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CREDIT APPLICATION (cover page

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BORROWER BRANCH DATE OF C.A. C.A. REFERENCE NO. CUSTOMER ID RELATIONSHIP MANAGER APPROVING CREDIT COMMITTEE * DATE OF DISPOSAL BY C.C. * NATURE OF DISPOSAL * RESOLUTION REFERENCE NO. * REPORTED TO NEXT LEVEL ON *

Kansai Nerolac Ltd.

IA / IB / II / III / IV / Board

Approved as recommended / Approved with modifications / Deferred / Declined

OBSERVATIONS OF CORPORATE RISK

INDUSTRY SPECIFIC:

– – –

Prices of Raw materials: Rise in raw material prices especially crude oil prices may affect margins adversely. Foreign Currency Risk: Due to weakening of rupee there will be a negative impact on the performance of the company as it is a net importer. Highly dependent on repaint business, which increases the correlation to the GDP and disposable income

BORROWER RELATED:

Forex Risk: KNL limited sources approximately 33.3% of its raw materials from imports. Also foreign sales form 16% of its revenue. So a change in foreign exchange prices like recent strengthening of Indian Rupee can have an adverse impact on the company’s profitability. Joint Ventures: KNL has an important joint venture with Kansai Management Risk: The overall management quality is good involving no special risks.

• •

CREDIT POLICY COMPLIANCE:

Turnover

Nerolac Rs. 1326 crore

Profitability Credit Rating DSCR* Leverage** Current Ratio Promoter Contribution Credit History

Yes AAA 1.83 0.67 2.07 NA

Corporate Finance / SME Corporate: Above Rs.50 Crore SME: Up to Rs.50 Crore Profits in the last 3 years Minimum I-A or facility rating of minimum A Min 1.25 with average of at least 1.50. TOL to TNW of max 2.00 To be acceptable NA

No known willful default No known willful default by by Raymonds Coy or group

PROPOSAL FACILITY FB: CC/WCDL/STL/FCN R (B)/EPC Outstanding 202 EXISTING LIMIT 0 PROPOSED LIMIT 40 TENOR/ PRICING/ PURPOSE / MARGIN WCDL 35 Crore – BPLR – 1% STL 5crore – RH to decide price Min 8.75%% pa Term Loan 240 0 40 Tenor:- 48 months Installments of 5 Crores each for 12 quarters after moratorium of 12 months after first draw drown. Ternor 2 Years at BPLR with annual reset

Unsecured Loans Total FB

216 658

0 0

25 105

TOTAL FB 105 TOTAL NFB 6 TOTAL FX LINE 0 TOTAL EXP 111 Other recommendations (including change, if any, in terms of previous sanction):

MODULE 1: CUSTOMER PROFILE COMPANY i-RISK – CURRENT i-RISK - PREVIOUS EXTERNAL CREDIT RATINGS AGENCY Kansai Nerolac A+ BASE YEAR: 2005-2006 BASE YEAR: RATING MEANING

CRISIL CRISIL GROUP INCORPORATED ON CORPORATE STATUS INDUSTRY BUSINESS Kansai Group 1920 Listed Paints

AAA P1+

For Non Convertible Debentures Short Term Debt

Industrial paints, decoratives

MODULE 4: FINANCIALS Year ended Net Sales Other Income PBDIT PBDIT/NS% Interest Cover Cash Accrual PBT PAT PAT/NS% Tangible Net Worth TOL/TNW Net Working Capital Current Ratio NCFO DSCR CAR (for NBFCs) Net NPA% (for NBFCs) Contingent Liab. (normal) Contingent Liab (disputed) Contingent Liab (other) TOL+Cont Liab / TNW 925.95 28.45 190.27 20.55% 220.22 168.8 121.74 13.15% 264.93 0.82 226.46 2.29 128.54 Year-3 (A) Year-2 (A) 1061.3 4 75.01 259.58 24.46% 292.05 227.02 178.48 16.82% 323.4 0.85 241.01 2.09 188.97 Year-1 (A) 1287.4 8 24.05 211.37 16.42% 185.22 176.85 160.25 12.45% 406.06 0.84 289.62 2.07 257.91 Current Year (A) 1404.14 24.85 247.69 17.64% 147.58 206.68 153.61 10.94% 510.29 0.62 368.5 2.56 210.54 (Rs in Crores) Year+1 (P) 1562.54 5 39.87 284.78 18.23% 227.85 262.92 220.60 14.12% 593.69 0.56 444.41 2.74 247.64 -

Financials of Major Group Companies (including corporate guarantor) Asian Paints 3585.86 21.78 619.55 375.2 37.92 928.5 0.85 1.15 61.1 Berger Paints 1559.75 18.49 130.16 83.07 18.18 274.46 0.72 1.33 243.74 Nerolac 1404.14 13.18 247.69 153.61 10.94 510.29 0.62 2.56 368.5 ICI Paints 1025.84 5.4 115.87 60.21 -86.57 761.5 0.35 0.81 -73.35 Shalimar 256.05 17.97 16.14 4.75 39.3 27.25 2.43 1.18 68.21

Net Sales Net Sales growth % PBDIT PAT PAT growth % TNW TOL /TNW Current Ratio NWC

MODULE 5: MANAGEMENT BOARD OF DIRECTORS Chairman Vice Chairman Director Managing Director Director Director Director Director Additional director Whole-Time Director Company Secretary : : : : : : : : : : : J J Irani D M Kothari Y Kawamori H M Bharuka S M Datta Y Tajiri H Ishino Pradip P Shah Noel N Tata Pravin D Chaudhari G T Govindarajan 30,401.70 crores 911.00 INDUSTRY P/E: 19.35

CAPITAL MARKET STATUS

PAID-UP SHARE CAPITAL: MARKET VALUE PER SHARE: 52-WEEK HIGH /LOW: P/E: 15.60

SHAREHOLDING PATTERN

Particulars

Mar-08 Dec-07

Indian promoters -

Foreign promoters 66.41 66.41

Acting person -

Other promoters -

MFs/UTI 4.73 7.93

Banks/FIs 4.97 4.97

FIIs 7.20 7.32

Public corporate bodies 7.00 3.61

Indian public 9.58 9.65

QUALITY OF TOP MANAGEMENT Mr. D. M. Kothari A qualified C.A. by profession, Mr. Kothari has also been the President/member of several leading trade Associations such as the Indian Paint Association, The Chemicals & Allied Products Export Promotion Council (CAPEXIL), The Indian Chemical Manufacturers Association (ICMA), The Bombay Chamber of Commerce and Industry (BCCI) and The Federation of Indian Export Organisation (FIEO). During his tenure as Managing Director, Kansai Nerolac became undisputed leader in industrial paints.

Mr. S. M. Datta He is a Non-Executive Director on the Board of the Company & is a reputed management expert. Mr. Datta graduated with Honours in Chemistry, Presidency College, Kolkata and obtained a Post-graduate Degree in Science & Technology from the Kolkata University. Mr. Datta is a Chartered Engineer, Fellow, Institution of Engineers, Fellow, Indian Institute of Chemical Engineers, Member, Society of Chemical Industry (London) and Honorary Fellow of All India Management Association.

Mr. H. Ishino Mr. H. Ishino is a Non – Executive Director on the Board of the Company. Mr. Ishino is an expert in the field of Marketing. Mr. Ishino is a Nominee Director of Kansai Paint Co. Ltd., Japan, the Company’s holding Company. Mr. Noel N. Tata Mr. Noel N. Tata is the Managing Director of Trent Ltd. and director of various Tata companies including Voltas Ltd., Titan Industries Ltd., Tata Investment Corporation, Trent Brands and Landmark. He is also a director at Bombay Chamber of Commerce & Industry and Satnam Developers & Finance. Before joining Trent, Mr. Tata worked with Nestle, UK and Tata Exports (now Tata International). He is a graduate of Sussex University (UK) and INSEAD.

Mr. Pravin D. Chaudhari Mr. Pravin D. Chaudhari has been appointed as an Additional Director and a Wholetime Director of the Company with effect from 1st May, 2008. Mr. Chaudhari is B.E. (Production), MMS and was DirectorSupply Chain prior to his appointment on the Board.

Mr. H.M. Bharuka Mr. H.M. Bharuka is a qualified Cost Accountant with a varied experience of around 24 years in various facets of management and profound knowledge of the Paints Industry. The Company has shown remarkable performance during the tenure of Mr. Bharuka as Managing Director of the Company from 1st April, 2001.

TRACK RECORD Kansai Nerolac Paints Ltd won the coveted ICSI National Award for Excellence in Corporate Governance, 2007, established by the Institute of Company Secretaries of India. The award was presented to the Company in Kolkata on November 26, 2007. The Award was conferred on the Company in recognition of the Company’s creative and contributive capabilities, sustainable relationship with major stakeholders in delivering value and its future vision and sustainability. The Company was appreciated for its open culture with transparency in operations and professional approach, its strong value system that serves as a guide for exhibiting appropriate behavior, internally and externally and its endeavor to make corporate governance as a part of the Company’s culture. The company also established Experience centres where the customers get an opportunity to see colours, colour schemes, designer finishes, this helped the company get first-hand knowledge of exactly what customer need. The company has pursued Environmental protection policies & has introduced new generation Cathodic Electro Deposition which can be baked at low temperatures & emits less volatile components.

Awards & Recognitions

The company’s commitment to building a brand centric model towards leveraging quality products and service to customers to generate sustainability and assured annuity revenues has earned them recognition in various circles. Few of the awards they received last year : Best Vendor Award from customers like Toyota Kirloskar Motors (TKML) for Cost and from Maruti Udyog Limited (MUL) on overall commendation. • Awards for Marketing initiatives like Cannes 2007 Bronze for press Ad. • Emvies 2007 Gold & Silver for Best Media innovation, Best case study – Media innovation (Impression Rang Jama De), Best Integrated Campaign, Best Media strategy & People’s Choice Award. • Reader’s Digest Trusted Brands Gold Award for 2008. • Frost & Sullivan Market Leadership Award in Indian Industrial Paints & Coating Market. • ‘Hall of Fame’ from CTO Forum, PC Quest & Best Implementation-APO in IT. • ICSI National Award for Excellence in Corporate Governance – 2007 from the Institute of Company Secretaries of India. • Greentech Environment Excellence Gold and Silver for Bawal and Chennai units. • ABCI Silver for Annual Environment Report.

MODULE 6: BUSINESS 1. PRODUCTS

Kansai Nerolac Paints Ltd, the country’s leading paint manufacturing company which has always been at the forefront for launching technologically superior and innovative products that deliver more value to its customers. The company has five strategically located manufacturing units all over India and a strong dealer network of over 11000 dealers across the country. The company manufactures a diversified range of products ranging from architectural coatings for homes, offices, hospitals and hotels to sophisticated industrial coatings for most of the industries. Its products are divided catering to its two segments which are: 1. Decorative paints  Interior • • • • • Emulsions Distemper Lustre Flat oil Enamel

 Exterior
• • • • 2. Industrial Paints • • • • Automotive Coatings General Industrial coatings High performance coating Powder coating Emulsions Textured Cement Nerolac Impression Everlast

Automotive Coatings of Kansai Nerolac have been tested and certified by global automotive manufacturers who have set up base in India, like: Suzuki Motors Honda Motors, Toyota Motors, Ford Motor Company, General Motors Corporation, IVECO Motors, and Peugeot. Through its various strategic collaborations, Kansai Nerolac offers a total painting system to auto makers in India with a range of products, starting from Pretreatment Chemicals, Electro Deposition Primers, Intermediate Coats/primer Surfacers, Solid & Metallic Top Coats, Clear Coats Touch-up Paints.

The product range is backed up by a strong technical service network of experts placed at customers’ end, training programs, VA/ VE activities in co-ordination with customers resulting in ultimate delivery of optimized painting solutions.

2.

PRICE MOVEMENTS

We have plotted the stock prices of Nerolac corresponding to the market prices over a period of 5 years i.e. from 2003 – 2008. We can see that the stock price of Nerolac is heavily dependent on the market conditions so it’s highs correspond with the market high and low correspond to the market lows . This shows that the stock does not have a movement of it’s own and instead is guided by the market sentiments

3.

MARKET SEGMENT The market can be further split into decorative paints and industrial paints. The demand for

decorative paints is highly price-sensitive and also cyclical. Monsoon is a slack season while the peak business period is Diwali festival time, when most people repaint their houses. The industrial paints segment, on the other hand, is a high volume-low margin business. In the decorative segment, it is the distribution network that counts while in the industrial segment the deciding factor are technological superiority and tie-up with automobile manufacturers for assured business. The share of industrial paints in the total paint consumption of the nation is very low compared to global standards. It accounts for 30 per cent of the paint market with 70 per cent of paints sold in India for decorative purposes. In most developed countries, the ratio of decorative paints vis-Ã -vis industrial paints is around 50:50. But, with the decorative segment bottoming out, companies are increasingly focussing on

industrial paints. The future for industrial paints is bright. In the next few years, its share would go up to 50 per cent, in line with the global trend.

4.

MAIN CUSTOMERS NPL dominates the industrial paints segment with 41 per cent market share. It has a lion's share of 70

per cent in the OEM passenger car segment, 40 per cent share of two wheeler OEM market and 20 per cent of commercial vehicle OEM market. It supplies 70 per cent of the paint requirement of Maruti, India's largest passenger car manufacturer, besides supplying to other customers like Telco, Toyota, Hindustan Motors, Hero Honda, TVS-Suzuki, Mahindra & Mahindra, Ashok Leyland, Ford India, PAL Peugeot and Bajaj Auto. NPL also controls 20 per cent of the consumer durables segment with clients like Whirlpool and Godrej GE. The company is also venturing into new areas like painting of plastic, coil coatings and cans.

5.

COMPETITORS & MARKET SHARE

The leaders in the organised paint industry are Asian Paints (India) Ltd. (APIL), Nerolac Paints Ltd. (KNPL), Berger Paints, Jenson & Nicholson Ltd. (J&N) and ICI (India) Ltd. Asian paints is the industry leader with an overall market share of 33 per cent in the organised paint market. It has the largest distribution network among the players and its aggressive marketing has earned it strong brand equity. The Berger Group and ICI share the second slot in the industry with market shares of 17 per cent each. KNPL has a market share of 15 percent in the organised sector. APIL dominates the decorative segment with a 38 per cent market share. The company has more than 15,000 retail outlets and its brands Tractor, Apcolite, Utsav, Apex and Ace are entrenched in the market. NPL, the number-two in the decorative segment, with a 14 per cent market share too, has now increased its distribution network to 10,700 outlets to compete with APIL effectively. Berger and ICI have 9 per cent and 8 per cent shares respectively in this segment followed by J&N and Shalimar with 1 and 6 per cent shares. APIL, the leader in decorative paints, ranks a poor second after Nerolac in the industrial segment with a 15 per cent market share. But with its joint venture Asian-PPG Industries, the company is aggressively targeting the automobile sector. It has now emerged as a 100 per cent OEM supplier to Daewoo, Hyundai,

Ford and General Motors and is all set to ride on the automobile boom. Berger and ICI are the other players in the sector with 10 per cent and 9 per cent shares respectively. Shalimar too, has an 8 per cent share.

6.

SUPPLIERS

1. Khakhu Enterprises They introduce ourselves as one of the leading OIL BROKERS in India since the last 58 years started by our ancestor, Mr. HAFIZ TARMOHAMMED KHAKHU. They are rendering their prompt & efficient services for all the Indian Paints, Resins & Chemical Manufacturing Multinational Companies like, M/s. Asian Paints (India) Ltd., M/s. Berger Paints India Ltd., M/s. Goodlass Nerolac Paints Ltd., & many more to name

7.

COMPETITIVE ADVANTAGE

Kansai Paints of Japan, which has a 65% stake in Goodlass,is a global leader in industrial paints. This is a prime competitive advantage. No wonder domestic auto majors like Telco and Maruti, as well as most MNC auto companies, prefer Goodlass over others. Goodlass is able to leverage Kansai's R&D efforts and product innovations to make deep inroads into auto OEMs in India . For Goodlass Nerolac, the implementation of ERP and datawarehousing solutions have helped the company gain a competitive advantage. In 1999, Goodlass Nerolac decided to simultaneously implement an ERP (SAP R/3) system and a datawarehousing solution. Finally, the company selected the SAS suite of datawarehousing tools as it provided facilities for multi-dimensional analysis of data and allowed for import of data from all platforms. The implementation of SAP R/3 enabled the company to move from multiple servers to a centralised SAP system and have everyone log on to a single server.

Backed by Kansai Japan's product innovations, Goodlass has a 60% share in auto paints and 44% share in industrial paints. In decoratives (24% share), it has products for various price points and a strong dealer network. Goodlass was the first to introduce Acrylic CED (cathodic electro-deposition) coat for 2-wheelers in India. This saved OEMs significant cost and time, because of only one top-coat for the vehicle instead of primer plus top-coat earlier. Likewise, Goodlass introduced the 3C- 1B (3 coat 1 bake) system for Maruti's Swift. Here, the OEM saves production time as the 2nd and 3rd coats can be applied without having to wait for the previous one to dry.

8.

STRATEGIES / PLANS

The Company this year has ventured into setting up Impressions Style Zones – Experience Centers and has started two franchise stores in the South at Chennai and Hyderabad. The response from the consumers is encouraging and based on the learning of this pilot run we will take the initiative forward. Continuing with the platform of innovation taken up in the past, new products have been launched in order to offer unique products and finishes to the consumers. Some of the new products are Flexi Coat, Stucco Marble finish, Tile Guard, Exterior Texture finish. The 3 coat-1bake technology introduced last year at Maruti Udyog, Manesar plant has been well established. This eco-friendly coating, with low VOC (Volatile Organic Compounds), has helped the customer increase its productivity and reduce power cost.

9.

ADEQUACY OF PRODUCTION CAPACITY & RELEVANCE OF TECHNOLOGY

All the paint majors have tie-ups with global paint leaders for technical know-how. • • • Asian Paints has formed a JV with PPG Industries Inc to service the automotive OEMs. Berger has a series of tie-ups for various purposes. It has a technical tie-up with Herbets Gmbh of Germany in addition to its joint venture with Becker Industrifag. Berger has now allied with the Japanese major Nippon Paints to boost its OEM turnover since the Indian roads are being flooded with Japanese automobiles. It also has an agreement with Orica Australia Pvt. Ltd. to produce new generation protective coatings. The company also has tie-ups with Valspar Corp and Teodur BV for manufacturing heavy duty and powder coatings. • • • ICI makes paints with the technical support of Herbets, which has been recently acquired by by E I Du Pont de Nemours of the US. Du Pont, which is a leader in automotive coatings in the US, has a technical tie-up with Goodlass Nerolac for the manufacture of sophisticated coatings for the automotive sector. Goodlass has technical collaborations with Ashland Chemicals Inc, USA, a leader in the petrochemical industry, Nihon Tokushu Toryo Co and Oshima Kogyo Co Ltd, Japan.

MODULE 7: INDUSTRY 10. DEMAND-SUPPLY POSITION – LOCAL & GLOBAL Demand Supply Dynamics The Indian Paint Industry grew by 18% from Rs. 95 bn. in FY06 to Rs. 112 bn in FY07 (Source: Company). The industry has a positive correlation with GDP as both have same drivers for growth. Demand for paints is both, derived as well as direct. The demand for decorative paints is a direct demand whereas the demand for industrial paints is a derived demand. Demand drivers for Paints Industries 1. Increase in Per capita consumption of paints: India’s contribution to world paint markets is 0.6% with per capita consumption of around 800-900 gms. Based on the expenditure in the construction activity and increase in the repaint activity coupled with industrial growth, the industry is expected to increase at a 11.85% CAGR over next three years. 2. Increase in Real Estate Investments: The demand for decorative paints is directly related to the increase in the investment in the real estate thus increasing the cement area. Out of the total demand for decorative paints, around 30-40% of the demand comes from the fresh construction (Source: Cris-Infac). The size of real estate industry is estimated to grow to Rs. 18,517 Bn, over next five years period (Source: Cris-Infac). Investment in real estate will be primarily led by housing, which is expected to account for nearly 90% of total investment in the sector (Source: Cris-Infac). Housing investments (permanent, non-slum houses) are expected to grow at a TAGR of 12% over the next 5 years period. On other hand, repainting activity which accounts for 70% of the decorative paint demand is also increasing, mainly due to increase in per capita income. The demand from the repainting activity has increased by 6-7 percent in last two year. Based on the expected investment in the housing, demand for paint is expected to increase at a CAGR of 12 percent over the next 5 years (source: CRISINFAC). 3. Increase in Industrial Paints: Increase in income levels of the consumers contributes towards the growth in the auto-segment and growth in the industrial segments like power, road and infrastructure leads to growth in the non-automotive

segment. Along with these, growing needs for consumer durables and export opportunity for auto ancillaries will also contribute towards the growth of industrial paints. 4. Increase in Per Capita Income: Due to increase in disposable income, Indian consumer is expected to shift from lime wash to paints and those already consuming paints would move up the value chain. On other hand, the increasing capacity would also drive automotive and consumer durable, thereby increasing the consumption of industrial paints. 5. Prices in line with substitute product: Large scale of operations and technical know-how has helped prices of paints to come down. They are now in line with those of substitute products like lime wash, distemper etc., manufactured by local players. This gives consumers the incentive to shift from lime to paints.

Supply 1. Distribution In case of industrial paints, distribution network doesn’t play an important role, whereas the situation is totally different in case of the decorative paints. India being a wide and scattered market having a large distribution network becomes prime requirement for any company in decorative paints business. 2. Outsourcing: The organized players in the decorative paint segment have to compete directly with those in the unorganized sector manufacturing low cost paints like distemper and enamels. In-order to face this competition organize players outsource small part of their production (25-30%). 3. Import Scenario: Indian climatic conditions are not conducive for foreign formulations and modification cost in product formulation is quite high. As a result, imports are no threat to the Indian players. In case of industrial paints, most of the major players in the industry already have a tie-up with global players, for latest technology and markets accessible to them. It negates the further supply from the international markets even after reduction of import duty from 40% to 15.3% in last 8 years.

11. GOVT POLICY / OTHER REGULATIONS The benefit in General Excise Duty Cut from 16% to 14% is restricted due to cut in Abatement Rates from 40% to 35%. Also the industrial paint segment would benefit from the excise duty cuts in the auto sector. • • • • • • Excise duty on small cars reduced from 16% to 12% Excise duty on hybrid motor vehicles is being reduced from 24% to 14%. Excise duty on three-wheelers (for transport of not more than 7 persons, including the driver) is being reduced from 16% to 12%. Excise duty on Motorcycles (including mopeds and scooters) is being reduced from 16% to 12%. The cut in Personal income tax and waiver of Agricultural Debt which results in the rise of disposable income would be beneficial for the decorative paint segment. The reduction in the rate of Central sales tax from 4% to 2%. is also a positive change for the paint industry. Overall the Union budget 2008-09 is favourable to the paint industry.

12. RECENT DEVELOPMENTS The paints sector is raw material intensive, with over 300 raw materials (30% petro-based derivatives) involved in the manufacturing process. The raw material costs amount to around 60% of the net sales. With the increase in the crude oil prices and rupee depreciating costs are bound to increase in the paint sector. Recent Developments for KANSAI NEROLAC • Net profit rose 11.26% to Rs 119.79 crore in the year ended March 2008 as against Rs 107.67 crore during the previous year ended March 2007. Sales rose 7.97% to Rs 1319.75 crore in the year ended March2008 as against Rs 1222.38 crore during the previous year ended March 2007. • • The board of Kansai Nerolac Paints has recommended dividend at the rate of 120% on 2nd of May 2008 Kansai Paint Co, Japan Kansai Nerolac Paints is di-investing its 55%stake consisting of 1,65,00,000 equity shares of RM 1 each, in Kansai Coatings Malaysia Sdn. Bhd. to Kansai Paint Co, Japan. on 3rd May 2008 • On 26 November 2007 Kansai Nerolac Paints has won the ICSI national award for excellence in Corporate Governance, 2007

MODULE 8: ASSESSMENT OF LIMITS 13. FUND BASED WCAP The assessment of the limits is based on the Actuals for FY06, FY07, FY08 and projection for FY09 and FY10. We have determined that the company will need excess working capital financing of 79.2 Crores. Also it has not taken any Working Capital loan to finance the net working capital position of Rs 424.17 cr. as at FY 2008. For that matter we have provided a limit of 100 Crores to the company for Working Capital and would advice them to stop financing the same from their equity to increase their EPS or announce higher dividens. 14. FUND BASED TERM Pants is not a capital intensive business. This can be understood from the fact that Fixed Assets to Sales Ratio is just at 0.16 for FY 08. This is expected to remain so going into the future as well. Hence, we are not offering any Term loans to them. 15. LC The company requires LC’s for purchasing raw materials as it has raw material imports of 1,806 crores for FY 08 implying 20% of the total raw material requirement of Rs 8,370 cr. A limit of 50 crores has thus been provided for letters of credit for the company. 16. BG NPL does not need any bank guarantees since it can easily avail of corporate guarantee from its holding company, Kansai Paint Co. Ltd., Japan 17. OTHERS FACILITY Forex Swaps For hedging against foreign exposures. PURPOSE REPAYM ENT DATE TAKE-OUT

COMPUTATION OF WORKING CAPITAL REQUIREMENT

MODULE 9: TERMS SECURITY MARGINS TERM COVENANTS 1. 2. EXISTING NIL PROPOSED - The company will provide financial information to the bank on a regular basis - The assets can’t be sold off to the tune of more than 30% of the asset value as at FY 2008 - Factoring should be availed of for debtors outstanding of more than 6 months - Financials - Current Ratio above 2.0 - TOL/TNW below 1.00 (annual) - Others - Cross default (as and when) - Change in Management (as and when) - CARE rating above A (as & when) Consortium limits of Rs. ******** Lacs (FB Rs. *** Lacs and NFB Rs. *** Lacs) are to be secured by First charge on all current assets of the company ranking pari passu with other participating banks for WC limits. LCBD limit and TL against BG: is on unsecured basis.

EVENTS OF DEFAULT

NIL

PRIMARY SECURITY (Indicate type of charge; seniority of charge; value of assets; location; our share in asset value in absolute terms; status of creation) MARGINS COLLATERAL (Indicate type of charge; seniority of charge; value of assets; location; residual value of assets if 2nd charge; our share in asset value in absolute terms; status of creation) GUARANTEES (Indicate net worth of guarantors; date of compilation of net worth report; status of creation)

NIL

NIL NIL

3rd/Residual charge on all fixed assets of the company including factory and buildings on pari passu terms with other banks.

NIL

MODULE 10: RECOMMENDATIONS

1.

STRENGTHS OF THE CREDIT:

NPL has secured loans of only Rs 192 crores that has been secured by a charge on the fixed assets of the factory at Jainpur, hence the credit given is very safe even if third charge is given on the assets of the company.

2.

RISKS PERCEIVED AND MITIGANTS:

Risks Perceived: • • Mitigants: • • The company can hedge itself against oil price fluctuations by employing various futures and options contracts. The company has hedged itself against currency fluctuations by employing various forwards and options. Prices of Raw materials: Rise in raw material prices especially crude oil prices may affect margins adversely. Foreign Currency Risk: Due to weakening of rupee there will be a negative impact on the performance of the company as it is a net importer.

3.

CERTIFICATION: a. b. c. d. There are no unrectified audit irregularities in respect of the account, except for the following: The company / its directors / promoters / group companies / guarantors do not figure in RBI’s defaulters’ list, except for the following: There are no deviations from the credit policy, RBI instructions, and other regulatory provisions, except for the following: There are no litigations existing against the company

RELATIONSHIP MANAGER

SR. MANAGER / AVP –CB

BRANCH HEAD

INSTRUCTIONS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. Entire document to be e-mailed / couriered with enclosures to Corporate Office / Regional Head Branch to fill entire document, excluding items marked * which are to be filled in at Corporate Office / Regional Level, as appropriate. Mini CA to comprise Cover Page, Recommendation, Profile, Analysis Sheet No portion of the document should be deleted / amended. Uniform font style and size – Times New Roman / 10. Date of CA will be date of despatch from Branch. Number all pages in the form page no./total no. of pages

Compliance with standard accounting / classification norms Comments for variations between estimates and actuals in respect of critical items Analysis of associate companies financials and business – inter unit linkages Data on utilization of bill limit, LC, BG Comments on fund flow, cash flow statements Specific confirmation that promoters / directors / borrower / group companies / guarantors do not appear in RBI defaulter list. In case existing, full details of defaults and role / involvement with concerned companies to be stated, liability potential, impact. 15. Audit comments 16. Copy of audited balance sheet 17. Security / guarantors worth – residual value , our share