Coramandel Case

Priyanka Garg- country head of Wholesale Banking group

Ex6- No. of banks = 5 NBA is a consortium of banks
Consortium decides whether they'll lend money
CIL - 4 M&As
outflow - 8.1 bn rupees- they have paid on their own - completely equity funded
Hence there's a cash shortage. Hence need a short term loan or working capital loan
They already have been given 39.5 B INR - existing loan
Lokking for a higher amt- 56.80 B
If they accept this as a single bank and not as a consortium - prudential norms will be violated - industry specific and
EID Parry - phospatic fertilizer,organic compost and pesticides - 14 manufacturing facilities - also have retail outlets-
Popular brands - Parry Super, Parry Gold…- market share 16%
Started in 1961 as pvt ltd and 1964 - public ltd
In 2007- amalgamation to godaveri, Un 2009 name changed to 2009
In 2007-08 : Mana Gromor stores
Leaders insectides,herbicides,fungicides
Mkt share-14%
All 4 M&As beneficial
Comoany has won many awards- Green co., energy conservation
Company has good reputation in terms of corporate governance
Ex 5 - Top line : domestic sales, fertiliser subsidy,export sales
Gross sales going up; bottom line is coming down and it is projected to go up
2014/15 and 2015/16- projected no.s
Ex4- revenue streams, manufacturing products (56%), subsidy (30%),trading(13%)
Pg11- Gross Cash accrual = PAT + non cash expenses(depr etc)
7440 Gross cash acc for 2016
Operating ratio = (CGS+SGA+Int&Fin cost)/Net sales SGA : selling, general admin expenses
Oper ratio for 2013/1 0.952 Lower the no. better the performance
For 2015/16 0.94 cost fo Sales = CGS
Pg 4- hedging policy- to avoid exchange risk - forward contracts - 95% covered
Also going for interest rate derivatives
CO.'s financial risk profile is conservative
Industry is quite busy for 8 months from June-Jan. Not busy during Feb-May
Co. needs cash help - going for cash credit
Cash credit/Line of credit/ Notes payable (bank loan) are the same
Overdraft -you have a current acc with bank and you can borrow more than your acc balance
In cash credi t- you have a credit limit within which you can borrow
Companies with good credit rating - give
Fund based loan vs non fund based loan
Fund based - Bank gives loan in the form of cash
non-fund based - Bank gives commitment or guarantee. Eg : Letter of credit, bank guarantee
higher share from NBA
Inc in exposure 39.5 to 56.8
56.8 divided into Fund based(13BN) and NFB(43.8B)
90% of purchase on LC
5.75 months (incl 0.75 months of lead time) - time to settle payments ; remaining 10% at the time of delivery
Ex-7 - Conditions the bank is going to look at
Promoter's contribution - 25% of CA
Pg5 - categories are 5. Our company is dealing with phosphatic and also nitrogen
In India- people prefer nitrogenous instead of phosphatics
urea is becoming costlier - Asia is the largest consumer- GOI has been giving subsidy
fert co.s don’t have the free hand to decide the mRP
NBS- Nutrient based subsidy scheme
Trend - coming down - highest subsidy given to nitrogen
Prfit is coming down
EBIT/interest - Interest coverage ration; look at footnote pg11: EBITDA/interest - this is a variation
Profit of industry dec by 1-1.5%
Pg6- Risk given
Ex2- comparative data - our company is being compares to others
Debt equity ratio-lower the better
Tata Chemicals is mostly better
Ex3- Fin indicator of group companies
Ex-7Criteria1: Profitability of last 2 years
2nd condn - credit history
Current ratio - min expected 1.25- 1ST YEARS MEIN but actual is less- THIS IS A PROBLEM
Projections for current ration are in favour-can't trust it
Interest coverage ratio - min expectation 2 times - It is coming down (but meets the criteria)- it is coming down beca
Balloon repayment loan ?
Term loan is going down
Other term liabilities are coming down
Short term borrowing is going up
Next criteria-leverage : Total outside liability/Total net worth = (CL+LTL)/(Capital+R&S 1.813446
TOL= TL-RS-Capital TOL=total outside liability
Ex7
Contingent liability is not exceeding owner's equit- company is good
Pg11 - All ratios given
Assessment 1
e violated - industry specific and for single company. Hence Priyanka Das is apprehensive
cilities - also have retail outlets- also have pesticide system

0% at the time of delivery

is a variation

criteria)- it is coming down because profit is coming down and interest is going up (borrowing is increasing)
 Assessment1
Sales Inc
(CGS+SGA+IntFIncost)/Net salesOR (94%,9Fluctuating (can't conclude ; more weight to be given to actual data)
ProfitabilitActuals going down, forecasted going up
Liquidity ( Going dowPerformance not good
ICR Going dowPerformance not good (meets criteria but trend not favourable)
Net fixed assets/term loans FACR Higher theSafety margin is more
Gros cash aGoing dowNot good
Proportion of current assets NWC Ging downLower the better
Mag of change in sales is diff f % current assets to sales
Look at opgood enouprojection mein problem
n to actual data)

t trend not favourable)

Q1 What is the operating cycle and cash cycle for the co for these period of 4 years ?
Q2 Evaluate the cash credit limit for cIL
Q3 Evaluate the letter of credit limit

ans 1 Particulars 2013 2014 2015 2016

Operating cRaw material storage period(RM*365/Cost of material) 34.08761 34.04601 25.98454 20.3866
WIP storage period (=WIP*365/cost of prodn) 0.499338 0.687192 1.8438 1.478423
FG storage (FG*365)/COS 34.97446 39.76035 26.51164 21.79908
Days inventory 69.56141 74.49355 54.33997 43.66411
AR*365/gro Days receivables-Dom sales 102.1574 57.81667 58.86948 52435900
Days receivables-Fert sales 155.7016 142.0708 108.5625
Total 257.8591 199.8874 167.4319 52435900
Days inv+DR 327.4205 274.381 221.7719 52435944
credit/Pur Days payable 167.1522 53.20105
CCC 160.2682 274.381 221.7719 52435890

ans 2 Particulars 2013 2014 2015 2016

TCA 51639 47578 46340 49700
TCL- Bank borrowings 40966 38045 21870 24270
Working cap gap 10673 9533 24470 25430
25% of TC Promoter's contri 12909.75 11894.5 11585 12425
TCA-TCL Conventional WC 9905 3942 11470 12430
Ban is supposed to lend -2236.75 -2361.5 12885 13005
Working cap gap - Conventional gap 768 5591 13000 13000
Lower (Bank supposed to lend, Bank borrowings) -2236.75 -2361.5 12885 13000
Excess borrowing 3004.75 7952.5 115 0

ans3 Particulars 2013 2014 2015 2016

Pg4 - middCost of material 750101 100620
90% of COM- Documentation against acceptance 675090.9 90558
43392.38
Pg4 Remainign 10 %- Documentation against payment 628.875
Total LC limit 44021.25
 Net trade cFor all theree components of cycle : receiveable, inventpory, payables : commmom idr i.e. net
ntc ((AR/Inv-AP)*365)/Net sales

Cash conver
(AR/NS*365)+(Inv*365/CGS)

Operating cycle = Days invenrtory +days receivables

They are asking for 13 and we can give 13

Total amunHence this amount can be given

ayables : commmom idr i.e. net sales