of the Post Graduate in Management 2012-2014)

Submitted by: Abhas Agarwal 211181 FMG 21C

Under the Guidance of: Mr. H.S. Brar Asst. General Manager Mid-corporate Branch, Central bank of India, Lucknow

& Dr. Anita Tripathy Lal Internal Project Guide FORE School Of Management

Summer Internship Project

CERTIFICATE

This is to certify that Mr. Abhas Agarwal, Roll No.- 211181 has completed his summer internship at Central Bank of India, Lucknow and has submitted this project onUnderstanding and analyzing the flow of credit facilities to the Mid-Corporate Enterprises by the banking sector in India with special reference to Central Bank of India, under my supervision.

. Dr. Anita Tripathy Lal Faculty Guide FORE School of Management

Date: Place:

ACKNOWLEDGEMENT

This particular project report would have been incomplete without the acknowledgement of some people associated with it. I am grateful to Mr. H.S. Brar, Assistant General Manager, Mid-Corporate Branch Central Bank of India, Lucknow, Ms. Nikita Agarwal, Manager, Central Bank of India, Lucknow, Dr. Anita Tripathy Lal for guiding me throughout my project. These people have been a constant source of inspiration throughout my work. I would also thank the employees at Central Bank who helped me by giving constant feedbacks and sharing their expertise and ideas which actually made my work easier.

With Best Regards, Abhas Agarwal

Table of Contents
S.No. Description 1. 2. 3. 4. 5. 6. 7. 8. Cover Page Certificate from Institute Certificate from Company Acknowledgement Table of Contents List of Table Executive Summary Chapter 1: Introduction 9. 1.1 Significance of the study 1.2 Purpose of the study 1.3 Objective of the study 10 11 11 Page No. 1 2 3 4 5-7 8 9

Chapter 2: Literature Review 2.1 About Credit Analysis 2.2 About Organisation 13 17

10.

Chapter 3: Methodology 3.1 Universe of the study 3.2 Locale of the study 3.3 Sample size 3.4 Data Collection 21 21 22 22

 11.

3.5 Data Analysis 3.6 Field Experience

23 24

Chapter 4: Detailed Analysis 4.1 Case- M/s Medics International Life Sciences Ltd. 4.2 Balance Sheet 4.3 Security Coverage 4.4 About Promoters 26 29 30 25

12.

Chapter 5: Detailed Analysis Contd. 5.1 Background of the Company 5.2 Cost and Means of finance of the project 5.3 Repayment of loan 31 33 34

13.

Chapter 6: Detailed Analysis Contd. 6.1 Business Risk 6.2 SWOT Analysis 36 38

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Chapter 7: Detailed Analysis Contd. 7.1 Breakup of Revenue 7.2 Net profit 7.3 Debt-Equity and Current Ratio 41 41 42

15.

Chapter 8: Conclusion 8.1 Major Findings of the study 8.2 Suggestions 43 43

8.3 Limitations of the study 8.4 Further scope of the study

44 44

16.

Bibliography

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List of Table
S.No. Description 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. Year and Banking Activity from 1921-1962 Year and Banking Activity from 1976-1994 Gist of Proposal Balance Sheet Security Coverage About Promoters Cost of Project Means of Finance Term Loan-I Term Loan-II Term Loan-III Business Risk Breakup of Revenue Net Profit Debt-Equity & Current Ratio Page No. 18 19 26 27-29 29 30 33 33 34 34 35 36 41 41 42

Executive Summary
This report provides an analysis and evaluation of credit facilities given by banks to MidCorporate Enterprises with respect to Healthcare Sector. The data was collected majorly by annual report of the company and by detailed proposed report for the project. The method of analysis includes examining CIBIL report, checking feasibility of the project, finalizing the rate of interest, drawing the detailed repayment structure and constantly monitoring them over time. Results of the data analyzed show that CIBIL report and other qualitative data were as per requirement; also ratios like DSCR, Current ratio have improved with significant pace with respect to time. The report finds that the prospects of the project in its current position are positive. Industry has great potential and is expected to grow rapidly because of increasing population. Recommendations Include that many parameter like Rate of inflation, Cost of labor etc are subjected to vary as per change in macro economic conditions, thus they are to administered accordingly, also, qualitative data may not be interpreted same by all, thus tools to quantify them should be developed. Limitation of the report is that due to lack of time for study, Risk grading model could not be used for analyzing risk, however concrete ratio analysis is done as prescribed by SEBI.
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Chapter 1: Introduction
Credit analysis is the method by which one calculates the creditworthiness of a business or organization. It is the evaluation of the ability of a company to honour it financial obligations. The audited financial statements of a large company might be analyzed when it issues or has issued bonds. or, a bank may analyze the financial statements of a small business before making or renewing a commercial loan.

Credit analysis involves a wide variety of financial analysis techniques, including ratio and trend analysis as well as the creation of projections and a detailed analysis of cash flows. Credit analysis also includes an examination of collateral and other sources of repayment as well as credit history and management ability. Analysts attempt to predict the probability that a borrower will default on its debts, and also the severity of losses in the event of default.

1.1 Significance of the study

In todays world, analyzing risk in any investment is an important and most challenging step. As per many experts easy credit policy of United States of America was one of the significant reasons for the global recession of 2008. It was an ignorance of State Bank of Indias officials on Kingfisher Airlines Finance that led to a default of more than 1600

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crores. In news, we listen very frequently about such financial mishaps occurring by one company or another. To further prevent such mishaps, SEBI has issued strict guidelines to banks and other profitable financial institutions to strictly examine the financials of the new borrower. With the span of time, many techniques for checking creditworthiness of company have evolved and many are under improvement. Thus, this is area has a bright scope in near future. As per todays trend, Ratio analysis of financials, CIBIL report score and various risk grading model are the techniques majorly used by banks. In Central Bank of India, Ratio analysis and CIBIL report score are the ways officials judge the creditworthiness. Researcher has worked in the same direction in this report.

1.2 Purpose of the study

Central Bank of India offers credit facilities to many Corporate, Mid-corporate, Small and Medium Enterprises. The researcher wanted to study the credit policies for Mid-corporate Enterprises as they are emerging markets of tomorrow and have great potential in them. Also, as Tier-II and Tier-III cities are developing with a fast pace, and studies in this segment is scarce. Thus, researcher chose Mid-corporate Enterprise in Lucknow region.

At Central Bank of India, Hazratganj, Lucknow, many sectors were funded with credit namely Tyre industry, Public Transport, Healthcare etc. Since studies in healthcare sector is few, and this sector is tomorrows need, so researcher chose to work for healthcare sector in Mid-corporate Branch of Central Bank, Lucknow.

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1.3 Objective of the study

Following are the objectives of the study: To understand the assessment of creditworthiness in Mid-Corporate Enterprise at Central bank of India, Lucknow. To examine the process of CIBIL Report being submitted. To examine the feasibility of the project to be carried out by Mid-Corporate Enterprise. To finalize the interest rate of the credit to be sanctioned by Mid-Corporate Enterprise. To develop the detailed repayment structure. To propose various monitoring parameters for the credit throughout the credit period.

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Chapter 2: Literature Review

2.1 About Credit Analysis

Credit analysis is the method by which one calculates the creditworthiness of a business or organization. In other words, it is the evaluation of the ability of a company to honor it financial obligations. The audited financial statements of a large company might be analyzed when it issues or has issued bonds. Or, a bank may analyze the financial statements of a small business before making or renewing a commercial loan. The term refers to either case, whether the business is large or small.

Credit analysis involves a wide variety of financial analysis techniques, including ratio and trend analysis as well as the creation of projections and a detailed analysis of cash flows. Credit analysis also includes an examination of collateral and other sources of repayment as well as credit history and management ability. Analysts attempt to predict the probability that a borrower will default on its debts, and also the severity of losses in the event of default. Credit spreads--the difference in interest rates between theoretically "risk-free" investments such as U.S. treasuries or LIBOR and investments that carry some risk of default--reflect credit analysis by financial market participants.

Before approving a commercial loan, a bank will look at all of these factors with the primary emphasis being the cash flow of the borrower. A typical measurement of
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repayment ability is the debt service coverage ratio. A credit analyst at a bank will measure the cash generated by a business (before interest expense and excluding depreciation and any other non-cash or extraordinary expenses). The debt service coverage ratio divides this cash flow amount by the debt service (both principal and interest payments on all loans) that will be required to be met. Commercial Bankers like to see debt service coverage of at least 120 percent. In other words, the debt service coverage ratio should be 1.2 or higher to show that an extra cushion exists and that the business can afford its debt requirements.

Typical education credentials often require a bachelor degree in business, statistics, and psychology (to include an emphasis in accounting, finance or economics). Commercial Bankers also undergo intense credit training provided by their Bank or a third-party company.

Significant resources and sophisticated programs are used to analyze and manage risk. Some companies run a credit risk department whose job is to assess the financial health of their customers, and extend credit (or not) accordingly. They may use in house programs to advise on avoiding, reducing and transferring risk. They also use third party provided intelligence. Companies like Standard & Poor's, Moody's, Fitch Ratings, and Dun and Bradstreet provide such information for a fee.

Most lenders employ their own models (credit scorecards) to rank potential and existing customers according to risk, and then apply appropriate strategies. With products such as unsecured personal loans or mortgages, lenders charge a higher price for higher risk customers and vice versa. With revolving products such as credit cards and overdrafts,
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risk is controlled through the setting of credit limits. Some products also require security, most commonly in the form of property.

Credit scoring models also form part of the framework used by banks or lending institutions grant credit to clients. For corporate and commercial borrowers, these models generally have qualitative and quantitative sections outlining various aspects of the risk including, but not limited to, operating experience, management expertise, asset quality, and leverage and liquidity ratios, respectively. Once this information has been fully reviewed by credit officers and credit committees, the lender provides the funds subject to the terms and conditions presented within the contract.

Machiko Nissanke, Ernest Aryeetey in their book: Financial Integration and Development explained about the loan administration and risk reduction by formal lenders(i.e. banks), Credit Analysis Standards, Increase Project equity requirements, Loan screening of banks and assessing creditworthiness during screening. Banks consider return on project as an important indicator for appraising the projects.

A research was conducted by Mr. V.M.V.Subba Rao, B.Com., FCA, DISA(ICA), MICA on Monitoring of Advances -- A New Look. The researcher gave two views on the commencement of monitoring process-(i)Narrow view- the monitoring starts only after the advance is disbursed, (ii)Broad view- at the time of conducting credit investigation of the borrower and continue in all other stages of credit cycle. Mritunjay Kumar Pandey conducted a study on Financial Performance Apprasial of TISCO, the paper of which was published in Accounting World, September 2008, The
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ICFAI University Press. The Objectives of the study was to check the profitability and efficiency of the firm in the near future, to give brief summery about the ratios which affect the organizations financial structure and to point out the relationship between ratios and reasons behind it. Eleanor Charles in his paper Appraising the Role of the Appraiser Published: September 3, 1995, talked about the centralized function of the appraiser to grant the loan and virtually every loan applicant will have to rely on an appraisal to set a value on the property against which the loan is to be made. Following are some of the other studies made on credit analysis: Uwe Wehrspohn (2005) Credit Risk Evaluation: Modeling - Analysis Management,Center for Risk & Evaluation , Vol. 33 , pp 345 -356, June 14, 2005 Christian Roland(2006) Banking Sector Liberalization in India Indian Institute of Capital Markets 9th Capital Markets Conference Paper, January 25, 2006. Arnoud W. A. Boot, Anjan V. Thakor (2007) Corporate Finance, Financial Intermediation and Banking: An Overview, CORPORATE FINANCE, FINANCIAL INTERMEDIATION AND BANKING: AN OVERVIEW, Amsterdam Center for Law & Economics Working Paper No. 2007-07 , Oct. 23,2007. Gary B. Gorton (2009) Securitized Banking and the Run on Repo National Bureau of Economic Research (NBER), Research Paper Series No.G01, G1, G12, G18, G21. Abhijit V. Banerjee (2002) Contracting Constraints, Credit Markets and Economic Development, MIT Dept. of Economics Working Paper No. 02-17 , April 25, 2002
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Agarwala, R.G., Banking Finance A Leading Monthly of Banking & Finance Published by Sashi Publications, Vol. XXII No.1 January, 2008,ISSN-0971-4498

Alan D. Morrison (2001) Banking Sector Liberalization in India Oxford Financial Research Centre Working Paper No.2001-FE-01.

Simona Mihai Yiannaki (2008) Bank Risk Regulation and the Credit Crunch, Journal of elibraryno. G 34, June 17, 2008,

Simone Westerfield , Hans-Dieter Zimmermann (2008) Credit Risk Measurement under Basel II: An Overview and Implementation Issues for Developing Countries Swiss Institute of Banking and Finance, Vol.45, pp 347-76

Wolf Wagner(2004) The Liquidity of Bank Assets and Banking Stability December 2004

Uwe Wehrspohn (2005) Credit Risk Evaluation: Modeling - Analysis Management, Center for Risk & Evaluation , Vol. 33 , pp 345-356, June 14, 2005

2.2 About Organisation

Central Bank of India a government-owned bank, is one of the oldest and largest commercial banks in India. It is based in Mumbai. The bank has 4100 branches and 270 extension counters across 27 Indian states and three Union Territories. At present, Central Bank of India has one overseas office, which is a joint venture with Bank of India, Bank of Baroda, and the Zambian government. It was established on 21 December 1911 by Sir Sorabji Pochkhanawala with Sir Pherozesha Mehta as Chairman, and claims to have been the first commercial Indian bank completely owned and managed by Indians. In 1923, it acquired the Tata Industrial Bank
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in the wake of the failure of the Alliance Bank of Shimla. In 1969, the Indian Government nationalized the bank on 19 July, together with 13 others.

During the past 99 years of history the Bank has weathered many storms and faced many challenges. The Bank could successfully transform every threat into business opportunity and excelled over its peers in the Banking industry.

A number of innovative and unique banking activities have been launched by Central Bank of India and a brief mention of some of its pioneering services are as under:

Year

Description

1921 Introduction to the Home Savings Safe Deposit Scheme to build saving/thrift habits in all sections of the society. 1924 1926 1929 1932 1962 An Exclusive Ladies Department to cater to the Bank's women clientele. Safe Deposit Locker facility and Rupee Travellers' Cheques. Setting up of the Executor and Trustee Department. Deposit Insurance Benefit Scheme. Recurring Deposit Scheme.

Subsequently, even after the nationalisation of the Bank in the year 1969, Central Bank continued to introduce a number of innovative banking services as under:

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Year

Description

1976 The Merchant Banking Cell was established. 1980 Central Card, the credit card of the Bank was introduced. 1986 'Platinum Jubilee Money Back Deposit Scheme' was launched. 1989 The housing subsidiary Cent Bank Home Finance Ltd. was started with its headquarters at Bhopal in Madhya Pradesh. 1994 Quick Cheque Collection Service (QCC) & Express Service was set up to enable speedy collection of outstation cheques.

Further in line with the guidelines from Reserve Bank of India as also the Government of India, Central Bank has been playing an increasingly active role in promoting the key thrust areas of agriculture, small scale industries as also medium and large industries. The Bank also introduced a number of Self Employment Schemes to promote employment among the educated youth.

Among the Public Sector Banks, Central Bank of India can be truly described as an All India Bank, due to distribution of its large network in 27 out of 29 States as also in 3 out of 7 Union Territories in India. Central Bank of India holds a very prominent place among the Public Sector Banks on account of its network of 4214 branches and 26 extension counters along with satelite branches at various centres throughout the length and breadth of the country.

Customers' confidence in Central Bank of India's wide ranging services can very well be judged from the list of major corporate clients such as ICICI, IDBI, UTI, LIC, HDFC as also almost all major corporate houses in the country.
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Vision
To emerge as a strong, vibrant and pro-active Bank/Financial Super Market and to positively contribute to the emerging needs of the economy through consistent harmonization of human, financial and technological resources and effective risk control systems.

Mission
To transform the customer banking experience into a fruitful and enjoyable one. To leverage technology for efficient and effective delivery of all banking services. To have bouquet of product and services tailor-made to meet customers aspirations. The pan-India spread of branches across all the state of the country will be utilized to further the socio economic objective of the Government of India with emphasis on Financial Inclusion.

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Chapter 3: Methodology
Methodology is description of the process, rules, methods employed in a study. Research refers to a search for knowledge. One can also define research as a scientific and systematic search for pertinent information on a specific topic. In fact, research is an art of scientific investigation. This chapter deals with universe of the study, locale of the study, method of data collection, tools used for data collection, types of sampling used, sample sized used for study and analysis of the study.

3.1 Universe of the study

The universe of the study consists of all the financial proposals coming in the Banking sector for credit approvals.

3.2 Locale of the study

The locale of the study has been narrowed down to the Regional Office, Lucknow and Branch office Hazratganj, Lucknow of Central Bank of India. The study is categorized to Mid-corporate Branch of Branch office,Hazratganj, Lucknow. A term loan proposal recently came to CBI for approval. So the researcher decided to take up this proposal for appraisal purpose. The findings may or may not be similar to the other branches of the company across the country.
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3.3 Sample Size

The study has been done based on the detailed project report submitted by the project developer and queries regarding the report were answered by the developer of the report. Thus it was convenience sampling as there was just one target audience which was to be analysed. Sample Size was too very small here, as all the queries during the study was answerable by the developer of the report or by the promoters of the company.

3.4 Data Collection

For the purpose of data collection, two different sources were adopted for the study:

Primary Sources Secondary Sources

Primary Source was the detailed project report submitted by the clients along with the application to issue term loan. Since the promoters do not previously run any listed company, so Project report prepared by authorised and reputed financial consultant was acceptable.

For secondary Data, various guidelines and methodology used by the banks were used. During the study many research papers based on tools and techniques for risk calculation
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in term loan was studied. For making any forecasts, proposed data from financial magazines and journals was used.

Bank uses tool named CIBIL (Credit Information Bureau (India) Limited), which is used to check the financial health of any individual or organisation, primary information was used as input for this tool. The Data of this report was regarded as secondary data. Apart from this, many calculations were made to check the creditability of the client, e.g. calculation of DSCR (Debt-Service Coverage Ratio), calculation of time value of money etc.

3.5 Data Analysis

An actual term loan proposal was done to get a hand on experience on the procedure of Project Appraisal. Excel statistical tools have been used for analyzing the data. Following steps were taken for analysis (appraising the project): Doing a management appraisal-checking the promoters contribution, credentials and years of experience in the business. Doing a technical appraisal-visiting the locality of the project and checking whether the machines and other utilities for the plant are sufficient to sustain the project. Doing a financial appraisal-Doing a ratio analysis and checking whether the ratios adhere to the prescribed norms. Calculating Debt Service Coverage Ratio, IRR, NPV and doing a sensitivity analysis. Doing a commercial appraisal- Checking the demand and supply of the project.

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3.6 Field Experience

The data analyzed was the result of interviews and questioning from the officials of CBI, Lucknow. The project was dealt by Mid-Corporate branch of Hazratganj, Lucknow.

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Chapter 4: Detailed Analysis

This chapter will deal with the detailed analysis of the project undertaken. The project is from a Healthcare sector where the client is proposing to setup a healthcare centre naming Medics International Life sciences Ltd. (Name Changed, due to confidentiality of the project)

4.1 Case M/s Medics International Life Sciences Ltd.

M/s Medics International Life Sciences Ltd. (Medics) is going to be a new healthcare centre to be established in Lucknow by January 2015. There are 10 partners of the centre, all being reputed personality of the city. The Chairman Dr. Sushil Gattani is also the founding member of Awadh hospital, Lucknow (A healthcare centre that needs no introduction in Lucknow region). Others are either senior doctors themselves or business tycoons having agency of Hyundai, Tata, Rolex etc. The total cost of healthcare centre is proposed to be Rs. 160.48 Crs., of which 41.84 Crs will be funded by the promoters themselves and rest 118.64 Crs has to be funded by Banks, namely Central Bank of India & Bank of Baroda. Both the banks will share an equal amount of Rs.59.32 Crs. At Central Bank of India, researchers job was to analyse the feasibility of sanction the loan.

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Following was the detailed Gist of the proposal:Limits Term Loan-I (Phase I) Purpose For payment to Luckow Development Authority (LDA), Construction of hospital Building, Infrastructure development Term Loan-II (Phase I) Term Loan-III (Phase II) Total Infrastructure Development for additional 114 Beds in proposed Hospital 59.32 5.90 Purchase of medical equipments 15.43 Amount (in Crs.) 37.99

Phase I: Company will start its operations with 150 beds, tentative date is January 2015. Phase II: Expansion of existing facilities by operationalizing additional bed of 114 in the said hospital, tentative date is January 2018.

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4.2 Proposed Balance Sheet

The propose Balance Sheet of the firm is as below Particulars Projected 2015 Share Capital Reserves & Surplus Net Worth Intangible assets Tangible Net worth Term Liabilities Term Loans Unsecured Loans Other Creditors Capital Employed Net Block Funds invested outside business Other noncurrent assets Current Assets Inventories Debtors Cash & Bank Balance Other Current Assets 37.55 -8.53 29.01 0.00 29.01 104.73 104.73 0.00 0.00 133.75 127.23 0.00 0.00 9.89 0.58 0.99 8.32 0.00 Projected 2016 40.16 -9.91 30.25 0.00 30.25 102.90 102.90 0.00 0.00 133.15 119.42 0.00 0.00 23.28 1.13 5.74 16.41 0.00 Projected 2017 41.84 -6.85 34.99 0.00 34.99 99.78 99.78 0.00 0.00 134.77 122.76 0.00 0.00 25.61 1.41 7.51 16.69 0.00 Projected 2018 41.84 1.07 42.92 0.00 42.92 97.64 97.64 0.00 0.00 140.56 126.02 0.00 0.00 31.19 1.68 9.42 20.10 0.00 Projected 2019 41.84 20.16 62.00 0.00 62.00 72.94 72.94 0.00 0.00 134.94 118.82 0.00 0.00 51.29 2.07 12.18 37.05 0.00
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Current Liabilities Creditors Bank Borrowings TL payable in one year Other Liabilities/Provisions Net Current Assets Capital Deployed Operational data: Gross Sales Less: Excise/Sales Tax Net sales Other Income Direct Cost Admn. Selling expenses Depriciation Interest Net Profit before Tax Tax Provisions Net Profit after Tax Dividend Cash Accruals Ratio Analysis: PBT/NS (in %)

3.38 0.39 0.88 2.10 0.00 6.52 133.75 0.00 12.08 0.00 12.08 0.00 7.92 0.85 8.49 3.37 -8.53 0.00 -8.53 0.00 -0.05

9.55 0.80 4.55 4.20 0.00 13.73 133.15 0.00 69.78 0.00 69.78 0.00 44.52 4.88 7.81 13.94 -1.37 0.00 -1.37 0.00 6.44

13.60 0.99 5.95 6.66 0.00 12.01 134.77 0.00 91.38 0.00 91.38 0.00 58.35 6.40 7.89 14.17 4.58 1.52 3.06 0.00 10.95

16.66 1.18 7.43 8.04 0.00 14.54 140.56 0.00 114.60 0.00 114.60 0.00 72.43 8.02 7.98 14.31 11.86 3.94 7.92 0.00 15.90

35.17 1.46 9.00 24.70 0.00 16.12 134.94 0.00 148.17 0.00 148.17 0.00 88.14 10.37 7.20 13.87 28.58 9.50 19.09 0.00 26.90

-70.63

-1.97

5.01

10.35

19.29
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PAT/NS (in %) Return of capital employed (in %) Current Ratio (Considering TL) Current Ratio (Without TL)

-70.63 -6.38 2.93 7.76

-1.97 -1.03 2.44 4.35

3.35 2.27 1.88 3.69

6.91 5.64 1.87 3.62

12.88 14.15 1.46 4.90

4.3 Security Coverage:

Apart from this proposal following was the security that the promoters are willing to keep as bank guarantee. Primary Securities 1. 2. 3. 4. Land on Lucknow Kanpur Road (Area 7000 sq.m) Hospital Building Plants & machinery Furniture & fixtures Total Security value Total Credit Facilities Security Coverage Primary (Times) Value (Rs. in crores) 27.37 75.80 36.20 4.00 143.37 118.64 1.21 Times

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4.4 About Promoters:

Following is the Name and Net Worth of the Promoters of the Healthcare Centre Net Worth as on 31.03.2012 S. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Name Dr. Sushil Gattani Ravi Somani Priya Somani Jagdish Prasad Dhoot Vijay Kumar Agarwal Suresh Kumar Agarwal Dr. Mayank Somani Ashok Kumar Agarwal Kavita Somani Sunita Gattani (Rs. In Crores) 7.78 2.06 1.14 10.92 28.45 14.25 0.44 0.92 1.02 4.00

Also CIBIL Report of all the promoters was observed, it was found that none of the promoters have ever defaulted in any financial process, 3 of them do have an existing personal loans but the repayment is on-time. Respective banks have issues a No objection certificate to them.

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Chapter 5: Detailed Analysis Contd.

This section would deal with other qualitative and quantitative data being observed.

5.1 Background of the company

The Medics International Life Sciences Ltd. Incorporated on 12.01.2011, with objective to setup a super specialty hospital in Lucknow. The promoters, Dr. Sushil Gattani, is one of the reputed cardiologist ,also founder partner of 100 beds hospital Avadh Hospital and Heart Centre Lucknow and having a vast experience of 23 years in management & operation of hospital. The project comprises of a total of 264 beds (04 Suits, 37 Single rooms, 40 Semi private, 99 General ward, 38 Intensive care Unit, 14 Neonatal Care unit, 20 High Dependency Unit, 6 Cardiac care Unit, 6 CTVS ICU). Out of this company has proposed to install 150 beds in phase I. The proposed Hospital will mainly cater to the following major services: Emergency & Trauma care General Surgery Obstetrics & Gynecology Orthopedics Medical & Surgical Gastroenterology ENT Neurology
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 Burns Treatment and Plastic Surgery Neurology & Neurosurgery Women Child Care Cardiology & Cardiothoracic Surgery Minimum Access Surgery Ambulatory Services: Endocrinology, Dialectology, Endoscopy, Weil womens Clinic.

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5.2 Cost and Means of finance of the project:

Cost of Project Land Building & E&M Cost Plant & Machinery Furniture & Fixture IDC Construction Period Expenses Working capital Margin Total Project Cost Phase 1 27.37 60.05 30.53 2.95 14.82 2.00 0.29 138.01 Phase 2 0.00 15.74 5.67 1.06 0.00 0.00 0.00 22.47 Total 27.37 75.80 36.20 4.00 14.82 2.00 0.29 160.48

Means of Finance Term Loan Borrowers Fund Total Project Cost

Phase 1 106.83 31.18 138.01

Phase 2 11.81 10.66 22.47

Total 118.64 41.84 160.48

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5.3 Repayment of Loan

Term Loan-I Period Repayment Per Month Oct 15 to Mar 17 Apr 17 to Mar 19 Apr 19 to Aug 22 Sept 22 Total 0.125 0.20 0.737 0.74 18 24 41 1 84 2.25 4.80 30.20 0.74 37.99 No. of Installments Total

Term Loan-II Period Repayment per Month Oct 15 to Sept 17 Oct 17 to Sept 19 Oct 19 to Aug 22 Sept 22 Total 0.05 0.075 0.345 0.35 24 24 35 1 84 1.20 1.80 12.08 0.35 15.43 No. of Installments Total

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Term Loan-III Period Repayment per Month Jan 18 to Jun 19 Jul 19 to Dec 20 Jan 21 to Nov 22 Dec 22 Total 0.06 0.09 0.133 0.13 18 18 23 1 54 1.08 1.62 3.07 0.13 5.90 No. of Installments Total

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Chapter 6: Detailed Analysis Contd.

Chapter deals with the business Risk involved and the SWOT analysis of the project

6.1 Business Risk

Factors Industry Impact Moderate Explanation Since Lucknow is capital city of the Uttar Pradesh and it is well connected with nearby cities, and there is a good demand of good quality medical facilities and it is expected that there will be above average level of capacity utilization in the proposed Hospital. It is expected that the patients from various cities/town/villages will approach the proposed hospital to avail quality medical services. The proposed 264 bed multispecialty hospital will be having ultra modern medical equipments/machines supported by the experienced and renowned doctors of various fields. The promoter are already running the 100 bed hospital in the same city since last 10 years and the support facilities are clearly above average, and are a significant strength to the companys operations. Demand & Moderate Past growth rates relatively high and stable. Positive

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Supply

demand-supply gap scenario. Relatively insulated from economic Recession. Favorable growth rate likely to continue in the medium term. However, product off take not as easily assured as higher grades.

Government Policy

Positive

Moderately favorable policies (such as protective import tariffs/incentives), positively impacting profitability. Hospital industry comes under service industry and generally the policies of the government are moderately favorably to this line of activity. Government is also promoting entry of the private sector in these activities as existing medical system cannot meet the requirement of the growing population.

Availability of skilled Manpower

Positive

Skilled manpower easily available for the foreseeable needs of the company. Promoters of the lucknow are themselves renowned doctors of the lucknow city and they are already running 100 beds hospital successfully in the lucknow city and as such there will be no shortage of skilled labour to meet out the foreseeable needs of the company.

Management Positive

Since the promoters of the proposed Hospital are having a long experience in this line activity, it can be presumed that they will ensure that the controls and processes are highly organized and they will also develop a mechanism to get feedback of the customers so that they may further improve
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the operating procedures. The management has exposure to the business for more that 15 years and they are already running a 100 bed hospital (Avadh Hospital) with which our bank is also having a walk in facilities.

6.2 SWOT analysis

Strengths: Its strength lies in its diverse economic base, conducive environment for industrial growth provided by responsive local administration. City is the capital of Uttar Pradesh state, which attracts patients from cities of Uttar Pradesh and also neighboring states. A new Multi Super specialty hospital will only increase the trend of referral in the city. The population is mixed, but with enough affordability for the services of the proposed hospital. The location is excellent with no direct competitor in the vicinity. The promoters, well known Doctors themselves have successfully managing 100 bed hospital in the name of Avadh Hospital & Health Centre. The promoter is not only looking at profitable business as the primary end product. As per all the promoters primary end product will be delivering world class healthcare services to the population being catered and revolutionize the standards of healthcare in Lucknow.
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Weaknesses: Although Lucknow is a large city, many of the consumers had not seen or heard about the medical services available at the well established hospitals. Patients referral chain system is dominated by GPs in the region; cut practice trend of 20 to 50% of patient bills prevails in the healthcare market. This deep rooted health seeking behavoiur of first visiting the general practitioner and quakes has created the cut practice. This cut practice is not only unethical but also results in the trickledown effect where the consumer ultimately bears the inflated price of services. The major weakness of the city is lack of educational institutions to respond to local institutional demand and inadequacy of integrated health facilities to cater to the needs o population in 2011 and 2021. The presence in a smaller city as compared to other metros viz Delhi, Mumbai may make it difficult to attract the right talent inform of junior doctors, nurses and paramedical staff. Added incentives and attractive remuneration packages will have to be designed for this purpose. The government sector has got a good presence currently in the area for secondary and tertiary care, like King Georges Medical University & Sanjay Gandhi post graduate Institute of medical sciences. But the infrastructure and services do not seem to be adequate for the population. If this is strengthened then government hospitals can become direct competitors.

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Since Lucknow is not very from Delhi, Patients may choose to seek secondary and tertiary care in well tries out institutions of Delhi which is the current practice.

Opportunities: The recent development and growth of the industries in the city region should be considered as an opportunity for further growth and business friendly environment. Not much has happened in terms increase of hospital beds in the city, where as population has increased by 30% every decade. The healthcare industry in India has show a CAGR of 12-13 percent based on a demand supply gap and the need for quality health infrastructure and services. There is said to be a huge untapped potential for growth. There is as such no established major private hospital presence and hence no major competition in the region. Threats: Many of paying population goes to Delhi for planned procedure and poor goes to KGMU hospital or SGPGI, Lucknow, so creating a market for a new brand will be a hard work. There is no information or data on any other developments planned by unknown new players in Lucknow and the surrounding districts. However this cannot be ruled out. Trained and paramedical staff has to be attracted with good remunerative packages, and high turnover of this trained staff is a big threat.

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Chapter 7: Detailed Analysis Contd.

This chapter deals with the breakup of revenue and net profit.

7.1 Breakup of Revenue:

Particulars Bed Charges OT Consultation Lab Sciences Pharmacy Total Revenue 2014-15 1.30 4.27 0.87 3.98 1.66 12.08 2015-16 7.50 24.64 5.05 22.98 9.61 69.78 2016-17 9.82 32.27 6.61 31.10 12.58 91.38 2017-18 12.31 40.47 8.29 37.78 15.78 114.60 2018-19 15.92 52.33 10.72 48.80 20.40 148.17

7.2 Net Profit

Particulars Projected 2015 Net PBT Depreciation Cash Accruals -8.53 8.49 -0.05 Projected 2016 -1.37 7.81 6.44 Projected 2017 3.06 7.89 10.95 Projected 2018 7.92 7.98 15.90 Projected 2019 19.09 7.20 26.29

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Particulars

Projected 2015

Projected 2016 -2% 28%

Projected 2017 3% 28%

Projected 2018 7% 29%

Projected 2019 13% 33%

PAT/Net Sales EBIDTA/Net Sales

-71% 27%

7.3 Debt-Equity and Current Ratio

Particulars Projected 2015 DE Ratio (TTL/TNW) DE Ratio (TOL/TNW) Current Ratio 3.61 3.73 2.93 Projected 2016 3.40 3.72 2.44 Projected 2017 2.85 3.24 1.88 Projected Projected 2018 2.28 2.66 1.87 2019 1.18 1.74 1.46

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Chapter 8: Conclusion
Credit facility in any banking environment is a systematic cascaded process of many investigations. In major cases the borrower needs to fulfill nearly all the necessary requirements of the lender, however many a times the lender can see-off some of the criteria as per the situation. Many qualitative comparison are based on the judgement of officials, thus their results may vary from branch to branch and bank to bank.

8.1 Major Findings of the study

During the analysis of financial records of the borrowers, many of the pre-defined steps are followed, such as checking the bank account details of the borrowers, the applicability of the project, the acceptability of the project, various ratios like DSCR over the time, also breakup of revenue, Net profit, and depreciation techniques used. During the study of this project the bank employees have found all the necessary details to be fine. Therefore the borrower was sanctioned the loan amount.

8.2 Suggestion
Although the banking process is already well structured and concrete in itself to avoid any discrepancies in the repayment of the loan, however there is always a chance of improvement in all such activities. Researcher would suggest that all the data passed on by the financial consultant to the bank must be randomly checked by authorities; also all majors should be taken to

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safeguard the entire amount of the bank. Many a times, when things are qualitative, the officials should have an extra strictness as that information can be ambiguous in nature.

8.3 Limitation of the study

The data received from the financial consultant is the only well-structured source of the primary data, sometimes the financial consultant may dress up a false figure in favour of the borrower. Thus our study may have a failure if such situation arises. Also, majority of the calculations are based on proposed data, which is affected by rate of interest, repo rate, CRR, inflation, CPI, WPI etc. The bank official do try to reach to possible forecasted figures, but any change in macro economic level may change the credibility of the borrower, it may show its effect both positive and negative for the borrower.

8.4 Further Scope of the Study

The data analysis done at the time of issuing of loan and after a significant interval of time will be different, thus the bank official needs to constantly keep a check on the credibility if the borrower, the repayment amount and the repayment time should be well monitored until the entire amount of loan is not received.

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Bibliography
Medics International Life Sciences Ltd. ANNUAL REPORT Detailed project report from Medics Management of Indian Financial Institution, 10th Edition, R.M. Srivastava Financial Institution and Markets, 5th Edition, L.M. Bhole

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