CASE STUDY ON TRADE

FINANCE

About the firm and borrower

Name of The Firm: M/s Raghavendra Traders

Constitution: Sole Proprietor
Sector: Retail Trade
Line of Activity: Trading of Gingelly Oil
Name of the Proprietor: Smt Vasundra Raghvendar
Chief Executive: Mr. Raghvendar
Registered and Administrative office: No 8 Nungambakkam

high road chennai 600034

Date of Inception of business: 01/04/2013

Customer Since: Since April 2012, CA with
Indian Bank
Liability with financial System: Nil
Guarantor: Shri Raghvendar.
Net Worth of Firm : Rs 2.25 Crores
Net Worth of Guarantor: Rs 6.00 Crores
Ram Rating of the firm for 31/03/2015
Obligator: BBB
Combined: A

FINANCIAL DETAILS
Amount in lakhs

Financial
Details

ABS 2014

ABS 2015

ABS 2016
Proj.

Net Sales

625.02

718.77

862.52

% increace over
last year

3.50%

15%

20%

Depriciation

1.25

1.20

1.10

Net Profit after

Tax

4.20

5.10

7.00

Cash Profit

5.06

6.30

8.10

Capital Account

10.00

12.00

15.00

Quasi Capital

Nil

50.00

50.00

Long Term
Liabilities

3.15

2.20

Nil

Current Liabilities

122.15

121.85

150.00

Total Liabilities

135.30

186.05

215.00

Net Fixed Asset

6.50

5.30

4.20

Ratio analysis

Ratio

2014

2015

2016 Proj.

Current Ratio

1.05

1.48

1.40

TOL/TNW

12.53

2.0

2.30

ICR

Working Capital Assessment

Note: Since Applicant Amount is 1.5 crores which
is less than 5 crores. It is clear that we should
apply turnover method for assessment of
working capital
According to Turnover method
WC = 20% Net Sales for projected year 2016
(862.52*20)/100 = 172.50 lacs or
1.72 crores>1.50crores

Working Capital Assessment

According to MPBF method
WC Gap = (CA-CL(Excluding Bank Borrowing)
210.80 lacs or 2.11 cr
* Since No Other Current Liability after excluding
Bank Borrowing
Required WC = WC Gap-25% of Current Asset
210.80-52.70 = 158.10> 150 lacs or 1.58>1.50 cr

Strength

Firm is dealing in retail trade of Gingelly Oil of

a reputed brand having good market demand.
Market approach of the firm is very effective and
depend upon small vendors and local sales in
Chennai Metro.
Since firm establish on 01/04/13 So firm have 3
yrs experience in current activity
Chief Executive of Firm and husband of Smt
Vasundra Raghvendar has already experienced
in line of activity having worked as sales
executive in leading oil manufacturing company.

No Liability with any financial system

Firm having strong Net worth Rs 2.25 crores
Net-worth of Guarantor is Rs 6 crores which is
enough to recover the loan in worst situtation

TRADE FINANCE FEATURES

Minimum Experience of 3 years
Secured OD
Profit Making
Margin- 25% on Stocks and Book debts (1.97 cr)
ROI based on Rating.
Current ratio- 1.40:1
TOL/TNW -2.30:1

ANALYSIS
There is continuous increase in Net sales in the last three

years aprox.14% , projected sales 20% acceptable

The firm has drawn the acceptable profits in the last 2
years.
The Current Ratio of the firm is above the Stipulated
benchmark level of 1.10.Hence CA>CL. The firm is able to
meet its short term sources over short term uses .So
adequate liquidity is available.
TOL/TNW is within the stipulated limit of 6:1.
There is healthy TOL/TNW ratio
ICR to be verified based on projections ?
So We May Sanction the working capital limit for borrower

Securities to be proposed
1. Hypothecation of Stock worth Rs 1.25 crores and

book debts 0.72 crores.

2. Admin office cum residence at Nugambakkam High
Road worth Rs 5 crores.
3. Personal Guaranty of Mr. Raghvendar (CEO of
Firm) Net worth Rs 6 crores

Weakness of the firm

DOCUMENTS TO BE EXECUTED
D1-Demand

Promissory Note
D7 Disposal of Proceeds letter
D32-Creation of Equitable Mortgage
D57-agreement of Guarantee
D101- Agreement for hypothecation of movables.

Trade Finance Sec OD

Projected Sales Turnover Rs.80 lakhs
20% of Sale Turnover
-16 Lakhs
(As per Turnover Method)
Margin:
1. 33% on House property worth Rs 25 Lacs = Rs.16.75 lacs
2. 50% on agri land owned by Proprietor worth Rs.3 Lacs =Rs
1.5 lacs.
* Market Value of EM property is Rs.25 lakhs at Riverandagam
Town.
Hence we may sanction this loan under Sec OD Trade Finance
by taking EM property of residential house of Mr.Raghavender
and agri land owned by him in his name to a maximum of Rs
16 Lacs.