Q1

1. Background –
a. Name - Neo Pharmaceuticals (P) Ltd (NPPL)
b. Main products / services offered is in pharmaceutical sector
c. Initially owned by Patel brothers but due to declaration as SICK under BIFR, the
company could not be reformed. Hence, it was bought out by Hegde brothers for Rs.
310.11 lakhs
d. This take-over was funded by a consortium of banks. The liabilities with IDBI who funded
the project were not taken over by the consortium.
e. They partnered with the Bhat brothers who were already in a similar line of business
f. After the takeover, we can see that the sales and net profit have increased consistently
2. Sector Analysis –
a. Indian pharma sector supplies 50% of the global demand for various vaccines, 40% of
the generic demand for US and 25% of all medicines for UK.
b. Globally, India ranks 3rd in terms of pharmaceutical production by volume and 14th by
value
c. India is the 12th largest exporter of medical goods in the world. It contributes 6.6% to
the total merchandise exports.
d. As of May 2021, India supplied a total of 586.4 lakh COVID-19 vaccines, comprising
grants (81.3 lakh), commercial exports (339.7 lakh) and exports under the COVAX
platform (165.5 lakh), to 71 countries.
e. The sector drivers are –
i. Cost efficiency – Low cost of production and R&D
ii. High economic growth along with increasing health insurance penetration
iii. Increasing investment - The Indian drugs and pharmaceuticals sector has
received cumulative FDI inflows worth US$ 17.75 billion between April 2000 and
December 2020.
iv. Policy Support - ‘Pharma Vision 2020’ aims to make India a major hub for end-
to-end drug discovery.
3. Financial Indicators –

Bank Liabilities 1178.19 1415.4 2023.27

Adjusted Tangible Net
worth 2498.45 3105.67 4037.3
Quick Ratio 0.681526503 0.678872559 0.73004269
Current Ratio 1.23 1.32 1.32
Debt-Equity Ratio 0.471568372 0.455747069 0.501144329

4.
a. Present limit exposure and conduct of the account
b. Request of the borrower and explanation -
c. Assessment of MPBF –
 i. Since the total WC requirement is greater than Rs 10 (Rs 15.41L), we will use
Tandon Method 2 for the MPBF calculation –

31.3.2020 31.3.2021 31.3.2022

Total CA –A 2526.49 3819.37 3855.01
Total CL - B 1916.8 2732.56 2932.76
Bank Borrowing – C 931.96 1399.36 1750
OCL – D 984.84 1333.2 1182.76
WC Gap – E 1541.65 2486.17 2672.25
25% of A – F 631.6225 954.8425 963.7525
Actual NWC- G 609.69 1086.81 922.25
E-F 910.03 1531.33 1708.5
G-F 931.96 1399.36 1750
MPBF (lower of H or I) 910.03 1399.36 1708.5
Current ratio 1.32 1.4 1.31

Q2
My job as a bank manager will be check the eligibility of the son and his repayment schedule.

Father’ account and loans will not be considered since the prime security is the house being purchased
by the son

Assessment based on cost

Purchase cost of house 25L
Market Value 32L
Lower 25L
Eligible Amount (80%) (A) 20L
 
Assessment based on Income
Income for year 1 6L
Income for year 2 6.8L
Average of 2 years 6.4L
5 times Average (B) 32L
Max limit as per bank's scheme (Z) 50L
 
Lower of the 3 (A,B,Z) 20L
Hence, the eligible loan amount is 20L
Rs2149
Monthly EMI 2
Rs25790
Annual EMI     4
According to Income –

1. 5 times of average income is Rs 32L for the son

2. Eligible amount that bank can give is 80% of the property value which is Rs 20L
3. Since 5 times average income is greater than eligible amount, bank can sanction the loan

According to Repayment Schedule –

1. Average annual income for the 2 years of son is Rs 6.4L

2. Annual EMI is Rs 25.79L
3. EMI (Annual) by the bank is less than 60% of average annual income of the son. Hence the loan
can be sanctioned.

Sanction Note is given below -

1 Facility Home Loan
2 Limit Rs. 20,00,000 (Rupees twenty lakh only)
3 Purpose To purchase a flat
4 Disbursement Immediate
5 Security Prime security is Flat
Charge - Mortgage
6 Rate of interest Fixed rate of interest of 10%
7 Duration 15 years
8 Repayment Equated Monthly Instalments (EMI)
9 EMI Monthly - Rs 21,492
Yearly - Rs 2,57,904