SUMMER PROJECT REPORT: 2010

Madhya Pradesh Financial Corporation (MPFC

WORKING &PROJECT
FINANCING : MPFC

Submitted by:

Ishan Trivedi
 CERTIFICATE

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 ACKNOWLEDGEMENT

“The satisfaction Euphoria that accompany the successful completion of any work would be
incomplete unless we mention the name of the persons, who made it possible, whose constant
guidance and encouragement served as a beckon of light and crowned our efforts with
success”

I consider it a privilege to express through the pages of this report, a few words of gratitude
and respect to those who guided and inspired in the completion of this project.

I am deeply indebted to Shri A K Sinha for mentoring me throughout the internship in this
esteemed organization. For their timely suggestions & valuable guidance. I want to thank
Shri. R.G. Dwivedi (General Manager – MPFC, H.O. Indore) and Shri. P.K. Sinha
(Manager – Systems).

I cannot do away without thanking few more individuals who educated us in their respective
field of expertise and otherwise:

 Shri Mukesh Gupta (Manager)

 Shri S.S. Agnihotri (Dy. General Manager, RRC)
 Shri R.K. Jain (Accounts)
 Shri A.K. Sinha (Manager, Legal)
 Smt. Geeta Agrawal (Recovery & Follow-Up)
 Shri Bhartesh Jain (Manager, Recovery & Follow-Up)

Last but not the least I would also thank all my co-interns and friends for the constructive and
fruitful discussions and knowledge sharing.

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1. INTRODUCTION

Madhya Pradesh financial corporation is the premier institute of the state engaged in
providing financial assistance and related services to small/medium size industries and it was
incorporated under State Financial Corporation Act 1951(act 63 of 1951) in1955and also
registered as category 1 merchant bankers and Securities Exchange Board of India (SEBI)
since 1996, set up a separate merchant banking division in the name of the MPFC Capital
Market Division. MPFC works under the control of board of directors, consisting of
representatives from State Government, Small Industrial Development Bank of India, RBI,
Scheduled Bank, Insurance Company, Cooperative Bank and Shareholders. However fee
based services can be extended to units located in any part of the country. In the definition of
industry almost every type of manufacturing or process activity related operations are
covered. In addition, MPFC also provides assistance to activities in the service sector also
approved by Industrial Development Bank of India (IDBI).

As per provision of the “State Financial Corporation Act 1951”, MPFC can grant
Assistance to only that concern that’s paid up capital and free reserves taken together
Do not exceed rupees 20 crores. This limit is not applicable to non fund activities.

MPFC is well knit organization with head quarter at Indore, and also have tonal and
Branch network at 20 districts.

Initially the corporation was established with the objective of providing financial assistance
to Small Scale Industries but at present 68% of the corporation’s funds assist industrial
projects, 20% of the funds are invested in service sector and 12% in infrastructure

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SECTOR WISE SANCTION OF LOAN

Loan

Industrial
Services
Infrastructure

PERFORMANCE IN DIFFERENT AREAS

250

200

150
sanction
disbursement
100 recovery

50

0
2007-08 2008-09

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SIZE WISE SANCTION OF LOAN

Size wise sanction of loan in MPFC up to 100 lakh is 67% and above 100 lakh is 33%

loan

upto 100 lac

above 100 lac

MANAGEMENT STRUCTURE OF MPFC

Management 

(1) the general superintendence, direction and management of affairs and business of the
Financial Corporation shall vest in a Board of directors which may exercise all powers and do
all such acts and things, as may be exercised or done by the Financial Corporation and are not
by this Act expressly directed or required to be done by the Financial Corporation in general
meeting. 

(2) The Board may direct that any power exercisable by it under this Act shall also be
exercisable in such cases and subject such conditions, if any, as may be specified by it, by
chairman, managing director or the whole-time director. 

Board of Directors

The Board of directors shall consist of the following, namely:- 

(a) a director to be nominated as chairman under sub-section (1) of section 15; 

(b) two directors nominated by the State Government of whom one director shall be a person
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who has special knowledge of or experience in small-scale industries: 
Provided that in the case of a joint Financial Corporation, the number of directors shall be
such as the State governments of the participating States may, by agreement among
themselves, think fit to nominate each participating State Government nominating not more
than two directors: 
Provided further that in the case of a Joint Financial Corporation, the director, who shall have
special knowledge of, or experience in, small-scale industries, shall be nominated by that
participating State which, according to the terms of agreement between the participating
States, is entitled to make such nomination; 
(c) two directors nominated by the Small Industries Bank; 
(d) two directors nominated in the prescribed manner by the parties mentioned in clause (c)
of sub-section (3) of section 4; 
(e) such number of directors elected, in the prescribed manner, by shareholders, other than
those mentioned in clauses (a), (b) and (c) of sub-section (3) of section 4, whose names are
entered on the register of shareholders of the Financial Corporation, ninety days before the
date of the meeting in which such election takes place on the following basis, namely:- 
(I) where the total amount of issued equity share capital held by such shareholders is ten per
cent. Or less of the total issued equity capital, two directors; 
(ii) where the total amount of issued equity share capital held by such shareholders more than
ten per cent. But less than twenty-five per cent. Of total issued equity capital, three directors; 

(iii) Where the total amount of issued equity share capital held by such shareholders is
twenty-five per cent or more of total issued equity capital, four directors; and 

(iv) where the total amount of issued equity share capital held by equity shareholders referred
to in this clause does not permit election of all the four directors, the Board shall co-opt such
number of directors as is required to make up the staid number who shall retire in equal
number on the assumption of charge by the elected directors in the order of their co-option; 

(f) a managing director appointed in accordance with the provisions of sub-section (1) of
section 17: 
Provided that on the first constitution of the Board, the directors referred to in clause (d)
shall be nominated by the State Government and directors so nominated shall, for the
purpose of this Act, be deemed to be elected directors

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ORGANISATIONAL CHART

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BRACH NETWORK AND FIELD OFFICE STRUCTURE OF MPFC

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CAPITAL STRUCTURE OF MPFC

 Refinance from SIDBI

 Share Capital from Sate Government
 Loan in Lieu of Share Capital
 Subscription of Bonds to financial institution such as Nationalized Bank, LIC,
Cooperative Society, APEX Banks.

THE CORPORATION OFFERS:

1. Financial assistance by sanction of Term Loans to New, Tiny, Small and Medium
Enterprises and Services Sector for acquiring fixed assets like land, building, plant &
machinery and other miscellaneous assets.
2. Sanction of Term Loans to existing industrial concerns and services sector units
For expansion or modernization or diversification.
3. Sanction of Working Capital Term Loans to meet working capital requirements of
Industrial or service enterprises under special schemes.

FINANCIAL ASSISTANCE – LIMITS OF ACCOMMODATION:

Category Maximum Loan
I. Proprietary or Partnership Rs.200.00 lakhs
II. Corporate bodies (both private & public limited) Rs.500.00 lakhs

In respect of existing units operating successfully, maximum limit can be extended up

toRs.400.00 lakhs for category (I) and Rs.1000.00 lakhs for category (II).

In respect of category (II) the financial assistance can be sanctioned provided the paid up
capital and free reserves do not exceed Rs. 3000.00 lakhs.

If the requirements of the funds for a project are substantial and cannot be extended
By the Corporation alone, then the requirement of loan of such projects can be met in
Consortium with other financial institutions.

ACTIVITIES FINANCED BY THE CORPORATION:

• General Loans for setting up new tiny, small and medium scale enterprises and service
sector units.
• Hotels/Restaurants.
• Tourism related facilities (Amusement parks, Convention centers, restaurants,
Travel & Transport, Tourist service agencies, Mobile canteen /catering),
• Hospitals/Nursing Homes.
• ..... Acquiring Electro Medical Equipment, setting up of Medical Stores.

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• Transport Loans (SRTOs) & acquisition of private vehicles, construction and
Purchase of commercial complex and Development of Residential Colonies.
• Development /maintenance and construction of roads.
• Qualified Professionals (Management, Accounting, Medical Professionals,
Architects & Engineers, Veterinary clinics)

2. OBJECTIVE
The main objectives of MPFC are-
 Industrial development of the state.

 Providing financial assistance to the micro, small and medium scale industries,
service sector and infrastructure development projects.

 Socio-economic development of the state.

The corporation offers financial assistance by sanction of term loans to new, tiny, small
and medium enterprises and service sector for acquiring fixed assets like land, building,
plant and machinery and other miscellaneous assets. It also offers sanction of term loans o
existing industrial concerns and services sector units for expansion or modernization or
diversification. Apart from this the corporation also offers sanction of Working Capital
Medium Term Loan to meet Working Capital requirements of industrial or service
enterprises under special schemes.

3. HISTORY
MPFC – Establishment, Growth, Challenges

1. Year 1955-56 MPFC came into existence in Madhya Bharat Period of

infancy
Selection of right people for the right job successfully established the procedures,
probably with hardly half a dozen of employees on its roll. No financial
institution existed in other regions of the newly formed state of Madhya Pradesh
– Renamed “MPFC”. Renowned industrialist Chairman of the corporation for
about ten years. Later replaced by an ex-officer (financial secretary) continues
with an exception of two years in seventies.

2. Year 1957-60  Conservative approach

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 Conscious of safety of public money and one should be – Selective financing
mostly in Madhya Bharat region may be a surprise to the present generation in
the corporation that notice under section 30 of state financial corporation’s act,
1951 (SFC act) served even for a single default on a renowned industrial house –
Format of notice continued to be used for years

3. Year 1961-64  Activities and facilities published

Periodical press conferences – Extensive touring and financial assistance
extended to other regions (Chhattisgarh and Mahakaushal) Liberal financing to
provide impetus to set up industries in a state considered to be industrially
backward – Positive response resulted in paucity of funds – Had to augment
resources through Bonds, guaranteed by the State Government for the first time,
position as per an editorial in a daily reversed SFC act amended.

4. Year 1965 onwards General

‘Sickness’ already entered in field of industry – considerable amount lock up in
corporate sector – this sector took advantage of reference to BIFR putting a
brake on the recovery. Organized consortium meetings, seminars for
rehabilitation of ailing units, References to BIFR hardly served any purpose.
Procedures in BIFR time consuming targets oriented financing and availability
more and more incentives including subsidy always have a drawback – Selective
financing close and effective monitoring including regular interaction with
borrowers, critical analysis of working results warranted. One cannot ignore the
security aspect also even in a development banking, personnel responsible for
appraising the projects and release of funds should invariably be part of
recovery and rehabilitation cells. One cannot be perfect and bound to err -: An
adage: ‘To err is human. He alone can improve and become perfect who realizes
his own mistake and is particular in correcting them’.

The corporation is proud of having always a dynamic leadership with new

dimensions brining its activities comparable to any financial institution with
good governance. More than 10,000 units have been established. Around 5 lacs
people have been given direct employment. Indirect employment has changed
the Madhya Pradesh state.

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 4. Key Functions of MPFC

1. SANCTION:-

Every institution when they are created they are bonded within some rules and
regulations whether by any law or constitutional clauses. This binding is
necessary to the extent that it is not adopting a rigid attitude. When there exists a
proper balance between the rigidity and flexibility, then only the motive of
establishing an institution becomes successful. Thus, MPFC operates within the
criteria fixed by the clause defined under sections of the State Financial
Corporations Act 1951.
Basic tasks involved in sanction are submission of application form along with all
the required documentation. The process of documentation happens during as
well as post disbursement (details are attached in the Appendices).
1) Loan application form- The form must be filled and duly signed by the
borrower, along with the documents which are given in the check list. The form
is submitted by the borrower along with application fees for registration of their
case for example - copy of Partnership Deed, MoA, and Estimation of
Civil/Technical Engineer.
2) Registration of Loan Case- The concerned authorities go through the rules
and regulations/ procedure prescribed and request of the borrower is registered
as Case.
3) Bank Opinion- in order to check the credit worthiness of the company, MPFC
issues a confidential letter to the bank for their opinion about the borrower as
well as guarantor.
4) Verification of the property- MPFC verifies the property/registry which the
borrower mortgages to the organization. Scrutiny of the security offered by the
borrower is performed in the form of confidential search by the registrar
through whom MPFC finds out the charges created in favour of other institute.
Terms & Condition are discussed further in detail in this report.

2. DISBURSEMENT:-
Disbursement is the stage where actually funds are at stake, hence it is very vital
that before disbursement all required formalities are completed with all the
terms & conditions well defined, documented, and executed. Before considering
disbursement the Company has to provide sufficient certified details of
implementation already taken place.

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 During disbursement it is checked that all conditions agreed upon in the sanction
process are fulfilled. Disbursement process essentially includes photographs of
site, certified summary of accounts and technical manager’s report.

3. RECOVERY: -
The recovery includes all those efforts made to recover the amount in the form of
instalment against interest and principle amount due. The amount paid by the
borrower is deposited in the preference of other charges, Penalty charges,
Arrears of interest, Principle amount. The payment of interest & principle are
normally kept separate to avoid the burden on the borrower. In case of multiple
loans, the amount received shall be appropriated first towards the loan overdue
having

Power delegation

The authorities to sanction the loan by the concerned officer are:

OFFICER SANCTION POWER

Asst. Branch Manager Up to Rs. 5.00 Lacs

Dy. Manager Up to Rs. 10.00 Lacs

Manager Up to Rs. 15.00 Lacs

Dy. General manager Up to Rs. 30.00 Lacs

General Manager Above Rs.30.00 Lacs

Up to Rs. 50.00 Lacs
Managing Director:
Term loans Up to Rs. 100.00 Lacs
Assets Credit Scheme Up to Rs. 100.00 Lacs
WCMTL Up to Rs. 100.00 Lacs
ROTL Up to Rs. 100.00 Lacs
Short Term Loan Up to Rs. 75.00 Lacs
D G Set Up to Rs. 50.00 Lacs
Loan committee Above Rs. 100.00 Lacs
Up to Rs. 240.00 Lacs
Board Above Rs.240.00 Lacs

5.SCHEMES
MPFC has been providing financial assistance to industrial units in the state of Madhya
Pradesh for the last five decades. It has been extending wide ranging fund and non-fund
based services. A number of new schemes for providing financial assistance and services to
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industries, professionals and other business associates have been successfully introduced by
the corporation.

Its fund based schemes are available for setting up

industrial/business ventures within the state of Madhya
Pradesh. Whereas, its non-fund based schemes are available
throughout India.

General Loan Limits:

Proprietorship & Partnership: Normal: Rs. 200Lacs Special approval from SIDBI: Rs.
800.00 Lacs
Companies: Normal: Rs. 500Lacs Special approval from SIDBI: Rs. 2000.00 Lacs
Currently under consideration: Limits to be extended to Rs.1000 Lacs under normal
conditions

S Sector Maximum Loan Amount

No.
1 Industrial Sector 60% of the cost of project
2 Infrastructure Project 50% of the cost of project (excluding land cost)
3 Service Sector 70% of the cost of project

Application fees for all schemes:

(1) 0.05% of the loan amount – Registration of loan proposal

(2)0.20% of the loan amount – before issue of sanction letter
(3) Upfront Fee to be charged at the time of first disbursement:
 Term Loan Scheme – 1.00%
 Small Loan Scheme – 0.50%
 Short Term Loan Scheme – 0.25%

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 SCHEMES

Fund based schemes Non fund based schemes

FUND BASED SCHEMES

 TERM LOAN

 EQUIPMENT FINANCE

 ASSET CREDIT

 SHORT TERM LOAN

 WORKING CAPITAL

 ELECTRO-MEDICAL EQUIPMENTS

 HOSPITAL FINANCE

 FINANCE FOR PROFESSIONALS

 H P PORTFOLIO MANAGEMENT

 LOAN REPLENISHMENT

 D G SET FINANCE

 SCHEME FOR FINANCING MISCELLANEOUS FIXED ASSETS

 SCHEME FOR MEDICAL PROFESSIONALS

 LIQUID FUND SCHEME

 COMPOSITE LOAN

 COMMERCIAL COMPLEX

NON FUND BASED SCHEMES

 CREDIT SYNDICATION

 CORPORATE ADVISORY SERVICES

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 FINANCIAL SCHEMES

a- PROJECT FINANCE-
The financial assistance is provided to new industrial units for creation of fixed assets,
such as land, factory building, plant and machinery, electrical installation etc. and for
modernization, diversification, expansion and/or replacement of equipments etc. to
existing units.
Provided to- Hotels, Service industries, R & D, Nursing Homes, Diagnostic Centers,
Cold Storage, Restaurant, Marriage Garden, Tourism related activities and setting up
for various facilities for industries.
For Period- 5-8 years

b- EQUIPMENT FINANCE-
Existing industrial concerns operating for 2 years earning profit and/or declaring
dividends during the preceding 2 years and regular with FIs/Banks can avail financial
assistance to acquire capital goods/equipments (imported or indigenous), even when
it’s not a part of the complete project.
Maximum assistance- up to 75% of the cost of the equipment with a ceiling of Rs. 90
lacs per proposal.
Overall debt equity ratio- should not be more than 2:1

c- ASSET CREDIT-
The scheme similar to Equipment Finance scheme considers financing up to 100% of
the cost of equipments in deserving cases. The company should be in profitable
operation for at least two years having good track record with Banks/FIs.
Maximum assistance- 100%
Overall debt equity ratio- 1:1

d- SHORT TERM FINANCE-

This scheme has been designed to meet the short term requirement of funds for
working capital purposes due to peak season needs or for fulfillment of specific
order/job enhancement of working capital limits pending up to Bank etc.
It is provided to concerns which are in the profit for the last 4 years, having working
capital limits sanctioned by any other commercial bank, having regular account with
MPFC /Other financial institution. The minimum assistance under the scheme is Rs.
2.00 lacs and maximum Rs. 100.00 lacs. The debt equity ratio should not be more
than 1:1 and current ratio should not be less than 1.5:1. Repayment should be done
within 12 months.

e- LOAN REPLENISHMENT:
Assistance is available for the purpose of purchase of further machineries and
extension of factory building for the existing line of activity. It is provided only to

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 MPFC's existing profit making borrowers with good track record of repayment (at
least 3 installments paid in time). The limit of assistance is up to the extent of loan
already repaid by them till the date of application. Minimum loan is Rs. 2.50 lacs and
maximum loan is Rs. 75.00 lacs. Repayment should be done within 5 years.

f- CREDIT LINKED CAPITAL SUBSIDY FOR SSI:

The Credit Linked Capital Subsidy Scheme (CLCSS) aims to facilitate technology up
gradation of SSI units in the specified products/ sub-sectors by providing 12% capital
subsidy for induction of proven technologies approved under it. CLCSS would cover
the following products/ sub sectors in the SSI:

Leather and leather products, Food processing, Information technology, Drugs and
pharmaceuticals, Auto parts and components, Electronic industry, Glass and ceramic items,
Dyes and intermediates, Toys, Tires, Hand tools, Bicycle parts, Foundries - ferrous and cast
iron, Stone industry.

The list of products/ sub sectors may be expanded with the approval of the Governing
and Technology Approval Board (GTAB). The scheme will be in operation for a
period of five years from October 1, 2000 to September 30, 2005, or till the time
sanctions of capital subsidy by the Nodal Agency reach Rs 600 Crores, whichever is
earlier. The 12% capital subsidy support would be limited to the loan amount
indicated below:
(Rs. in lacs)
Investment in Max. Ceiling of loan Maximum subsidy
Plant & Machinery * eligible for support ** available
Up to 10 lacs 8.00 0.96
10 lacs to 25 lacs 20.00 2.40
Above 25 lacs 40.00 4.80

* (the purchase price will be considered) ** (the eligible subsidy would be calculated
on the actual loan amount or maximum ceiling on loan eligible for subsidy, whichever
is lower)

Promoters' contribution, security, debt-equity ratio, upfront fee, etc. will be applicable
as per existing norms.

Entrepreneurs availing credit linked capital subsidy for technology up gradation shall
not avail any other benefit including Interest Subsidy, under any other scheme of the
Central Government. If it is found that capital subsidy from the Government has been
availed on the basis of any false information, the industrial unit shall be liable to
refund the subsidy availed, along with interest.

g- WORKING CAPITAL MEDIUM TERM LOAN:

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 Term Loan is provided under this scheme to part finance long term/medium term
working capital requirements of the industrial units.
It is provided to industries having last 3 years profitable operations and proven track
record with institution/bank. MPFC borrowers whose fixed assets are mortgaged with
MPFC and those who are not MPFC borrowers but intend to offer all their existing
fixed assets by way of mortgage as primary security can also avail assistance under
the scheme.
Minimum loan of Rs. 2.50 lacs and maximum loan of Rs. 500.00 lacs may be
provided under this scheme. Repayment should be done within 3-5 years.
The prevailing annual interest rate is 14.00% payable quarterly. A penalty @2% p.a.
is levied in case default for the period and amount of default.

h- TERM LOAN: -
Term loan is provided for the purpose of creation of fixed assets (such as land, factory
building, plant and machinery, electrical etc.), for setting up of new unit and for
modernization, diversification, expansion, and/or replacement of equipments in
existing units.
Finance is provided to new industrial units. It is also provided to Hotels, Service
Industries, Transportation, and R&D activities. The maximum limit of assistance to non-
corporate sector is Rs. 200.00 lacs and for corporate sector it is Rs. 500.00 lacs. Period of
assistance depends upon merits of the case ranging between 5-8 years.

The prevailing annual interest rate structure is as follows:

Interest Rate Structure

Term Loan Scheme Interest Rate Rebate Effective Rate
on Timely
Repayment
Up to Rs. 50,000 10.00 % - 10.00 %
Above Rs. 50,000 & 12.00 % 0.50 % 11.50 %
Up to Rs. 2.00 Lacs
Above Rs. 2.00 & Up 14.00 % 0.50 % 13.50 %
to Rs. 25.00 Lacs
Above Rs. 25.00 & Up 14.00 % 1.00 % 13.00 %
to Rs. 200.00 Lacs
*Industrial Units
Above Rs. 200.00 14.00 % 1.00 % 13.00 %

A penalty @2% p.a. is levied in case default for the period and amount of default.

i- COMMERCIAL COMPLEX

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 The scheme is for providing financial assistance for construction of commercial
complex including show rooms and sales outlets. Loan will be given for purchase of
land and construction of commercial complex within the State of M.P.
Sale of shops, show room or any portion of complex shall be permissible with the
prior approval of the Corporation. The proceeds shall be deposited in the loan account
of the borrower as per terms of agreement. The min cost of project should be Rs 10.00
lacs.
The promoter is required to contribute 50% of total cost of project. In case of
companies, net worth should not exceed Rs. 30.00 Crores. MPFC will hold the first
charge by mortgaging assets i.e. land & building, shop premises, saleable part of
complex.
The loan should be repaid in 5 years, including a maximum of 2 years moratorium.
Interest shall be 15.75% p.a. payable quarterly. A penalty @2% p.a. is levied in case
default for the period and amount of default.

j- CREDIT SYNDICATION: -

Services for credit syndication with other financial institutions/banks/finance

companies in respect of term loans/lease finance/working capital etc. are provided.

6. PROCESS OF PROJECT FINANCING

1 Submission of application form.

2 Documents required before sanction.
3 Cost of project and means of financing.
4 Project appraisal.
5 Sanction of project with terms and conditions.
6 Documents required after sanction of project
7 Disbursement of sanctioned loan amount.
8 recovery and follow-up.

 Submission of application form

The application form contains the following necessary information-

 Basic information about the proprietor, partners, directors, promoters,

guarantors including educational qualification, complete bio data & other
information.

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  Nature of industry & product required knowing the area of operation, market
share, product performance, product quality, pricing strategies, marketing
policies etc.
 Financial position of concern, which include the last 3 years performance of
the firm in the market with its profitability & position of asset & liabilities.
Cost of project & means of finance.
 Utilities regarding infrastructure facilities, Technological management,
Security granted for the loan, declaration by proprietors, director, partners &
 other related persons with complete hierarchy
0.25 % of the Term Loan applied for, subject to minimum of Rs.1000
Application fee has to be deposited along with the application form

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  Documents required before sanction

Sin Particulars
o
A General
Application Form
Processing fees
Detailed project feasibility report covering technical, economical, & financial aspects
B About the Promoters
Form duly filled and signed by the promoter with photo
KYC Form duly filled and signed by the promoter with photo
KYC Documents:
- Identity proof viz. voter ID / PAN Card/ Driving License
- Proof of Residence viz. Electricity / Telephone Bill
Copies of Income Tax Returns for last 3 years
Net worth statement duly certified by C.A.
Details of Bank A/Cs (Personal) viz. copies of passbook
C About the applicant concern / company
(I) In case of Partnership Firm
Copy of Partnership Deed
Firm’s Registration Certificate
Application form to be signed by all the partners with seal
(ii) In case of Companies
Memo & Articles of Association (Certified Copy)
Incorporation Certificate
Copy of Board resolution for availing loan from MPFC along with authorization for
MD/Director for negotiations
Details of concerns in which the directors are interested and Nature of interest
Certificate of commencement of business (in case of Public Limited Company)
List of existing and proposed shareholders, their relationship with promoters and their
amount of investment.
(iii) In case of Hindu Undivided Family (HUF)
Genealogical tree of the family the correctness of which is sworn to be true before a
magistrate.
Consent in writing for taking loan from MPFC signed by all major members of HUF
(above 18 years of age).
The application form should be signed by the “KARTA” of HUF
D. Past Performance – Existing Units
Audited balance sheet & working results for 3 years
Details about existing track record with Bank / FIs viz. assistance availed, present
outstanding, Bank’s opinion
Name and address of the Bankers
E. Details of Associate Concerns
Audited balance sheet & working results for 3 years
Details about existing track record with Bank / FIs viz. assistance availed, present

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 outstanding, Bank’s opinion
Name and address of the Bankers
F. Details about the Project
Copies of the title deed / allotment order / lease deed of the land.
Site Plan / Map duly approved by competent authority
Land diversion order in case of freehold land
Blueprint and detailed layout of the existing as well as proposed construction
Detailed Civil Estimated for proposed construction
Comparative Quotations and catalogues for machinery / electrical items (from three
suppliers).
Technical knowhow. Marketing agreement.
Necessary application / approval for Working Capital of collateral security offered / to
be offered to the bank for w.c. limits sanctioned / to be sanctioned.
Arrangement for procurement of critical raw material comparative quotations (from
three suppliers)
G. Statutory Approvals / Permissions / Registrations
MSME Registration Certificate
Permission from Pollution Department for Air and Water discharge.
Permission from Department of Tourism in case of Hotel Projects
Permission from Drug Controller in case of Pharmaceuticals unit
Any other permission required specific to the project
H. Details of additional Security
Copy of title deeds
Valuation of property by Chartered Engineer
Photograph of Property
Consent from the owner for mortgage of the property in favor of the Corporation
I. Others
Copy of letter if reference addressed by the promoters to their bankers personal as well
as concern firm / company for disclosing the information required by MPFC
Source of contribution to the capital of the concern which the promoters are intended
to make
CIBIL Status & AML compliances
Credit Rating (If Applicable)

 Cost of project and means of financing:-

(A) Cost of project: Finance requirement of any project can be sub divided into two
categories, namely
(a) Finance needed for creating the assets
(b) Finance needed for raw material and day-to-day working as well as extending
credit facilities on the sale of goods.
The first category would need resources, which will be required to be deployed for a
considerably long period before they are earned back as cash. On the other hand, in
the case of second category, the deployment of resources will be for a considerably
short period. Accordingly, the finance requirements in both the categories will be

23 | P a g e
 classified as long term, short-term finance, the long-term finance is generally known
as “term loan”, and the short-term finance is generally known as “working capital”.
The term finance is the money required for financing the creation of fixed assets in
terms of-
(1) Land and site development- the items of cost covered here are cost of land including
conveyance charges, premium payable on leasehold land and conveyance charges,
cost of leveling and development, cost of laying approach roads and internal roads,.
Cost of fencing compound walls, cost of gates.
(2) Building and civil works- these includes factory building for the main plant and
equipments, factory building for auxiliary services, administrative building, go
downs, warehouses, and open yard facilities, misc. non factory building, quarters for
essential staff, silos, tanks, wells, chest, basin, cisterns, hopers, bins, garages, sewers,
drainage civil engineering works, architect fees etc.
(3) Plant and machinery – the major cost item in most of the projects, this covers
imported machinery, indigenous machinery, machinery stores, spares, and foundation
and installation charges.
(4) Technical knowhow, engineering fees- the technical knowhow and engineering fees
payable to foreign/Indian collaborators is indicated here. Recurring annual royalty
payment is not shown here, but included in the profitability statements.
(5) Misc. fixed assets— these include furniture, office machinery and equipment, misc.
tools and equipment, cars, trucks, railway siding, equipment for power, laboratory
equipment, workshop equipment, firefighting equipment, effluent collection misc.
fixed assets.
(6) Preliminary and capital issue expenses – the items included are brokerage and
commission on capital issue, expenses on company floatation and cost of preparing
project report and conducting market surveys etc.
(7) Pre-operative expenses— these expenses incurred on the following till the date of
commencement production: establishment, rent, rates and taxes, travelling expenses,
misc. expenses, interest and commitment charges on borrowing insurance, mortgage
expenses, interest on deferred payments, start-up expenses.
(8) Provision for contingencies – this represents a provision to meet any unforeseen
expenses or expenses ignored inadvertently from the estimates. This provision is not
meant for meeting price escalation, which can be anticipated at the time of estimating
the project cost.
(9) Margin money for working capital – a certain part of working capital requirement
representing the margin money for working capital finance by commercial banks and
certain items are not supported by commercial banks. This part naturally is included
in the cost of protect under the head “margin money for working capital”. To figure
out the margin money for working capital the requirement on the following items is
estimated indigenous raw material, consumable stores, wages and salaries, cost of
fuel, light and power, taxes, insurance, rent, cost of repairs, maintenance, packing and
sales expenses, stock of finished goods at cost excluding depreciation, stock of WIP,
o/s debtors, other items of working capital.

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REVISED COST OF PROJECT

S Particulars As Inc./Dec. due Overruns Revised estimated

No. appraised to addition cost of project
1 Land & site - - - -
development
2 Building & civil work - - - -

3 P&M - - - -

4 Misc. fixed asset - - - -

5 Technical knowhow - - - -
fees
6 Interest during - - - -
construction
7 Preliminary expenses - - - -

8 Preoperative expenses - - - -

9 Margin money for W.C. - - - -

TOTAL A B C D

Means of finance
 Equity /paid up capital
 Preference capital
 Secured debenture
 Term loan
 Deferred credit
 Capital subsidy and development loan
 Unsecured loan and deposit

Equity Capital—this is the contribution made by the owners of business, the equity
shareholders, who enjoys the rewards and bear the risks of ownership. However, their
liability is limited to their capital contribution. From the point of view of the issuing
firm, equity capital offers two important advantages: it represents permanent capital,
and it does not involve any fixed obligation for payment of dividends.

25 | P a g e
 Preference capital – a hybrid form of financing, preference capital partakes some
characteristics of equity capital and some attributes of debt capital. It is similar to equity
because preference dividend like equity dividend is not a tax-deductible payment. It
resembles debt capital because the rate of preference dividend is fixed. Typically when
preference dividend is skipped it is payable in future because of the cumulative future
associated with most preference issues. The high cost associated with it and the near
fixity of preference dividend payments renders preference capital somewhat
unattractive in general as a source of finance.

Secured debentures— they are protected by a charge on the properties of the issuing
company. While the secured debentures of a well-established company may have
appeal to investors, secured debentures of a new company do not evoke interest in
investing public.

Term loan – term loans, which represent secured borrowings, are presently the most
important source of finance for new project. They carry a fixed rate of interest and are
repayable over a period of 6-10 years in equal annual or semi-annual installments.
Banks, Madhya Pradesh financial institutions and all India term lending financial
institutions provide term loan. Banks and state level institutions and all India term
lending normally provide term loan to project having lesser cost. If the cost is much
higher than above then it is financed by all India institutions and state level financial
institutions, but not by commercial banks. For larger protects all India financial
institutions provide bulk of term finance MPFC as schemes offered previously.

Deferred credits— many a time the suppliers of machinery provide deferred credit
facility under which payment for the purchase of machinery can be made over a period.
The interest rate on deferred credit and the period of payment vary rather widely.

Capital subsidy and Development loans/ sales tax loans – central govt. provides capital
subsidy to industries set up in notified backward districts. Many state govt. or state
development agencies also provide development loans/sales tax loans. They provide
this facility for districts, which are considered backward districts by the central
government.

Unsecured loans and deposits – unsecured loans are typically provided by the promoter
to fill the gap between the promoter’s contribution requited by financial institutions and
the equity capital subscribed to by the promoters. These loans are subsidiary to the
institutional loans. The rate of interest chargeable on these loans is less than the rate of
interest on the institutional loans.

PROPOSED MEANS OF FINANCING

As appraised Funds raised as on Revised means
date of overrun of financing

A. Capital promoters capital / - - -

Public issue

26 | P a g e
 B. Investment subsidy - - -
C. Term loan - - -

7. PROJECT APPRAISAL
There are various schemes under which the corporation provides financial assistance that is
term loan to new & existing units/setup/clients and other loans only to existing units. MPFC
appraises a project from all the aspects like- Marketing, Technical, Managerial and Financial.
This is to ensure the viability and feasibility of the project before disbursement. Till the time
of sanctioning the corporation’s funds are not at the stake but as soon as the first
disbursement is done, the funds get stuck, thus before the disbursement it ensures the working
and estimations in all the possible domains. In order to safeguard its interest and principal
amount the corporation would like to be confident of the returns attached with the project.
For the same, MPFC can advice on choosing the right mix of means of finance. It can help
the borrower in assessing the working capital requirement, repayments schedule of the term
loans and evaluation of the IRR and BEP.

The project appraisal is supported by the details of the borrowers obtained by the application
forms and other documents mentioned above. Some of the important aspects are-

 Promoters’ background
 Particulars of the project
 Cost of the project
 Means of financing
 Marketing and Selling arrangements
 Profitability and working results
 Economic consideration

The whole process of project appraisal is divided in 5 components-

.1- Marketing Appraisal- Many entrepreneurs do not give much heed to marketability of the
proposed product. In most of the cases proponents do not give proved, sufficient, credible and
authentic information and often end up giving vague remarks like- “market is good and
demand is plenty”. In order to have proper appraisal of demand forecast made by the
borrowers the lending institutions require information regarding demand, supply distribution,
pricing and external forces.

 Demand- Product uses consumers, actual consumption, likely consumption in future

and export prospects.
 Supply- Production Capacity, actual production, capacity utilization imports and
likely future capacity.
 Distribution- Channels of distribution involves the cost of distribution and mode of
transport.
 Pricing- Domestic and international price trends, control on prices, duties and taxes.

27 | P a g e
  External forces- Government policies regarding industrialization, export, imports,
foreign collaboration, plan outlay etc.
Existing entrepreneurs may put hurdles for new entrant by reducing their prices thus the
lending institutions should keep in mind all these factors and the proponent should be in
position to face and get through such initial problems.

2- Technical Appraisal- The major portion of the time is devoted for this section, as it’s the
backbone of the project appraisal. The ignorance in this component may result in the failure
of the project as Technical Appraisal is done to ensure all technical aspects relevant to the
successful commissioning. It balances the requirement and acquiring of the technical inputs
like- raw material, manpower, engineering facilities etc. It ensures that the necessary physical
facilities required for production would be available and the best possible alternative is
selected to procure them. The important issues considered in this appraisal are-

 Location of the unit should have transport, communication and other

infrastructure facilities. If the unit is labor intensive, it should not face problems in
acquiring labor.
 Proximity to the raw material is essential to consider as if the raw material
requirement is bulky and difficult to transport, it is better to locate the plant near
the source of raw material.
 List of Suppliers and their quotes in order to establish the availability of the raw
material, equipments and other inputs.
 Appropriate choice of the machine, equipment and the supplier according to
manufacturing process and size of the unit.
 The sufficient building and civil work to accommodate the future plant and
machinery
 Area of the land used to build up the required new infrastructure and the quality of
material used for the same.
 The availability of raw material should be from more than one source. Proponent
should have knowledge of alternate sources of raw material.
 Selecting the optimal scale of operation.
 Size of the plant or its capacity with respect to output, input or number of
machines.
 Existing set of plant and machinery together with the installed capacity.
 Enough places for treatment of effluents and disposal of waste.
 Procurement of required licenses and statutory requirements.

3- Financial Appraisal- The decision of sanctioning and disbursement is highly based on the
financial soundness of the project. The detailed feasibility study is carried out to find that the
objectives of the project are achieved successfully. The main objectives of any project are-

 To generate adequate profit and cash to recover capital outlay.

 To give regular returns to the owner of capital.
 To enable retention of adequate profit in business for future growth.

28 | P a g e
Various financial aspects such as realistic cost estimates, right source of financing,
preparation of projected financial statements based on realistic estimates as well as proper
financial evaluation through most scientific financial methods and techniques is covered in
this component. The major heads of these aspects are-

a- Capital Cost Estimation- It covers the following-

 The cost of capital assets like Land and Building, Plant and Machinery, SFF,
electric installations, vehicles, equipments and other tangible assets and
intangible assets like- Patents, Goodwill etc. which are of permanent use in
business.
 Preliminary expenditure to be allocated to various assets on proportionate
basis. This should be estimated on the basis of volume of business, project
time schedule, manpower and its training requirements and administrative set
up during project execution. Fee for collaboration, consultancy, technical
know-how etc are to be estimated on the basis of technical analysis of the
project.
 Initial working capital such as inventory, debtors etc for starting commercial
activities.
 Other incremental costs attributable to utilization of existing facilities, if any.
 Minus the expected cash inflow from sale of old assets, if any due to
replacement.
These Cost estimations would be helpful only if the basis of cost estimations should be
realistic and should be based on latest budgetary quotations, prevailing market rates, taxes
and duties. The market survey should be analyzed carefully to get the realistic estimate.
Charges like registration fees, legal fees etc should not be omitted and should be added to the
respective asset. Also, the important points such as technical scope of the project, detailed
technical specifications of machine tools, state of technology, sources of supply of tools- both
imported and indigenous, delivery commitments etc. should be critically analyzed to make
realistic assessment of funds required. To make it more realistic and less risky the cost of
project should also include Provision for Contingency. The Project costs are mere estimates
based on certain assumptions, which may go wrong for various reasons and uncertainty
attached, therefore it is essential that capital outlay must includes adequate provision for
contingency depending upon factors like- gestation period, delay in foreign supply, domestic
and international price conditions, requirements of Foreign Currency and risks of
fluctuations, changes in taxes and duties etc. To estimate this amount the corporation
considers part experience and knowledge of business world.
b- Determining Capital Structure-
Various sources for financing a project are-

 Equity Share Capital

 Preference Share Capital
 Long Term Loans (including Foreign Currency Loans) from financial
institutions/banks
 Debentures/ Bonds
 Public Deposit
 Cash Subsidy

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  Internal Accruals/Promoters’ Contribution
The balanced or optimum capital structure is planned by analyzing the following
factors-

 Cost of financing that is cost of capital, cost of borrowed capital, cost of ordinary
share capital, cost of retained internal accruals and the weighted average cost of
capital.
 Risk involved (for example- borrowing adds risk to business in terms of fixed
obligations that is regular and timely payment of interest and liquidity of project)
 Management Policy
 Profitability and Liquidity of existing products (that is not to accept any Project
which returns less that existing rate of return of the company)
 Prescribed Debt Equity ratio, if any
 Statutory requirements (like- Industrial License Company Law Requirements,
Term Loan Conditions etc.)

c- Projected Financial Statements- Apart from providing the meaningful analysis and
performance of the company, financial statements are also required for the purpose of
raising capital from different sources. These statements include-

 Projected Income Statements

 Projected Cash Flow Statements
 Projected Cash Balance Sheet
 Projected Fund Flow Statements
 Other Statements such as Working Capital, Income Tax, Value-added etc.

d- Evaluation- Some of the important methods of financial evaluation are-

 Return on Investment
 Pay-Back period
 Discounted Cash Flow Techniques like- Net present value method and Internal
rate of return
 Sensitivity analysis.

4- Managerial Appraisal- A financially sound and technically feasible project also fails if it is
not backed up by the capable and efficient personnel. Thus MPFC evaluates the management
as a part of its appraisal.

 Background of the Promoters/ Partners/ Directors

 Relationship among the Partners or Promoters and Directors.
 Net Worth of the business held by them.
 Partners’/Directors’ Qualification and experience in same line of industry.
 Details of the personnel hired.

APPRAISAL OF A TERM LOAN PROPOSAL

30 | P a g e
Since the main objective of Madhya Pradesh financial corporation is to promote
entrepreneurship and small and medium scale industries in the state, MPFC adopted much
liberalized policy regarding appraisal of a loan proposal. It used to finance at very low margin
as 10% with Debt equity ratio as high as 3:1 or 4:1. But know due to large percentage of
NPA’s these norms are tightened and appraisal is done totally security based. The main
parameters used for appraisal of a loan proposal are: -

BREAK-EVEN POINT: - It must be comfortably low to the capacity utilization and

providing safety margin acceptable to the market condition.

PAYBACK PERIOD: - It most is comfortably below five years.

INTERNAL RATE OF RETURN (IRR): - For calculating IRR, cash flow after tax + Interest
paid to the MPFC as inflow. Hence it must be comfortably above the rate of interest charge
by the corporation.

DEBT SERVICE COVERAGE RATIO (DSCR): - This is considered as most important

parameter for appraising a loan proposal. I observed that if a loan proposal is fulfilling this
parameter is also used to fulfil all parameters used by MPFC. This ratio must be two (average
of five year is considered).

DEBT – EQUITY RATIO: - This ratio must be 1:1.

SECURITY DEBT RATIO: - This ratio must be more than two times.

CASH FLOW ANALYSIS: - Cash flow must be sufficient enough to the need of directors
and business requirement after deducting interest payment and loan payment.

ANALYSIS OF OLD BALANCE SHEET AND PROFIT AND LOSS ACCOUNT if the
borrower is applying for expansion and modernization. This is for getting helping in future
forecasting.
SESITIVITY ANALYSIS: - Project must earn enough return to bear the sensitivity of the
market conditions and cost.
CREADIT ANALYSIS: - Credit analysis is done for borrowers on the basis of different
parameters and rate of interest are adjusted according to that. Since there are different type of
factors that affects existing units and newly established units, hence different type of model
used for rating different type of units. On the basis of fast experiences, MPFC has realized
that parameters/attributes in normal cases are not applicable in construction cases. Therefore,
revised credit rating model constructed for this. All types of credit rating models are given
below.

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  Sanction of loan with terms and conditions

Every institution when they are created they are bonded within some rules and regulations
whether by any law or constitutional clauses. This binding is necessary to the extent that it is
not adopting a rigid attitude. Somewhere it is obvious that the rules and regulations have to
maintain some extent of rigidity so that infringement could be avoided, but that does not
mean that there should be no scope for flexibility. When there exists a proper balance
between the rigidity and flexibility, then only the motive of establishing an institution
becomes successful. Thus, MPFC operates within the criteria fixed by the clause defined
under sections of the State Financial Corporations Act 1951.

BASIC TERMS AND CONDITION:

ELIGIBILITY
MPFC grants assistance to "Industrial Concerns" as defined in clause (c) of
section 2 of "State Financial Corporations Act. 1951", which are located in the
state of Madhya Pradesh. However free based service can be extended to units
located in any part of the country. In the definition, almost every type of
manufacturing and/or process activity and related operations are covered. In
addition to it, MPFC also provides assistance to activities in the service sector,
as approved by the Industrial Development Bank of India (IDBI). As per the
provisions of the "State Financial Corporation Act. 1951", MPFC can grant
assistance to only those concerns whose paid-up capital and fee reserves taken
together do not exceed Rs. 30.00 crores. This limit is not applicable to non-
fund based activities. Subject to the limits prescribed under the various
schemes, MPFC's total exposure to a single concern under all the schemes
taken together shall not exceed Rs. 200.00 lacs in case of partnership and
proprietary concerns, and Rs. 500.00 lacs in case of corporate entities.

SECURITY
MPFC grants loan against security only. The primary security for the loan is
usually a first charge on land, building, plant and machinery etc.
acquired/proposed to be acquired. In case of loan under consortium
arrangements, pari-passu charge is accepted along with the other participating
institutions.
Generally MPFC takes collateral security of land and/or building of the
borrower or any third party in addition to primary security. MPFC also has a
floating charge on all the remaining assets of the borrower, subject to the
charge in favor of the bankers for working capital.

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REPAYMENT PERIOD
The period of repayment of loan is decided on the merits of each case, which
generally ranges between 5 to 8 years.
The principal amount of loan is payable normally in quarterly installments with an
initial moratorium period of 3 months to four years depending upon the size of the
project & stage of the implementation.
Interest is also normally charged on quarterly basis and the months of payment of
interest & principal are kept different to even out the liability of the borrowers.

PROMOTER'S CONTRIBUTION
The minimum promoter’s contribution envisaged in the project is worked out on the
basis of Debt-Equity norm and the security margin norm applicable at the time of
sanction of the loan. The debt equity ratio is the ratio of loan component and the
equity contribution in the total project cost. The maximum amount of assistance shall
be lower of the two amounts worked out on the basis of Debt-Equity norm and the
security margin norm. The normal lending norm for debt- equity is 1.5:1; however in
some specific schemes this norm may be flexible.

The entire promoter's contribution envisaged in the project is desired to be raised by

way of capital before first disbursement of the loan installment. However in case the
promoters are short of own capital, some amount may be raised as unsecured loans in
the form of quasi-capital. The quantum is ascertained during the appraisal of loan
proposal.

INSURANCE
The assets offered, as a security of the loan should be kept insured for their full value
during the currency of the loan. The risk normally covered under the insurance are
those relating to fire, riots etc., and the specific risks attributable to a specific project
which the corporation may specify.
The insurance policy should be taken in the joint names of the corporation and the
borrower - with the usual mortgage clause. The first insurance policy and the
subsequent renewals of the same should be sent to MPFC as soon as they are in effect.
In case the same is not sent in time. MPFC has a right to get the same insured on the
cost & risk of the borrower unit.

MARGIN
Margin is the difference between the value of assets offered as prime security and the amount
of loan.
The margins prescribed for loans under various categories are as under:

Backward
Other
Category
Districts
Districts
Small Scale Industries 20% 25%
Medium Scale Industries 25% 40%

33 | P a g e
 Hotel Industry 50% 50%
Tiny Sector 10% 15%
Composite Loan NIL NIL

 Documentation required after sanction of loan:

Sino Particulars
A. Legal compliances
Title Search Report by approved legal advisor & Sub-Registrar
Paper Publication for Prime & Additional Security
Certificate from Law Officer for completion of all Legal formalities
B. Technical Compliances
Valuation Report from Technical Officer for Investment in the project & verification
of assets created at site
Valuation of additional security(s) as per CGL
Comments of Technical Officer regarding deviations in the approved scheme (if any)
Verification of Performa Invoice (if applicable)
Comments of Technical Officers in case there is difference between investments
claimed by the borrower and his valuation.
C. Financial
CA Certificate regarding investment in the project & promoter’s contribution
Money Receipt duly discharged by the Bank
Insurance cover note on fixed assets of the unit
Sanction of power from MPSEB
Sanction of Working Capital by the Bank
Permission / NOC from MP Pollution Control Board
Review of Project cost & means of finance
Photographs of assets created at site
Receipt of charge registration certificate (in case of companies)
.

REQUIREMENT OF DOCUMENTS/ TITLE DEEDS-:

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CHECK LIST-

1- Loan acceptance letter

2- Undertaking of Directors and Guarantors regarding conditions of sanction and no case
of economic offense is pending against them.
3- Undertaking regarding special conditions.
4- Two photograph of all executants.
5- In case of existing unit C.A. Certificate is regarding regular payment of ESI, PF, and
Sales Tax, MPEB clearance certificate or photocopy of challan regarding up-to date
payments.
6- Income Tax clearance certificate of Directors of the Company/Partners of the
firm/proprietor.

a- In case of Leasehold Land-

1- All original lease deeds of land offered in primary security.

2- Search report from the Sub- Registrar for last 20 years.
3- Permission to assign leasehold rights of land from MPAKVN/ DIC/ IDA/ Municipal
Corporation etc. in favor of the MPFC.
4- No dues Certificate regarding payment of up to date lease premium/Lease rent etc.
5- Copy of approved map of factory building from competent authority. Municipal
Corporation/Panchayat whichever is applicable.

b- In case of Freehold Land-

1- All original sale deed/title deeds offered in prime security.

2- Search report from the Sub-Registrar for last 20 years.
3- Certified copy of P.II Chars/ Panchshala for last 20 years.
4- Certified copy of “Kist band Khatauni” for last 20 years.
5- Certified copy of diversion order passed by SDO (diversion) concern U/s 172 (I) of
MPLR code 1959.
6- No dues certificate regarding up to date payment of diversion Premium/rent etc.
7- Original Bhu adhikar avam rin pustika bhag I and II.
8- Copy of Naksh Aksh prepared by Patwari.
9- Municipal record (if property is suited Municipal Limit)
10- Copy of Site plan and construction plan duly approved by Municipal
Corporation/competent authority.

c- In case of Partnership Firm-

1- Copy of partnership deed.

2- Firm’s Registration Certificate.
3- Income tax clearance certificate of Partners/Firm and Guarantors.
4- Sales Tax, PF and ESI clearance certificate and payment of MPEB dues in case of
existing units.

d- Case of Company-

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 1- Memorandum and Articles of Association of Company duly certified by Director.
2- C.A. Certificate regarding capital structure of Company.
3- C.A. Certificate regarding charges verification from the record of registrar of
companies concern.
4- Certified copy of board resolution regarding execution of documents in affixation of
common seal of the company.
5- Certified copy of resolution U/s 293 1(a) and U/s 293 (d) of the Company’s Acct in
case of public limited company.
6- Certificate U/s 149 of Company’s Act regarding commencement of business (in case
of public limited company)
7- Income Tax Clearance certificate of Directors of the company and Guarantors.
8- Sales Tax, PF and ESI clearance certificate and payment of MPEB due in case of
existing units.

e- Additional security-

9- All original Sales Deed/ Lease Deed/ Vasiyatnama, Gift Deed, Partition Deed, Title
Deeds.
10- Search report of Sub-Registrar concern for last 20 years.
11- Copy of approved map of property offered in additional security.
12- Apartment deed duly registered M.P. Swamitva Prakoshtha Adhiniyam 2000 (if the
property is of multi-storey/ flats/ shops etc.)
13- Copy of power of attorney if deeds are executed through power of attorney holder.
14- Copy of municipal records- Tax payment receipts from Municipal Corporation (If the
property is in the Municipal Limits)

 Disbursement:
Following are the compliance that borrower must fulfill before starting disbursement
process:
 Financial Tie-up if necessary.
 Initial investment conditions must be fulfilled.
 Sanction of required power load from MPEB.
 NOC from M. P. pollution control board.
 SSI registration.
 DGTD registration.
 Execution of Technical Know-how agreement.
 Condition regarding availability of raw materials and fuel etc.
 Charge registration certificate (in case of companies).
 Non – Encumbrance certificate for the balance period.
Above mentioned conditions are subjected to relaxation under special circumstances.
While Disbursement following requisites are to be taken care:
 Application for disbursement duly filled in along with details of expenditure
incurred of land, building and machinery etc. in the prescribed proforma.
 Latest Trail Balance duly certified by the Chartered Accountant.

36 | P a g e
  Advance money receipt duly sighed by the Proprietor/All the
partners/authorized directors and authenticated by the Banker of the borrower.
 Insurance cover notes regarding comprehensive insurance of the properties on
which disbursement in desired (in joint name of borrower & MPFC)
 Sanction letter of working capital from Bank.
 Certificate of registration of charge with the RoC (in case of companies)
 Sanction letter from MPSEB for power.
 Any paper/document in compliance of special terms and conditions of
sanction letter.

 Recovery & Follow Up:

INSTALLMENT: In general the installments of interest & principal fall due for payment
on quarterly basis. The months of payments of interest & principal are normally kept
separate to avoid burden on the borrower. The due dates of payments are specified in the
loan documents.
The payments made by the borrowers are appropriated in the following order: firstly
towards other charges, followed by arrears of interest, and lastly towards principal. In
case of multiple loans, the amount received shall be appropriated first towards loan over
dues having lower rate of interest.

REPAYMENT
The borrowers are expected to be well aware about the due dates for payment of
installments. However, to facilitate them. It is a usual practice of the corporation to issue
demands for such payments well in advance.
In case due to postal delay or any other reason, the demand is not received by the
borrowers, they should contact the concerned field office and deposit the amount well in
time to avoid penal interest and other consequences of default.
It may be noted that non-receipt of demand notice cannot be taken as an excuse for
default.
The payment of the dues can be made at the field office or at head office but as far as
possible the payment should be made at the concerned field office only.

RESCHEDULEMENT

In case the party fails to pay the dues to the corporation in time, due to some genuine
reason, the related facts & circumstances should be informed to the field office with full
details.

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 Depending upon merits of the case, postponement of some particular dues, for some
period, may be allowed; or the facility of the reschedulement of the entire outstanding
may be granted.
However, grant of such facilities is solely at the discretion of the corporation. It is
necessary that the borrower should remain in regular touch and continue to keep the field
office informed of the progress and working of the concern at regular intervals.

REVIVAL OF SICK UNITS

In case, assisted units turnout to be sick and the promoters are very keen and ready to
revive the unit, the corporation extends a helping hand for revival of such units - strictly
on merits of each case, and if the corporation feels that the operations of such a unit can
still be made viable.
The benefits, which may be passed on in such cases, generally include reschedulement of
loan accounts, funding of overdue interest, grant of loan for balancing equipments,
approval for change in the management, recommendation to other financial institutions,
Bank,Govt. etc.

PENALTY
Penal interest is charged in case of default. This interest is over and above the contracted
rate.

TAKEOVER AND SALE OF UNITS

In case the default becomes a chronic & persisting feature or the corporation feels that the
dues are willfully not being paid, or the management is unable to run the units, the
corporation is constrained to take painful decision of acquiring the assets U/S 29 of the
SFC'S Act, 1951 and dispose them off by auction/sale to recover the outstanding dues.
In case the sale proceeds of the assets are less as compared to the outstanding, the
corporation is free to initiate legal proceeding to recover the balance amount from
promoters/guarantors personally.
The Government of Madhya Pradesh has also conferred the powers of Tahsildar on the
Dy.General Managers of MPFC.
This has been done for the limited purpose of recovery of MPFC dues as arrears of land
revenue to the extent of issuing Revenue Recovery Certificate (RRC) under the
provisions of the M.P.Land Revenue Code, 1959 and the Madhya Pradesh Lok Dhan
(Shodhya Rashiyon Ki Vasuli) Adhiniyam, 1987. RRC's are also being issued in favor of
officers at Collect orate and Collect orate Officers are recovering the MPFC dues - as
dues of Land Revenue, from the defaulting borrowers and their guarantors.

CHANGE IN MANAGEMENT

38 | P a g e
 It is one of the usual conditions for grant of loan that the change in the constitution and or
management should not be done by the concern.
However if it becomes necessary in the interest of the project, a written request should be
made to the concerned field office and the desired change may be affected only if the
approval of the request is granted in writing.

SECOND CHARGE
On the request of the regular borrowers, the corporation usually permits second charge on
fixed assets in favor of the Bankers.

DEFAULT REVIEW COMMITTEE

Defaulting borrowers are reviewed by the corporation both at field offices and at Head
Office.
Default review committee (DRC) at Zonal level considers the cases for reschedulement of
loan account, granting of rebate, issue of legal notice, takeover of the unit, change in
management, disposal of units, etc.
The zonal level DRC considers cases having sanction amount less than Rs. 20.00 lacs,
while those having a higher sanction amount are dealt with by H.O.

STANDING COMMITTEE
Cases of disposal of taken over units where assistance originally sanctioned is above Rs.
5.00 lacs, are considered by the standing committee (SC), and constituted in the Head
Office of the corporation.
The units are disposed off after giving news papers advertisement, calling offers from
intending purchasers and subsequent negotiations.

8. SWOT ANALYSIS AT MPFC

STRENGTHS:

Large coverage area: The Madhya Pradesh financial corporation has its coverage
area in all over Madhya Pradesh with its 22 branches and zonal offices for the work
operation and trying to provide the best services to its existing and new clients.

 Helpful in providing small scale industries:-

The main objective of Madhya Pradesh financial corporation is to provide better services
through various schemes of financial assistance to small-scale industries and time-to-time

39 | P a g e
proper guidance from experience people so that they can achieve their task of higher
profitability and a good quality product easily.
 Objective of corporation:-
The corporation formed under the SFC’s (small financial corporation) act, is established
particularly with a view to support small scale and medium scale industries in the state of
Madhya Pradesh. It serves both manufacturing as well as service industries in the state.
 Milestone for industrial development:-
As during the year the corporation sanctioned financial assistance for Rs. 10702 lakhs and
almost 75% of it as disbursement, this will bring growth and development for small and
medium scale industries to cope up with the situation and to reach in the market with their
latest technology and innovation ideas through which they can survive into this competitive
world.
 Facilities with financial assistance:-
The Madhya Pradesh financial corporation is providing various facilities and services related
to financial assistance. This attracts new clients and encourages existing clients, as well as the
new projects to be financed in association with financial assistance for the projects they were
going to implement

WEAKNESS:

 Lack of innovative ideas.

 Lengthy and rigid process for financial assistance.
 Ineffective follow up and recovery.
 Obsolete technique of keeping the records. The corporation is still practicing the
technique of keeping the record in files.
 Comparatively high rate of interest.
 More legal formalities.
 Poor security and verification of documents submitted.
 Lack of human resource training.
 Not using latest techniques, not yet fully computerized.
 Lack of advertising and promotional policies.
 Limited resources.
 The corporation is incurring losses.

OPPURTUNITIES:

 Effective use: the Madhya Pradesh financial corporation can make effective use
of its human resource to build a good and healthy relationship with the clients
and makes its staff more productive and efficient with proper training and
development.
 The Madhya Pradesh financial corporation can go for financing large-scale
industries in the state of Madhya Pradesh.

40 | P a g e
  The higher rates of interests are attractive so if the rates are lowered the
corporation can make better use of market opportunities and create business out
of it.
 If the process of financing a project were made easier the borrower, can make
use of proper disbursement by the corporation to implement the project and can
save time involved in the project so that he can deposit the dues of the
corporation in time and can take benefit of it.

THREATS:

 Increasing competition with other financial corporations.

 Still using the obsolete technique of record keeping, which increases the chances
of stakes and loss of records.
 Promotional policies should be revising to make people aware of its policies and
services.

PROBLEMS FACED BY MPFC

 In strictly technical terms, the corporation Balance Sheet might be

carried forward losses. However, the losses, so reflected, are not
operational in nature. The corporation results in key performance areas
also underline the confidence enjoyed by it from the entrepreneur class in
general. This fact is confirmed by the fact that the corporation has been
consistently posting incremental gains in its main functions i.e. promotion
of industrialization and effective plough-back through strong recovery
structure built up over the year.

 The quantum of loss on account of stringent provisioning norms, made

effective from 1.4.2002, following guidelines received from SIDBI, is not
MPFC – specific but is a ground reality with all SFCs and Financial
Institutions in the country

 The Corporation was offered a Relief Package towards refinance

outstanding by IDBI as well as SIDBI carrying 12% p.a. and 11%p.a.
interest rates, respectively. The Corporation has requested both the
institutions to convert their outstanding into Preferential Capital, for
which no decision has been taken so far. The Corporation, in order to
have the actual liability ascertained until decided favorably, had to
provide for a substantial amount towards provision for interest towards
Relief Package outstanding. The Gupta Committee recommendations are
yet to be implemented and IDBI/SIDBI are being repeatedly requested to
give concessions on the interest. The said amount shall remain as a

41 | P a g e
 provision and if the concessions are provided, the losses shall get reduced
to that extent.

 Besides above, other factors such as acute industrial recession and

depressed market conditions and high cost of borrowing are eating into
the margins available to the Corporation.
 In brief, a large portion of the carried-forward losses are attributable to
the reasons beyond the control of the Corporation. The losses can be
wiped-off, given support from the State Govt. & Creditors mentioned in
the following paras.

 MPFC is one of the 18 SFCs functioning in the country and its plight is
not much different from that of other SFCs. Despite a consistently good
performance in the key operational areas viz; sanctions, disbursements,
recovery ( appreciated by none other than IDBI in their last two years
reports), and an excellent record of regular payments to its creditors in
the last 10 years, the circumstances are hardly propitious for its survival,
what to speak of growth.

42 | P a g e
8. CASE STUDY

To consider the sanction of a Term Loan of Rs. 46.00 Lacs and WCMTL of Rs.
15.00Lacs (composite Rs. 61.00 Lacs) to M/s Sona Industries for the expansion of their
existing unit for Manufacturing of BOPP Self Adhesive Tapes at Plot no. D-2, Sector –
DIND. Area, Sanwar road, Indore(M.P).

PROJECT AT A GLANCE

1 Name of the unit : M/s SONA INDUSTRIES, INDORE

2 Location : Plot no. D-2,sector-D, Industrial Area,

Sanwer road,indore

3 Constitution :A Proprietorship firm

4 Name of proprietor: Shri Rajesh Maheshwari

5 Cost of project :Rs.104.27lacs

6 Completion of project : 3 month

7 Projected turnover :1st year 2nd year 3rd year 4th year
150 lac 187.50 225

9 Net profit after tax :7.78lac 11.00 14.90 15.10

10 Breakeven point :35.47%

Product Units Capacity Production Utilization Sales

being Based price/box
installed on double
shift &
working
300 days in a

43 | P a g e
 BOPP self Boxes of 72 25000 boxes 1st year 40% 60% in the 1500
adhesive tape rolls of 2” 2nd year 50% 3rd year
per box 3rd year 60% onward

The Project is:

1. A new project
2. The Proprietor is first time seeking financial assistance from MPFC
3. The products are well established the market.
4. S.S.I Unit
5. The additional security worth Rs. 15.00 lacs in the form of fixed assets/FDR offered.
6. Adequate built in security.

Total cost of project

Items IN LAKHS

Land factory shed 50.00

Site development &repairs 2.50
Plant and machines 21.25
Misc. Fixed Assets 0 .50 Means of finance
Provision for contingency 4.42
Pre-operative expenses Items
25.13 In lakhs
Working capital Proprietor
108.10 capital 25
TOTAL Term
211.90loan from MPFC 56
WCTML from MPFC 15
Unsecured loan 22.01

1. Introductory
M/S Sona Industries Indore is proprietorship Total 108.01
concern of Shri Rajesh Maheshwari
Engaged in manufacturing of BOPP (Bi Oriented poly Propelyne) self adhesive tape
At Indore for the last 5 Year. The unit has been working in a rented premise and after
Witnessing market growth, the proprietor decided to expand the unit in its owned
Premises. In this respect the concern has purchased an industrial property which is
Located at plot no D-2, Sector –d, Industrial Area, Sanwer Road, Indore.

2. Proposal in Brief
The concern has moved existing set up to newly purchased industrial premises and
Proposes to expand the capacity for manufacturing of BOPP self adhesive tape from to
2500 boxes per annum. Total cost of scheme is estimated at Rs 28.00 laces, U/S loan
Rs. 13.50 lacs and financial assistance of Rs. 61.00 lacs sought from the corporation
Under ‘Single Window Scheme’.

3. Promoter and Management

The proprietor Shri Rajesh Maheshwari S/o Shri Maheshchandra Maheshwari aged
about 36 year is commerce graduate and hails from Vidisha . He belongs to agriculturist
Family and has been engaged in BOPP self adhesive tape business since the year 2002.
Subsequently in the year 2004 he acquired an ongoing tape unit situated in a rented
premises and managed it successfully. His financial worth is 34.08 lacs. He is income

44 | P a g e
tax payer and returns have been filed up to 2008-09.

Details about the project

2007-08 – Turnover was 83.35 lacs
2006-07 – Turnover was 50.58 lacs
2006-05 - Turnover was 8.66 lacs

4.Working capital
The total requirement of working capital on the basis of second year of its working has been
estimated at Rs. 24.80 lacs. The detailed calculations of working capital requirement of the
proposed scheme are given below:-

Particulars Period Margin (%) Total (Rs. In lacs)

Raw Material 20 days 25% 9.30
Finished goods 15 days 25% 7.70
Sundry debtors 20 days 25% 12.50
Working expenses
Total 29.50
Less: sundry 10 days (4.70)
creditors
Other current (-)
liabilities
NET WORKING 24.08
CAPITAL

5.Profitability Estimates
The concern has estimated following turnover and profit for first five years of its working
after providing interest depreciation and taxes.

particulars
Capacity 40% 50% 60% 60% 60%
utilization
Turnover 150.00 187.50 225.00 225.00 225.00
Profit before 34 24.77 28.59 27.29 26.63
depreciation,
interest and
tax
Interest 8.37 7.80 8.58 5.40 4.14
Depreciation 4.30 4.30 4.30 4.30 4.30
Profit after 8.81 12.67 15.71 17.5 18.19
tax
Cash profit 13.11 1697 20.01 21.89 22.49

6.Repayment

45 | P a g e
Keeping in view the liquidity position based on the estimated profit & projected cash flow
,the proposed loan is too repaid in eight years in 28 quarterly instalments with six months off
period as per schedule given below:

First instalment of Rs.100000/- 1.00 lacs

Next 03 instalments of Rs.200000/- 6.00
Next 24 instalment of Rs.225000/- 54.00
Total 61.00

MPFC’s prior experience

The corporation’s experience of financing in packaging industries in general is satisfactory.

1- Calculation of working capital requirement

particulars Holding margin First year Second year Third year

period
(A) Current assets
Raw material 20 25% 7.47 9.33 11.20
Work in process 0 25% 0.00 0.00 0.00
Sundry creditors 20 30% 10.00 12.50 15.00
consumables 0 25% 0.00 0.00 0.00
Finished goods 14 25% 5.78 7.24 8.68
Sundry expenses 1 25% 0.14 0.52 0.62
Total(A) 23.66 24.59 35.50
(B) Current
liabilities
Sundry creditors 10 30% 3.98 4.73 5.66
Total (B) 3.98 4.73 5.66
Total (A-B) 19.49 24.86 29.84

46 | P a g e
 Calculation of Break Even Point
S.No Particular Amount
Rs. In Lakhs
I Job Work Receipt 225.00

II Total Variable Cost

1. Raw Material 168.00
2. Power 3.27
3. Wages 10.69
4. Direct Expenses 3.36
5. Consumables 0.25
6. Interest on WCMTL 1.13
7. Depreciation 4.30
191.00
III Net Surplus (I - II) 34.00

IV Total Fixed Cost

1. Admin. & Comm. Salary 0.00
2. Admin. Overhead 4.80
3. Interest on Term Loan 4.89
9.69

V Break Even Point 28.50%

For Installed Capacity

VI Break Even Point 17.10%

For Capacity

7. Calculation of Debt Service Coverage Ratio

Amt. in Lakhs
Particulars I II III IV V VI VII VIII

Profit after Tax 9.56 12.99 17.5 17.83 18.29 18.97 19.51 19.65
Interest on Term loan 5.52 5.40 4.89 4.29 3.60 2.64 1.68 1.26

Interest on WCTML 1.78 1.49 1.13 0.77 0.41 0.07 0.00

Depreciation 4.30 4.30 4.30 4.30

TOTAL (A) 21.16 24.18 27.82 27.19 26.60 25.98 25.49 25.21

Interest on Term loan 5.52 5.40 4.89 4.29 3.60 2.64 1.68 1.26

Interest on WCTML 1.78 1.49 1.13 0.77 0.41 0.07 0.00 0.00

Instalment of Term Loan & 1.50 7.00 8.00 8.00 11.00 9.50 8.00 8.00
WCMTL

TOTAL (B) 8.80 13.89 14.02 13.06 15.01 12.21 9.68 9.26

47 | P a g e
D.S.C.R (A/B) 2.40 1.74 1.98 2.08 1.77 2.13 2.63 2.72

Average DSCR 2.18

Credit rating chart

S.No Parameters Full Unit’s
. Marks Score
Financial & Operational Risk Parameters
A Static Ratios
1 Projected DER 3 3
2 DSCR of the Project 5 4
3 Terms of repayment 3 1
4 Arrangement of Working Capital 5 5
5 Arrangement of Utilities (Power ETC) 3 1
6 Payment of Statutory dues 3 1
Sub Total 22 15
B Risk Mitigation
1 Value of Collateral Securities 5 3
2 Nature of Collateral Securities 5 4
3 PC Margins 5 1
4 Default ratio in the Portfolio 8 5
5 Solvency of the Promoters 4 1
Sub Total 27 14
Aggregate financial & operational Risk Score 49 29
Qualitative Risk Factors
C Business Risk Parameters
1 Technology 4 3
2 Compliance of environment regulations 4 4
3 User / Product Profile 2 1
4 Market Network 4 2
5 Location of the unit 2 2
Aggregate Business Risk Score 16 12
D Industry Risk Parameters
1 Competition 2 1.5
2 Industry Outlook (In Industry Cycle) 4 3
3 Regulatory Risk 2 2
Aggregate Industry Risk Score 8 6.5
E Management Risk Factors
1 Integrity 5 3
2 Track Record 3 2
3 Management Competence & Expertise 5 3
4 Experience in the Industry 5 5
5 Payment Record 4 2
6 Length of relationship 5 0
Aggregate Management Risk Score 27 15
Total Score of the Unit 100 62.5
Credit Rating Awarded

48 | P a g e
 Project Report for Term loan of

MANUFACTURING UNIT

( M/S PRASHANTI ENGENIRING )

I got an opportunity to prepare a project report of Rs.150.00lacs under MPFC terms

and conditions for a proprietorship firm M/S PRASHANTI ENGENIRING

CONTENTS :-

 Project at a glance

 Promoters and activities of the firm

 Purpose of loan

 Cost of project

 Securities

 Re-payment schedule (dates and installments)

 Annexure
49 | P a g e
 PROJECT AT A GLANCE

1. Name of promoter : Shri Manoj Gala ,Shri Narayan

Dhanotiya

2. Address : Plot no 60,Industrial area -1

Pithampur

3. Constitution : Private Limited

4. Nature of business : Manufacturing concern

5. Debt / Equity ratio : 1.50: 1

6. Promoters contribution : 40%

7. D.S.C.R :1.95 (8 year average)

8. Name & address of bankers : Dena Bank, Sukhliya branch, INDORE

9. Size of the unit. : Small-scale business.

50 | P a g e
 10. Amount of term loan

Recommended : Rs.150.00 lace.

For sanction.

PROMOTERS AND ACTIVITIES OF THE FIRM

Promoters of the firm Shri manoj gala & Shri Narshing dhanotiya are well qualified
engineers and have work experience of over 10 years in the same field. The company
promoted by them proposes to manufacture automobile components, material handling,
hydraulic cylinders & power packs, tooling jigs & fixtures, special purposes machineries.
Apart from these the company proposes to do job work for M/s EICHER motors ltd.,
Larson & turbo ltd. ,Force motors ltd. Hindustan motors ltd.etc.

PURPOSE OF LOAN

Promoters of PRASHANTI Eng.ltd require a term loan of Rs 150.00 lacs for setting up a
new unit for manufacturing of automobile component at pithampur.

COST OF PROJECT

51 | P a g e
1. Land: - The co had purchased land & building of M/s Technomech Eng.( INDIA )
through MPFC in the year 1993 .

2. Site Development: Rs.9.00 lac A provision of Rs 9.00 lac has been made in the scheme
towards site development which includes site leveling, interval & approach road bore
well, boundary wall etc.

3. Factory building: Rs 91.00 lac the co. proposes to consult main production shed, office
building, D.G. set rooms security office etc. The total area of construction will be to
1774.35 sq mtrs costing of Rs. 91 lacs has been made.

4. Plant & Mach.: Rs 105.00 lac The main plant & mach comprises CNC machines,
Drilling machines, fabrication equipments etc. The total cost of plant & mach. Including
taxes, erection, installation &electrical comes to Rs 105.00 lacs.

5. Misc. fixed asset: Rs. 2.50 lac A provision of 2.50 lacs is made towards misc. assets
viz. furniture & computer.

6. Preliminary & pre-operative expenses : Rs .15.00 A provision of 15.00 lacs had been
made in the scheme to take care of expenses during implementation of the project
including interest during implementation period ,deposits & expenditure on legal
documentation ,stamp duty etc.

7. Provisions for contingency: Rs 15.00 lac Rs. 15.00 lac has been provided for purposes
of contingencies to take care of cost escalation.

8. Margin money for working capital :Rs 12.50 lacs

52 | P a g e
 SECURITY

1. Primary security: - First charge by way of English / equitable mortgage of Land &
buildings, plant & mach., furniture & furniture &fixtures of the company.

2. Additional security: - The co. shall offer additional security worth Rs 10.00 lacs in the
form of fixed assets.

PERSONAL GUARANTEE

The loan shall be personally guaranteed by following personal for repayment of Principal &
interest:-

1. Mrs. Sudha Dhanotiya w/o Shri Narsingh Dhanotiya, promoter of the above firm.
2. Mrs. Kalpana Gala W/o Shri Manoj Gala, promoter of the above firm

3. Mr. Manoj Gala S/o Mr. Kalyanji Gala

4. Mr. Narsingh Dhanotiya S/o Mr. Badrilal Dhanotiya

53 | P a g e
 RE – PAYMENT SCHEDULE

PRINCIPAL AMOUNT

YEAR 1ST 2ND 3RD 4TH 5TH 6TH 7TH 8TH

AMOUNT 0.00 8.00 16.00 20.00 20.00 24.00 28.00 34.00

INTEREST

YEAR QUATER AMT. INST BAL. INT.@13% YEARLY TOTAL

.

1ST 1ST 150 - 150 4.88

2ND 150 - 150 4.88

3RD 150 - 150 4.88

4TH 150 - 150 4.88 19.50

2ND 1ST 150 150 4.88

2ND 150 150 4.88

3RD 150 4.00 146 4.88

4TH 146 4.00 142 4.75 8.00 19.37

54 | P a g e
 3RD 1ST 142 4.00 138 4.62
2ND
138 4.00 134 4.49
RD
3
134 4.00 130 4.36
TH
4
130 4.00 126 4.23 16.00 17.68

4TH 1ST 126 5.00 121 4.10

2ND 121 5.00 116 3.93

3RD 116 5.00 111 3.77

4TH 111 5.00 106 3.61 20.00 15.41

5TH 1ST 106 5.00 101 3.45

2ND 101 5.00 96 3.28

3RD 96 5.00 91 3.12

4TH 91 5.00 86 2.96 20.00 12.51

6TH 1ST 86 6.00 80 2.80

2ND 80 6.00 74 2.60

3RD 74 6.00 68 2.41

4TH 68 6.00 62 2.21 24.00 10.01

7TH 1ST 62 7.00 55 2.02

55 | P a g e
 2ND 55 7.00 48 1.79

3RD 48 7.00 41 1.56 28.00 6.70

4TH 41 7.00 34 1.33

8TH 1ST 34 8.00 26 1.11

2ND 26 8.00 18 .85

3RD 18 9.00 9 .59 2.83

4TH 9 9.00 0.00 .29 34.00

TOTAL 150 150 104.29

56 | P a g e
 ANNEXURE

LIST OF ANNEXURE:-

 COST OF PROJECT

 DEBT SERVICE COVERAGE RATIO

 PROJECTED CASH FLOW STATEMENT

 PROJECTED BALANCE SHEET

57 | P a g e
 ANNEXURE –A

COST OF PROJECT

(Amount in lacs)

Particulars Amount

Land 0.00

Building &Site Development 107.23

Plant & Machinery 112.59

Miscellaneous Assets . 2.68

Pre –operative Expenses -
Contingencies 15.00
Margin money for Working capital 12.50

Total 250.00

Means of finance

Particulars Amount

Share Capital (Including Share Premium) 64.00

Unsecured loan (Quasi equity) 36.00

Term Loan from MPFC 150.00

Total 250.00

58 | P a g e
 ANNEXURE – B

DEBT SERVICE COVERAGE RATIO

Particular 1st 2nd 3rd 4th 5th 6th 7th 8th

Year Year Year Year Year Year Year Year

Net Profit After 32.82 38.51 47.71 59.05 57.05 56.37 55.42 55.14
Tax

Add: Depreciation 9.46 9.46 9.46 9.46 9.46 9.46 9.46 9.46

Interest on Term 19.50 19.37 17.68 15.41 12.81 10.01 6.70 2.83
Loan

TOTAL A 61.78 67.34 74.85 83.91 79.31 75.84 71.58 67.42

Interest on term 19.50 19.37 17.68 15.41 12.81 10.01 6.70 2.83
loan

Repayment of - 8.00 16.00 20.00 20.00 24.00 28.00 34.00

term loan

TOTAL B 19.50 27.37 33.68 35.41 32.81 34.01 34.70 36.83

D.S.C.R.(A/B) 3.17 2.46 2.22 2.37 2.42 2.23 2.06 1.83

AVERAGE 1.95
RATIO

59 | P a g e
 ANNEXURE – C

PROJECTED CASH FLOW STATEMENT

Particulars Const 1 2 3 4 5 6 7 8

SOURCES
OFFUND

1 N.P. after tax 0.00 56.24 61.78 69.29 78.37 73.76 70.28 66.03 61.88
with int.

2. Add 0.00 9.46 9.46 9.46 9.46 9.46 9.46 9.46 9.46
:Depreciation

3. Increase in share 64.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
capital

4 Increase in long 150.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
term borrowing

5 Increase in u/s 36.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
loan /deposit 0.00

6 Increase in 0.00 .31 1.14 1.18 0.00 0.00 0.00 0.00

current 6.84
liabilities

7 Increase in 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

other liabilities 0.00

8 Increase in Bank 0.00 30.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
borrowing

TOTAL 250.00 102.54 71.55 79.89 89.01 83.22 79.74 75.49 71.34

USES OF
FUNDS

1 Increase in 237.50 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
capital
Expenditure

60 | P a g e
2 Increase in 0.00 49.34 12.07 9.07 0.00 0.00 0.00 0.00
Current assets
10.06

3 Decrease in term 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
loan-existing

4 Decrease in term 0.00 0.00 8.00 16.00 20.00 20.00 24.00 28.00 34.00
loan-proposed

5 Decrease in 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
bank loan

6 Interest 0.00 23.40 23.27 21.58 19.31 16.71 13.91 10.60 6.73

TOTAL 237.50 72.74 43.34 46.65 49.37 36.71 37.91 38.60 40.73
DEPOSITION

Opening balance 0.00 12.50 42.30 70.50 103.74 143.39 189.90 231.73 268.62

Net Surplus (A- 12.50 29.80 28.21 33.24 39.64 46.51 41.83 36.89 30.61
B)

Closing Balance 12.50 42.30 70.50 103.74 143.39 189.90 231.73 268.82 299.23

ANNEXURE – D

BALANCE SHEET AS AT 31/03/09

61 | P a g e
 Particular Amount Amount

As at 31/0/09 As at 31/3/08

Sources of fund

Share Capital 13040 130400

Reserve &Surplus 322242 306715

Unsecured Loan 2165161 896049

Total 2615161 1333164

Application of funds

Fixed Assets 693617 693617

CURRENT ASSETS

Cash &Bank balance 59593 82535

Loans Advances 1304489 44489

&deposits

TOTAL 13064082 127024

Less current liabilities 95984 98857

Net current assets 1268098 28167

Preliminary expenses 2500 2500

Pre operative expenses 653588 608880

TOTAL 2617803 133164

Annexure :1

MPFC Performance Appraisal Format

CIBIL Status-

KYC Status-

Factory Location-

Registered Office-

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Constitution-

Application Informatio ZO HO Loan Loan For HOLC

received on n Appraisal Appraisal applied appraised consideration
completed completed completed (Rs. in (Rs. in (Rs. in Lacs)
by on on Lacs) Lacs)
Promoters
on

Activity:-

Products Unit Registered Installed Utilization Sale Price

Capacity Capacity based on 2
shifts 300
days

PROJECT HIGHLIGHTS-

PROJECT COST-

Particulars Applied by Appraised by the Security Utilization of loan

the party Corporation Cover
SIDBI MPFC
Total
Land (leasehold)
Site Development
Factory Building
Plant & Machinery
Miscellaneous
Fixed Assets
Preliminary and
Pre operative
Expenses
Contingencies
Working Capital
Margin Money
Total

FINANCIAL PARAMETERS-

RISK RATING SCORE :

Promoters’ Contribution : Appraised By Means of

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 Finance
Debt-Equity Ratio : Technical Financial (Rs. in Lacs)
Security Margin :
Return on own Capital :
Return on Capital Emp. :
Break Even Point (Ins.Cap):
Repayment :
Moratorium :
Instalment :
Employment :
Interest Rate :
Rebate :
Credit Rating Rebate :
Penal Interest : TOTAL

Auditors:-

Bankers:-

Architects:-

Main Plant Supplier:-

Technical Know How Supplier:-

1- Introduction
2- Proposal in Brief
a- Company
b- Land Owners
3- Promoters and Management
4- Guarantors
5- Past Performance and Financial Position
6- Details about the Project
i- Land
ii- Factory and Building
iii- Plant and Machinery
iv- Electric Installation and Generator Set
v- Preliminary and Pre-operative Expenses
vi- Contingencies
7- Details about-
a) The activity
b) Manufacturing Process
c) Market Scenario
d) Pollution and Effluent Disposal
8- Cost of Construction
9- Sales Price (Per unit)

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 10- Marketing Arrangements
11- Arrangement of Utilities
a) Raw Material
b) Power
c) Water
d) Men power
12- Profitability Estimates

I YEAR II YEAR III YEAR IV YEAR V YEAR

Capacity
Utilization
Turnover
PBDIT
Interest
Depreciation
Profit after
Tax
Cash Profit

13- Repayment-

Year I Year II III IV V VI VII VIII TO

Year Year Year Year Year Year Year TA
L
Amoun
t in
Lacs

14- Debt equity Ratio-

Equity Amount Debt Amount

Share capital Term Loan-MPFC
Reserves and Term Loan-Others
Surplus
Unsecured Loans
Debt Equity Ratio

15- Security Scenario-

Security Amount Debt Amount

Prime Security Term Loan-MPFC
Term Loan-Others
Total

16- Capital Structure of the Company-

17- Technical Feasibility
18- Implementation Schedule and Present status of the Project

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 S.no. Project Work Period in months
1 Preliminary and Promotional Work
2 Acquisition of Land and Site development
3 Construction of Building and Structure
4 Design and Engineering of equipment/ air
conditioning arrangements
5 Order and procurement of equipment
6 Electrical installments
7 Furnishing
8 Power Connection
9 Possession to tenants
Opening to Public

19- MPFC’s prior experience-

20- Board assumptions underlying profitability estimates

Sr. No. Parameters Assumptions

1 Total Construction area
2 Capacity Utilization (in %)
3 Raw materials-
Consumables-
Packing Material-
4 Rental Income
5 Salary and Wages
6 Power and Fuel
7 Repairs and Maintenance
8 Depreciation
9 Interest on Term Loan
10 Interest on Working Capital
11 Others

21- Recommendation
22- Signed by Deputy GM and GM

Enclosures

1- Details of Profitability estimates- Annexure A

2- Cash Flow estimates- Annexure B
Draft resolution-
Security- First Legal Mortgage/Legal Mortgage
Margin
Utilization
Interest

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 Guarantee
Repayment
Capital
Unsecured Loans
The loans shall be released after- (conditions)
Other Conditions

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