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PART- A INTRODUCTION:
Finance is the lifeblood of all types of economic activity. It is so indispensable that no one can neglect nor ignore the importance of finance. Finance is defined as distribution of and purchase of liability and equity claims issued for the purpose of generating revenue producing assets its management of monetary affairs of the company it includes determining what has to be made for raising money on best term available and what has to be made for allocating available funds to the best use.
Finance is the administration of economic activity it includes banking money and credit for different type and classes. All major business decisions made financial implications no matter whether an organization is small or big newly started or existing business needs finance. If decision relating to money or funds fails it may result in failure in whole of business organization.
Finance function is a comprehensive activity which includes not only sources but also cost associated with their resources duration of requirement and proper utilization of funds.
Global Scenario of Finance: In recent years the financial sector in most of the countries around the world has undergone major changes. Deregulation, liberalization and technological innovations, allow financial institution to a larger variety of products and services, making the traditional frontiers between banking, securities and insurances sectors more. In practice, the financial sector is in a process rapid transformation. Reforms are continuing as part of the overall structural reform aimed at improving the productivity and efficiency of the economy. The role of an integrated financial infrastructure is to stimulate and sustain economic growth.
The US$28 billion Indian financial sector has grown at around 15 percent and displayed stability for the last several years, even when other markets in the Asian region were facing a crisis. This stability was ensured through the resilience that has been built into the system over time. The financial sector has kept pace with the growing need of
P.G. Dept. of Management Studies, PESITM, Shivamogga
Karnataka State Financial Corporation, Bangalore
corporate and other borrowers. Banks capital market participants and insurers have developed a wide range of product and service to suit varied customer requirements.
Indian Financial System: The world system stands for a set of bodily organs like composition or concurring function, a scheme of classification and a method of organization. Finance holds the key to all human activity. Finance is the study of money, its nature, creation, behaviors, regulation and administration. So all those activities dealing in finance are organized in the know as the financial system or financial sector.
The evolution of the financial system in India has been interlinked with the growth of the macro economics. The financial system has travelled up and down from barter financial system greatly influenced by the spread of urban society and above all the advent of large-scale industrialization in the second half of the nineteenth century, altered the expansions of the railways and especially with the revolutionalisation of information technology.
In India, the evolution of financial system reflected its political, social and economic need and aspiration. Government has played a large role in the creation and broad basing of the financial system depending in the country. The government has exerted its influence over the flow of credit control and direction. It is also big borrower as well as regulator of the financial system.
The growth path of financial system can be divided into three distinct phases the first phases are characterized by active state intervention with all view to build up the institutional infrastructure. Developing countries are in a hurry to catch up with modern banking and development in money and capital markets and they can‟t afford to wait for the spontaneous and autonomous growth of the financial system to take place.
The financial system is closely connected or interlinked institutions agents practices, market transactions claims and liabilities in an financial system is concerned about money, audit and finance some of the terms are related but some different form each other.
P.G. Dept. of Management Studies, PESITM, Shivamogga
Karnataka State Financial Corporation, Bangalore
Money refers to current medium exchange. Finance is monetary resources comprising debt and ownership funds of state company. Credit or loan is a sum of money to be returned normally with interest. Currency and exchange form an essential part of financial system.
Scope of the Financial Function: a) Estimation of the financial requirements: Estimating the financial requirements is the first and the foremost task and long term financial needs of the concern. This calls for preparation of the financial plan for present as well as for future. The amount required for purchasing fixed assets as well as needs of funds for working capital have to be estimated.
b) Deciding the capital structure: The term capital structure refers to the kind and proportion of deferent securities for raising funds. After deciding the quantum of funds required it should be decided as to which type of securities should be raised further while deciding about the capital structure due consideration.
c) Selecting a source of finance: Once the capital structure is decided an appropriate source of finance is selected the various sources of finance include share capital, debenture, financial institution, commercial banks and public deposited etc.
d) Selection pattern of investment: Once the funds have been procured the decision about investment pattern that is to be taken. A decision has to be taken as to type of assets that are to be purchased first funds may be invested in fixed assets and an appropriate portion may be kept for the purpose of working capital.
e) Proper cash management: Requirement at different times and then make arrangements for acquiring cash.
P.G. Dept. of Management Studies, PESITM, Shivamogga
Karnataka State Financial Corporation, Bangalore
f) Implementing financial control: An efficient system of financial management necessitates the of various control device generally such as ROI, Budgetary Control, Break Even Analysis, Cost Control and Ratio Analysis.
g) Proper use of surpluses: The utilization of profit or surpluses is also an important factor in financial management. A judicious use of surplus is essential for expansion and diversification plans and also in protecting the interest of share holders.
Objective of the Financial Function: The primary objective of the finance function is to arrange for required funds for the business from time to time
a) Acquiring sufficient funds: The basic objective of finance function is to asses or estimates the financial requirements of an enterprises and then finding our suitable sources for revising them.
b) Proper utilization of funds Though selecting the source and rising of funds is most important objective of the finance function. The proper utilization of such funds is even more critical, the funds should be utilized in such a way that maximum benefit is derived from them.
c) Increasing profitability The planning and control of finance function aims at increasing profitability of the concern. It is a fact that money generated money sufficient fund will have to be invested in order to increases profitability.
d) Maximizing concern value: Finance function also aims at maximizing the value of the firm usually a concerns value is linked with profitability.
P.G. Dept. of Management Studies, PESITM, Shivamogga
P. e) Certificate of deposits: RBI introduced this in 1989 with the objective of broad basing the money market. If it is for a period of more than a day and less than 14 days it is called as notice money. c) Treasury bills: It was introduced in the year of 1986. PESITM. Bangalore Pattern of Fund Requirement: A firm basically needs three types of funds they are: I. Long term finance Classification of Various Sources of Finance Short Term Investment a) Call money/ call notice: This is the barrowing and landing money for short term ranging from 1 to 14 days. Dept. Treasury Bills are issued by the central govt. Shivamogga 5 . to meet its short term needs. It is an unsecured promissory note issued by the company either directly or through bank or merchant bank. It is called because of the money that is lent is to repaid the next day together with agreed interest.. The unique feature of these commercial bills is that could be subjected to further rounds of discounting by bank holding their bills of their funds. This was a towards disintermediation. Short term finance II. d) Commercial bills: One of the ways of raising working finance is by way of discounting bills as own by the supplier on his customer in course of his routine trade activities. b) Commercial paper: It is another short term instrument introduced in a domestic money market. Medium term finance III.Karnataka State Financial Corporation. It is the marketable receipt of funds deposited in bank for a period at a specified rate of interest. of Management Studies. if the money is lent for a day is called call money.G. This is the most liquid instrument available in Indian market.
Karnataka State Financial Corporation. b) Preference shares: The characteristics of preference shares are hybrid in nature like bonds their claims on the company income are ltd. e) Public deposits: It is usually raised by a company from general public as means of borrowings assuring them a fixed % interest for a specific period of time. Classification of Financial Market: There are different way of classifying financial market ways of classifying are on the basis of: 1) Type of Financial Claim: The debt market is the financial market is the financial market for fixed claims or debt instruments and the equity market is the financial market for residual claims or equity instrument.. PESITM. The equity shareholders enjoy special powers of voting and can become director of a company. c) Debentures: The private sector companies generally issue debentures as a long term promissory note for raising loan capital. Dept. and they received the fixed dividend in event of liquidation of company their claims on assets of firms are also fixed. It is also called as internal source of finance. The company promises to pay interest and principal as stipulated bond is an alternative form of debentures in India.G. Bangalore Medium and long term finance: a) Equity shares: Equity shares are commonly referred to common stock or ordinary share. P. It is an instrument issued by the company to mobilize the capital companies issues them in new issue market. of Management Studies. Shivamogga 6 . d) Retained earnings: Retained earnings refer to creation of reserves out of profit and the utilization of accumulated profit or reserves for meeting the finance requirements of business.
5) Exchange trade market and over the counter market: The fifth way to classify financial markets is by the nature of its organizational structure an exchange-traded market is characterized by a centralized organization with standardized procedures. A cash or spot market is one where the delivery occurs immediately and a forward or future market is one where the delivery at a predetermine time in future. The interest rate on 365 days treasury bills determined by aucations and they are expected to reflect the free markets rates. 4) Cash spot market and forward market: Yet another way to classify financial market is by the timing of delivery. P.Karnataka State Financial Corporation. The market where investor trade outstanding securities is called secondary market. The interest rate on company deposits is freed. the government has taken the following steps: 1. The interest rate on debentures is allowed to be fixed by companies depending upon the market rate. Recent trends in Indian financial system: With a view to bringing the interest rates nearer to the free markets rates. Shivamogga 7 . of Management Studies. Dept. An over the counter market is a decentralized market with customized procedures. 5. The maximum rate of interest payable on bank deposits above one year. 3. 4. An over the counter market is a decentralized procedures. 2. Bangalore 2) Financial market by maturity of claims: The market for short-term fiancial claims is referred to as the money market and the market for long term financial claims is called as capital market. The coupon rate on government loans been revised updates so as to be market oriented. 3) Primary market and secondary market: The third way to classify financial markets is based on whether the claims represent new issues or outstanding issuers. PESITM.G.
IDBI has been providing direct financial assistance to large and medium industrial units and helping small and medium industrial concerns through banks and state level financial corporations. b) Industrial Finance Corporation of India (IFCI): The government of India has set up the IFCI in 1948 under the special act. is the principal financial institution for providing credit and other facilities for development of industry. Current shareholding is widely spread among various state owned banks. It is an independent financial institution aimed to aid the growth and development of micro. The newlyestablished DFI was provided access to low-cost funds through the central bank's Statutory Liquidity Ratio which in turn enabled it to provide loans and advances to corporate borrowers at concessional rates. It was incorporated initially as a wholly owned subsidiary of Industrial Development Bank of India. Merchant bankers and underwriting firms were almost non-existent. it has expanded it's activities. 1948. Shivamogga 8 . Although there was significant demand for new capital. as the first Development Financial Institution in the country to cater to the long-term finance needs of the industrial sector. of Management Studies. co-ordinate working of institutions engaged in financing. there was a dearth of providers. insurance companies and financial institutions.G. Dept. which was established in 1964 under the act of parliament. small and medium scale enterprises in India. India's capital market was relatively under-developed. Beginning as a refinancing agency to banks and state level financial institutions for their credit to small industries. It is against this backdrop that the government established The Industrial Finance Corporation of India (IFCI) on July 1. And commercial banks were not equipped to provide long-term industrial finance in any significant manner. At the time of independence in 1947. Now it is converted into banking sector. c) Small Industries Development Bank of India (SIDBI): SIDBI has been established in 1989 to function as an apex bank for tiny and small scale industries. Bangalore Major players in Financial Sector: a) Industrial Development Bank of India (IDBI): The IDBI. PESITM. including direct credit to the SME through 100 branches in all major industrial clusters in P.Karnataka State Financial Corporation. promoting or developing industrial units and assisting development of such institutions.
of Management Studies. For the purpose of assisting the financial help to small and medium sized industries. namely developmental institutions and investment institutions. ICICI Bank. ICICI established Banking Corporation as a banking subsidiary. with the objective of creating a development financial institution for providing medium-term and long-term project financing to Indian businesses. Shivamogga 9 . Its issued capital has been subscribed by Indian banks. the British eastern exchange banks and general public in India. insurance companies and individuals and corporations of the Indian banks. credit cards. Recently it has opened 7 branches christened as Micro Finance branches. the Government of India and representatives of Indian industry. to undertake normal banking operations . Formerly known as Industrial Credit and Investment Corporation of India. P. Besides. ICICI founded a separate legal entity. PESITM. Dept. It was registered in january1995 under the Indian companies act. insurance companies and individuals and corporations of the United States. In 1994. ICICI Banking Corporation was later renamed as 'ICICI Bank Limited'. car loans etc.00 lakh.taking deposits.Karnataka State Financial Corporation. it has been playing the development role in several ways such as support to micro-finance institutions for capacity building and onlending. aimed especially at dispensing loans up to Rs. 5. Functionally there are two types of financial institutions in the Indian market.G. Bangalore India. the government of India desired to set up state financial corporations. The Industrial Credit and Investment Corporation of India Limited (ICICI) was incorporated at the initiative of World Bank. Evolution of State Financial Corporation (SFC): The Indian Financial sector today comprises an impressive network of financial institutions and wide range of financial instruments. e) State Financial Corporation’s (SFCs): SFC‟s form a unique set of institutions established to assist and develop industrialization in the state of India. d) Industrial Credit and Investment Corporation of India (ICICI) The Industrial Credit and Investment Corporation of India was sponsored by a mission from the world bank for the purpose of developing small and medium industries in the private sector.
Shivamogga 10 . These funds are deployed mostly as loans and advances to the various medium and small enterprises. The activities of IFCI were statutorily restricted to large scale-sector. borrowing from RBI. The need for stabling a similar institution at the state level was left unsolved. State Level bodies like State Industrial Investment Corporation. Dept. PESITM. Establishment of regional development banks has been important means to meet this end. The Indian socio-economic environment with certain under-developed feature constantly stressed the urgent need for the development of medium and smallscale industries. Under this urge. debentures etc. The establishment of Industrial Finance Corporation of India (IFCI) though bridged serious gap in institutional finance for large-scale industrial units. IDBI.G. The need for establishing a similar institution at the state level was initially felt as device to bridge the nexus. These bodies are to assist in particular small-scale industries. SFC‟s form a unique set of institutions established to assist and develop industrialization in the state of India. In the category of investment institutions comes the Unit Trust of India (UTI). Bangalore Developmental institutions include industrial finance corporation of India (IFCI). State Finance and Development Corporation. since they undertake both banking function as well as developmental functions. of Management Studies. Industrial Reconstruction Bank of India (IRBI). units in backward areas. Life Insurance Corporation (LIC). corporate share. Hence the SFC‟s came into existence to look into this problem as regional development banks over a period of years. Their sources of funds are issue of bonds and debentures in the market. a developmental bank was conceived as an instrument for promoting all round development.Karnataka State Financial Corporation. The Idea of developmental banks has its origin in the urge in the backward and under developed countries to achieve quick economic growth. There are 18 SFCs operating in India they are P. investment in government securities. the problem of term finance for medium and small-scale units was left unsolved. state governments etc. fixed deposits from the public.
Granting of loans or advances to or the subscribing to debentures of industrial concern repayable within a period not exceeding 20 years from the date on which they are granted or subscribed as the case may be.G. Guaranteeing on such terms and conditions as may be agreed upon raised by industrial concerns that are repayable within a period not exceeding 20 years capital are floated in the public market. Bangalore Assam financial corporation Bihar state financial corporation Delhi financial corporation Gujarat financial corporation Haryana financial corporation Himachal financial corporation Jammu Kashmir financial corporation Karnataka state financial corporation Kerala financial corporation Madya Pradesh financial corporation Maharashtra state financial corporation Orissa state financial corporation Punjab financial corporation Rajasthan financial corporation Tamil nadu industrial investment corporation limited Objectives of SFC’s The SFC‟s have been authorized under section 25 of the SFC‟s Act to carry on the following kinds of business. Shivamogga 11 .Karnataka State Financial Corporation. Dept. of Management Studies. PESITM. Under writing of the issues of stocks. Generally doing of all such acts and things as may be incidental to or consequential upon the exercises of their powers or the discharge of their duties under the act. bonds or debentures by industrial concerns. P. shares.
It is also the privilege P. KSFC has assisted more than 154000 units with cumulative sanctions of over Rs. Dept. trust and speed. loan syndication. under writing of shares. deferred payment guarantee. 1973.Karnataka State Financial Corporation. Today. 20 crores. was known as t he Mysore Financial Corporation. KSFC has controlled most for the growth of SSIs. KSFC extends lease finance assistance and hire purchase assistance for acquisition of machinery/equipment/transport vehicle. 7184 crores out of which more than 50 % are towards SSIs. Term loan up to Rs. was established on March 30. Background And Inception Of The Company: The Karnataka state financial corporation. Then the Government of Mysore established the KSFC by notification No. Bangalore COMPANY PROFILE 2a. project report preparation. while the state economy is making rapid strides in the global market. KSFC has decentralized system of working. of Management Studies. KSFC has a merchant banking department and is approved as a category merchant banker by the Security Exchange Board of India (SEBI) And this department takes up fees based activities like the management of public issues. 1959. Since inception. PESITM. keeping this in view KSFC has re-engineered itself to ensure utmost customers satisfaction with new energy. the fund based activities like subscription to the non convertible debentures. bill discounting etc. FD 28bis 59 DATED 30th March 1959. Shivamogga 12 . backward area development and promotion of first generation entrepreneurs. which prior to November 1. KSFC is fine tuned to fulfill the plans and aspiration of entrepreneurs by extending all possible assistance. KSFC on ISO 9001:2000 certified organization is proud to have played a major role in the industrial development of the state. 25 lakhs are sanctioned at the head offices and loan jointly with KSIDC/commercial banks for projects whose cost is less than Rs. In the 45 years of existence.G. KSFC is moving in tandem as a pioneering and responsive financial institution. Its achievements in these areas are unparalleled. factorings services are also considered. Amendments to the SFCS Act provide for wide ranging scope of assistance and operational flexibility.
Setting up or development of an industrial area or industrial estate. Providing hardware or software services relating to information technology. bill discounting etc. This department takes up the management of the public issues. As per SFCs Act. testing or servicing of machinery or power. KSFC‟S assistance covers almost all types of industrial and service sectors. deferred payment guarantee. 2b. loan syndication. preservation or processing of goods. Finishing or providing shore facilities for fishing or maintenance thereof. Mining or developing of mines. equipment and transport vehicles. Nature of Business Carried: The business carried by this institution is generally related with providing the term loans to MSME sector. technical. of Management Studies. Dept. under writing of shares. This financial institution works mainly over long term financial loans to medium enterprises. telecommunication or electronics including satellite and audio or visual cable communication. project report preparation. repairs. Bangalore of KSFC to have assisted many industries that are internationally recognized like INFOSYS & BIOCON. the fund based activities like subscription to the non convertible debentures. Providing medical. Shivamogga 13 . Maintenance. Providing weigh bridge facilities. Providing engineering.G. KSFC extends lease financial assistance and hire purchase assistance for acquisition of machinery. It not only provides lending facilities but also it deposits the funds. P. health or other allied services.Karnataka State Financial Corporation. marketing or other services or facilities for industry. Manufacturing. Generation or distribution of electricity or any other form of power. PESITM. the following activities are eligible for financial assistance. financial management. Hotel industry Acquisition of transport vehicle. factorings services are also considered.
Mission: KSFC is committed to continually nurture. software. PESITM. P. Development. Vision. infrastructure and health care. Research and development activities. Setting up of medical stores. for creation of the fixed assets and current assets through various products mix. 2c. transport etc. Service industry. Quality Policy: Customer satisfaction through professional management and team work. breeding and hatcheries. poultry. Tissue culture. Such other activities approved by SIDBI from time to time. technical know-how‟s. develop and service the SME sector through need based products and services. Providing commercial complex facilities and community centers. Quality objective: To effectively identify and assist the entrepreneurs in establishing successful business enterprises. Floriculture.G. The main purpose of the organization is to extent adequate and timely financial assistance to all the SMEs in the area of industries. Setting up of entertainment industries including production of films.. services. Shivamogga 14 . Mission. Dept. hospitality. Bangalore Construction activity. Setting up of vocational training centers for importing technical knowledge to entrepreneurs and running the units efficiently and produce quality goods. of Management Studies. Its vision is all for one and one for all. maintenance and construction of roads.Karnataka State Financial Corporation. by providing effective and efficient service to all sectors of people under one roof. and Quality Policy: Vision: Vision KSFC is to be premier financial in the country.
. improvement in packaging etc. undertaking expansion. 2d. Shivamogga 15 . Assistance from NEF helps the small scale units in strengthening their equity base and thereby improving their acceptability for term financing. Limits: Total cost of the not to exceed Rs.G. Bangalore To provide financial and related services on a continuous basis. To transform the organisation to a customer centric institution. quality etc. To encourage the employees to upgrade and enhance the knowledge and skill through effective training and development. To motivate and involve employees to achieve the set of organisational growth targets. private limited companies. 100. 50. Products/Service Profile: Following are the various product and services of the KSFC: National Equity Fund Scheme:Objective: The objective of the scheme is to provide equity type of support to entrepreneurs. providing assistance for purchasing of capital equipment. Eligible borrowers: sole proprietorships. co-operative societies.Karnataka State Financial Corporation.00 lakhs P. To continually upgrade our product and services.00 lakhs Revised Technology Development and Modernization:Objective: The objective of the scheme is to encourage the existing SSI to modernize their production facilities in order to improve productivity. modernisation. PESITM. and compete successfully in domestic and international market. diversification. Limits: project outlay not exceed Rs. Dept. of Management Studies. Technology up gradation. acquisition of technical know-hows. sick units etc. Eligible borrowers: new and existing projects in tiny and small scale sector.
Eligible borrowers: Existing industrial concern in the SSI sector having a good report of the past performance and sound financial position. of Management Studies. P. audit. However this scheme meant for non-small scale industrial unites in textile industry for taking up technology up gradation and modernization of their production facilities. partnerships. Bangalore Acquisition Of ISO 9000 Series Certification:Objective: The purpose of assistance will be towards meeting the expenses on consultancy. 1. technology Upgradation for Textile Industry-B: Objective: This scheme is similar to the one given in detail under „A‟ above. 3. private and public limited companies. Technology Upgradation For Textile Industry-A: Objective: To provide encouragement for textile industries (including units in cotton ginning and pressing sector) in the small scale industrial sector for technology up gradation and to modernize their production facilities. Have earned profit and declared dividend during the preceding two financial year. private and public limited companies. Eligibility Criteria: New units and existing units with or without expansion. Have been in operation for a period of at least two years. Dept. Not be in default to institution/banks in payment of their dues.Karnataka State Financial Corporation. Eligibility Borrowers: Sole proprietary concerns. co-operative societies. Eligibility criteria: co-operative societies.G. PESITM. documentation. Shivamogga 16 . certification fee etc. Entrepreneurs are advised to refer to the booklet of technology up gradation fund scheme brought out by the Government of India for the further details and also the machineries eligible for coverage under this scheme. 2.
P. And also stock of the goods subject to minimum of Rs. Limits: Minimum limit is Rs. of Management Studies. Establishment of permanent exhibitions or trade centres Training of personnel in marketing skills Establishing sales offices or showrooms abroad. Building.Karnataka State Financial Corporation.50. Bangalore Assistance for Marketing Related Activities: Objective: To provide financial assistance to small and medium scale unites to undertake various activities necessary to increase their scale in domestic and foreign markets and/or to create physical marketing infrastructure. Eligible Borrowers: Existing units with a good track record and sound financial position are eligible for assistance.00 lakhs. breading. interiors technology. expansion of existing sales outlets for marketing products irrespective of whether it is a product of a small scale industry or not. PESITM. Rental discounting scheme: Objective: To provide financial assistance on the strength of the rent earned by non-residential properties located within the city and municipal limits of Bangalore.G. Assistance for Marketing Enterprises: Objectives: The objective of the scheme is to assist entrepreneurs to set up sales outlets or renovation. production of audio-visual aids etc. broadcasting catalogues preparation. equipment. 50. Eligible criteria: The assistance under this scheme is provided for undertaking various market related activities such as: Market research Preparation of strategic marketing plan Advertising. Eligible borrowers: The loan amount will be restricted to 75% of the cost of the land. 5 lakhs and maximum limit is Rs. Dept.00 lakhs and maximum of Rs. 50 lakhs. branding. Shivamogga 17 .
Mysore and Belgaum subject to gross rent earned of not less than Rs. subject to certification by the technical officers of the Corporation. Interest Subsidy Scheme of GOK: Objective: To encourage small and medium scale entrepreneurs and to upgrade the technology and modernize their existing production facilities the Government of Karnataka has come up with an interest subsidy scheme.00 lakhs.G.Industrial/commercial properties located at prominent places within municipal limits with a minimum of 29 years residual life. 25000 per month. Eligible Criteria: Plant and machinery-Machinery of a reputed make with a minimum residual life of 10 years as assessed by the technical officers of the Corporation supported by Chartered Engineer‟s certificate. Gulbarga. Hubli. PESITM. Eligible Criteria: Unit should be in operation at least for a period of three years and should not be in default in payment to the institution or banks. Dharwad. of Management Studies.Karnataka State Financial Corporation. P. Land chnology. The scheme is operating from 18th October 2000. 10. Shivamogga 18 . Dept. Shimoga. This scheme is applicable to the units financed by KSFC and KSSIIDC only. Textile and tannery units which do not avail the interest subsidy scheme under the Government of India‟s scheme are also eligible. with or without & Building. Nature & extent of finance-Financial assistance will be in the form of term loan not exceeding 70% of the estimated value of the asset being considered for finance. Minimum limit of the scheme will be Rs. Eligible borrowers: Existing enterprises engaged in the activities eligible for assistance from the Corporation and in existence for a minimum period of 2 years with good track record. Bhadravathi. Bangalore Mangalore. Financing Existing Assets And Enterprises: Objective: To extend financial assistance for taking over of existing assets/enterprises.
Eligible criteria: Proprietary concerns. Eligible Criteria: Existing units eligible for financial assistance from KSFC under the SFCs Act. private and public limited company in SSI sector. New SSI units which are registered with the state Directorate of industries and who set up proposed facility with the appropriate eligible and proven technology duly approved by GTAB are also eligible. Dept.Karnataka State Financial Corporation.00 lakhs. of Management Studies. However corporate loan is restricted normally to the manufacturing sector.G. co-operative societies. Shivamogga 19 .. Existing SSI units registered with the state directorate of industries who upgrade with the state of art technology are eligible. modernization. Bangalore Credit Linked Capital Subsidy Scheme (CLCSS): Objective: The objective of the scheme is to facilitate technology up gradation of SSI units in specified products/sectors by providing 15% capital subsidy for induction of proven technologies approved under the scheme. General Scheme: Objective: To extend financial assistance for new enterprises to establish SSI‟s/MSI‟s/Service units and for expansion. This loan is also to consider for developing/expanding new markets and opening LC for purchase of new equipments till a term loan is sanctioned and released by the financial institutions. by the existing units. Maximum limit is 15. Corporate Loan Scheme: Objective: The objective of the scheme is to extend short term loans to existing successful units who require urgent working capital funds either to meet the gap in the working capital requirements or funds required for executing the rush of orders. 1951 are eligible to be covered under the scheme. P. partnerships. PESITM. diversification etc. Cases covered under RTDMS of SIDBI are also eligible for capital subsidy under the proposed scheme.
PESITM. Shivamogga 20 . of Management Studies. the details of which are given under the first part of the brochure are covered under General Scheme of the Corporation. Software Parks.G. private practices and consultancy services in their line of expertise. Assistance to Entertainment Industry: Objective: the objective of the scheme is to provide financial assistance for the construction / purchase of cinema house multiplexes. The premium tariffs applicable are same to the other insurance companies and at no extra service charges. And net worth of the company should not exceed Rs. production of starting TV serials and feature films as well as software for vision media publicity to be set up/produced/film within Karnataka. Roads. Dept. Eligible Borrowers: Firm/company shall been in existence for at least 5 years and proven profit for the last 3 years with no default to any bank/financial institutions.Karnataka State Financial Corporation. Foreign Letter Of Credit (FLC): Objective: KSFC has been operating this scheme for opening foreign letter of credit for importing the capital goods through commercial bank exclusively for our borrowers since 1995. Commercial complex. Assistance to Construction Activity: Objective: To provide financial assistance for construction group Housing. Bridges etc. Insurance: Objective: KSFC has entered into a strategic alliance with IFFCO-TOKIO General Insurance Company to market the Non-Life Insurance Products. Flyovers. These would enable the clients of KSFC to have the credit and the insurance in less than one roof. Bangalore Eligible Criteria: Projects which are eligible to be financed as per the SFCs Act.20 corers . Assistance For Qualified Professionals: Objective: KSFC has been operated in this scheme for setting up of business enterprises. An exclusive insurance Cell with trained staffs is operating at head office. P.
New Schemes: 1. line of credit (LOC) for purchase of raw materials from KSSIDC : The objective is to provide timely adequate working capital term loan to MSME s for purchasing raw materials. Shivamogga 21 . Other Financial Service Activities: Mutual Fund products Insurance business Monitoring of IPOs Acting as Corporate Resolution Agency P.00 lakhs. Accounting professional: ACA/AICWA/Certificate of practice issued by Commissioner of the income tax/sales tax. KSFC operated the scheme to promote MSME sector by providing financial assistance to them there by contributing to environmental improvement and economic development. Dept. Architects and medicine: Bachelor degree in any branch of engineering. Bangalore Eligible borrowers: Management professionals: ACA/ICWA/ACS/CFS/MBA/M. 2. Interest Subsidy Scheme for scheduled tribe entrepreneurs: This facility was extended on the lines of existing scheme for scheduled caste entrepreneurs. of Management Studies.G. Scheme for financing wine manufacturing industries : The objective is to promote provide financial assistance to wine manufacturing industries in the state of Karnataka their by helping farmers to get better markets and price for their products. 4.Karnataka State Financial Corporation. PESITM.00 lakhs and minimum LoC amount is 5. The maximum Loc amount is Rs 100. Scheme for financing of Energy Saving Projects (SESP) for MSME s under JICA line of credit of SIDBI : This facilitates the flow of funds for the investment in energy saving projects. 3.Com graduates. Medical professional: Bachelor degree in any branch of medicine.
Davangere. Tumkur. This has helped many petty and tiny business to flourish. Karwar. The Branch Offices of the corporation are adequately delegated with powers of sanction and disbursement. requirements of financial assistance upto Rs. Mangalore. 500. Area of Operation-Global/National/Regional: The area of operation covers the entire State of Karnataka. P. Shimoga. Chamarajanagar.G. Gulbarga. Shivamogga 22 . The industrial units / service sector established or to be established within the State are only eligible for assistance. „A‟ grade branches are Bangalore. the entrepreneurs will have to approach Head Office. Bijapur. Madikeri. Bellary. Mandya. Dept. of Management Studies. Belgaum. Chickmagalur.00 lakhs. The expected incomes will be shared by the owners in mutually agreed ratios. The corporation is interacting with various government departments and government agencies and exploring suitable infrastructure projects on joint venture basis. 500. Mofpi Scheme: The ministry of Food Processing Industry scheme was introduced for sanctioning grant or subsidy in the form of financial assistance to food processing industries. PESITM. If the requirements of loan are more than Rs. Haveri. KSFC has branches in all the district head quarters. „A‟ Group and „B‟ Group. Koppal. These units all over the Karnataka are categorized into 2 types i. Bidar. Mysore. 2e. Kolar. Generally. In Bangalore it has three branches in Jayanagar.Karnataka State Financial Corporation. Raichur.G. Hassan. Gadag.00 lakhs are handled by the concerned Branch Office itself. and M. Udupi „B‟ grade branches are Bagalkot. Hubbli.e. road. Micro Finance: KSFC supports Micro Financial Institutions (MFIs) across the state as a poverty alleviation program. Bangalore Infrastructure Development Activity: As part of the new initiative and diversification process KSFC has decided to take up infrastructure development projects with public / private participation. Rajajinagar. Chitradurga.
Remaining shares in the hands of Insurance Companies.e. The majority of shares of KSFC are held by government of Karnataka and Small Industrial Development Bank of India.54% shares.41% of shares and SIDBI hold 7. P. PESITM. Co-operative societies and banks and other parties i. the ownership is generally with Government.05% shares. of Management Studies. Government of Karnataka hold 92.Karnataka State Financial Corporation. Dept. Public Sector banks. Bangalore PIC: AREA OF OPERATIONS 2f. . Ownership Pattern: Since this is the financial institution of the Government. Shivamogga 23 .G.
Achievements: KSFC has completed 50 years of operation. 5.53 0.39 627. 3.G.90 1. Institution is able to lend 75% of the Peenya Enterprises INFOSYs. Shivamogga 24 . Dept.39 1127. cottage industry. Of Shares 45376515 537388 1127500 47041403 3210385 627500 3837885 16100 7900 1530 Paid up Equity 45376. KSFC has provided the financial assistance of around Rs. 01 Government of Karnataka Under section 4(3) (a) Under section 4(5) Total 02 SIDBI under section 4(3)(b) Special capital issued U/S 4A Total 03 04 05 Insurance Company U/S 4(3)(c) Public sector Bank U/S 4(3)(c) Co-operative Societies and Banks U/S 4(3)(d) 06 Other parties U/S 4(3)(d) Total 935 50905753 0. KSFC has ventured into diversification in infrastructure development activity with the public/private participation model.BPL were one time customer of KSFC. Its is an ISO-9001 2000 certified institute.41% Percentage Holding 2g. 4.Karnataka State Financial Corporation.75 0. artisans. ACE DESINGER. No.50 3837.54% 92. It has contributed significantly for the growth of small scale industry and development of backward areas in the state.03% 0.6 lakhs to small and medium scale industries.40 3210. Bangalore Share Holdings Composition of the Shareholdings of the Corporation Sl.00% 7.50 47041. 6. 2.9000 crores to more than 1. Establishment of women entrepreneur guidance cell for guidance and escort service of the women entrepreneur.10 7.94 50905.02% 0. PESITM. P. SC/ST entrepreneurs and other economically weaker section of the society under special loan scheme.89 16. It has extended financial assistance to rural. of Management Studies.52 537. 1. BIOCON.00% 100% Particulars No.
8. P. EG Cell passes the relevant documents to Appraisal section. Small Industrial Development Bank of India. After detail study the loan is sanctioned and then the file is sent to Disbursement section for disbursement of loan amount. HDFC. v. disbursements and recovery. Karnataka State Industrial Investment Development Corporation Limited (KSIIDC). Work Flow Model Entrepreneurs approach to EG cell of KSFC. Competitors Information: KSFC is a basically a development bank catered to the needs of SSI & SME‟s. UTI etc. which are governed by RBI & SIDBI. Dept. 2h. The screening committee scrutinizes the document submitted by the loanee and legal department verify all the legal matters affecting the interest of the corporation. the number of customer for KSFC has been reduced. As far as interest rates are concern. Shivamogga 25 . EG cell provides information to the customer about the loan sanctioning procedure and requirements in KSFC and collects all required document from loanee.Karnataka State Financial Corporation. HDFC and by their attractive interest rate. ii. KSFC has received a commendation from IDBI as one of the best SFCs of the country. Due to changing economic scenario the corporation is facing stiff competition. Appraisal section interacts with the clients and collects further detailed information specific to the project. Commercial Bank ICICI. After getting that information they send a copy to screening committee along with the observation of legal department. After verifying the documents the proposal is cleared by screening committee then it sent to EG Cell. Some foreign lending banks. 2i. an aggressive approach is adopted by ICICI. of Management Studies. iii.G. Corporative bank. Bangalore 7. Following are the main competitors of KSFC: i. PESITM. iv. Premier position among all SFC‟s of the country with regard to sanction. HSBC.
It also coordinates with the legal department and takes their help as and when it required. Entrepreneur Screening Committee E. Recovery department is also linked with the financial department. This is how an fully operational units comes into existence. they transfer the amount to account department which is collected from lonee. PESITM. Appraisal Section Account Dept. Assisted Unit Pic--Work flow model P.G.Karnataka State Financial Corporation. Recovery Department collects the recovery payments from lonee. Cell Legal Dept. Shivamogga 26 .G. Dept. of Management Studies. Disbursement Recovery Dept. Bangalore Disbursement section sends information to Account department regarding disbursement made and Recovery department.
Shivamogga 27 . Dept. These 7 elements are distinguished in so called hard S‟s i. The model stars on the premise that an organization is just not structure but consists of 7 elements. Staff. The Mckensy‟s 7S model is a widely discussed framework for viewing the interrelationship of strategy formulation and implementation. P.G. They published the books : “ Structure is not organization “. It helps to focus managers attention on the importance of linking the chosen strategy to variety of activities that can affect the implementation of that strategy.e Strategy. Systems and soft S‟s i.e Style . of Management Studies. A helpful application is to determine the current state of each element and to compare this with the ideal state. Structure. There are two persons who developed this model.Karnataka State Financial Corporation. The 7Smodel is a valuable tool to initiate change processes and to give them direction. PESITM. Skills and Shared values. “ The art of Japanese Management” and “ In search of Excellence”. Bangalore McKENSEY’S 7S MODULE: The 7S model is better known as Mckensy’s 7S. Tom Peters and Robert Waterman.
Public Grievance Cell department Entrepreneurial Guidance department Business development and Credit research department Credits department Management information services department Internal audit department P. There are several departments in the company which look after the work confined to that particular department in changing the procedures.G. The power of administration is given to the authority of respective branches within some constraints. The MD is guided by Board of Directors and Chairman in policy making and strategic management decision. fulfilling of the requirements etc effectively and efficiently. Arrangement about reporting relationships . requirement. often changes in the strategy may be implemented with some changes in “system” rather than in the organization structure. of Management Studies. what roles he has to perform .Karnataka State Financial Corporation. what rules and procedures exist to guide the various activities performed by members of all the parts of the organization structure.‟A‟ and „B‟ grade branches. It prescribes the formal relationships among various positions and activities. capital budgeting systems . The corporation is headed by Managing Directors. PESITM. Its procedures. In that. They are. Shivamogga 28 . performance evaluation systems etc. super „A‟ grade branches and zonal branches are headed by managers. planning and budgeting system . Dept. Systems: A system in the 7-S framework refers to all the rules . how an organization member is to communicate with other members. The KSFC has purely a democratic way of function. The organization is having a super „A‟ grade branches . regulations and procedure both formal then compliment the organizational structure. The structure of the KSFC is well designed and the tasks and authorities are systematically distributed. The basic structural form is decentralization. Bangalore Structure: It is like skeleton for the whole organization. training and development system. In other words. it is equivalent of the term “infrastructure”.
G. in house and outside to update the employees with latest techniques. Staff: Staffing is the process of acquiring human resources for the organization and assuring that they have the potential to contribute to the achievement of the organizations goals. marketing and public relationship skills. Various positions in the company require different contributions and thud have the implication that different people are needed to fit these various roles. There are various training programs organized by KSFC . PESITM. The employees are well delegated and they discharge utmost interest for the organization. Certain positions require people with special skills. There will be periodical meetings. it believes in teamwork. Bangalore Recovery department Sick units monitoring department Insurance department Sec-29 department PAT department Library Assets reconstruction department Style: This is the leadership approach of top management and company s overall operating approach. computer skills . Dept. finance . Shivamogga 29 . special knowledge and also different types of P. of Management Studies. economical . The Board and Executive committee meetings are conducted once in a month.Karnataka State Financial Corporation. It believes that quality can be achieved by providing quality financial and related services on a continuous basis. Highly qualified professionals in the company have major skills like technical. For each task teams are being constituted to attain specific goals. It includes programs like communication skills. The company s staff has different skills for their own works. projects concepts . Style impacts the norm people follow and how they work and interact with each other and with customers. secretarial skills etc. The company is having a democratic or participative style of management .
It is essential that the company recruits .G. top management systems. It is the first step that a company has to take in leading its organization to the ladder of success. when organization make a strategic shift it becomes necessary consciously build new skills. selects and develops the right people for mix of role requirements. communicates and implements that vision and direction is called a strategy. There are about 38 branches including the head office in which all together 1181 employees in the corporation . These are developed over a period of time and are a result of the interaction of people in the organization. as well as the manner in which it derives. marketing. P. etc hence.Karnataka State Financial Corporation. the external environment influences. and public skill. It can also be defined as the choice of direction and action that adopts to achieve its objectives in a competitive situation. The company also looks for the development of the staff skills. articulates. Strategy: The integrated vision and direction of the company. Shivamogga 30 . out of them 365 are class „A‟ officers . PESITM. 61 employees were deputed to external training programs during the year 2008-09 which shows that the corporation wants to make each and every employee highly skilled and talented so that they can compete with other competitors. economical. 691 are of class „B‟ assistance and clerical staff and 125 are of class „C‟ subordinate staff. There are various training programs are organized by KSFC. of Management Studies. Organization has strengths in number of areas but their key strengths or dominant skills are few. Skill: Skills are considered as one of the most crucial attributes or capabilities of an organization. The corporation has 8 in-house need based training programmers which were conducted covering 468 employees. Bangalore personalities. Highly qualified professionals in the company have major skills like technical. The term “skills” includes those characteristics which most people use to describe a company. The company staffs have different skills for their own works. Dept. finance. in-house and outside.
G. single window and tourist related activities . The institution focus over there demands and wants. Shared value is satisfying entrepreneurs first. of Management Studies. Dept. PESITM. These values have great meaning because they focus attention and provide a broader sense of purpose. Bangalore KSFC is one of the pioneers in this industry of providing long term loan to small and medium scale industries. They also come up with various schemes like national equity finance . Roadmap and Strategic planning collecting inputs from external environment. These schemes are there for the purpose of attracting entrepreneurs and to feel satisfactions by the institutions. Functional Departments: Entrepreneurial Guidance Department: The main functions of EG Department is provide information to the customer about the loan sanctioning procedure in KSFC and collect all required document from P.Karnataka State Financial Corporation. technological developments and modernization funds. The value that the company upholds most is customers satisfaction”. Shivamogga 31 . Mission of KSFC is “ Committed to continually nature . The company looks for the satisfaction of the customers who are generally the entrepreneurs. As a part of its marketing strategy it makes its advertising through newspaper. The following can be the strategies used by the KSFC to compete with its rivals: Group assignment over some project Job rotation Under supervision works Budgeting. Shared Values It refers to the core or fundamental values that are widely shared in the organization and serve as guiding principles that are important. develop and service the small sectors through need based products and services. They also give a strong basis of stability to an organization in rapidly changing environment by providing a basic meaning to people working in organization. leading channels and focus over the quality certificate (ISO 90012000).
It involves 20 people and it divided into different teams. and also studies the financial viabilities. Estimate/specification. If the EG Department requires additional information on a technical project they obtained from specialists and collect the necessary details & examine before placing the project clearance committee meeting. raw materials. ii. Marketing tie up(marketing arrangements/job order/assurance letter) d. power. marketing department.Karnataka State Financial Corporation. c. building. of Management Studies. plant and machinery etc. Each team contains finance department. one assistance and one personal assistance. two managers. v. Project report/project profile Bio data & net worth statement of promoters/partner/director(as per Performa ) PRC/DTGD/pmt registration/ industrial registration or any other approval Constitution details such as partnership deed MOA. i. Machinery quotation. marketing department checks the present and future demand for the company product etc. Collateral security detail Credit Department: Credit department one of the important departments of KSFC. Financial statement of the concern and associate concern for min period of 3 years (previous) They also collect the information relating to the project like: a. iii. plan & approval from competent authority b. PESITM. and the team which handles the particular cases should perform the activity of disbursement. Shivamogga 32 . technical department collects the information about location. Each team handles the individual cases. and legal department. Finance department checks the past years financial performance and current financial status. P.G. transportation. Dept. The following documents are collected.AOA by law Location document like sales deed land allotment land conversation letter KSSIDA shed/ PVT shed lease agreement vi. Single window clearance letter if power requirement is more than 250 KVA and project is an MSI vii. technical department. Bangalore loanee for sanctioning the loan. There are five members working in EG Department they are: AGM. iv. and also studies technical feasibility.
experience. Normal sector.e. It is to avoid the delay. 15 days for additional loan. of Management Studies.e. The legal documents are kept as record for the purpose of lending. Normally 13% per annum rate of interest is charged.G. land and building or any fixed property or proprietor personal property etc. The corporation may also insist additional security by the promoters at the time of sanctioning the loan i. and 40 to 45 days for big cases. Dept. Every department is provided with a legal officer. If the organization is ISO certified it provides 0. To serve the purpose of operational flexibility legal activity is decentralized. With their help KSFC takes any suitable legal action at the time of defaults or changes on project or changes in promoter or changes in securities. It involves panel of advocates. plant and machinery to avoid the over or undervaluation of asset. buildings or machines etc. Legal personnel accompany the P. Bangalore When the credit department gets the file from EG Cell they check the background of the proprietors i.. Even the Recovery Department has a legal wing. Credit department divides projects into 4 categories.5% reduction in interest rate. During this activity extensive discussion with promoter are held. Restricted sector and Prohibited sector.Karnataka State Financial Corporation. Legal Department: In a Financial Institute Legal department is very important as they involve in binding the legal requirements to securities. Legal department attends to all legal matters affecting the interest of the corporation. legal department. They are Thrust sector. Security is nothing but fixed asset i. lands. Shivamogga 33 . It sanctions 75% of the total loan amount and remaining 25% should be borne by the promoters. After sanctioning it passes a copy of document to account department. In appraisal department legal person scrutinizes the submitted document before the loan is sanctioned. technical feasibility of firm / organization and it also value the land and building. financial strength etc. Credit department takes 20 days to check these documents for new cases. PESITM. knowledge. recovery department or related branches if the firm is outside Bangalore.e.
recovery of money is one of the major sources of funds for the corporation. Treasury Department: Mobilization of the fund and serving the debt is the main function of treasury department. banks etc. Debt Recovery Tribunal deals with the cases of non recoveries. The role of recovery personnel is to tender full complement of services to the loanee throughout the curing of loan. The corporation lends money to industrial concerns for establishment. Dept. It has also evolved guidelines and procedures for taking over and disposal of units under sec 29 of SFC‟s Act for filling petition under sec of KPM (R) Act 1979. expansion. He would also help the loanee in getting other facilities available from various government organizations corporate bodies. Treasury department mobilizes the fund through different sources. The repayment period can extend up to 20 years for sound viable projects. Head Office has two Deputy General Managers to look after the recovery works for Bangalore other than Bangalore Cases. He keeps a close watch of the venture throughout the period of recovery. Therefore. diversification of the projects while sanctioning the loan based on the certain assumptions. The main sources of funds can be classified into two types such as: P. modernization. PESITM.G. for invoking of personal guarantee of borrowers/sureties. of Management Studies. Legal departments clear the file for the sanctioning of the loans based on security undertaken by it. tackling sickness in assisted units. Recovery Department (RD): Collection of amount due is called as recovery. For tackling chronically default units. Bangalore technical team in visiting the land. tackling wilful and deliberate defaulting units etc. The health of the corporation is judged by the extent of recovery that it can affect. Shivamogga 34 . the repayment period generally spread to 7-8 years with a moratorium period of 1-2 years for sound viable projects.Karnataka State Financial Corporation. All these have been communicated by means of circulars from time to time to all the field officers. Recovery officer acts as an intermediary between the loanee and the corporation in keeps the pulse of the venture and the sorting out the various problems face by the industrial units and suggests proper remedial measures to come out of the problem. Interest payments are the expenses and plough back requirements.
Refinance: Refinance is nothing but loan provided by the SIDBI. The majority of the shares are held by the government and SIDBI. Other Source: The other sources like line of credit given by bank. bond is a long term bond issued by R. Fixed Deposit (F. and the rate of interest also fixed by R. It provides only call option not put option. the duration of bond is 5 to 8 years. Bangalore a) External Source. bond is one of the main sources of finance to treasury departments. b) Internal Source: It is nothing but interest recovered by recovery department. Recovery in terms of capital and interest. It is the major source of finance to KSFC. The duration of bond is 10 years. Dept.L. the paid up capital of the company is Rs. P. It is a major source of funds for KSFC and the profit and loss of the firm depends on recovery performance. KSFC gets finance by pledging the loan asset. KSFC gives least preference to this source because KSFC charged fixed rate of interest to its customer but banks charge fixed and floating rate of interest.I.R. a) External Source: Following are the important external sources such as: Share Capital: KSFC has Rs 500 crore authorized capital.L. S. of Management Studies. PESITM.R.G.e. Shivamogga 35 .D. S.SIDBI finance the 55% of each disbursement made by KSFC. Bonds: There are two types of Bonds i.B. KSFC should repay the loan amount sanctioned by SIDBI within 8 years. Bond and Private Placement Bond. The bonds issued by the KSFC are guaranteed by the government. But KSFC not much concentrated on this source because it involves long procedure and time consuming.): KSFC is also eligible to raise the fund by general public in the form of F.L. Private Placement Bond issued by the government.Karnataka State Financial Corporation.D.B. S. The rate of interest will be fixed on the basis of market situation.R. 105 crore. b) Internal Source.I.
which highlights that the corporation gives prime importance to quality of services. Public sector: science the KSFC is a government undertaking it can relay on government for its funds in case of shortage 8. 9. KSFC has got well diversified activities which not only deals with the lending function but also with functions with leasig . Variety of new schemes in the product line. These aspects are carefully handled by every company to be in safe mode. hire purchase . Repayment period is very flexible 5. Dept. Shivamogga 36 . Bangalore SWOT ANALYSIS The overall evaluation of company‟s Strength. insurance and financial assistance to small and medium scale industries Weaknesses These are the companies negative aspects which stand as obstacles during achievement of the future goals. of Management Studies. The weakness of the organization are as follows: 1. fault or defect in the organization that will keep it from achieving its objectives. This analysis helps the firm in realizing its strengths and building upon them in order to overcome its weakness so that it can take advantage of the opportunities to manage the threats. 2. 2. SIDBI etc are working directly and providing services P. 3. 7. Customers and the people at the concern perceiving the legal procedures and persons who scrutinize them as interference and not as a contingent protection. KSFC maintains good industrial relations and also morale. The KSFC‟s strengths are : 1. It is limitation. The institutions like IDBI. Opportunities and threats called SWOT analysis.Karnataka State Financial Corporation. recoveries and one time settlement. PESITM. 4. One of the major strength is the presence of highly expertise and qualified people 6. Strengths: It is the resource or capacity of the organization that can be used effectively to achieve its objectives. Network : KSFC has its branch in all districts of Karnataka and it gives strength to access to reach every nook and corner. Support of other financial institutions is being reduced these days.G. KSFC is ISO 9001-2000 certified organization . KSFC is a client friendly and provides need based policies in the area of credits . Weakness.
4. To generate funds for investing in different avenues. 4. of Management Studies. HDFC are aggressive in financing loans by reducing their processing time in their corporate financing P. SIDBI. Co-operative banks are gearing up for term loan financing to capital SME‟s. KSFC can take the opportunity of serving for the development of small and medium scale industry when commercial banks fail to perform faster. 2. damage or injury. Indian economy is growing at a faster rate owing to the faster development of small scale and medium scale industry. 1. news paper .G. 4. which provide funds at lower interest rates can be a big threat for organization. Incase of certain schemes. Private banks like ICICI. Bangalore 3. it takes long procedures Opportunities It is any favorable situation in the organizations environment.Karnataka State Financial Corporation. Multinational banks are coming up with new innovative ideas for increasing the loan amount like that of pre draft loan for the prompt customer. It is usually a trend or change of some kind or an overlooked need that its position by supplying it KSFC can focus on: 1. 3. Many commercial banks have set their branches in SSIs area. Comparatively higher interest rates. Dept. PESITM. Development of infrastructure. Threats It is an unfavorable situation in the organizations environment that is potentially damaging to its strategy. televisions . This serve as an opportunity for KSFC. The organization can improve its marketing activities to create demand by undertaking creative and attractive advertisement activities in the modes like online. it can accept the deposits from public in large extent. 5. The threats may be a barrier. magazines etc. 2. a constraint or anything external that might cause problems . 3. 6. the corporation has the opportunities to come up with new credit schemes with attractive norms. Since the concern is enforced with a credit research department in future. Shivamogga 37 .
95 889.96 0.39 0.50) -57858.92 296.70 0.00 8.00 58.50 880.00 8.96 Year Ended 31-03-2010 18214.97 313.00 20191.33 4374.05 -3917.00 -3984.G.61 4.50 1.50 16384.53 1050.29 219.00 186.55 P.50 63.49 4152.94 0.00 20598.88 26402.56 76.39 1875. Dept.48 2685. of Management Studies.74 621674 60891.75 7536.04 148.70 41. Bangalore Profit and Loss Account for the Year ended 31st March 2010 (Rs in lakhs) PARTICULAR Year Ended 31-03-2008 INCOME: Interest income Other Income Total EXPENDITURE: Interest And Other Financial Expenses Personnel Expenses Administrative expenses Bad Debt written off Provision towards Contingencies/Expenses Depreciation Provision For NPA‟s Total Profit before tax Add: dividend payable withdrawn Less: Provision for Fringe Benefit Tax Less: Provision For Wealth Tax Less: Provision For Income Tax – Previous Year Profit After Tax Add/Less: Loss Brought Forward Deficit carried to Balance Sheet 13634.77 6329.15 (57858.24 53874.56 20900.34 358.22 4027.00 8.03 18984.47 22484.11 0.76 5560.59 1306.42 301.01 3383.73 808.72 Year Ended 31-03-2009 16923.96 621. PESITM.09 (53874.46 6216.Karnataka State Financial Corporation. Shivamogga 38 .59) -5756244 26521.
41 17214.58 11710.83 During the year2009-2010 under review.08 230209.84 crore in 2008-09.69 156142.00 crore on accrual basis as against Rs. In 2008-2009 KSFC incur a net loss of Rs.63 6155.17 22937.56 107268.69 5640.86 6094.17 105734.62 53874. PESITM.71 161945. 224.15 57858.G. 209.37 111629.19 6011.99 15371.69 5566. Bangalore KARNATAKA STATE FINANCIAL CORPORATION Balance Sheet as at 31st March 2010 (Rs in lakhs) As at Particulars CAPITAL AND LIABILITIES: Share capital Loan pending conversion to Share Capital Reserve fund and other Reserves Term Borrowing Current Liabilities and Provisions Total PROPERTY AND ASSETS: Cash and Bank Balances Investments Loan and advances Fixed assets Current assets Profit and Loss Account Balance 4995.17 crore because of provisions made during the year.73 9453. Shivamogga 39 .94 246772.35 52879.44 27467.50 6498.08 52488. 39.00 5492.73 166586.83 31-03-08 As at 31-03-09 As at 31-03-2010 Total 209069.55 917.34 9292.Karnataka State Financial Corporation. Dept.94 65340.59 6979.14 230209.37 35275.19 18900. of Management Studies.41 246772. In current year the gross revenue of the KSFC is decreased because of recession and poor recovery.90 57562. P.06 917.97 209069.09 0. the corporation generated a gross revenue of Rs.
14 9453.55:1 Debt Equity ratio can be calculated by dividing total debt from total equity. of Management Studies. Bangalore Interest income as a % on Working fund: Year 2007-2008 2008-2009 2009-2010 Interest Income 18984.85:1 1.21:1 1.48 Working Fund 133668.09:1 2.38 130319.41 Ratio (%) 1. Current year is 2.34 166586. and it is more than ideal ratio because KSFC borrow 55% of each loan amount from SIDBI. But when compare to previous year it is decreased because of increase in Equity.97 9292.90 Current liability 18900.55 52488. Current year it is 13. Current Ratio: Year 2007-2008 2008-2009 2009-2010 Current asset 22937. The ideal ratio is 2:1.24 130981. Debt Equity ratio: Year 2007-2008 2008-2009 2009-2010 Debt 156142. Current asset). PESITM. Shivamogga 40 .75 16923. The Current ratio in the current year is 1.23:1 which is less than the previous year because of decrease in current asset and increase in current liability.23:1 Current ratio can be calculated by dividing current asset by current liability.97% when compared to previous year it is increased because of increase in interest income.97 Interest income as a % on working capital can be calculated by dividing the interest income from working fund (Cash and bank balance.G.76 18214. Dept.15 11710.55:1. Loans and advances.44 Percentage (%) 14.62 17214.09 Ratio 5.06 65340.20 12.92 13.19 161945.68:1 3.73 Equity 27467.Karnataka State Financial Corporation. P.
Current year liquid ratio is 1.41 1. Bangalore Liquidity ratio: Year 2007-2008 2008-2009 2009-2010 Liquid asset 27933. of Management Studies.97 9292.48:1 2.55:1 1.14 9453. it is more than ideal ratio (1:1) and less than the previous year because of increase in current liability and decrease in current asset.G.97:1.52 18690.97:1 Ratio Liquid ratio can be calculated by dividing the liquid asset from liquid liability.Karnataka State Financial Corporation. P.61 23712. Dept. Shivamogga 41 . PESITM.25 Liquid liability 18900.
Recovery Department and Treasury Department and it gives me a practical knowledge about the functioning of an organization. This is because every human being learns hence only out of experience and experience is the way of life. I also observed that the management style of working here is basically participative i. a person enhances his / her knowledge only when exposed to real conditions in a systematic manner. Shivamogga 42 . Credit department. P. of Management Studies. Legal Department. The main objective of this project is better understanding of practical implication of the conceptual learning which we studied in classroom. this indicate that it was also participative in its approach. Each department was functioning according to a set of objective to achieve the goals.e. which was for a period of 10 weeks period. I observe the importance of management functions such as planning. directing and controlling in the organization. I understood the importance of communication and how it plays major role in the organization. This project has helped me to gain the knowledge about various functional departments of the organization like Entrepreneur Guidance Cell. Bangalore LEARNING EXPERIENCE Learning is synonymous to experience. organizing. I had been to Karnataka state financial corporation (KSFC) on 1/1/2010 for summer project. In KSFC there is a good coordination amongst various departments which was responsible for efficient functioning of this industry. though all the policies and procedure are decided by the management committee and for any suggestion to be followed for the further improvements are most welcome. PESITM. staffing.G. In life. Suggestion are also taken from the employees. Dept. I also came to know that co-ordination among various departments plays an important role to achieve the goals of an organization.Karnataka State Financial Corporation.
Some institutions follow the shorter procedures in project appraisal and some follow the elaborate procedures. Shivamogga 43 . PESITM. it is equally necessary to determine the economic significance. etc. The consideration for credit appraisal are type of organization. While broadly the same sets of factors are taken into consideration. market potential etc. Basically project appraisal is about finding out whether the project is technically feasible and financially viable. From this it‟s evident that there is no standardization in approach towards project appraisal. DFIs follow certain approaches of project appraisal. Projects which offer the extensive employment opportunities reduce regional imbalance. P. product development projects. The dictionary meaning of appraisal is to estimate the worth or values of something. of Management Studies. size of the firm. the weight age given to individual factors varies from case to case and institution. Apart from profitability. Project appraisal is one of the major functions for a lending institution because the institution depends upon the interest earned by lending the money.Karnataka State Financial Corporation.B GENERAL INTRODUCTION: Appraisal means critical evaluation of the project for calculating its worth. Based on initiating or participating organization such as internal projects. nature of the product. departmental projects cross unit projects. earn foreign exchange etc are performed. IT projects. Dept. apart from that of commercial bank and other financial institutions. activity of the firm. RD projects Logistic projects etc. Bangalore PART . KSFC categorized the project on the basis of different aspects.G. such as: Based on project content like construction project.
Karnataka State Financial Corporation. While the object of appraisal may differ. To study the project appraisal system and procedure at KSFC. the corporation took active role to provide working capital also. Shivamogga 44 . guarantees or other incentives. To analyse and interpret the data obtained to make suitable suggestion.G. Objectives of the Study: To understand the conceptual background of project appraisal. The available capital should be used in a manner that is consistent with the overall socio economic objective of organization. The project is about a detailed study of such an appraisal system. complex projects and programs etc. Need for the Study:Industrial projects are appraised by different institutions for a variety of reasons. SFCs and other financial institution appraise projects to determine whether it is worthwhile to make investments in them and or to extend the loan. it is necessary for any financial institute to know the feasibility of the project before lending the money. P. As the commercial banks were selective in providing working capital facilities to newly set up units. The main objective of establishing KSFC was to provide term loan assistance to tiny. Bangalore Based on complexity it can be classified as simple projects. Hence. Many business lack access to capital and money markets and approach DFIs for term finance. Hence the project is titled “A Study on Project Appraisal at KSFC”. Dept. The purpose of appraisal thus varies from one appraising agency to another. Credit is the life line of the business. Hence. Government and allied agencies may appraise projects with a view to find out whether they should be given tax exemption. Statement of the Problem:Capital is a scarce resource. the general principles of appraisal are almost the same. To study the categories of loan proposal appraised at KSFC. hence it should be optimally utilized and therefore rational allocation of this resource is of utmost importance. subsides. projects should be appraised using different appraisal techniques. small and medium enterprises mainly for the purpose of acquisition of fixed assets. of Management Studies. PESITM.
Small and Medium projects financed by KSFC. It involves gathering data and uses statistical technique interpretation and drawing conclusions about the research data. Bangalore Scope of the Study:The scope of studying the project appraisal covers the system and operations at KSFC.G. Project eligible for assistance from KSFC. Descriptive research does not establish a cause and effect relationship. P. PESITM. Shivamogga 45 . It is a blue print which is followed to complete the study. Category wise sanction performance. Descriptive research helps in drawing definite conclusions. KSFC services towards customer. Hear the researcher has observed various departments and its functions interrelationship process and various other transactions undertaken in processing prospective clients in KSFC. They are Different loan schemes of KSFC. The area of the study of project appraisal in KSFC covers several areas of importance. of Management Studies. Research Methodology:Research methodology is a method to solve the research problem systematically. Dept.) In the present study descriptive method of research is under taken. With the help of descriptive research few insights were drawn and conclusion given at the end based on observation. The main purpose of descriptive research is to describe the state of view as it exists at present.Karnataka State Financial Corporation. (It is similar to builder blue print to building a house. process and appraising system pertaining to Micro. The study aims to cover the spectrum of how the projects are appraised by KSFC for new business venture as well as existing enterprises and the way they asses the viability of the project by studying the project. In this study effort being made to describe the characteristic of operation. Procedures followed to sanction loan.
Tools and Techniques: The collected data has been tabulated. of Management Studies. P. Bangalore Sources of data:Primary Data:Primary data may be described as those data that have been observed by the researches for the first time. magazines. analyzed and shown in way of graphs. Primary data are collected from interviews. Shivamogga 46 .G. books and articles. Which are already existing and prepared for some other purpose. identified wherever required. The study is limited by the exposure and experience of their researcher. Personal interview and discussion have been carried at informally with the officials of KSFC. annual report of the companies. PESITM. news papers etc. discussions. The study is limited by time constraint.Karnataka State Financial Corporation. The finding so obtained cannot be compared with the other commercial bank since they are not universally applicable. Dept. observation for the specific purpose of the research. Limitations of the study: The collection of data for analysis is restricted to KSFC head office only. The system and practices are described. manuals provided by the company. diagrams and interpretation. Secondary Data:Secondary data includes information generated from companies‟ previous records.
Approval of the project by screening committee: Screening committee consists of top officials including Executive Directors. He comes to know about different schemes and clauses which are suitable for him or he may have an idea about the project already in his mind. Entrepreneur approaches the EG cell: The Entrepreneur Guidance Cell is the link between KSFC and the entrepreneurs. which enables them to have indepth knowledge and specialization in these industries. This form contains basic details of the project like the product. Shivamogga 47 . The EG cell then checks the EG form. All these conditions are conveyed to the entrepreneur in the meeting. amount to be bought in by promoters or partners etc. In either case EG cell will issue a form. it will forward the same to screening committee. which should be filled up by the entrepreneurs and returned back to EG cell.Karnataka State Financial Corporation. the committee will approve the project in principle and ask the EG cell to issue the application form along with the list of documents to be submitted while returning filled up application form. It guides the entrepreneur who approaches it. of Management Studies. PESITM. The appraisal department has been divided into two groups. All will give their opinions about the project in the meeting. Depending upon the nature of the project the committee may ask for additional securities or the promoter‟s equity or such other conditions. the amount applied for. which should be attended by the entrepreneur in person.G. if found correct and complete with all the enclosures. technical and financial experts. the organization and like. Bangalore PROJECT APPRAISAL AT KSFC: A long – standing experience has enabled KSFC to have its own methods and standards for appraising a project. The process of appraisal is carried out in phased manner as explained in following paragraphs. After clarifying some basic functions like type of security. Dept. The efficiency with which projects of different industries have been appraised is the result of this arrangement. P. Also it consists of legal. Each group has been allotted certain industries..
The case then will be forwarded to ADM department for appraisal. The following particulars of the entrepreneur are examined in detail-name. This is an important step in appraisal processes because background is unique to each entrepreneur. of Management Studies. technical arrangements. educational qualification. It includes the study of manufacturing process. An amount of half. preference is given by KSFC. but first generation entrepreneur is also given preference if they have sound technical knowledge. age. net worth. The EG cell then verifies the details provided by the entrepreneur. Dept. if the entrepreneur has a sound experience in the field.Karnataka State Financial Corporation. Shivamogga 48 . selection and procurement of plant and machinery. Bangalore Getting the filled – in application form and its verification: The entrepreneur then fills up the application form along with necessary details. experience etc. The concerned team of ADM department will appraise the project. product mix. Technical appraisal: Technical appraisal of project is essential to ensure that necessary physical facilities required for production will be available and best possible alternative is selected to produce them. the project is appraised on following factors: Background of the entrepreneur Technical appraisal Commercial appraisal Financial appraisal Legal appraisal Background of the entrepreneur: As explained earlier. special and technical qualifications of the entrepreneur etc.percent of proposed loan will be collected as processing fee. plant P. PESITM. size of the plant. Then starts the work of appraising the project in detail. As already mentioned. It will check the documents provided by the applicant to make sure that the necessary document are submitted.G. stakes in other firms by the entrepreneur. He submits the form with the documents required.
Design and engineering: While checking the design and engineering aspects of plan and building it should be seen that plant layout is satisfactory and provision has been made for storage of raw materials and finished product is sufficient for future expansion. The team of technical experts will visit the unit for inspection of building if it already exists. town. Arrangements must have been made for standby equipment. village etc.. type of buildings.G. power. Shivamogga 49 . It may be decided keeping in view the relative importance of various requirements of production like proximity to raw material.. schedule of project implementation and location of the project with reference to availability of various inputs required for production. proximity to market.Karnataka State Financial Corporation. and also a particular size within the general location. critical spare parts. Bangalore layout. necessary study should be done about the success of the process in other countries and it should be ensured that arrangement for using the proposed technology is satisfactory. utilities such as water. The entrepreneur should get permission from municipality or any other concerned legal authority for constructing the building and the KPTCL letter for power supply is obtained. P. and availability of particular raw material and cost of process. Dept. It will also examine the area and location and the unit. fuel etc. internal handling and effluent treatment. care should be taken to see that there is no infringement. required quality of the product required. naturally a comparative study should be done to choose the most suitable process. PESITM. power. facilities like water. availability of labour. Technical process/technologies: If the product can be manufactured by using alternative raw materials with alternative processes. its end-use. tools. The technical appraisal includes the following: Location: Study of location includes selection of general location like city. road etc. If the product is to be manufactured by a particular process for the first time in the country. The selection of the process depends upon the quality of production. of Management Studies. The technical team will also verify other factors to make sure that the project will not fail technically. etc. Where trademarks or patents have been obtained.
it may be worthwhile to have such additional facilities or at least to keep provision to install such additional facilities. Selection of the plant and machinery: Selection of plant and machinery is done according to manufacturing process and size of the unit. Dept. of Management Studies. dust control etc. Plant layout and factory building. humidity control. 2. Plant layout: The efficiency of a manufacturing operation also depends on the layout of the plant and machinery. This is to make sure that the estimated production with these machines will be materialized. Technical collaboration arrangement. Choice of technical process and appropriate technology. its impact on the viability of the project may be studied. 5. consumable goods in process and finished goods.mix or product range may be decided according to market requirements. Bangalore Product mix / product range: Product. Shivamogga 50 . P. If the supplier insists the unit to purchase required machineries from these suppliers chosen by entrepreneur is a reputed one then there is no problem. if such flexibility needs additional to investment. If the manufacturing process requires air conditioning / air cooling. raw material. It may be ensured during projects implementation that constructional of building and installation of machinery is done according to building plans and layout. PESITM. Selection of plant and machinery. KSFC has got a list of registered suppliers of machinery. Location aspects of the project and availability of infrastructure facility. 6. Plant layout may be done in such a way that minimum time is taken in handling equipment. Size and scale of operations. 1. 4. Different stages of manufacturing process should have proper balance of capacity. whenever required in future. Plant layout helps in specifying the construction of buildings required for the plant and preparing building plants.G. if any 3. If the project has to face tough competition in the market or the demand for the product changes according to fashion or extra amount required for the additional facilities is not heavy. KSFC check is the plant should have flexibility to change product-mix according to changes in the market conditions.Karnataka State Financial Corporation. necessary care may be taken while preparing building plants.
DSCR etc.E. The financial institution insists for minimum contribution from the promoters to ensure that P. PESITM. of Management Studies. On the basis of financial projections.A. Projected Balance-sheet: This is prepared on the basis of profitability estimates and cash flow estimates. according to the movements shown in cash flow and profitability estimates. the cost of raw materials. Dept.G. The financial institutions that finance the projects are concerned with the successful operation of the unit. important ratios like B. cost of labour and such other aspects. Depending upon the information given by the entrepreneur and information collected on their own. Balance sheet is a snap shot of to confirm where the total of its assets side will be equal to the total of its liability side. current assets etc. which is already written off from the expected profit of the unit. The team visits the unit and collects the information about profit expected along with probable sales. Financial appraisal: The purpose of financial appraisal is to find out the financial viability of the project. These ratios included: Debt-equity ratio: It is the ratio between the contribution by owners and financial institutions. bank borrowings. term loans. Cumulative surplus shown in profitability and estimates balance shown in cash estimates represents the position of cash and bank balance. Preliminary expenses are taken after deducting the amount. Bangalore 7. sundry creditors. For this it should be confirmed that the project generates enough cash surplus to meet all the contractual obligations The financial appraisal helps to find out the risk associated with financing the project. DER. financial experts will prepare several financial estimation like projected cash flow statement. Shivamogga 51 .Karnataka State Financial Corporation. Fixed asset are taken after deducting depreciation provided in profitability estimates. the financial institutions use the following ratios. Project design and networking analysis for the assessment of project implementation schedule. The position of share capital. are ascertained at the end of each year.
This cost of production can be fixed and variable cost.G.Depreciation I. R.5:1 will be accepted in extremely deserving cases. DSCR for projects below 1. repairs and maintenance. = Equity Debt-service coverage ratio: This is the ratio calculated to find the firm‟s ability to generate surplus cash generation and profitability of the project. For loans up to Rs. of Management Studies.Profit after tax D. PESITM. Dept. This fixed and semi fixed cost include salaries and wages.Interest rate charged L.Karnataka State Financial Corporation. A certain amount of fixed cost has to be incurred by unit the semi fixed cost may not vary materially with the level of output.E. Bangalore they take necessary interest in running the unit successfully.10 lakhs--------up to 2:1 Total Debt D. The formula used for calculation: PAT+D+I DSCR= ──────── L+I PAT.5:1 and 2:1 is accepted as reasonable.10 lakhs--------up to 3:1 For loan above Rs. The corporation adopts norms as per the guidelines issued by the SIDBI from time to time. administrative cost fixed portion of selling P.Loan repayment installment OR Net operating income DSCR= ──────────────── Total debt services Break-even analysis: The break-even point is a point which helps us to recover the production cost. Shivamogga 52 . For this purpose Average DSCR ranging between 1. Sometimes division of cost may be difficult.
outside purchases. power. Dept. Productivity ratios: Capital employed to value of output/sales Capital employed to net value added Investment per worker Productivity per worker Profitability ratios: Percentage of raw material to value of output Percentage of wages and salaries to value of output Percentage of interest to value of output Percentage of operating profit sales Percentage of profit after tax to equity P.G. of Management Studies. depreciation on straight line method. This includes raw materials. PESITM. the breakeven point should be expressed in terms of percentage of installed capacity to know the margin of safety in the capacity. fixed royalty and know-how payments. While appraising a project. Bangalore expenses.Karnataka State Financial Corporation.even point= ──────────── (Sales.variable cost) Or Fixed cost Break-even point= ────────── Contribution Break-even point can be called as bread earning point as a unit ears profits from sales above the breakeven point. Variable cost varies with the levels of production. Fixed cost Break. interest on loan. interest on working capital and other variable expenses. packing. Shivamogga 53 . fuel.
fuel. PESITM. Verification of the profitability estimates is highly essential for the proper appraisal of a term loan proposal. marginal efficiency of capital. Various items included in profitability estimates can be verified according to checklists given below: Sales realization Raw-materials and consumable stores Utilities(power. In other words. rate of return over cost. Profitability estimates: Profitability estimates are estimates of expected sales realization and expenses to be incurred by the unit. Mere checking of arithmetical calculation of various figures is not sufficient. Bangalore Internal Rate of Return statement Internal Rate of Returns (IRR) method is another cash flow technique which takes account the magnitude and timing of cash flows. Dept. water etc) Repairs and maintenance Wages and salaries Rent and salaries Administrative expenses Depreciation Selling expenses Interest on term loans Interest on bank borrowings Profit P. Shivamogga 54 .G. Excess of sales realization over expenses indicates the expected profit of the unit. of Management Studies. time adjusted rate of return and so on.Karnataka State Financial Corporation. Other term used to describe the IRR method are yield of an investments. it is the rate at which the net present value of the investment is zero. The basis of various figures should be ascertained and checked to satisfy that profits shown in profitability estimates are realistic. The internal rate of return can be defined as that rate which equates the recent value of cash inflow with present value of cash inflow with the present value of cash outflow of an investment.
Dept. Loan repayment schedule: All term loans except those financed under rehabilitation scheme are required to repay within a maximum of 8 years including moratorium period. The interest on the loan balance is called on quarterly basis. Hence it can easily judge the market potential for the proposed product. The report of the same is included in project report.Karnataka State Financial Corporation. Shivamogga 55 . While profitability estimates are prepared only from the year in which the unit is likely to commence production. competition. cash flow statement are necessary for the construction period also to ensure availability of cash according to requirement of the project. If the product to be manufactured is new or unique. of a particular industry. The expert assisting each team carries it out. supply. However the compounding of interest is calculated on monthly basis as well as quarterly basis depending upon scheme and type of loan. Generally the appraising team has the knowledge about demand. Bangalore Cash Flow Statement Cash flow statements are prepared to ensure that the unit will have necessary cash with it and it will not face liquidity problems. then special market survey is carried out. profit margin etc. Normally the term loans are required to be repaid in monthly instalment in smaller cases and quarterly instalment for bigger cases. of Management Studies. Commercial / Market appraisal: The step in project analysis is to estimate the potential size of the market for the product proposed to be manufactured or service planned to be offered and get idea about the market share that is likely to be manufactured. The cash flow statement includes sources of funds and their deployment. Steps in the market analysis: Situation analysis and specification of objectives Collection of secondary information Conduct of market survey Characterization of the market Demand forecasting P.G. PESITM.
of Management Studies. Supply and competition. magazines. This involves data from journals. PESITM.Karnataka State Financial Corporation. Characterization of the product: Based on the information gathered from the secondary and the primary sources the characteristics of the market may be analyzed in terms of the following factors or the characters. Price. Conducting market survey: The market survey basically is a sample survey in which a sample of the product is given to the customer and his views are elicited based on which the success of the product is determined. websites and government organization. Bangalore Market planning Situation analysis and specification of objectives: This involves through understanding of the current factors and future changes that may occur in the selected business and in the manufacture of the product for the selection project to be success.G. The important thing to be remembered is to have a clear idea about the target population. Shivamogga 56 . Collection of secondary information: This is the data collected for some other purpose but may be useful in the current analysis of the market for the product. The second type of the market survey is thought questionnaire in which a few questions are asked and the views are elicited. P. Methods of distribution and salary promotion. Dept. Effective demand in the past and the present. newspaper. Consumers. Break down of demand.
Subjective method: ─────────── Delphi method Jury method Objective method: ─────────── Census method Statistical method Chain command Cause and effect model Economical model Lead indicator Analysis based on secondary data Market planning: Market planning is most important aspect in market demand analysis. Dept.Karnataka State Financial Corporation. Thus the appraisal is carried out in a detailed manner. Shivamogga 57 . Legal appraisal: KSFC works to make sure that the loan is secured and the documents are authentic. pricing. It should cover distribution. A suitable market plan should be developed to reach a desired level of market penetration. P. Bangalore Demand forecasting: The demand for the product may be forecasted either through the subjective or through the objective methods. The legal appraisal will be complete after all documents are verified.G. The primary objective of industrial development is always kept in focus while appraising the project. the team depending upon the nature of the project. For this it needs various legal documents from the entrepreneur. A list of documents to be given by the entrepreneur is issued at the time of issuing application. and service. Further. PESITM. of Management Studies. promotion. will ask necessary additional security documents. during the process of appraisal. The legal experts will check the documents given for their authenticity. The stringent procedure is to make sure that entrepreneur has real interest in the project and the loan is given for the good purpose.
Dept. which have significant ecological implications like power plants and irrigation schemes. The method of credit appraisal in KSFC is evolved out of its experience over the year and is always be scrutinized for improvement. of Management Studies. and environmental polluting industries (like bulk drugs. PESITM. environment concerns have assumed a great deal of significance and rightly so. P. Ecological analysis should be done particularly for major projects. Ecological appraisal: In recent years. chemical and leather processing).G. Shivamogga 58 . Bangalore KSFC insists for more documents and margin to make sure that project becomes a success and also to safeguard its interest in the project.Karnataka State Financial Corporation. In case of default on the part of the entrepreneur it should be able to recover the loan amount by liquidating the pledged assets.
sanctioned amount. 70000 60000 50000 40000 30000 20000 10000 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 No of Projects Sanctioned Amount Disbursement Amount Recovery Amount Analysis: The table represents the performance of KSFC during last 5 years in terms of projects sanctioned in numbers. P. The number of project sanctioned during the year 2009-2010 is 1461 which is the highest comparing to last 5 year.62 38391. Year No of Projects 1 2 3 4 5 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 1161 1326 1195 1420 1461 Sanctioned Amount 31620.G.50 42452.75 Disbursement Recovery Amount 19986. Dept.31 63148. of Management Studies.55 43438. Bangalore ANALYSIS OF THE PROJECT APPRAISAL PROCEDURE IN KSFC: Table 1: Showing the performance of KSFC during last 5 years (Amount Rs in lakhs) Sl.Karnataka State Financial Corporation.44 55494.30 30312.07 56524.94 36815.09 Source: KSFC record.52 Amount 54158.02 50122.34 48163. No. PESITM. Shivamogga 59 .09 31039.73 56114. disbursement amount and the recovery amount during last 5 years.
52 lakhs which is the highest disbursed amount followed by Rs.30 lakh in the year 2006-2007. 43438. 31039. Dept.G. PESITM. The recovery amount during the year 2009-2010 is Rs. of Management Studies. 56657. 55494.24 lakhs which is the highest amount recovered during the year 2004-2005 P.09 lakhs recovered in the last 5 years and Rs.75 lakhs which is the highest sanctioned.Karnataka State Financial Corporation. The disbursement amount during the year 2009-2010 is Rs. Shivamogga 60 . Bangalore The sanctioned amount during the year 2009-2010 is Rs 63148.
53 (37.05 (24.38%) 488.50 (. No. 3 3 2007-2008 Amount 4 575. 7 7 Amount 8 640.Karnataka State Financial Corporation.86%) 13938.32 6 48 No.50%) 8 76 No.2009-2010.06 (40.86%) 21420.00 (1. of Management Studies.56%) 6179. 1 1 Type of Constitution 2 Public ltd Companies 2 Private ltd Companies 3 Cooperative Societies 4 Partnership Concerns 5 Joint Hindu Family 6 Proprietary Concerns TOTAL Source: KSFC record 1195 715 3 420 14962.54%) 3 575.00 485 21545.31 1468 63156.30 (40.00 (.90%) 1420 56524.11%) 36815.00 2008-2009 Amount 2009-2010 No. Shivamogga 61 .75 877 24679.41%) 14766.73 (31. (Amount Rs in lakhs) Sanction (gross) Sl.00 (.66%) 304.50 (.78%) 182. 2008-2009.21 (16.G.93 1 35. Bangalore Table 2: Constitution-wise Classification of Loan Sanctioned during the years 2007-2008.50 P.07 836 4 485 17639.00 88 15673. PESITM.50 (4.64%) 150. 5 11 6 2733. Dept.
93 lakhs. 40.e. 2008-09 No. 2009-10 Amount Analysis In the above table we can observe that in the year of 2007-2008 KSFC was more concentrating on Partnership concerns.Karnataka State Financial Corporation. Dept.e.64%.e. PESITM. because in the year 2007-2008 the highest sanction was made for partnership concerns i. Shivamogga 62 .11% But in the year 2009-2010 the highest loan sanctioned for proprietary concern i. followed by partnership concerns. 2008-09 Amount 2007-08 Amount 2009-10 No. 40. P.G. Bangalore 25000 20000 15000 10000 5000 0 Public ltd Companies Private ltd Companies Co-operative Societies Partnership Concerns Joint Hindu Family Proprietary Concerns 2007-08 No. of Management Studies. 24679. followed by proprietary concern i.
61%) 5 Joint Hindu Family 98.33%) 6 Proprietary Concerns 11899.Karnataka State Financial Corporation.93%) 265.50%) 3 Co-operative Societies 101. 20082009. 2009-2010.35 (0.63 (34.27 227.50%) 8744. Shivamogga 63 .56 (18.67 2009-2010 Amount 1490. No. Type of constitution 2007-2008 Amount 1 Public ltd Companies 297.32%) 38391.52 17911.33%) 4 Partnership Concerns 12218.65 (0.35 (2. of Management Studies.25%) TOTAL 30312.00 7530.30 (22.66 (0.78%) 301. 2007-2008. (Amount Rs in lakhs) Disbursements Sl.24 (0.55 43438.69%) 14711.62 2008-2009 Amount 960.21 (40.72 (. Bangalore Table 3: Constitution-wise Classification of Loan Disbursed during the years.12 (39.98%) 2 Private ltd Companies 5697.78%) 13408. Dept.50 P.38 (38.30 57. PESITM.G.78 16221.
Dept. In the year 2009-2010 the highest amount of disbursement is for proprietary concerns. Bangalore 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 Public ltd Companies Private ltd Companies Co-operative Societies Partnership Concerns Joint Hindu Family Proprietary Concerns 2007-08 Amount 2008-09 Amount 2009-10 Amount Analysis In the year 2007-2008 highest amount of disbursement was made on partnership concern. Shivamogga 64 . In the year 2008-2009 highest amount of disbursement was made on proprietary concerns. followed by partnership concerns and least is for co-operative societies. of Management Studies. PESITM.Karnataka State Financial Corporation. P. followed by proprietary concerns and least for Joint Hindu Family. followed by partnership concerns and least is Joint Hindu Family.G.
17 423054.27 25583.47 664 328 2 27280.50 388 12664. 2008-09 No.38 35599 30452. Amount 2009-2010 No. 2008-09 Amount 2007-08 Amount 2009-10 No. of Management Studies. Dept.G.77 2355. No.95 753872.47 272201.83 12293 1379 54712.26 478 12440.70 5 66 6 573. PESITM.09 1404 58306.15 148496.13 860 12590.67 56542 17.66 194 28936.55 92529 14822. 1 1 2 2 SRTO‟s Small scale sector a) Tiny sector b) Ancillaries c) Other SSI units 3 Others Total Source: KSFC record 3 28 896 680 5 211 455 4 192.91 263903.54 7 37319 Amount 8 66914.Karnataka State Financial Corporation. Sector 2008-2009 No. Shivamogga 65 . 2009-10 Amount P.52 142141 450000 400000 350000 300000 250000 200000 150000 100000 50000 0 SRTO’s Small scale sector a) Tiny sector b) Ancillaries c) Other SSI units Others 2007-08 No. Bangalore Table 4: Representing sector-wise classification of loans Sanctioned (Amount Rs in lakhs) Sanctions Sl. Amount Since inception Up to 31-03-2009 No.
09 lakh has been sanctioned for various sectors.70 lakh and for small scale sector Rs. for SRTO‟s Rs 192. Major portion of the sanction is in the other sector that is Rs 28936.52 lakh has been sanctioned for various sectors.26 lakh is being allotted. 12440.G.55 lakh. Bangalore Analysis In this table we can see the sector wise classification of loans has been sanctioned. of Management Studies.83 lakhs. Shivamogga 66 .Karnataka State Financial Corporation. 27280. In the year 2008-2009 the total amount of Rs 54712. 25583.13 lakh. PESITM.38 lakh. In the year 2009-2010 the total amount of Rs 58306. 30452. and small scale sector Rs. Major portion of the sanction is in the Small scale sector that is Rs. In 2009-2010 the numbers of sanctions were 1404 and in the year 2008-2009 the numbers of sanctions were 1379. Other Rs. Dept. P.
G.44 46.74 17809.53 Source: KSFC record.74 20415.68 7454.88 2330. of Management Studies. PESITM.40 2335724. No. Dept.06 266566. Sector 2008-2009 Amount 2009-2010 Amount Since inception Up to 31-03-2009 Amount 1 1 2 2 SRTO‟ Small scale sector a) Tiny sector b) Ancillaries c) Other SSI units 3 Others 3 166.50 10303.50 10308. Shivamogga 67 .10 11643.34 414446.77 5 64945.65 21965.13 210507. 2500000 2000000 1500000 1000000 500000 0 Public ltd Companies Private ltd Companies Co-operative Societies Partnership Concerns Joint Hindu Family Proprietary Concerns 2007-08 Amount 2008-09 Amount 2009-10 Amount P.13 4 420.Karnataka State Financial Corporation.47 13.34 145879. Bangalore Table 5: Representing Sector-Wise Classification Loan disbursed (Amount Rs in lakhs) Disbursement Sl.
210507. PESITM.74 lakh has been given to SRTO‟s and Rs. 38391.68 lakh has been given to Small Scale Sectors. P. Dept. 20415. 420.52 lakh. Shivamogga 68 . In this a portion of Rs 21965. In this a portion of Rs 17809.65 lakh has been given to SRTO‟s and Rs.43438. In the year 2008-2009 the total amount disbursed is Rs.10 lakh has been given to Small Scale Sectors.Karnataka State Financial Corporation.13 lakh to other sectors.77 lakh to other sectors. Rs.55 lakh. of Management Studies. In the year 2009-2010 the total amount disbursed is Rs. Bangalore Analysis In the above table we can see the sector wise classification loan has been disbursement. Rs. 166.G.
86 4443.50 .5.95 51308.00 lakh Rs 5.45 2110.30.5 lakh Rs 0.32 3696.00 lakh Rs 30. 4 25. No. of Management Studies.55 2007-2008 Amount 5 2 41 56 104 205 188 164 701 No.00 .52 4035.99 5628.00 lakh 3 12 121 78 213 383 208 121 284 Size of loan No.00 349. 2009-2010 Amount 6 30.00 lakh Rs 20.00 lakh Rs 220.127.116.11.50 lakh Rs 7. Dept.00 231.00 lakh Rs 10.00 .00 lakh Above Rs 45. PESITM.2.55 P.00 .51 6355.05 535.Karnataka State Financial Corporation.32 2547.20. 1 1 2 3 4 5 6 7 8 9 2 Up to Rs 0.09 950.50 604.40 36820.00 .G.00 .5 . Bangalore Table 6: Representing Size-Wise Analysis of Loan Sanctions (Gross) (Amount Rs in lakhs) Sl. Shivamogga 69 .
50 lakh 70 .00 lakh Rs 2.5 . PESITM. and 188 projects are sanctioned between Rs.31 lakh.00 lakh Rs 5.00 lakhs.45.00 lakh Rs 0.20.5 lakh Rs 10.00 lakh Up to Rs 0.G.50 . 2009-10 Amount Analysis In the year 2008-2009 the total amount sanctioned is Rs. 30.00 lakh 2008-09 No.00 lakhs followed by 284 projects sanctioned above Rs. The numbers of projects sanctioned were 1461. P. The numbers of projects sanctioned were 1420. Bangalore 60000 50000 40000 30000 20000 10000 0 Rs 7.10.00 . 45 lakhs.00 lakh Rs 20.00 lakhs.Karnataka State Financial Corporation.00 lakhs to Rs. 2008-09 Amount 2009-10 No. 45 lakhs followed by 205 projects sanctioned between Rs.7.00 lakh Rs 30. 63148. Shivamogga Above Rs 45. 20. in that 383 projects are sanctioned between Rs.30.00 lakhs. and 213 projects are sanctioned between Rs. in that 701 projects are sanctioned above Rs.50 lakhs to Rs. 7.75 lakh. In the year 2009-2010 the total amount sanctioned is Rs.00 lakhs to Rs. Dept.10.5.00 .00 . 56524.00 . 10.00 lakh to Rs 20. of Management Studies.00 .20.2. 10.
18 43056.5 to 2. of Management Studies.25 2926.34 9201.50 2009-2010 Amount P.00 to 50.36 49565.30 795.82 2008-2009 Amount 47 150 295 453 516 No 660.00 lakh Rs 20.85 778. Dept.96 9822.00 lakh Rs 10. PESITM.Karnataka State Financial Corporation.00 to 5. Shivamogga 71 .00 lakh Rs 5.G.00 lakh Above Rs 50 lakh 23 144 281 486 486 Project Cost No 57.00 to 10. Bangalore Table 7: Representing Project Cost-Wise Classification of Loan (Amount Rs in lakhs) Gross Sanctions Sl.00 lakh Rs 2.5 lakh Rs 0.50 2808. 1 2 3 4 5 6 7 Up to Rs 0. No.00 to 20.
00 lakh 2008-09 No.00 lakhs and 516 number of projects costs above Rs. In the year 2008-2009 the total gross sanction is Rs.31 lakh.Karnataka State Financial Corporation.00 lakh Rs 20.50 10.20. PESITM. Bangalore 50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 Up to Rs 0.75 lakhs.00 lakh Rs 5. In that 453 number of projects cost between Rs. 56524. of Management Studies. 50.50 lakhs. 63148.00 to Rs. In that 486 number of projects cost above Rs. In the year 2009-2010 the total gross sanction is Rs.00 to Rs.00 7.G. 50.2. Dept. 2008-09 Amount 2009-10 No. 50 lakhs and 486 number of projects cost between Rs.00 lakhs.5 . 20. P. Shivamogga 72 . 2009-10 Amount Analysis This table represents the project‟s cost wise classification of loans.00 5.00 20.5 Rs 0.00 30.00 lakh lakh Rs 2.00 lakh Rs 10.50 lakh Rs 7.
75 3818. 43438.75 38391. Dept. PESITM. Bangalore Table 8: Zone Wise sanction and disbursement for the year 2009-2010 (Amount Rs in lakhs) Sl. No.40 3918.There are 8 zones in Karnataka state.25 7579.05 2051. The total amounts of sanctions are Rs.G. Bangalore Zone (Urban) is the highest amount of sanction and disbursement.31 Disbursement 12480.55 Sanctions Disbursement Analysis This table shows the zone wise sanction and disbursement for the year 20092010.51 5597.00 56524.63148.52 lakhs from all the zones. 1 2 3 4 5 6 7 8 Zone / District Bangalore zone (Urban) Bangalore zone (Rural) Mysore zone Hubli zone Davangere zone Gulbarga zone Belgaum zone Mangalore zone GRAND TOTAL Source: KSFC Record.23 1861. 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 Bangalore zone (Urban) Mysore zone Davangere zone Belgaum zone Sanctions 17521. of Management Studies.21 4018.34 1323.60 6287. P.80 lakhs and disbursement of Rs.Karnataka State Financial Corporation.08 4442.68 6286.33 5105. Shivamogga 73 .61 3397.07 9227.
But the firm sanctioned high amount for other sectors that is Rs. Bangalore Findings: The following are the findings of the report: In last five years highest number of projects were in the year 2009-2010 for about 1461 projects. of Management Studies. Rs. P.50. Compare to last three years we can see Rs. 210507.47. We can see that rehabilitation work is done in2008-2009. least in the year 2005-2006 for about 1161 projects. 43438. which is Rs. Comparatively more loan are sanctioned to new projects than expansion or modernization of existed business. Rs. SRTO‟s and Ancillaries unites are not approaching KSFC for loan. PESITM. 63148. 32624.75 lakhs and Rs. In last five years the recovery was highest in the year 2007-2008 about Rs.52 lakhs respectively. In last five years highest sanctioned and disbursement were in the year 2009-2010 about Rs. Dept.65 lakhs which is the highest sanctions done for new projects.52.30 respectively.G. Rs. If many reason the existing are not approaching KSFC for additional loan If we see the sector wise classification then 860 numbers of small scale sectors are sanctioned in the year 2009-2010 which is the highest number in the year compare to other sectors. 14962. 63156. We can see more amount of sanctions in the year 2009-2010 that is Rs. 56114.e. But in the year 2008-09 they concentrate on proprietary concern and sanction more amount to this sector i.02 lakhs. 21420. The disbursement made during the year 2009-2010 is Rs 43438. 30452. and the number of sanction is also more that is 1468. Shivamogga 74 .75 lakhs. We can see highest amount disbursed for other sectors that is Rs.e. In the year of 2006-2007 and 2007-2008 KSFC more concentrate on Partnership concern and sanctioned more amount for that sector i.is highest.83 lakhs.Karnataka State Financial Corporation. 17759. 68 lakhs.77 lakhs.
worth Rs 49565.87 lakhs. 20. Dept. 45 lakh and 205 numbers are sanctioned between Rs.Karnataka State Financial Corporation.00 lakhs and above Rs 50 lakhs. 13915. PESITM. Project Cost-Wise Classification of Loan 453 numbers are sanctioned between Rs.00 to Rs.00 lakhs and worth Rs.00 lakhs to 20. 2547. In the year 2008-2009 the sanctions and disbursement were least in Gulbarga zone about Rs.50 lakhs and Rs.87 lakhs respectively P. 22407.G. 10.32 lakhs.80 lakhs and Rs. In the year 2009-2010 the sanctions and disbursement were highest in Bangalore zone (urban) about Rs. Shivamogga 75 .50 lakhs. 50. 2416. Bangalore In size wise sanctions 701 numbers are sanctioned to Above Rs. 1661. of Management Studies.
Bangalore SUGGESTIONS: After analyzing both primary and secondary data we can suggest: KSFC has to concentrate more on development of backward and rural areas. KSFC needs to concentrate on its existing customer to avail loan for their establishments and provide some benefits to their existing customers who are making prompt payment of interest and loan amount. To make the terms and conditions in general and interest rate structure in particular more competitive as compared to other players. Dept.Karnataka State Financial Corporation. PESITM. Sensitivity analysis and NPV methods could be adopted for effective appraisal of the project. KSFC needs liberalize their policy to attract the small sectors like SRTO‟s and Ancillaries and exploit the growing auto industry. Corporation has to speed up releasing of funds and ensure that the sanctioned amount is fully utilized. disbursements and recovery. focused efforts may be made to achieve consistency in growth. KSFC has to focus its attention on innovative projects to cope with the changing business conditions. Since a consistent growth is not observed on sanction. even small industries should be given encouragement in the form of providing financial assistance. To popularize scheme to everyone. of Management Studies. Shivamogga 76 .G. This enhances current interest demand which helps in better recovery performance. Rate of interest should be reduced to encourage more customers and to be more competitive in the market. Rehabilitation cases need to be given more emphasis to reduce bad portfolios. P. Though higher proportion of finance seems to be for service sectors.
women entrepreneurs and other disadvantaged groups. rural artisans. marketing. The proposal will be cleared ensuring that .G. there are lots of developments and changes in financial sectors. P. For the purpose of project appraisal. globalization. Due to the economic reforms. this helps to increase their profits. hard working and technically sound personnel. KSFC is spread over Karnataka extending financial service to small-sector. PESITM. this project report has been prepared within the objective of understanding the project appraisal procedure of KSFC. The corporation must concentrate on unique and innovative projects in order to compare with large domestic and foreign banks. tiny sectors. Bangalore CONCLUSION AND RECOMMENDATIONS: As part of the curriculum. financial and economical aspects. of Management Studies. A good project appraisal system is the heart of the organization like KSFC. liberalization.KSFC is continuously striving to provide better services to its customers. While appraising the projects the appraisal department carry out detailed analysis of all the aspects collecting information from the customers. it meets all the lending polices requirements and viable financially. From past fifty years. Shivamogga 77 . Considering all applications received from the entrepreneurs all the aspects like technical.Karnataka State Financial Corporation. internal and external sources. KSFC is successfully functioning. nationalized banks and other financial institutions. KSFC is one of the best financing corporations in assisting the SSI and non SSI‟s in term finance. Dept. Corporation has to take up fee based activity. This department consists of efficient. These have to be effectively incorporated in the light of severe competition among the foreign banks. KSFC has a separate department.
Peenya industrial area. specially for the export market. Dept. Bangalore ANNEXURE ANALYSIS AND INTERPRETATION OF CASE STUDY Company Address : : Bhramha Rubber Industries Pvt. of Management Studies. The promoters intend to construct about 20000 sqft building for proposed expantion and to acquire additional plant and machinery in the first phase of expantion. therefore. Shivamogga 78 . The company has also started manufacturing of solid tyres. the promoters have acquired two acres of land from KIADB at Sompura Industrial Area. bonding gum etc.Karnataka State Financial Corporation. Ltd. rubber envelop. PESITM.650.980. The existing space is not enough for proposed expansion. Bangalore Constitution : Private Sector Private Company Project: The proposed project is about expansion of the existing unit.G. conventional tread rubber. Plot No.98 &99 8th main. 3rd phase. In order to meet the demand the company intends to expand the production facility. the company is engaged in manufacturing and selling of tyre retreading materials such as precured tread rubber.00 lakhs towards acquisition of additional plant and machinery. The cost of the proposed expansion is estimated at Rs. Hence the company has approached the corporation for additional term loan assistance of Rs.00 lakhs. The company is mainly exporting 90% of its product to US and Europe. P. Presently.
Inchara Arora his mother.2596.49 49. Shivamogga 79 . In lakhs) 31/03/2008 Sales &other income Net profit/Loss Depreciation Cash Generated 1621.23 31/03/2010 2596. Inchara Arora AGE 35 58 % OF THE SHARE HOLDING 31.50 10. Financial standing: The promoters have submitted the audited financial results of the company for the past 3 years. of Management Studies. PESITM. The details of which are as follows: (Rs.66 From the above statement it can be seen that. It is reported that the sales were reduced mainly due to recession in the world economy. The other director is Smt.61 lakhs as compared to the sales of Rs.74 19.19 53.10 lakhs. The company has submitted financial statement for the 6 month time period ended 30-9-2010 and the company has achieved a sales turnover of Rs. Hence. Background: Promoters background: The details of the directors and their share holding in the company is as follows: NAME Sri Mihir Arora Smt. the company is being managed on the profitable lines. Bangalore 1.20 10.G. Sri Mihir Arora took over the company after the death of his father.Karnataka State Financial Corporation.55 lakhs during 2008-09. However.61 25. the promoters are confident of achieving the projected sales. 1971. P.3439.47 28.69 21. Dept. the sales during 2009-10 have reduced to Rs. Smt.14 Sri Mihir Arorav is the managing director of the company.55 29.19 31/03/2009 3439. Inchara Arora is also the director of the company and involved in the affairs of the company since 1991. He is a chemical engineer having about 11 years of experience in this line of activity.71 17.
The Company will approach KPTCL for the required additional power. Licenses and certificates: The Company has submitted all the necessary proofs of having memorandum of information. Transportation: The unit is located in Sompura Industrial Area adjacent to NH-4 and is well connected to highway and Nidagunda railway station. production.00 lakhs. Bangalore. 185. And now in order to construct the proposed plant the promoters have acquired two acres of land from KIADB at Sompura Industrial Area. The company is serving food services to the public and it has maintained good reputation in the society. And it has also obtained a rating as per CRISIL is „SE-2B‟ which indicates high performance capability and moderate financial strength. The required water will be provided by KIADB.G. Plant and machinery: The Company is purchasing the machineries and other plant and machineries from reputed manufacturers. income tax clearance certificate. The banker gave opinion that the account is categorized as standard. which includes office & administration. Dept. Land and Building: The unit is located at plot No. PESITM. Man power: The Company is having exiting manpower of 300 persons. Power: The Company for its Peenya unit has got sanctioned power of 400 KVA power for its expansion project at Sompura Industrial Area. The total cost of proposed and acquired plant and machineries work out Rs. Technical Appraisal: Location. 2.8th main. skilled and unskilled lobours. The promoters intend to construct about 20000 sqft building for proposed expansion. of Management Studies. The company will be recruiting 200 people for the expansion programme. As per the policy of the Corporation. and certificate of registration. this rating can be considered as bankable project.98 & 99. marketing. Shivamogga 80 . Water: The unit requires water for production mainly for cooling purpose and for the human consumption. but not eligible for interest rate reduction. P.Karnataka State Financial Corporation. Bangalore Banker‟s opinion: The Company is maintaining its current account and enjoying OD facility in bank. 3rd phase of the Peenya industrial area.
185.00 980. Dept.70 15.00 lakhs for acquiring two acres of land from KIADB at Sompura Industrial Area.00 lakhs towards KIADB and other P.00 580. 15. Bangalore 3. 580. 4.00 63.00 lakhs The deposits of Rs.00 12. 6.00 lakhs The details of plant and machinery have been worked at Rs. Financial Appraisal: The project cost and funding pattern to the project goes as follows: SI.00 Plant and machinery Indigenous(new) Miscellaneous Fixed Asset Deposits Additional working capital margin Total Cost of Project 1% 2% 6% 13% 19% 59% Land Cost Plant and machinery Indigenous(new) Deposits Building cost Miscellaneous Fixed Asset Additional working capital margin ANALYSIS: The details of land have been worked out at Rs.00 185. 2.Karnataka State Financial Corporation. PESITM. Land Cost Building cost Project details Amount(lakhs) 125. 125. 3. The promoters intends to construct about 20000 sqft building costing Rs. Shivamogga 81 .G. of Management Studies. 5.NO 1.
Karnataka State Financial Corporation, Bangalore
Means of Finance: SI. No 1. Details DEBT: Term loan from KSFC Sum EQUITY: Equity Share Capital Interest free U.S loan from promoter Internal Accruals Sum TOTAL 205.00 80.00 45.00 330.00 980.00 650.00 650.00 Amount(lakhs)
Term loan from KSFC Interest free U.S loan from promoter
Equity Share Capital Internal Accruals
ANALYSIS: The project cost is funded by a term loan of Rs. 650.00 lakhs from KSFC and Equity of Rs. 330.00 lakhs consisting of Rs. 205.00 lakhs by means of share capital and Rs. 80.00 lakhs through interest free unsecured loans and Rs. 45.00 lakhs through internal accruals.
P.G. Dept. of Management Studies, PESITM, Shivamogga
Karnataka State Financial Corporation, Bangalore
Financial & profitability indicators a. Promoters contribution b. Debt-equity ratio-Project c. Debt-equity ratio-Overall d. Debt-service coverage ratio e. Security margin
Minimum prescribed 22.50% 2.00:1.00 2.00:1.00 1.50:1.00 25.00%
25.50% 1.97:1.00 1.31:1.00 1.67:1.00 26.96%
4. Allocation of loan amount: The loan amount should be utilized for the following (Rs. In lakhs) Towards acquisition of land Towards contingency on building and civil works Towards indigenous plant and machinery Total 92.00 135.00 423.00 650.00
5. Repayment: The proposed loan of Rs. 650.00 lakhs should be repaid in 26 quarterly installment as noted below 1st Quarterly installment of Rs. 12,00,000.00 each Next 8 Quarterly installment of Rs. 20,00,000.00 each Next 8 Quarterly installment of Rs. 26,00,000.00 each Last 9 Quarterly installment of Rs. 30,00,000.00 each
6. First Investment Clause Before drawing the first installment of loan the following should be produced 1. First Investment Clause 2. Proof of clear to title to the properties offered as security to the satisfaction of corporation. 3. Building plane duly approved by the chief inspector of factories and Boilers and by KIADB.
P.G. Dept. of Management Studies, PESITM, Shivamogga
Karnataka State Financial Corporation, Bangalore
4. Proof of having increased the authorized share capital of the company to Rs. 240.00 lakhs. 5. An upfront fee at ½% should be payable on the total loan amount of Rs. 650,00,000 sanctioned either at the time of executing the legal document or before seeking the 1st release. 6. Income tax returns filed proof of the director. 7. Proof of having owned the properties declared in the networth statement of the director.
7. Market Analysis: The company is in existence since 1971 and is one of the pioneers in manufacturing and selling of the tyre retreading materials such as procured tread rubber, conventional tread rubber, rubber envelop, bonding gum etc. The company has also started manufacturing of solid tyres, specially for the export market. The company is mainly exporting 90% of its products to US and Europe. The company is having established market in India and abroad and it is opened that there is no difficulty in marketing the products.
8. Management Analysis: The unit is successfully managed by Sri Mihir Arora and Smt Inchara Arora who are the managing directors of the company. Sri Mihir Arora took over the management of the company, he is a chemical engineer having about 11 years of experience in this line of activity. Smt Inchara Arora is also the director of the company and involved in the affairs of the company since 1991.
9. Legal Analysis: The documents in respect of the properties being offered as security are being scrutinized by the legal officer of the department. Legal clearance to be obtained before release of loan.
Status of Government Consent: a. The unit has been allotted permanent SSI registration number by the Department of Industries and commerce. b. The land has been allotted by KIADB on lease-cum-sale basis. P.G. Dept. of Management Studies, PESITM, Shivamogga 84
Karnataka State Financial Corporation, Bangalore
c. Building plan approval by KIADB has to be sanctioned. d. Power required to the extent of 1000 KVA is yet to be sanctioned by KEB. e. N.O.C from Karnataka State Pollution control Board has to be obtained.
Analysis of Balance sheet Particulars A) Gross Block Less- Depreciation Net Block B) Capital W-i-P C) Investments D) Current Assets, Loans and Advances E) Current Liabilities : Secured loans from banks Sundry creditors Others TOTAL F) NET WORKING CAPITAL(D – E) G) NET TANGIBLE ASSETS(A+B+C+F) H) LONG TERM LOANS 176.00 332.8 58.54 567.36 66.10 0.00 590.19 90.60 680.88 45.50 0.00 535.66 216.34 752.00 29.93 2008-2009 58.28 10.68 47.60 0.21 633.46 2009-2010 47.60 10.55 58.15 0.21 726.37 2010-2011 58.15 19.49 38.66 0.21 781.93
I) NET WORTH Analysis of Profit and Loss Account 2008-2009 2009-2010 2010-2011
P.G. Dept. of Management Studies, PESITM, Shivamogga
07:1.19 102.34 25. of Management Studies.74 19. Bangalore subject to the terms and conditions stipulated in the sanction order in addition to the other usual terms and condition. Ltd.19 389. P.04:1.Karnataka State Financial Corporation.00 1. 98 & 99A.01 10.47 28. 1st Stage.09:1. Sompura Industrial Area.27 107. it is recommended that M/S Super Rubber Industries Pvt.00 1.21 29. Shivamogga 86 .12:1. Near Dobaspet. Dept.00 1.00 Lakhs for the expansion of their existing small scale Industries engaged in the manufacturing of Rubber Moulded Goods at Plot No. PESITM.00 2009-2010 0. 650.41:1. May be sanctioned an additional term loan of Rs.49 49. Bangalore SALES JOB CHARGES NET PROFIT/LOSS DEPRICIATION CASH GENERATED 1519.00 2010-2011 0.69 21.38:1.23 2489.G.34 50.00 Conclusion: In the light of the above.66 2008-2009 DEBT EQUITY RATIO CURRENT RATIO 0.19 53.50 10.
a) Annual Report 2009-2010.ksfc. of Management Studies. Bangalore BIBLIOGRAPHY Manuals : Karnataka State Financial Corporation.G. c) Operational Statistics. b) Products and Services. Shivamogga 87 . PESITM. Bhojanna Prasanna Chandra Web sites : www.Karnataka State Financial Corporation. N. Books : S. Dept. Murthy.in P. U.
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