Prathama Bank

HO: Moradabad
________________________________________________________________________________
Credit Department

PROCESS NOTE

Date: 25.9.2013

Branch: Kemri Credit Rating: 03

Region: Rampur Asset Classification: Standard

Date of receipt of proposal at the Branch: 24.9.2013

Date of receipt of proposal at H.O: 30.9.2013

Name of the Applicant: M/S Kadari Rice Mill

Present proposal:
(Rs Lac)
Nature of Existing Present Applied limits Limits now proposed
facility Limits Balance
SOD 180 115.80 250.00 250.00
Term Loan 20.00 Closed
Total 120.00 115.80 250.00 250.00

II. Particulars of the applicant:

Constitution Partnership Firm

PAN of firm AAKFK5237B
TIN of firm 09660704860
Address- Factory Milak Road, Kemri, District : Rampur
Group to which the unit belongs No particular group
Date of establishment 30.7.2010
Sector Priority: MSME: Small: Food Processing
Line of activity Rice Mill
Products manufactured Edible rice

Ownership & Management:

Name of the Partners Age PAN No Net worth

(Rs lacs)
1. Sri Puttan Ahmad 43 AMHPA5600R 39.79
2. Sri Rafi Ahmad 48 ANLPA1849D 43.85
3. Sri Nisar Ahmad 42 ABKPA5083C 96.60
4. Sri Mukhtyar Ahmad 47 ACAPA6862E 94.84
5. Sri Siraj Ahmad 25 ATGPA6484R 9.01
6. Sri Ishaque Ahmad 25 ATGPA6475N 2.68

Quality of Management:
The quality of management is considered satisfactory. Partners are well-experienced
businessman. The unit employs suitable skilled and unskilled staff in running of the rice
mill.

Whether the Firm has suitable cost accounting system? Yes

1
Banking Arrangement:

Dealing with our Bank since
: Partners dealing with us since 2008. A term loan
of Rs 42.00 Lac was sanctioned to sister
partnership firm M/S Kisan Ware House on
19.9.2008 for construction of Rural Go down.
Four partners of applicant firm M/S Kadri Rice
Mill own this firm.

Has the firm powers to borrow : Yes.

Present banking arrangement : The existing credit facilities were sanctioned to

the firm last year. The firm is dealing with us
exclusively. Maintaining account with SBI for
RTGS purposes.

Details of the existing Credit Facilities:

a) From our Bank:
(Rs Lac)
Nature of facility Date of sanction Limit/ Present Balance Remarks
Amount
SOD 14.11.2013 180.00 115.80 Regular
Term loan 30.10.10 20.00 00.00 Closed

The SOD limit is valid up to 30.11.2013. A temporary overdraw of Rs 25.00 Lac is

sanctioned the party on 24.10.2012 for the period of one month.

b) From other Banks/FIs: Nil

Credit Facilities in the name of partners from our Bank: NIL

Name of the sister concerns and their dealings:

Name of the concern Nature of Date of Original Present Remarks

facility sanction Advance Balance
M/S Kisan Ware House Term loan 19.09.08 42.00 15.21 SRF

Four partners are common to both firms.

An amount of Rs 15.21 Lac has been kept in the Subsidy Reserve Fund in the name of the
unit

Brief History:

 The applicant is a partnership firm established on 30.7.2010. The firm runs a rice
Mill.
 Existing credit facilities sanctioned to the newly established rice mill in October
2010. The unit started functioning from season year 2010-11.
 The firm is registered with District Industries Center, UP VAT, Krishi Utpadan Mandi
Samiti, Milak, and Income Tax for the activity.
 There is a good margin of profit in the business and Bank's experience of financing
Rice Mills has been satisfactory.
 The unit is located in a rich rice cultivation area of Western UP. There is no dearth of
either raw material for the unit (paddy) or market for the finished product (rice).
Milak Tehsil has a number of rice milling units.

2
  The applicants belong to an experienced business family, presently engaged in the
farming and rice milling activity.

Organizational set up/particulars of present key personnel and the area supervised
by them, change of key personnel in the recent past, if any:
All partners jointly and hired staff manage the firm.

Technical aspects:
Manufacture of edible rice is a fairly simple process, which involves:
1. Pre-cleaning the paddy prior to milling.
2. Removing husk or outer layer from the paddy.
3. Polishing or whiting the brown rice to remove the bran layer.
4. Separating the broken grains from the whole kernels.
5. Bagging the milled rice.
6. Disposing off the by-products.

The unit is well equipped to handle these tasks.

Marketing arrangements:
The unit has its own marketing network. Rice being a staple food grain, no special
marketing efforts are required.

Major developments if any that have taken place in the firm: The unit has successfully
completed its two years of commercial operations.

Areas of strength and weakness: The unit is located in area with a large demand for rice.
The plant is well equipped. The raw material is
easily available in the area. There are no
discernible weaknesses at present

Future outlook of the firm: Going by the experience of the other units
operating in the area, the future outlook is
considered bright.

Resume of the financial position and working results:

The unit was established only on 30.07.2010. The following is the resume of the financial
position and working results.
(Rs Lac)
Particulars 31.03.11 31.03.12 31.3.2013 31.03.2014
(Audited) (Audited (Audited) (Projected)
Liabilities
Capital 25.47 36.23 52.61 88.84
Unsecured loans from 19.49 22.70 18.80 18.80
friends/relatives
Term Loans from Banks/FIs 19.98 14.20 18.53 00.00
TOTAL TERM LIABILITIES 39.47 73.13 89.94 107.64
Current Liabilities
Bank Borrowings – short term 50.86 122.48 60.63. 250.00
Sundry Creditors 174.82 162.40 334.92 88.89
Other Current Liabilities/Provisions 0.09 1.14 2.45 5.00
TOTAL CURRENT LIABILITIES 225.77 286.02 398.00 343.89
Total Outside Liabilities 265.24 322.91 435.33 362.69
TOTAL LIABILITIES 290.71 359.15 487.94 451.53
Current Assets

3
 Cash and Bank balances 0.56 0.21 1.04 2.00
Receivables 30.49 91.83 63.29 105.76
Inventory /consumables 229.18 227.68 373.64 297.95
Loans and advances 7.00 16.23 22.92 -
Other current assets - - - 25.00
TOTAL CURRENT ASSETS 267.23 335.95 460.89 430.71
Fixed Assets 23.47 22.56 24.22 20.82
Non-current assets 0.01 0.64 2.83 -
TOTAL ASSETS 290.71 359.15 487.94 451.53

Working Results and ratios:

Particulars 31.03.11 31.03.12 31.3.2013 31.03.14

(Audited) (Audited) (Audited) (Projected)
Tangible net worth 25.47 36.23 52.61 88.84
Sales 330.84 695.11 984.72 1269.08
Profit/(loss) 2.62 8.09 13.08 14.37
Depreciation 1.90 3.75 00.29 3.25
Cash generation 4.52 11.84 13.37 14.37
Net working capital 41.46 49.93 62.89 86.82
Current ratio 1.18 1.17 1.16 1.25
Solvency ratio (TOL/TNW) 10.41 8.91 8.27 4.08
Debt equity ratio 1.55 1.40 0.71 0.21
Profitability (%) 0.79 1.16 1.32 1.13

Comments on working results and financial position

Working results and financial position summarized as above may be considered
satisfactory.

Assessment of Working Capital Requirement: (under the turnover method)

The unit has achieved sales of Rs 695.11 in its second year of operations. On the basis of
the encouraging results put up for the second year of operations the unit has projected
sales at Rs 1071.97 Lac, an increase of around 54 % as compared to the previous year. On
this basis the unit’s experience we may accept 35% growth on the achievement of last year
for the purposes of assessment.
(Rs Lac)
Accepted estimated sales 1269.08
Working capital gap @ 25 % of the estimated turnover (A) 317.27
Margin @ 5 % of the estimated turnover (B) 64.80
Actual NWC as on 31.03.2012 (C) 49.93
Permissible bank finance: A-B or C whichever is high 252.47
Limit now proposed 250.00

It may be observed that the unit would be eligible for enhancement of the limit up to Rs
252.47 Lac as against Rs 250.00 Lac applies
Bank finance available on the basis of IInd method of lending:-TOTAL CURRENT ASSETS
430.72

1 Current liabilities 93.89

2 Working capital gap 1-2 336.82
3 Proposed bank borrowings 250.00

4 Total current liabilities 2-4 343.89

4
5 Projected net working capital 3-4 86.82
6 Minimum stipulated margin@ 25% of 3 84.21
7 Item 3-7 252.62
8 Item3-6 250.00
9 Maximum permissible bank finance (item 8 or 250.00
9 whichever is lower)

Security coverage for the proposed exposure: -

Particulars of security Value

(Rs Lac)
Primary: 24.22
Book value of plant and machinery as on 31.03.2012 358.00
Value of stock required to avail the proposed limit in full during peak season
with 30 % margin
Collateral:
Existing EM of land measuring 1.307 ha with buildings thereon in the name of 347.07
partners Puttan Ahmad, Nisar Ahmad, Rafique Ahmad and Mukhtiyar Ahmad,
at khsara no 124 & 125, village Miyudi, Tehsil Milak, valued by Sri Subodh
Bhardawaj, panel valuer on 19.10.2013. (This property is also mortgaged as
security for Rural Godown term loan of present balance Rs 15.21 Lac in the
name of the four of the partners.)
EM of land measuring 698.10 Sq.M with boundary thereon in the name of 26.50
partners Puttan Ahmad, Nisar Ahmad, Rafique Ahmad and Mukhtiyar Ahmad,
at khsara no 125, village Miyudi, Tehsil Milak, valued by Sri Vikas Agarwal,
panel valuer on 23.01.2013.
Cash security as SRF 15.21
Total value of security 771.00
Proposed exposure (SOD 250.002+ Rural godown TL Rs 15.21 Lac less balance 265.21
in the subsidy reserve fund of Rs 15.21 Lac
Security coverage 2.91

Security coverage is 2.91 against minimum requirement of 1.25 may be considered

satisfactory.

Compliance with Desirable Financial Parameters:

Parameter Bench mark 31.03.2013 Remarks

(Audited)
Current Ratio 1.25 to 1.33 under the 1.16 Not Complied
turnover method
TOL/TNW Less than 5:1 In exceptional 8.27 Complied with
cases up to 10:1
Profitability No loss for last 2 years Earning profit Complied with
since last one year
Security 1.30 2.91 Complied with
coverage

It may be observed that the unit complies with 3 desirable financial parameters out of 4, on
the basis of the audited financial statements. According to credit policy of our Bank the
sanctioning authority has powers to sanction the proposal with the deviation in 1 desirable
financial parameter.

5
Operational experience:

The unit has been a regular customer of our bank for the last 3 years and their dealings are
satisfactory. The party is also dealing with S.B.I. Bilaspur due to non-availability RTGS
facility at Branch.

(12 months ending 30.09.13)

(Rs in Lac)
Facility Limit Maxi Dr Bal Min Dr Interest Total T.O
Bal earned
SOD 180.00 179.97 34.17 11.54 1408.58
TL 20.00 NA NA 2.20 NA

Total income earned from the party: Rs 12.56 Lac

Guarantors: All partners in their personal capacity and -

Sl Name of Guarantors Age Net worth

no (Rs Lac)
1 Sri Chhuttan 58 33.53
2 Sri Usman Ali 65 67.03
Both guarantors are regular customers of the Branch.

Margin: 30 % on inventory

Compliance with exposure norms:

The unit had net worth of Rs52.61 Lac as per the financial statements (certified by the C.A.)
as on 31.3.2013. The existing and proposed exposure at Rs250.00 Lac is within the
permissible norm of 5 times the net worth.

Credit Rating:
The unit has been allotted credit rating of CR 04 as per the details furnished in the rating
chart enclosed, to be confirmed by the Competent Authority.

CIBIL Report: As per the latest information available on the CIBIL website, partners do not
figure among defaulters.

Primary Securities:
Hypothecation of raw materials, work in process, finished goods inventory and plant and
machinery.

Collateral Securities:
Existing EM of land measuring 1.307 ha with buildings thereon in the name of partners
Puttan Ahmad, Nisar Ahmad, Rafique Ahmad and Mukhtiyar Ahmad, at khsara no 124 &
125, village Miyudi, Tehsil Milak, valued by Sri Subodh Bhardawaj, panel valuer on
19.10.2013. (This property is also mortgaged as security for Rural Godown term loan of
present balance Rs 15.21 Lac in the name of the four of the partners.)
EM of land measuring 698.10 Sq.M with boundary thereon in the name of partners Puttan
Ahmad, Nisar Ahmad, Rafique Ahmad and Mukhtiyar Ahmad, at khsara no 125, village
Miyudi, Tehsil Milak, valued by Sri Vikash Agarwal, panel valuer on 23.012013.

Compliance with Legal Opinion/EM:

6
Sri Mahendra Parkas Agrawal, panel advocate 22.09.2010, gave legal opinion of the
immovable property mortgaged. Mortgage has been created in terms of the legal opinion
Sri Arvind Kumar Gupta, panel advocate gave legal opinion of the additional property area
698.10 Sq.M. Dated 22.10.2013.

Unit Inspection:

CM Credit & RM, Rampur, has inspected the unit jointly. The unit was observed to be
working well and no adverse features were noticed.

Recommendations:

On the basis of the above details, we recommend that the following credit facility may be
sanctioned in enhancement:
Nature of Limit Rate of Margin Security, value and date of valuation
facility (Rs Lac) interest
SOD 250.00 10.50 30 % Primary Security:
Hypothecation of stock in trade.
Validity of the limit: 31.11.2014
Collateral:

Existing EM of land measuring 1.307 ha with buildings thereon in the name of partners
Puttan Ahmad, Nisar Ahmad, Rafique Ahmad and Mukhtiyar Ahmad, at khsara no 124 &
125, village Miyudi, Tehsil Milak, valued by Sri Subodh Bhardawaj, panel valuer on
19.10.2013. (This property is also mortgaged as security for Rural Godown term loan of
present balance Rs 15.21 Lac in the name of the four of the partners.)
EM of land measuring 698.10 Sq.M with boundary thereon in the name of partners Puttan
Ahmad, Nisar Ahmad, Rafique Ahmad and Mukhtiyar Ahmad, at khsara no 125, village
Miyudi, Tehsil Milak, valued by Sri Vikash Agarwal, panel valuer on 23.012013.

Other Terms and Conditions:

1. Advance is to be classified under MSME: Small: Processing

2. Present SOD limit is sanctioned in cancellation of existing limit of Rs 180.00 Lac.
3. Existing Term Loan is to be continued.
4. Details terms and conditions of sanction are to be advised to the party and their
consent in writing is to be obtained before disbursement.
5. Existing mortgage has to be extended to cover the enhanced SOD limit now
sanctioned.
6. Drawings in the SOD limit shall be regulated on the basis of paid up stock,
specified in monthly stock statements, which are to be submitted regularly.
7. The unit has to route all their transactions through the limit.
8. Penal interest at 2 % over the applicable rate shall be charged for the period and
the amount overdue. Rate of interest on the credit facilities shall vary as per the
credit policy of the bank.
9. Both primary and collateral securities shall be comprehensively insured with
Bank’s clause at the cost of the borrower and the policy shall be kept in force at
all times.
10.NEC of the securities is to be updated and No Dues Certificate is to be obtained.

7
11.Bank’s nameplate is to be fixed at the main gate of the unit.
12.PG-68 as per Cir.No.43/96, End utilization reports are to be submitted by the
branch within a month of release.
13.Periodical reports like Property Inspection Report PA-33 and Machinery
inspection report PA-31 on half yearly basis, follow-up CAD-2 on monthly basis
is to be submitted regularly till closure of SOD a/c.
14.Before release, please obtain an undertaking from the directors that:
a) They shall not withdraw their capital without consent of the Bank.
b) Unsecured loans shall not be repaid during the currency of the credit
facilities.
15.Branch to ensure that the direct/indirect liabilities of the borrower and sureties
are regular.
16.All other terms and conditions as applicable to such types of advances as per
MOI, Circulars etc., issued from time to time shall be strictly complied with.
17.Processing charges as per circular no. 131/06 is to be collected.
18.Branch to take certificate of correctness of documents from panel advocate, declaration
from borrower for the compliance of post sanction formalities and due diligence
certificate, and submit to Regional Office in terms of H.O. circular no PBHO/Credit-
211/12 dated 09.10.2012
19.Before release branch to obtain PA-43 of all partners & guarantors with proof of
asset declared and kept it in branch record.
20. Branch to ensure that all the transaction routed through our bank as
RTGS/NEFT facility is available with us.
21.Branch to obtain declaration/statement submitted by the party to sales tax
department on monthly/quarterly basis for the period 2011-12 to cross check the sale.

S.K.JHA B.K.SEHGAL
Manager credit Br. Manager