SUMMER INTERNSHIP REPORT ON CREDIT APPRAISAL

(IN FULFILLMENT
OF

MASTER OF BUSINESS ADMINISTRATION )
REFERENCE TO

WITH SPECIAL

DENA BANK REGIONAL OFFICE BY: MBA, CLASS
SHARMA OF

2006-09

AB

JIMS JAGAN INSTITUTE OF MANAGEMENT STUDIES ROHINI , DELHI

ACKNOWLEDGEMENT

1

THE PROJECT TITLE “” HAS BEEN CONDUCTED BY ME DURING 14TH APRIL 2010 TO 15TH JUNE 2010 AT DENA BANK ,REGIONAL OFFICE .I HAVE COMPLETED THIS PROJECT ,
BASED ON THE PRIMARY AND SECONDARY RESEARCH UNDER THE GUIDANCE OF MY BANK GUIDES .

MR. DEVI SINGH CHHONKAR (CHIEF MANAGER ), MS. NEETU GUPTA (MANAGER CREDIT ), MR P . K . SAHI (MANAGER CREDIT ), MR . M . M . CHANDRA (MANAGER CREDIT ) & MS . SAVITA KASHYAP (JR . MANAGER ) THEY
HAVE HELPED ME TO LEARN ABOUT THE PROCESS OF CREDIT APPRAISAL BY GIVING

ME A VALUABLE INSIGHT INTO THE ROLE PLAYED BY

BANKS

IN CREDIT SECTOR .

MY

INCREASED SPECTRUM OF KNOWLEDGE IN THIS FIELD IS THE RESULT OF THEIR CONSTANT SUPERVISION AND DIRECTION THAT HAS HELPED ME TO ABSORB RELEVANT AND HIGH QUALITY INFORMATION .

I

WOULD LIKE TO THANK ALL THE RESPONDENTS WITHOUT WHOSE COOPERATION MY STUDY

WOULD NOT HAVE BEEN POSSIBLE .

LAST

BUT NOT THE LEAST ,

I

FEEL INDEBTED TO ALL THOSE PERSONS AND ORGANIZATIONS

WHO HAVE HELPED ME DIRECTLY OR INDIRECTLY IN THE SUCCESSFUL COMPLETION OF THIS STUDY .

DATED- 15TH JUNE , 2010

SHARMA

CERTIFICATE OF APPROVAL

2

THIS IS TO CERTIFY THAT THE FINAL PROJECT ON “CREDIT APPRAISAL” IS CARIED OUT BY AB SHARMA AS A PART OF THE REQUIREMENT FOR PGDBM. THE STUDENT HAS DONE THE PROJECT UNDER MY GUIDANCE & SUBMITTED THE STUDY REPORT. THE FINAL PROJECT IS MORE THAN GOOD & WOULD BE USEFUL IN UNDERSTANDING THE METHODOLOGY USED WHILE DOING CREDIT APPRAISAL. I WISH THE STUDENT ALL THE BEST IN HER FUTURE ENDEAVOURS. WITH REGARDS ,

CONTENTS ACKNOWLEDGEMENT 2

3

CERTIFICATE 3 CHAPTER 1 INTRODUCTION 1.1 BANKING INDUSTRY
OBJECTIVE
OF STUDY

5 1.2 CORPORATE PROFILE 6 CHAPTER 2 INTRODUCTION 10
2.1 13 2.2 16 2.3 17 2.4 20

&

EMERGENCE
OF

OF

CREDIT

APPRAISALN

MEANING CREDIT

CREDIT RATING

APPRAISAL SYSTEM RESTRICTIONS

CREDIT CREDIT MONITORING

POLICY

CHAPTER 3 RELEVANCE OF SME
3.1 23 3.2 25 3.3 27 3.4 33 INTRODUCTION SME TO SMALL & MEDIUM OF ENTERPRISE DENA (SME) BANK ACT SMES IN INDIA

PROCESS MSMED

SWOT

ANALYSIS

OF

CHAPTER 4 RETAIL LENDING POLICY
4.1 34 4.2 35 4.3 36 4.4 38 4.5 40 INTRODUCTION NEED STRETEGIES RISK OF OF RETAIL RETAIL BANKING BANKING MITIGATION
SCHEMES

CHAPTER 5

4

CASE 41 5.1 CASE STUDY (PROPOSAL ) 455.2 CONCLUSION 122 5.3 REFERENCES 123

STUDY

CHAPTER 1. INTRODUCTION
BANKING INDUSTRY

:

THE FINANCIAL SYSTEM IS THE LIFELINE OF THE ECONOMY. THE CHANGES IN THE ECONOMY GET MIRRORED IN THE PERFORMANCE OF THE FINANCIAL SYSTEM, MORE SO OF THE BANKING INDUSTRY. ECONOMIC LIBERALIZATION & FINANCIAL SECTOR REFORMS INTRODUCED IN 1991 FOLLOWED BY SECOND PHASE OF FINANCIAL SECTOR REFORMS IN 1997 USHERED IN AN ERA OF FAST TRACK GROWTH IN SIZE, TECHNOLOGY AND DELIVERABLES OF BANKS IN INDIA. THE INITIAL PHASE OF FINANCIAL SECTOR REFORMS FOCUSED ON MODIFICATION IN THE POLICY FRAME WORK, IMPROVEMENT IN FINANCIAL HEALTH THROUGH PRUDENTIAL NORMS. THE SECOND PHASE LAID EMPHASIS ON STRENGTHENING THE FOUNDATIONS, STREAMLINING PROCEDURES, UPGRADING TECHNOLOGY, HUMAN RESOURCE. THE FINANCIAL SECTOR REFORMS GRADUALLY MOVED THE BANKING INDUSTRY FROM A REGULATED ENVIRONMENT TO A DEREGULATED MARKET ECONOMY. IN THIS PROCESS, BANKING OPERATIONS TRANSFORMED FROM ITS TRADITIONAL INTERMEDIARY ROLE TO A BUSINESS OF RISK RETURN TRADE OFF. “INDIA VISION 2020” OF GOVERNMENT OF INDIA TARGETS AN ANNUAL GDP GROWTH OF 8.5% TO 9% OVER THE NEXT 20 YEARS. ECONOMIC DEVELOPMENT OF THIS MAGNITUDE WOULD CALL FOR CONSIDERABLE INVESTMENTS IN INFRASTRUCTURE AND ENORMOUS FUNDING REQUIREMENTS, WHICH WOULD POSE CHALLENGE TO BANKING AND FINANCIAL SYSTEM. PUBLIC-PRIVATE PARTNERSHIP AND COMMERCIAL FUNDING IN INFRASTRUCTURE PROJECTS WILL BE MORE DOMINANT IN THE YEARS AHEAD. SERVICE SECTOR WOULD ASSUME GREATER IMPORTANCE. SME SECTOR WILL EMERGE AS A VIBRANT SECTOR IN VIEW OF ITS EMPLOYMENT GENERATION AND SIGNIFICANT CONTRIBUTION TO GDP. INDIA’S SHARE IN INTERNATIONAL TRADE IS BELOW 1%, ACCOUNTING FOR LESS THAN 15% OF GDP, WHICH IS EXPECTED TO GO UP TO 35%. TAKING INTO ACCOUNT THE ECONOMIC PROFILE DRAWN IN INDIA VISION 2020 DOCUMENT, BANKING INDUSTRY VISIION 2010 WAS DRAWN UP BY IBA UNDER THE EMERGING ECONOMIC AND BANKING SCENARIO, A NEED WAS FELT BY THE BANK TO CHARTER ITS FUTURE GROWTH PATH AS A MID-SIZED PROFIT MAKING AND DIVIDEND PAYING BANKING COMPANY COMMITTED TO HIGH
5

STANDARDS OF CUSTOMER SERVICE. IN THIS DIRECTION, THE BANK HAD DRAWN DENA VISION 2010. VISION GOAL ENVISAGE ACHIEVING ADVANCE LEVEL OF RS.25000 CRORES BY 2008, RS.32000 CRORES BY 2009 AND RS.40000 CRORES BY 2010..

OBJECTIVE OF STUDY: THE OBJECTIVE OF THIS PROJECT IS TO STUDY THE WORKING OF DENA BANK FOR PROVIDING LOANS & ADVANCES KNOWN AS CREDIT APPRAISAL SYSTEM .CREDIT BEING A CRITICAL INPUT FOR DEVELOPMENT OF ALL SECTOR , NEEDS A SPECIAL ATTENTION AND BANKS PLAY AN IMPORTANT ROLE IN PROVIDING CREDIT FOR THIS DEVELOPMENT .

1.2 CORPORATE PROFILE
HISTORY DENA BANK WAS FOUNDED ON 26TH MAY, 1938 BY THE FAMILY OF DEVKARAN NANJEE UNDER THE NAME DEVKARAN NANJEE BANKING COMPANY LTD. IT BECAME A PUBLIC LTD. COMPANY IN DECEMBER 1939 AND LATER THE NAME WAS CHANGED TO DENA BANK LTD. IN JULY 1969 DENA BANK LTD. ALONG WITH 13 OTHER MAJOR BANKS WAS NATIONALIZED AND IS NOW A PUBLIC SECTOR BANK CONSTITUTED UNDER THE BANKING COMPANIES (ACQUISITION & TRANSFER OF UNDERTAKINGS ) ACT , 1970. UNDER THE PROVISIONS OF THE BANKING REGULATIONS ACT 1949, IN ADDITION TO THE BUSINESS OF BANKING , THE BANK CAN UNDERTAKE OTHER BUSINESS AS SPECIFIED IN SECTION 6 OF THE BANKING REGULATIONS ACT , 1949. MILESTONES ONE
OF AMONG SIX

PUBLIC SECTOR BANKS
FOR IN THE YEAR

SELECTED BY THE OF

RS.72.3 CRORES DEVELOPMENTAL PROJECT ONE
AMONG THE FEW AND TRAINING .

AUGMENTATION

WORLD BANK FOR SANCTIONING A LOAN TIER-II CAPITAL UNDER FINANCIAL SECTOR

1995. WORLD BANK
LOAN FOR TECHNOLOGICAL UPGRADATION

BANKS

TO RECEIVE THE

LAUNCHED

A

BOND ISSUE
OF

OF

RS.92.13

CRORES IN IN

NOVEMBER 1996.

MAIDEN PUBLIC ISSUE INTRODUCED TELE

RS.180 CRORES

NOVEMBER 1996.

BANKING FACILITY OF SELECTED METROPOLITAN CENTERS .

6

DENA BANK     

HAS BEEN THE FIRST

BANK

TO INTRODUCE :

MINOR SAVINGS SCHEME . CREDIT CARD IN RURAL INDIA KNOWN AS "DENA KRISHI SAKH PATRA" (DKSP). DRIVE -IN ATM COUNTER OF JUHU , MUMBAI . SMART CARD AT SELECTED BRANCHES IN MUMBAI . CUSTOMER RATING SYSTEM FOR RATING THE BANK SERVICES CORPORATE VISION

MISSION DENA BANK WILL PROVIDE ITS CUSTOMERS - PREMIER FINANCIAL SERVICES VALUE , STAFF - POSITIVE WORK ENVIRONMENT AND
OPPORTUNITY FOR GROWTH AND ACHIEVEMENT ,

OF GREAT

SHAREHOLDERS - SUPERIOR FINANCIAL COMMUNITY - ECONOMIC GROWTH

RETURNS ,

VISION
MOST PREFERRED CHOICE IN ITS AREA OF OPERATIONS , BY ITS REPUTATION AND PERFORMANCE

DENA BANK WILL EMERGE AS THE BANK OF CUSTOMER

DEPOSIT

SCHEMES

7

Apart from normal Current, Savings Bank and Fixed Deposits a number of other schemes of deposit mobilization have been introduced by our Bank from time to time. There are at present following schemes: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) Dena Samruddhi Deposit Scheme Dena Recurring Deposit Scheme Dena Minors Saving Scheme Dena Freedom Deposit Scheme Dena Savifix Deposit Scheme Dena Senior Citizen Deposit Scheme Dena Safe Deposit Locker Rent Care Deposits Scheme Dena Jeevan SB Scheme Dena Alpa Bachat Khata Deposit Scheme Dena Premium Current Account Scheme Dena Premium Saving Bank Account Scheme

i) Dena Samruddhi Deposit Scheme An account can be opened under this scheme in the individual’s own name or jointly with other person/s. The amount will be payable on maturity to all jointly or to either or any one of them or survivor/s according to written instructions specially obtained from the depositors at the time of opening the account. The account can also be opened by a parent/guardian on behalf of a minor. Deposits can also be made in the name of proprietorship firms, Hindu Undivided Families, Partnership Firms, Limited companies, Clubs, Associations etc. ii) Dena Recurring Deposit Scheme

An account can be opened in the name of individual or jointly with other person/s or by a parent/guardian on behalf of a minor. iii) Dena Minor Savings Scheme

This scheme is a product developed for children, to inculcate saving habits in the minors and helping them in becoming responsible by allowing them to partially operate this account independently. iv) Dena Freedom Deposit Scheme (DFD Scheme) This term deposit scheme gives maximum flexibility to the Account Holder. The depositor can withdraw up to 90% of initial deposit amount as overdraft. A lien should be marked on the deposit through the system. A Cheque Book is provided to withdraw amount from overdraft. No paper work is required for overdraft.

8

v) Dena Savifix Dena Savifix is an automatic conversion of Rs.1000/- and in multiple of Rs.1000/there of from Savings to Fixed Deposit. Under automatic conversion amount exceeding Rs.10,000/- in Saving Account is converted in to Term Deposit for minimum period as applicable for normal Term Deposit Accounts. vi) Dena Senior Citizen Deposit Scheme This is a fixed deposit scheme specifically meant for Senior Citizens offering higher rates of interest as compared to normal deposit of any size. This scheme is opened to individuals who have completed 60 years of age and who can satisfy the Bank by producing any of the prescribed documents as proof of age

CHAPTER 2 INTRODUCTION & EMERGENCE OF
9

CREDIT APPRAISAL

CREDIT APPRAISAL IS DIVIDED INTO THREE HEADS NAMELY:

1.CORPORATE 2.SME’S 3.RETAIL
1.1

CREDIT

CORPORATE CREDIT : INCLUDES

LIMITS: 1) FUND BASED 2) NON- FUND BASED 1) FUND BASED: A) CASH CREDIT LIMIT – THIS SHOWN BELOW :

IS ASSESSED ON THE BASIS OF THE FOLLOWING METHODS AS

METHODS OF ASSESSMENT FOR NBFCS

NOF METHOD

FOR CREDIT LIMITS UPTO RS.2 CRORE (RS.5 TURNOVER METHOD CRORE IN CASE OF SSIS) IN CASE WORKING CAPITAL CYCLE IS HIGHER, THE BORROWER WILL HAVE THE CHOICE TO BE ASSESSED UNDER TURNOVER METHOD OR MODIFIED MPBF METHOD. FOR CREDIT LIMITS BEYOND RS.2 CRORE (RS.5 CRORE IN CASE OF SSIS) FOR OPERATING CYCLE IS REASONABLY MODIFIED MPBF UNIFORM AND WORKING CAPITAL REMAINS METHOD MORE OR LESS STABLE FOR INDUSTRIES, WHERE OPERATIONS ARE CASH BUDGET SEASONAL OR PROJECT BASED IN NATURE METHOD LIKE, TEA, SUGAR, SOFTWARE, CONTRACTORS, BUILDERS & DEVELOPERS ETC. b) term loan - term loan is explained as per the case study enclosed as annexure xx. 2) NON FUND BASED: a) Letter of credit – a letter of credit or a documentary credit is an undertaking issued by a bank, on behalf of the buyer to the seller, to pay for the goods and services, provided that the seller presents documents which comply with the terms and conditions stipulated in the letter of credit.
PARTIES IN LC TRANSACTION

10

1) 2) 3) 4) 5) 6) 7) 1) 2) 3) 4) 5) 6)

APPLICANT BENEFICIARY ISSUING /OPENING BANK ADVISING BANK CONFIRMING BANK NOMINATED / NEGOTIATING BANK REIMBURSING BANK

TYPES OF LETTER OF CREDIT RECOVRABLE AND IRRECOVERABLE LETTER OF CREDIT SIGHT CREDIT AND ACCEPTANCE RED CLAUSE

(USANCE)

CREDIT

&

GREEN CLAUSE LETTERS OF CREDIT

REVOLVING LETTER OF CREDIT TRANSFERABLE AND BACK TO BACK LETTER OF CREDIT STANDBY LETTER OF CREDIT

B ) BANK GURANTEE

–“

A CONTARCT TO PERFORM THE PROMISE OR DISCHARGE THE LIABILTY OF A THIRD

PERSON IN CASE OF HIS DEFAULT ”. THUS THERE ARE THREE PARTY INVOLVED IN THE CONTRACT OF A GURANTEE I . E . THE APPLICANT CLIENT ON WHOSE BEHALF THE GURANTEE IS BEING ISSUED ), THE BENEFICIARY ISSUED

(THE

(TO

WHOM THE GURANTEE

)AND

THE GURANTOR

(IN

CASE OF BANK GURANTEE , IT IS THE ISSUING BANK ).

TYPE OF BANK GUARANTEE ON THE BASIS OF NATURE

1)FINANCIAL GURANTEE A FINANCIAL GURANTEE MAY BE SEEN AS A CERTIFICATE ISSUED BY THE BANK REGARDING THE FINANCIAL ABILITY /WORTH OF ITS CLIENT TO MEET CERTAIN FINANCIAL OBLIGATIONS ,MAKING PAYMENTS AND SATISFYING THE DUES ETC. 2)PERFORMANCE GURANTEE A PERFORMANCE GURANTEE ,ON THE OTHER HAND,THE ISSUING BANK PROVIDES A GURANTEE TO BENEFICIARY TO MAKE GOOD THE MONETARY LOSS IN THE EVENT OF NON-PERFORMANCE OF A CONTRACT BY THE CLIENT.
TYPE OF BANK GUARANTEE ON THE BASIS OF PURPOSE

1) BID BOND THESE ARE TYPICALLY THE BG’S REQUIRED IN LIEU OF EARNEST MONEY THAT A BIDDER HAS TO DEPOSIT BEFORE BIDDING AGAINST A TENDER. 2) ADVANCE PAYMENT GURANTEE ADVANCE PAYMENT GURANTEES ARE ISSUED BY BANKS ON BEHALF OF CUSTOMERS WHO ARE IN THE BUSINESS OF EXECUTION OF MAJOR

11

EXPORTS ORDERS, IMPLEMENTATION OF TURNEY PROJECTS,CONSTRUCTION CONTRACTS,MAJOR SERVICING PROJECTS ETC. 3) RETENTION MONEY GUARANTEE IT IS COMMON FOR THE EMPLOYERS TO RETAIN A SMALL PORTION OF THE PAYMENTS RELEASED BY THEM IN STAGES.THIS IS IN ORDER TO TAKE CARE OF THE ANY EXPENSE OR LOSS WHICH THE EMPLOYER MIGHT HAVE TO INCUR IN FUTURE ON A/C OF MISTAKES. 4) MAINTENANCE BOND WHEN THE CONTRACTOR SUCESSFULLY COMPLETES HIS JOB TO THE SATISFACTION OF THE EMPLOYER,THE BG’S ISSUED BY THE BANK WOULD HAVE SERVED THE PURPOSE AND THE LIABILITY WOULD CEASE TO EXIST. 5) DEFFERED PAYMENT GURANTEE A BANK IS REQUIRED TO ISSUE GUARANTEE FOR MAKING PAYMENT TO THE SUPPLIER OF MACHINERY, SUPPLIED TO THE BANK’S CLIENT ON DEFFERED TERMS,IN AGREED INSTALMENTS WITH PROVISIONS FOR CHARGING A STIPULATED RATE OF INTEREST ON THE RESPECTIVE DUE DATES IN CASE OF DEFAULT PAYMENT BY THE BUYER.THESE GUARANTEES ARE POPULARLY CALLED DEFFERED PAYMENT GUARANTEE (DPG).

2.1 Meaning of Credit Appraisals IN THE CREDIT APPRAISAL PROCESS: --1) THE DECISION MAKER MAKES AN ATTEMPT TO FIND THE ANSWER OF TWO QUESTION.FIRST, WHETHER THE ENTERPRENURE REQUIRES FUNDS, AND ALSO WHAT HIS CREDENTIALS ARE. IF THE ANSWER OF THE FIRST QUESTION IS POSITIVE, THE SECOND QUESTION IS ALL ABOUT THE EXTENT OF HIS REQUIREMENT AND THE WAYS AND MEANS TO FUND THE REQUIREMENTS. 2) ASSESMENT OF CREDIT REQUIREMENTS FOR ENTERPRISES WORKING AT A SMALL SCALE IS OFTEN DIFFICULT BECAUSE OF LACK OF DATA RELATING TO OPERATIONS OF THE UNIT. 3) THE PROMOTERS ARE SKILLED PERSONNEL OR ARTISIANS WITHOUT HAVING ANY KNOWLEDGE OF FINANCIALS MANAGEMENT OR ACCOUNTANCY.BESIDES,THE LOW LEVEL OF OPERATIONS MAY NOT ALLOW THE PROMOTER TO EMPLOY A REGULAR ACCOUNTANT.

12

4) A CREDIT APPRAISING OFFICER MAY NOT FIND ANY PROFIT AND LOSS A/C OR B/S OF THE BORROWING ENTERPRISE,ON THE BASIS OF WHICH HE MAY WORK OUT THE LEVEL OF CREDIT REQUIRED. 5) IN MANY SUCH SITUATONS,A CREDIT ANALYST MAY HAVE TO COUNSEL THE BORROWER ,AND EVEN WORK OUT THE LIKELY PROFIT/LOSS AND B/S ON THE BASIS OF AVAILABLE INFORMATION. 6) WE FINANCE CREDIT APPRAISAL ON THE BASIS OF RATIO COMPLAINCE TO FINANCIAL PARAMETERS. 7) THE BANK ALSO CHECKS THE INTEGRITY TO THE BORROWER BY CHECKING THE RBI THE WILFUL DEFAULTER LIST WHICH IS UP DATED QUARTELY BY RBI ON ITS WEBSITE THIS SHOWS WHETHER THE BORROWER IS/WAS DEFAULTER IN ANY BANK/FINANCIAL INSTITUTION.SIMILARLY CIBIL IS ALSO CHECKED TO VIEW THE STATUS OF LOANS AVAILED BY THE BORROWER AND POSSESION OF OVERDUES IN ANY ACCOUNT. SAIL LIST: EXPORTS CHECK WHETHER HE IS DEFAULTER OR NOT. 8) CRITERIA FOR TAKING CREDIT RELATING DECISION COMPLIANCE TO FINANCIAL PARAMETERS A RATIO IS A STATISTICAL YARDSTICK THAT PROVIDES A MEASURE OF THE RELATIONSHIP BETWEEN TWO VARIABLES OR FIGURES. THE APPRAISING OFFICIAL HAS TO STEER A CAREFUL COURSE. HIS EXPERIENCE AND OBJECTIVES OF ANALYSIS HELP HIM IN DETERMINING WHICH OF THE RATIOS ARE MORE MEANINGFUL IN A GIVEN SITUATION. FURTHER, RATIOS DO NOT PROVIDE A DEFINITE ANSWER TO FINANCIAL PROBLEMS. THERE IS ALWAYS THE QUESTION OF JUDGEMENT AS TO WHAT SIGNIFICANCE SHOULD BE GIVEN TO THE FIGURES. WHILE SOME STANDARDS OF REFERENCE AND SOURCES OF BACKGROUND MATERIAL MAY BE FOUND USEFUL IN THIS CONNECTION, IN THE FINAL ANALYSIS, ONE MUST RELY UPON ONE'S OWN GOOD SENSE IN SELECTING AND EVALUATING THE RATIOS. TOTAL DEBT EQUITY RATIO: THE INDICATIVE DEBT EQUITY RATIO FOR DIFFERENT CLASSES OF BORROWERS ARE GIVEN BELOW. ADHERENCE TO THE SAME WILL HELP THE BANK IN MAINTAINING A HEALTHY CREDIT PORTFOLIO.

SR. NO.

CATEGORY OF THE INDICATI BORROWER VE TOTAL D/E RATIO TOTAL DEBT EQUITY
13

IN CASE OF 100% OR MORE COLLATERAL SECURITY INDICATIVE TOTAL D/E RATIO

A) B) C) D) E) F)

RATIO INDUSTRIES (MEDIUM & LARGE) INDUSTRIES (SSI) TRADERS SHIP BREAKING SERVICE INDUSTRY

3.5:1 4:1 5:1 6:1 5:1 5:1

4.5:1 5:1 6:1 7:1 6:1 6:1

CURRENT RATIO: SR. NO. 1 2 ASSESSMENT METHOD TURNOVER OVER METHOD MODIFIED MPBF METHOD :I)WORKING CAPITAL RS.10.00 CRORE II)WORKING CAPITAL RS.10.00 CRORE LIMIT LIMIT UPTO ABOVE 1.17:1 # 1.25:1 # RATIO (INDICATIVE) 1.10:1

# WHILE WORKING OUT MPBF, MINIMUM MARGIN TO BE TAKEN @ 15% OR 20% OF TOTAL CURRENT ASSETS SO THAT MINIMUM CURRENT RATIOS ARE MAINTAINED AT 1.17 AND 1.25 RESPECTIVELY. IN CASE OF ITEM NO 2 (I) & (II), WHERE THE ADEQUATE FUTURE CASH ACCRUALS ARE ENVISAGED AND THE PRESENT CURRENT RATIO IS LOWER THAN THE MINIMUM, THE BANK MAY CONSIDER WORKING CAPITAL TERM LOAN (WCTL), REPAYABLE OVER A PERIOD OF OF 3 TO 5 YEARS AND COMPLY WITH THE CURRENT RATIO. IN CASE OF ASSESSMENT UNDER TURNOVER METHOD MARGIN REQUIREMENTS ARE TO BE MAINTAINED UPFRONT.

14

WHERE UPFRONT NWC IS HIGHER THAN THE MINIMUM MARGIN REQUIREMENTS, THE MPBF MAY BE COMPUTED BY EXCLUDING THE MINIMUM MARGIN REQUIREMENT FROM 25% OF THE ACCEPTED TURNOVER. INTEREST COVERAGE RATIO: INTEREST COVERAGE IS AN INDICATOR AS TO THE NUMBER OF TIMES THE PROFIT COVERS THE INTEREST LIABILITY OF THE COMPANY. THIS IS A RISK PARAMETER AND AN INDICATOR TO THE EXTENT TO WHICH THE INTEREST LIABILITY WILL BE SERVICED ON TIME. PROFIT FOR THIS PURPOSE WOULD MEAN THE GROSS PROFIT BEFORE INTEREST. THE RATIO SHOULD BE MINIMUM 1.5:1. EXAMPLE:- TOTAL INTEREST LIABILITY OF THE COMPANY IS RS.100/-. GROSS PROFIT MEANS NET PROFIT PLUS DEPRECIATION PLUS INTEREST IS RS.175/-. INTEREST COVERAGE RATIO WILL BE 175 DIVIDED BY 100 = 1.75 TIMES. 2.1 CREDIT RISK RATING SYSTEM

WHAT IS RISK? THE WORD RISK IS DERIVED FRON AN EARLY ITALIAN WORD “RISICARE” WHICH MEANS “TO DARE”. THE STORY OF MANKIND IS A STORY OF THREATS AND OPPORTUNITIES,OF BRAVING THE RISKS AND GETTING THE REWARDS IN THE PROCESS. WE MAY DEFIN RISK EMANATING FROM A SITUATION AS SOMETHING WHICH THROWS A CHALLENGE TO A PERSON TO ACT OR NOT TO ACT WITH REGARD TO AN EVENT OR HAPPENING. IN ORDER TO FACILITATE TAKING CREDIT DECISION IN A CONSISTENT MANNER, A DECISION MAKER WOULD LOOK FOR A RISK RATING SYSTEM WHICH SERVES AS A SINGLE POINT INDICATOR OF DIVERSE RISK FACTORS OF A COUNTERPARTY AND REFLECT THE UNDERLYING CREDIT RISK OF THE LOAN BOOK AS WELL. FOR THE PURPOSE,A SUBSTANCIAL DEGREE OF STANDARDISATION IS REQUIRED IN RATINGS ACROSS BORROWERS, WHICH SHOULD BE DESIGNED SO AS TO REVEAL THE OVERALL RISK OF LENDING,THE CRITICAL INPUTS FOR SETTING PRICING AND THE NON-PRICE TERMS OF LOANS. SUCH STANDARDISED RISK RATING SYSTEM SHOULD ALSO PRESENT MEANINGFUL INFORMATION FOR REVIEW AND MANAGEMENT OF LOAN PORTFOLIO AND PROVIDE A REASONABLE DEGREE OF COMFORT TO THE DECISION MAKERS IN ITS KNOWLEDGE O LOAN QUALITY AT ANY MOMENT OF TIME. CREDIT ASSESSMENT BY EXTERNAL CREDIT RATING AGENCIES: THE REVISED FRAMEWORK NORMS ALLOWS LENDING BANKS TO USE CREDIT RATINGS UNDERTAKEN BY ELIGIBLE CREDIT RATING AGENCIES FOR THE PURPOSE OF ASSIGNING RISK WEIGHTS(FOR CREDIT RISK) WHILE COMPUTING THE

15

TOTAL AMOUNT OF RISK WEIGHTED ASSETS. RBI HAS IDENTIFIED THE FOLLOWING CREDIT RATING AGENCIES IN INDIA FOR THIS PURPOSE: 1) CREDIT ANALYSIS AND RESEARCH LIMITED. 2) CRISIL LIMITED. 3) FITCH INDIA; AND 4) ICRA LIMITED. RBI HAS ALSO IDENTIFIED THE FOLLOWING THREE INTERNATIONAL CREDIT RATING AGENCIES, THE RATINGS ASSIGNED BY WHOM MAY BE USED FOR THE PURPOSES OF RISK WEIGHTING THE LOAN ASSETS OF THE LENDING BANKS FOR CAPITAL ADEQUACY PURPOSES IN SPECIFIED SITUATIONS: 1) FITCH 2) MOODYS 3) STANDARAD AND POOR’ 2.3 CREDIT RESTRICTIONS Negative & Discretionary Lists With a view to restrict exposure to sectors and activities wherein the credit risk is perceived to be high or the Bank’s past experience has not been satisfactory, the Bank will draw and maintain Negative and Discretionary Lists. Negative List shall comprise of sectors and activities in respect of which the Bank proposes to minimize its exposure. In case of such sectors / activities, any credit proposal shall be sanctioned only at the level of Board of Directors / Management Committee, subject to availability of adequate collateral security, irrespective of the quantum of credit facilities (FBL & NFBL) to be considered. In exceptional cases ED/CMD may consider the proposals appearing in negative list on merits subject to ratification by Board of Directors / Management Committee. The Negative List shall comprise of following sectors / activities: Negative List Plantation firms in the nature of NBFCs Unregistered NBFCs Partnership firm, where HUF is one of the partners Discretionary List shall comprise of sectors/activities in respect of which the Bank will exercise its discretion to finance or not. At present, the Discretionary List shall comprise of following sectors / activities: Discretionary List Registered NBFCs

16

Chits/Chit Funds & Credit/Thrift Cooperative Societies Marriage Hall Film Industry Cinema Hall T V Serials Entertainment & Amusement Parks Solvent Oil Extraction / Soya Industry Vegetable Oil and Vanaspati Sector Ship Breaking Manufacturing & Trading of Liquor Chemical Industries Fertilizer Industries Casting of Iron & Steel, Sponge Iron & Ferro Alloys Telecom Cables & Equipments Textile – Jute, Denim Real Estate (other than housing/infrastructure) development including construction of shopping malls /multiplex Sugar Mills/Factories Gem & Jewellery RESTRICTIONS AS PER SECTION 20 OF THE BANKING REGULATION ACT, 1949 NO BANKING COMPANY SHALL: GRANT ANY LOANS OR ADVANCES ON THE SECURITY OF ITS OWN SHARES, OR ENTER INTO ANY COMMITMENTS FOR GRANTING ANY LOAN OR ADVANCE TO OR ON BEHALF OF i) ii) iii) ANY OF ITS DIRECTORS ANY FIRM IN WHICH ANY OF ITS DIRECTORS IS INTERESTED AS PARTNER, MANAGER, EMPLOYEE OR GUARANTOR ANY COMPANY (NOT BEING A SUBSIDIARY OF THE BANKING COMPANY OR A COMPANY REGISTERED UNDER SECTION 25 OF THE COMPANIES ACT, 1956 (1 OF 1956) OR A GOVERNMENT COMPANY, OF WHICH (OR THE SUBSIDIARY OR THE HOLDING COMPANY OF WHICH) ANY OF THE DIRECTORS OF THE BANKING COMPANY IS A DIRECTOR, MANAGING AGENT, EMPLOYEE OR GUARANTOR OR IN WHICH HE HOLDS SUBSTANTIAL INTERET.

RESTRICTIONS IN TERMS OF SECTION 77A (1) OF THE COMPANIES ACT, 1956 ON CREDIT TO COMPANIES FOR BUY-BACK OF THEIR SECURITIES IN TERMS OF SECTION 77A (1) OF THE COMPANIES ACT, 1956, THE COMPANIES ARE PERMITTED TO PURCHASE THEIR OWN SHARES OR OTHER SPECIFIED SECURITIES OUT OF THEIR A) FREE RESERVES, OR B) SECURITIES PREMIUM ACCOUNT, OR C) PROCEEDS OF ANY SHARES, OR D) OTHER

17

SPECIFIED SECURITIES SUBJECT TO COMPLIANCE OF VARIOUS CONDITIONS SPECIFIED IN THE COMPANIES (AMENDMENT) ACT, 1999. THEREFORE, THE BANK SHALL NOT EXTEND LOANS TO COMPANIES FORBUY-BACK OF ITS OWN SHARES / SECURITIES. REGULATORY GUIDELINES ON CREDIT RESTRICTIONS a. THE BANK SHALL NOT GRANT LOANS AGAINST PRIMARY SECURITY OF CERTIFICATE OF DEPOSITS b. THE BANK SHALL NOT GRANT LOANS AGAINST PRIMARY SECURITY OF DEPOSITS OF OTHER BANKS. c. THE BANK SHALL NOT UNDERTAKE FINANCING OF BADLA TRANSACTIONS d. THE BANK SHALL NOT EXTEND LOANS TO PARTNERSHIP / PROPRIETORSHIP CONCERNS AGAINST THE PRIMARY SECURITY OF SHARES AND DEBENTURES e. THE BANK SHALL NOT EXTEND FINANCE FOR SETTING UP NEW UNITS CONSUMING /PRODUCING OZONE DEPLETING SUBSTANCE (ODS) f. THE BANK SHALL NOT EXTEND ADVANCES FOR SPECULATIVE PURPOSES OR EXTEND ADVANCES AGAINST COMPANY SHARES TO PROMOTERS OF SUCH COMPANIES DURING LOCK-IN-PERIOD g. BANK SHALL NOT GRANT TEMPORARY CREDIT FACILITIES FOR ADJUSTING OVERDUES IN OTHER ACCOUNTS. h. PURCHASE OF CHEQUES DRAWN IN FAVOUR OF BORROWERS BY THEIR ASSOCIATE CONCERNS, FRIENDS OR CLOSE RELATIVES WITHOUT TRADE TRANSACTIONS / CONSIDERATIONS. i. IN THE MATTER OF GRANTING OF LOANS AND ADVANCES AND AWARD OF CONTRACTS TO THE BANK’S DIRECTORS AND THEIR RELATIVES AND DIRECTORS OF OTHER BANKS AND THEIR RELATIVES, RESERVE BANK OF INDIA HAS LAID DOWN GUIDELINES, WHICH THE BANK WILL ADHERE TO SUBJECT TO CHANGES FROM TIME TO TIME BY RBI: j. SCOPE OF THE TERM, RELATIVE WILL COVER, SPOUSE, FATHER, MOTHER (INCLUDING STEP MOTHER), SON (INCLUDING STEP-SON), SON’S WIFE, DAUGHTER (INCLUDING STEP-DAUGHTER), DAUGHTER’S HUSBAND, BROTHER (INCLUDING STEP-BROTHER), BROTHER’S WIFE, SISTER (INCLUDING STEP-SISTER), SISTER’S HUSBAND, BROTHER (INCLUDING STEP BROTHER) OF THE SPOUSE, SISTER (INCLUDING STEP-SISTER) OF THE SPOUSE RESTRICTION ON ADVANCES AGAINST SENSITIVE COMMODITIES UNDER SELECTIVE CREDIT CONTROL (SCC) WITH A VIEW TO PREVENTING SPECULATIVE HOLDING OF ESSENTIAL COMMODITIES WITH THE HELP OF BANK CREDIT AND THE RESULTANT RISE IN THEIR PRICES, IN EXERCISE OF POWERS CONFERRED BY SECTION 21 & 35A OF THE BANKING REGULATION ACT, 1949, THE RESERVE BANK OF INDIA, BEING SATISFIED
18

THAT IT IS NECESSARY AND EXPEDIENT IN THE PUBLIC INTEREST TO DO SO, ISSUES, FROM TIME TO TIME, DIRECTIVES TO ALL COMMERCIAL BANKS, STIPULATING SPECIFIC RESTRICTIONS ON BANK ADVANCES AGAINST SPECIFIED SENSITIVE COMMODITIES.

2.4 CREDIT MONITORING POLICY CREDIT PORTFOLIO MONITORING: BANK MONITOR’S ITS CREDIT PORTFOLIO REGULARLY WITH PARTICULAR REFERENCE TO EXPOSURES, INDUSTRY WISE AND TO SENSITIVE SECTORS. SUCH MONITORING WILL ALSO FOCUS ON EXPOSURE BY WAY OF UNSECURED ADVANCES. ALL SUCH REVIEWS CONDUCTED ON QUARTERLY BASIS ARE PLACED BEFORE THE COMMITTEE OF DIRECTORS ON INTEGRATED RISK MANAGEMENT / BOARD OF DIRECTORS BY CREDIT RISK MANAGEMENT DEPARTMENT, HO. MONITORING THROUGH MMR REVIEW OF LARGE BORROWAL ACCOUNT/S IS/ARE UNDERTAKEN CONSTANTLY AND VIGILANTLY TO ENSURE THAT ANY WARNING SIGNAL REGARDING WEAKNESS OF THE BORROWAL ACCOUNTS ARE IDENTIFIED AND ANY IRREGULARITY/IES FOUND IN THE OPERATIONS OF THE ACCOUNT ARE ARRESTED AT THE INITIAL STAGE ITSELF. THE MONTHLY MONITORING REPORT (MMR) WOULD BE A TOOL TO IDENTIFY SUCH SIGNALS FOR TAKING CORRECTIVE MEASURES AT THE APPROPRIATE TIME. BASED ON THE MMR OF BORROWER, ANY DEFICIENCY, NOTED IN THE CONDUCT OF THE ACCOUNT SUCH AS FREQUENT EXCEEDING, NON PAYMENT OF QUARTERLY INTEREST/INSTALLMENTS ETC. AND NON CO-OPERATION / COMPLIANCE, NONSUBMISSION OF STOCK STATEMENTS, INADEQUATE INSURANCE ETC., BESIDES STATUS OF DOCUMENTATION/ CHARGE REGISTRATION ETC. COULD BE EASILY IDENTIFIED AND CORRECTIVE STEPS / COMPLIANCE ETC COULD BE TAKEN UP PROMPTLY.

CHAPTER 3.

19

RELEVANCE

OF

SMES

3.1 SME
INTRODUCTION TO SME

YEAR 1950 IN GROSS INVESTMENT IN FIXED ASSETS (INCL. RS.5LAKHS AND STRENGTH OF WORKFORCE VIZ . EMPLOYMENT LESS THAN 50 WORKERS PER DAY USING POWER OR LESS THAN 100 WORKERS PER DAY WITHOUT USE OF POWER .
THE YEAR WAS DEFINED AS A SIZE OF PLANT

1950, SME

&

MACHINERY , LAND

&

BUILDING ETC .) NOT EXCEEDING

YEAR 1950 TO 2004 SMALL
SCALE INDUSTRIES

(SSI)

ARE THOSE ENGAGED IN THE MANUFACTURE , PROCESSING OR

PRESERVATION OF GOODS AND WHOSE INVESTMENT IN PLANT AND MACHINERY NOT EXCEED MACHINERY

(ORIGINAL

COST ) DOES

RS.1CRORE . THIS

WOULD INCLUDE UNITS ENGAGED IN MINING OR QUARRYING , SERVICING

AND REPAIRING OF MACHINERY . IN THIS CASE OF ANCILLARY UNITS , THE INVESTMENT IN PLANT AND

(ORIGINAL COST ) SHOULD NOT EXCEED RS.1CRORE TO BE CLASSIFIED UNDER SSI. THE INVESTMENT LIMIT OF RS.1CRORE FOR CLASSIFICATION AS SSI HAS BEEN ENHANCED TO RS.5CRORE IN RESPECT OF CERTAIN SPECIFIED ITEMS UNDER HOSIERY , HAND TOOLS , DRUGS PHARMACEUTICALS AND STATIONARY ITEMS AND SPORTS GOODS BY THE GOVERNMENT OF INDIA . YEAR 2006 THE GOVERNMENT OF INDIA HAS ENACTED THE MICRO , SMALL AND MEDIUM ENTERPRISES DEVELOPMENT (MSMED) ACT , 2006 ON JUNE 16, 2006 WHICH WAS NOTIFIED ON OCTOBER 2, 2006. CONSISTENT WITH THE NOTIFICATION OF THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT (MSMED) ACT 2006, THE DEFINITION OF MICRO , SMALL AND MEDIUM ENTERPRISES
ENGAGED IN MANUFACTURING OR PRODUCTION AND PROVIDING OR RENDERING OF SERVICES HAS BEEN MODIFI

2.2 NEW NOMENCLATURE & CLASSIFICATION OF MSMED (MSMED ACT 2006)

20

E N T E R P R IS E S
M a nufa cturing E nterp rises (C eiling on investm e n t in P lant & M a ch ine ry)

S e rvice E n terprises (C e iling on in ve stm ent in E q uipm e nt) M IC R O R s.1 0la khs

R s.2 5lakhs

R s.5 cro re

SMALL

R s.2 cro re

R s.1 0crore
3.2

M E D IU M

R s.5 cro re

SME POLICY OF DENA BANK :

INTRODUCTION

21

MICRO , SMALL & MEDIUM ENTERPRISES ARE THE GROWTH ENGINES OF THE INDIAN ECONOMY DUE TO THEIR ABILITY TO CREATE JOBS , FOSTER ENTREPRENEURSHIP AND TO PROVIDE DEPTH TO THE INDUSTRIAL BASE OF THE ECONOMY . AS SSI, THE TOTAL SSI SECTOR (BOTH REGISTERED AND UNREGISTERED UNITS ) IN INDIA COMPRISED OF 1,05,21,190 UNITS OUT OF WHICH OVER 44 LAKH (42.26 %) WERE SSI AND THE REMAINING 61 LAKH (57.74 %) BELONGED TO THE SSSBES SEGMENT .
PER THE FINDINGS OF THE CENSUS ON

3RD

(2002)

ABOUT 55 %
INVESTMENT DOMINATING

OF THE TOTAL

SSI

UNITS WERE LOCATED IN RURAL AREAS . UPTO

IN PLANT

&

MACHINERY

99.5 %

OF THE TOTAL NUMBER

RS 25 OF SSI S.

LAKH NUMBERING

TINY UNITS WITH ORIGINAL 44.26 LAKH FORMED A

ABOUT 10.11 % THE 3RD

OF THE

SSI

UNITS WERE WOMEN ENTERPRISES .

CENSUS ALSO REVEALED THAT

44 %

OF THE UNITS WERE IN THE SERVICES SECTOR

FOLLOWED BY

40 %

IN THE MANUFACTURING AND ALLIED ACTIVITIES SECTOR AND

16 %

OF THE

UNITS IN REPAIR AND MAINTENANCE SECTOR . COMPONENT OF THE TOTAL

THUS

SERVICE SECTOR EMERGED AS THE DOMINANT

SSI

SECTOR .

AS

PER THE

3RD

CENSUS REPORT , TOTAL OUTPUT OF THE REGISTERED UNITS IN THE YEAR

WAS ESTIMATED TO BE THE TUNE OF

PERSONS DURING THAT PERIOD .

RS 70,861.73 CRORES . THE SSI SECTOR EMPLOYED THERE WERE 50606 EXPORTING UNITS ACCOUNTING RS 14,199.56 CRORES .

2001-02 2,49,32,763

FOR EXPORTS TO

THUS SME WITH

PLAYS A VERY SIGNIFICANT ROLE IN THE SOCIO -ECONOMIC DEVELOPMENT OF THE COUNTRY .

THE OPENING UP OF THE

INDIAN

ECONOMY DUE TO GLOBALIZATION AND LIBERIZATION , THIS VITAL

SECTOR OF THE ECONOMY IS FACING A LOT OF CHALLENGES AND COMPETITION FROM THE DOMESTIC AS WELL AS MULTINATIONAL CORPORATIONS .

THE

ABOVE POSITION IS AN ISSUE OF SERIOUS CONCERN .

PROBLEMS & CHALLENGES IN TERMS OF THE FINDINGS OF
SOURCES WERE FOUND SICK .

THE THIRD CENSUS OF

SSIS (2002) 39%

OF REGISTERED UNITS

WERE FOUND CLOSED AND ABOUT

18%

OF UNITS HAVING OUTSTANDING LOANS WITH INSTITUTIONAL

THE

PROBLEMS AND CHALLENGES FACED BY THE

SMES

AND THE FACTORS RESPONSIBLE FOR THEIR

SICKNESS ARE SUMMARIZED AS UNDER :

22

• • • • • • • • • • •

INCREASED COMPETITION FROM CHEAP IMPORTS DELAYED /INADEQUATE CREDIT HIGH COST OF FUNDS INSISTENCE ON COLLATERAL / MARGIN COMPLICATED AND CUMBERSOME PROCEDURES OF BANKS LIMITED FINANCIAL RESOURCES NON AVAILABILITY OF ADEQUATE PROMOTERS ’ CONTRIBUTION / LACK OF MARKETING SKILLS / POOR MARKETING GOVERNMENT POLICIES LOW QUALITY IMAGE (LOW ABILITY PERCEIVED ) DIFFICULTY IN DEALING WITH GOVT BUYING SYSTEM SME

EQUITY

MAJOR STRENGTHS • • • • • •

OF

SECTOR

ABILITY TO PRODUCE SPECIALISED PRODUCTS CAN OFFER INSTANT SERVICE ABILITY FOR QUICK ACTION – CAN CASH IN ON OPPORTUNITIES RELATIVELY LOW OVERHEADS FLEXIBILITY IN OPERATION – CAN JUMP FROM ONE PRODUCT TO ENJOYS TAX /DUTY ADVANTAGE
FOR

ANOTHER

POLICY PACKAGE CONSIDERING

SMES GOVT
OF TO

THE ABOVE

BOOST ADVANCES TO

INDIA ANNOUNCED A POLICY PACKAGE IN AUGUST 2005 SME SECTOR . THE PACKAGE ENVISAGED THE FOLLOWING :
WOULD BE ADVISED TO FIX THEIR OWN TARGETS FOR FUNDING

PUBLIC SECTOR BANKS
ORDER TO THE TO DOUBLE THE FLOW

TO ACHIEVE A MINIMUM

PUBLIC SIDBI SIDBI

SME SECTOR SECTOR BANKS

SMES IN SMES. THE OBJECTIVE IS OF CREDIT FROM RS.67,600 CRORE IN 2004-05 TO RS .135,200 CRORE BY 2009-10, I .E. WITHIN A PERIOD OF 5 YEARS . 20%
YEAR ON YEAR GROWTH IN CREDIT TO WOULD BE ADVISED TO FOLLOW A TRANSPARENT RATING SYSTEM WITH COST OF

CREDIT BEING LINKED TO THE CREDIT RATING OF THE ENTERPRISE . IN ASSOCIATION WITH IN ASSOCIATION

CREDIT INFORMATION BUREAU (INDIA ) LTD. (CIBIL) INDIAN BANKS ’ ASSOCIATION (IBA)
WOULD

WILL EXPEDITE AND POOL

SETTING UP A CREDIT RATING AGENCY . WITH COLLECT

IT-ENABLED APPLICATION , APPRAISAL AND MONITORING SYSTEM FOR SMALL (INCLUDING TINY ) ENTERPRISES . THIS WOULD HELP REDUCE TRANSACTION COST AS WELL AS IMPROVE CREDIT FLOW TO SMALL (INCLUDING TINY ) ENTERPRISES IN THE CLUSTERS . THE NATIONAL SMALL INDUSTRIES CORPORATION HAS INTRODUCED A CREDIT RATING SCHEME FOR ENCOURAGING SSI UNITS TO GET THEMSELVES CREDIT RATED BY REPUTED CREDIT RATING AGENCIES . PUBLIC SECTOR BANKS HAVE BEEN ADVISED TO CONSIDER THESE RATINGS APPROPRIATELY AND AS PER AVAILABILITY , AND STRUCTURE THEIR RATES SUITABLY .
COMMON DATA ON RISK IN EACH IDENTIFIED CLUSTER AND DEVELOP AN

23

SIDBI HAS DEVELOPED A CREDIT APPRAISAL & RATING TOOL (CART) AS WELL AS A RISK ASSESSMENT MODEL (RAM) AND A COMPREHENSIVE RATING MODEL FOR RISK ASSESSMENT OF CREDIT PROPOSALS FOR SMES. PUBLIC SECTOR BANKS HAVE BEEN ADVISED TO TAKE ADVANTAGE OF THESE MODELS AS APPROPRIATE AND REDUCE THEIR TRANSACTION COSTS . OUTREACH FORMAL CREDIT : OPENING OF NEW ACCOUNTS . THE COMMERCIAL BANKS (INCLUDING REGIONAL RURAL BANKS ) WITH OVER 67,000 BRANCHES WOULD MAKE CONCERTED EFFORTS TO PROVIDE CREDIT COVER ON AN AVERAGE TO AT LEAST 5 NEW TINY , SMALL AND MEDIUM ENTERPRISES AT EACH OF THEIR SEMI -URBAN / URBAN BRANCHES PER YEAR .
OF

SME SECTOR • • • • • • • • •

WANTS

GROWTH AND BETTER RETURNS ON CAPITAL EMPLOYED NOT LOSE AN OPPORTUNITY / BAG MAXIMUM ORDERS FINANCIAL REQUIREMENTS TIMELY CREDIT ADEQUATE CREDIT AT COMPETITIVE TERMS LATEST TECHNOLOGY FOR COMPETITIVE EDGE BETTER INFRASTRUCTURE INFORMATION SYMMETRY NOW WITH A TOTAL SIZE OF US$140 BILLION , SME IS THE DRIVING FORCE FOR THE LONG TERM GROWTH OF INDIAN ECONOMY , CONTRIBUTING OVER 45% OF THE COUNTRY 'S INDUSTRIAL PRODUCTION AND AROUND 40% OF THE TOTAL EXPORTS . THIRTEEN MILLION MSMES IN INDIA EMPLOY OVER 31 MILLION PEOPLE . BANKS’ I .E ., IT SME
EXPOSURE TO

SME

SECTOR HAS REACHED

RS 1,48,651
OF

CRORE BY END

MARCH 2008,

IS MORE THAN DOUBLED WITHIN A SPAN OF ONLY THREE YEARS AS AGAINST FIVE YEARS AS

ENVISAGED IN THE POLICY PACKAGE ANNOUNCED BY

GOVT

INDIA

IN

AUGUST 2005.

REMAINS THE BUZZ WORD AND MANY MORE INITIATIVES ARE BEING TAKEN AT VARIOUS LEVELS

INCLUDING

GOVT

OF

INDIA,

STATE

GOVTS ,

BANKS

&

FINANCIAL

INSTITUTIONS

AND

INDUSTRY

SME SECTOR . GOVT OF INDIA HAS ANNOUNCED A NEW CREDIT LINKED SUBSIDY PROGRAMME CALLED PRIME MINISTER ’S EMPLOYMENT GENERATION PROGRAMME WHICH IS SLATED TO GENERATE APPROXIMATELY ABOUT 37.38 LAC ADDITIONAL EMPLOYMENT OPPORTUNITIES .
ASSOCIATIONS TO ENSURE A STEEP GROWTH PATH FOR THE

24

3.3 MSMED ACT
IN GOVT OF INDIA BROUGHT IN A SPECIAL ACT CALLED ‘THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006 WHICH WAS PASSED ON 16TH JUNE, 2006 TO PROVIDE FOR FACILITATING THE PROMOTION AND DEVELOPMENT AND ENHANCING THE COMPETITIVENESS OF MICRO , SMALL AND MEDIUM ENTERPRISES AND FOR MATTERS CONNECTED THEREWITH OR INCIDENTAL THERETO . THE ACT HAS COME IN FORCE W .E.F . 2ND OCTOBER , 2006.
LINE WITH THE ANNOUNCEMENTS IN THE POLICY PACKAGE

WITH THE PASSING OF MSMED ACT -2006 THERE HAS BEEN CLARITY AS PER THE DEFINITION OF MICRO SMALL AND MEDIUM ENTERPRISES . UNDER THE PROVISION OF THE ACT STEPS ARE ALSO BEING TAKEN TO SUPPORT SME SECTOR WITH A VIEW TO INCREASING THEIR COMPETITIVENESS AND ALSO TO PROVIDE LEGAL PROTECTION . WITH THIS DEVELOPMENT IN THE YEAR 2006 THE GROWTH IN SME SECTOR SHALL BE ACCELERATED VISIBLY IN THE ENSUING PERIOD . OBJECTIVE POLICY:

OF THE

THE SME SECTOR IS GROWING AND IN THE PROCESS THERE IS OPENING UP OPPORTUNITIES FOR BANK FOR LENDING . THEREFORE , BANKS HAVE BEEN FOCUSING TO BROADEN THEIR SME LOAN PORTFOLIO BECAUSE LENDING TO SME IS PROFITABLE AND DIVIDES RISK OF NPAS INTO NUMBER OF SMALL UNITS . THE POLICY AIMS TO MAKE BANK ’ S FUNCTIONARY AT VARIOUS LEVEL AWARE OF THIS
FACT AND ALSO MOVE AGGRESSIVELY TO TAKE A FAIR MARKET SHARE TO BUILD UP AN APPROPRIATE AND SOUND

SME

PORTFOLIO .

HOWEVER ,

TO FACE THE COMPETITION AND FACILITATE GROWTH , THE POLICY

SHALL BE CONSTANTLY EVOLVING MEASURES TO FOSTER GROWTH , REMAIN COMPETITIVE AND ALSO TO MITIGATE RISK INVOLVED AND THUS BUILT UP A QUALITY PORT FOLIO . BORROWER BASE .

THE POLICY

ALSO AIMS TO

STRENGTHEN THE ARMS OF FIELD FUNCTIONARIES TO ACQUIRE NEW ACCOUNTS AND THUS INCREASE

APPLICABILITY OUR BANK’S

OF THE

POLICY:

LOAN POLICY DOCUMENT COVERS POLICY GUIDELINES FOR SANCTIONING FUND BASED

WORKING CAPITAL FACILITIES , TERM LOAN FACILITIES AND ALL NON FUND BASED FACILITIES . IN CASE OF ADVANCES TO SMALL AND MICRO UNITS, BEING A PRIORITY SECTOR ADVANCE , RBI GUIDELINES /GOVT . OF INDIA GUIDELINES ARE FOLLOWED . THUS, THE
CREDIT FACILITIES SUCH AS

25

CAPTIONED POLICY SHALL ALWAYS ACT AS SUPPLEMENTARY AND NOT A SUBSTITUTE FOR OUR

BANK’S

LOAN POLICY . DEFINITION OF SME SECTOR: MSME DEVELOPMENT ACT , 2006 HAS GIVEN THE DEFINITION OF MICRO , SMALL & MEDIUM ENTERPRISES FOR BOTH SECTORS I.E. MANUFACTURING AND SERVICE SECTOR . RBI HAS ISSUED LAST MASTER CIRCULAR NO. RPCD.SME&NFS.BC.NO.2/06.02.31/2008-09 DATED 1ST JULY , 2008 ON GUIDELINES FOR LENDING TO SMALL & MEDIUM ENTERPRISES ( SMES) SECTOR . THE DEFINITION OF MICRO , SMALL & MEDIUM ENTERPRISES SMALL ENTERPRISES SMALL (MANUFACTURING ) ENTERPRISES : ENTERPRISE
SPECIFIED BY IS AS FOLLOWS

:

ENGAGED IN THE MANUFACTURE /PRODUCTION OR PRESERVATION OF GOODS AND WHOSE THE

INVESTMENT IN PLANT AND MACHINERY

1722(E)
CRORE

DATED

(ORIGINAL COST EXCLUDING LAND AND BUILDING AND THE ITEMS MINISTRY OF SMALL SCALE INDUSTRIES VIDE ITS NOTIFICATION NO. S.O. OCTOBER 5, 2006 AS FURNISHED IN ANNEXURE I) DOES NOT EXCEED RS. 5

SMALL (SERVICE ) ENTERPRISES : ENTERPRISE ENGAGED IN EQUIPMENT (ORIGINAL COST
THE PROVIDING /RENDERING OF SERVICES AND WHOSE INVESTMENT IN EXCLUDING LAND AND BUILDING AND FURNITURE , FITTINGS AND OTHER NOT DOES NOT

DIRECTLY RELATED TO THE SERVICE RENDERED OR AS MAY BE UNDER THE

ENTERPRISES DEVELOPMENT , (MSMED), ACT 2006) MICRO (MANUFACTURING ) ENTERPRISES ENTERPRISE
ITEMS AS IN

MICRO , SMALL AND MEDIUM EXCEED RS . 2 CRORE .

ENGAGED IN THE MANUFACTURE /PRODUCTION OR PRESERVATION OF GOODS AND WHOSE

INVESTMENT IN PLANT AND MACHINERY

1.1.1)

DOES NOT EXCEED

(ORIGINAL COST EXCLUDING LAND AND BUILDING AND SUCH RS. 25 LAKH , IRRESPECTIVE OF THE LOCATION OF THE UNIT .

MICRO (SERVICE ) ENTERPRISES ENTERPRISE ENGAGED IN THE PROVIDING /RENDERING OF SERVICES AND WHOSE INVESTMENT IN EQUIPMENT (ORIGINAL COST EXCLUDING LAND AND BUILDING AND FURNITURE , FITTINGS AND SUCH ITEMS AS IN 1.1.2) DOES NOT EXCEED RS. 10 LAKH . MEDIUM (MANUFACTURING ) ENTERPRISES ENTERPRISE
ENGAGED IN THE MANUFACTURE /PRODUCTION OR PRESERVATION OF GOODS AND WHOSE

INVESTMENT IN PLANT AND MACHINERY

(ORIGINAL

COST EXCLUDING LAND AND BUILDING AND THE ITEMS

26

SPECIFIED

BY

THE

1722(E) CRORE .

DATED

MINISTRY OF SMALL SCALE INDUSTRIES VIDE OCTOBER 5, 2006) IS MORE THAN RS. 5 CRORE

ITS

NOTIFICATION

BUT DOES NOT

NO. S.O. EXCEED RS. 10

MEDIUM (SERVICE ) ENTERPRISES ENTERPRISE
EQUIPMENT ITEMS AS IN ENGAGED IN THE PROVIDING /RENDERING OF SERVICES AND WHOSE INVESTMENT IN

(ORIGINAL COST EXCLUDING LAND AND BUILDING AND FURNITURE , FITTINGS AND SUCH 1.1.2) IS MORE THAN RS. 2 CRORE BUT DOES NOT EXCEED RS. 5 CRORE . THE SMALL AND MICRO (SERVICE ) ENTERPRISES SHALL INCLUDE SMALL ROAD & WATER TRANSPORT OPERATORS , SMALL BUSINESS , PROFESSIONAL & SELF -EMPLOYED PERSONS AND ALL OTHER SERVICE ENTERPRISES . BANK'S LENDING TO MEDIUM ENTERPRISES WILL NOT BE INCLUDED FOR THE PURPOSE OF RECKONING UNDER PRIORITY SECTOR . MANUFACTURING SECTOR ORIGINAL INVESTMENT IN PLANT & MACHINERY UP TO RS.25.00 LACS FROM RS.25.00 LACS TO RS.500.00 LACS FROM RS.500.00 LACS TO RS.1000.00 LACS SERVICE SECTOR ORIGINAL INVESTMENT IN EQUIPMENTS UP TO RS. 10.00 LACS . FROM RS.10.00 LACS TO RS.200.00 LACS . FROM RS.200.00 LACS TO RS.500.00 LACS .

MICRO ENTERPRISES SMALL ENTERPRISES MEDIUM ENTERPRISES

TINY UNIT WOULD BE MICRO ENTERPRISES . SSI WOULD BE SMALL ENTERPRISES .

DIRECT / INDIRECT ADVANCES DIRECT
ADVANCES TO ABOVE REFERRED ENTITIES SHALL BE CONSIDERED AS DIRECT FINANCE WHEREAS

INDIRECT FINANCE IN THE

MICRO

AND

SMALL ENTERPRISES [MSE]
DECENTRALIZED SECTOR

SECTOR WILL INCLUDE CREDIT TO : IN THE SUPPLY OF INPUTS AND

PERSONS

INVOLVED

IN

ASSISTING

THE

MARKETING OF OUTPUTS OF ARTISANS , VILLAGE AND COTTAGE INDUSTRIES .

COOPERATIVES

OF PRODUCERS IN THE DECENTRALIZED SECTOR SECTORS VIZ . ARTISANS , VILLAGE AND OR OTHER INTERMEDIARIES FOR ON -LENDING TO

COTTAGE INDUSTRIES .

FINANCING OF NBFCS ENTERPRISES .

SMALL

AND

MICRO

GENERAL LENDING METHODS : THE •
FOLLOWING EXISTING METHODS OF LENDING WOULD BE FOLLOWED FOR WORKING CAPITAL FACILITIES .

TURNOVER

METHOD .

27

• • ALL

MODIFIED MPBF METHOD . CASH FLOW METHOD .

SME SECTOR UPTO RS.5 CRORES ARE TO BE ASSESSED IN TURNOVER METHOD SUGGESTED BY THE NAYAK COMMITTEE OR BY APPLYING ‘MODIFIED MPBF METHOD ’ AS PER THE NEEDS SPECIFIC TO THE CUSTOMER . IN THE CASE OF THE MPBF METHOD , THE SECOND METHOD OF LENDING WILL BE APPLICABLE IN GENERAL . HOWEVER , THE
THE FUND BASED EXPOSURES TO THE ACCORDANCE WITH THE FIRST METHOD OF LENDING ALSO MAY BE FOLLOWED IN DESERVING CASES WITH A CLEAR JUSTIFICATION FOR FOLLOWING THE FIRST METHOD BEING MENTIONED IN THE PROPOSAL .

THE

METHOD OF LENDING TO

BE FOLLOWED IN CONSORTIUM ADVANCES WILL BE IN ACCORDANCE WITH THE LEAD BANK ’S APPRAISAL .

IN IN

CASE OF WORKING CAPITAL LENDING , THE SANCTIONING AUTHORITIES MAY WAIVE THE BIFURCATION

OF FACILITY INTO CASE OF

CASH CREDIT
BASED

PORTION AND

WCDL

PORTION . A COMBINED LIMIT AGAINST STOCK AND

FUND

WORKING CAPITAL LIMIT

RECEIVABLES TO BE APPROVED AND NO SEPARATE SUB LIMITS FOR DEBTORS SHOULD BE FIXED .

CREDIT GUARANTEE FUND TRUST

FOR

MICRO

AND

SMALL ENTERPRISES [CGTMSE]

THE SCHEME “CREDIT GUARANTEE FUND TRUST FOR SMALL INDUSTRIES [ CGTSI]” SHALL BE KNOWN AS THE “CREDIT GUARANTEE FUND TRUST FOR MICRO AND SMALL ENTERPRISES [CGTMSE]”. THE SAID SCHEME SHALL COVER NEW OR EXISTING MICRO AND SMALL ENTERPRISES FOR CREDIT FACILITIES UP TO RS . 50 LAKHS ( TERM LOAN AND / OR WORKING CAPITAL , BOTH FUND AND NON FUND BASED ) FOR VIABLE PROJECTS IN RESPECT OF SINGLE ELIGIBLE BORROWER , WITHOUT COLLATERAL SECURITY AND OR THIRD PARTY GUARANTEE . THE GUARANTEE COVER IS RESTRICTED TO 75% OF THE AMOUNT IN DEFAULT IN RESPECT OF THE CREDIT FACILITY EXTENDED SUBJECT TO A MAXIMUM LIMIT OF RS .37.50 LAKHS AND THERE IS NO MINIMUM CEILING OF COVERAGE OF CREDIT . THE EXTENT OF GUARANTEE COVER WILL BE RAISED UP TO 80% FOR SPECIFIC CATEGORIES OF BORROWERS VIZ. MICRO ENTERPRISES FOR LOAN UP TO RS.5.00 LACS AND FOR MICRO AND SMALL ENTERPRISES OPERATED AND / OR OWNED BY WOMEN IRRESPECTIVE OF AMOUNT AND / OR BORROWERS FROM NORTH EASTERN REGIONS . AS INDIAN BANK ASSOCIATION , SIDBI HAS DECIDED TO EXTEND THE CURRENT GUARANTEE COVER UNDER CREDIT GUARANTEE SCHEME FOR LOANS TO MICRO AND SMALL ENTREPRENEURS FROM RS.50.00 LACS TO RS.100.00 LACS WITH GUARANTEE COVER OF 50%. FURTHER, SIDBI HAS ALSO REDUCED THE LOCK IN PERIOD FOR INVOKING CLAIMS IN RESPECT OF LOANS COVERED UNDER CREDIT GUARANTEE SCHEME TO 18 MONTHS FROM 24 MONTHS . DETAILS GUIDELINE WILL BE CIRCULATED BY SEPARATE CIRCULAR .
PER RECENT GUIDELINE FROM

RISK MANAGEMENT :

28

CREDIT RISK ASSESSMENT OF THE SME EXPOSURES IS DIFFERENT FROM THAT OF LARGE CORPORATES . THIS STEMS FROM DIFFERENCES IN THE DEFAULT BEHAVIORAL PATTERNS , GRANULARITY OF EXPOSURES AND HIGHER COLLATERAL USAGE TO MITIGATE CREDIT RISK . MAIN RISK     
ELEMENTS

EARLY MORTALITY INDUSTRY SPECIFIC RISKS . LACK OF PROFESSIONALISM THREAT FROM BIGGER PLAYERS ABSENCE OF DATA ON INDUSTRY

CREDIT RATING IS MANDATORY FOR THE NEW BORROWERS AND BANK MAY NOT EVINCE INTEREST IN THE

‘C’. IN CASE OF NEW BORROWER WITH NEW PROJECT , BANK MAY NOT EVINCE INTEREST IF SCORE IS BELOW 70 MARKS . IN CASE OF EXISTING BORROWERS HOLDING CREDIT RISK RATING ‘D ’ AND BELOW , SUCH ACCOUNTS MAY BE REVIEWED AT 6 MONTHLY INTERVALS AS PER DISCRETION OF RESPECTIVE SANCTIONING AUTHORITY .
NEW BORROWER HOLDING CREDIT RATING BELOW DOWNWARD AUTHORITY MIGRATION RO . OF RATING OF ASSETS AT THE TIME OF REVIEW SHOULD BE REPORTED IMMEDIATELY TO THE SME DEPARTMENTS

-HO

BY BRANCHES , UNDER INTIMATION TO NEXT HIGHER

/

IN

VIEW OF THE FACT THAT EACH BANK IS HAVING SEPARATE RATING PROCESSES AND DISCLOSURE FOR THE PURPOSE OF DISBURSING LOANS ,

REQUIREMENTS PROVIDE

SMES

FIND

THEMSELVES

SPENDING

SIGNIFICANT TIME , EFFORT AND MONEY WHILE APPROACHING DIFFERENT BANKS FOR CREDIT .

SMES FASTER ACCESS TO TIMELY AND ADEQUATE CREDIT , A RATING SCHEME SCALE INDUSTRIES , AS APPROVED BY THE MINISTRY OF SSI - GOVT . OF INDIA , HAS BEEN FORMULATED BY NSIC IN CONSULTATION WITH VARIOUS STAKE HOLDERS I .E., SMALL INDUSTRIES ASSOCIATION , INDIAN BANKS’ ASSOCIATION AND VARIOUS RATING AGENCIES VIZ. CRISIL , ICRA, DUN & BRADSTREET (D&B) AND ONICRA. EXTERNAL RATING : WITH A VIEW TO COMPLY WITH BASLE II NORMS , ALL SMES HAVING EXPOSURE MORE THAN RS .5.00 CRORE TO GET CREDIT RATING FROM OUTSIDE AGENCIES [ CARE, ICRA, FITCH & CRISIL]. BANK MAY CHARGE HIGHER RATE OF INTEREST TO BORROWER WHOEVER HAS NOT COMPLIED WITH THE SAME . / BANK MAY GIVE CONCESSION OF 0.50% IN APPLICABLE RATE OF
INTEREST TO BORROWER WHOEVER HAS COMPLIED WITH THE SAME

HENCE, TO FOR SMALL

BASED

IBA, OUR BOARD IN THE MEETING HELD ON 26.08.2005,HAS APPROVED “SCHEME FOR RATING OF SMALL SCALE INDUSTRIES : PERFORMANCE & CREDIT RATING SCHEME FOR SMALL SCALE INDUSTRIES ”. AS PER THE SCHEME , SSI UNIT WILL BE FREE TO GET THE PERFORMANCE AND CREDIT RATING DONE FROM NATIONAL SMALL INDUSTRIES CORPORATION LTD., [NSIC] OR FROM THE CREDIT RATING AGENCIES EMPANELLED WITH NSIC. CREDIT RATING ASSIGNED TO THE BORROWER WOULD BE SYNCHRONIZED WITH EXISTING CREDIT RATING MODEL OF OUR BANK AND ACCORDINGLY , THE INTEREST RATE FOR SUCH CREDIT RATING WILL BE DECIDED .
ON THE GUIDELINES OF

29

OUR BANK HAS ALREADY ENTERED INTO MOU WITH SMERA ON 27-01-2006 FOR CREDIT RATING OF SME UNITS AT CONCESSIONAL RATES . BANK HAS ALSO ENTERED MOU WITH CARE & CRISIL IN APRIL , 2006 FOR CREDIT RATING OF UNITS HAVING CREDIT LIMITS OF RS.5.00 CR . AND ABOVE . 3.4 SWOT ANALYSIS OF SMES IN INDIA STRENGTHS THEY THEY
CONTRIBUTE TO GENERATE

WEAKNESS NATIONAL ECONOMIC
AND HELP IN

GROWTH .

EMPLOYMENT

ENCOUNTERS PROBLEMS DUE TO LACK OF FUNDS . SMES LACK MARKETING SKILLS SMES ARE NOT FAST IN ADAPTING THE CHANGING
TRADE TRENDS

INDIAN BRAND TO THE WORLD HELPS IN THE REGIONAL DEVELOPMENT EXPORT MARKET EXPANSION . TECHNOLOGICAL INNOVATION
VITALIZING

NON

AVAILABILITY OF TECHNICALLY TRAINED

HUMAN RESOURCES

POOR MANAGEMENT SKILLS THEY LACK IN TECHNOLOGICAL
CONSULTANCY SERVICES

INFORMATION AND

OPPORTUNITIES BILATERAL
AND

THREATS
TRADE

MULTILATERAL
ENHANCED

AGREEMENTS

CREDIT SUPPORT IS THEY GET SUPPORT
GRADATION

FOR TECHNOLOGICAL UP -

DUMPING FROM DEVELOPED COUNTRIES LOT OF DISTRUST BETWEEN SMES AND FINANCIAL INSTITUTIONS SLOW IMPROVEMENTS IN QUALITY TO MEET
INTERNATIONAL STANDARDS

THE

COMPREHENSIVE
DEVELOPMENT

SUPPORT FOR CLUSTER

VIRTUAL ABSENCE OF ENTERPRISE EDUCATION POOR INCENTIVE STRUCTURES FOR
ENTREPRENEURS

MARKETING
SUPPORT

ASSISTANCE AND EXPORT PROMOTION

NON -TARIFF
DOMESTIC AND INTERNATIONAL COUNTRIES

BARRIERS FROM DEVELOPED

GROWING
MARKETS

30

CHAPTER 4
RETAIL LENDING POLICY 4.1 INTRODUCTION Definition RETAIL LENDING IS BASICALLY LENDING TO INDIVIDUALS AS OPPOSED TO INSTITUTIONS/ COMPANIES. BANKING DEVELOPMENT BANKING LEADING TO EMERGENCE OF RETAIL

IN THE BACK DROP OF THE CHANGING ECONOMIC SCENARIO, THE FOCUS OF LENDING IS INCREASINGLY GETTING SHIFTED FROM INDUSTRIAL/COMMERCIAL ADVANCES TO A DIVERSIFIED PORTFOLIO OF ADVANCE TO RETAIL, SME AND THE CORE TRADITIONAL SECTOR I.E. AGRICULTURE. RETAIL BANKING IS THE NEW MANTRA FOR ALL THE BANKS. IT IS THE PRINCIPAL GROWTH ENGINE FOR THE BANKS IN INDIA. AS FASTEST GROWING SEGMENT IN THE BANKING INDUSTRY, RETAIL BANKING HAS POSTED A 25-30% CAGR FOR THE PAST FIVE YEARS AND CONSTITUTES 30-40% OF THE TOTAL LOAN OUTSTANDING OF BANKS IN INDIA. THE BANKING INDUSTRY IS SHIFTING GEAR TOWARDS VOLUMES. MORE THAN 50% OF THE INCREMENTAL CREDIT THESE DAYS IS CONTRIBUTED BY RETAIL. COMPETITION LEVEL IN THE RETAIL BANKING DUE TO GLOBALIZATION, A NEW GENERATION OF PRIVATE SECTOR BANKS AND MANY FOREIGN BANKS HAVE ALSO ENTERED THE MARKET AND THEY HAVE BROUGHT WITH THEM SEVERAL USEFUL AND TECHNOLOGICALLY DRIVEN INNOVATIVE PRODUCTS. (THE INTEREST SPREAD HAS CONTINUOUSLY BEEN SHRINKING OVER A PERIOD OF TIME FROM AROUND 8% IN THE EARLY 90S TO AROUND 3% NOW IN THE INDIAN BANKING INDUSTRY. INTERNATIONALLY, THE SPREAD HOVERS BETWEEN 1% TO 1.5%). DUE TO FORCED COMPETITION, PUBLIC SECTOR BANKS ARE ALSO BECOMING MORE TECHNOLOGY SAVVY AND CUSTOMER ORIENTED. THUS, NON-TRADITIONAL COMPETITION, MARKET CONSOLIDATION, NEW TECHNOLOGY, AND THE PROLIFERATION OF THE INTERNET ARE CHANGING THE COMPETITIVE LANDSCAPE OF THE RETAIL BANKING INDUSTRY. WITH INCREASED NUMBER OF BANKS, PRODUCTS AND SERVICES, CUSTOMERS ARE EASILY SWITCHING BANKS WHENEVER THEY FIND BETTER SERVICES AND PRODUCTS. BANKS ARE FINDING IT DIFFICULT TO GET NEW CUSTOMERS AND MORE IMPORTANTLY, RETAIN EXISTING . 4.2 WHY RETAIL BANKING
31

BANKS TODAY ARE CONCENTRATING ON RETAIL LENDING MAINLY DUE TO FOLLOWINGADVANTAGES: (1) MITIGATE CONCENTRATION RISK (2) LOWER INCIDENCE OF NPAS (3) GROWING MARKET ON ACCOUNT OF CONSUMERISM AND GROWING INCOME LEVELS (4) REASONABLE YIELD AND LOW ASSET DURATION (5) FOCUS ON PRODUCTIVITY AND PROFITABILITY (6) DEREGULATION OF INTEREST RATES (7) INNOVATION OF NEW PRODUCTS AND SERVICES (8) IMPLEMENTATION OF PRUDENTIAL NORMS, RISK MANAGEMENT AND ALM MECHANISMS (9) LACK OF OTHER AVENUES FOR INVESTING AVAILABLE FUNDS RETAIL BANKING - ROAD MAP THE RETAIL LENDING POLICY SEEKS TO PROVIDE A SUITABLE ENVIRONMENT & SUPPORT SYSTEM TO ACHIEVE THE CONTOURS OF RETAIL POLICY. RETAIL LENDING WOULD RECEIVE DUE FOCUS. THE RETAIL LENDING CURRENTLY ACCOUNTS FOR ABOUT TWELVE PER CENT OF THE BANK'S TOTAL LENDING. BANK WILL ENDEAVOR TO RAISE IT TO TWENTY PER CENT OF TOTAL ADVANCES OVER THE NEXT THREE YEARS. AS STATED IN THE BANK'S CREDIT POLICY, "THE BANK WILL STRIVE TO PROVIDE FULL RANGE OF FINANCIAL SERVICES TO THE RETAIL SEGMENT USING MULTIPLE DELIVERY CHANNELS TO SUIT THE REQUIREMENTS AND TASTE OF CUSTOMERS." THE BANK WILL ENDEAVOUR TO FIND AN EFFECTIVE NICHE FOR ITSELF IN THE INDUSTRY AND STRIVE TO DEVELOP INNOVATIVE PRODUCTS IN ORDER TO MOVE AHEAD OF ITS COMPETITORS WHILE TRYING TO ENHANCE ITS CORE PROFITABILITY. ALL THE BRANCHES, IRRESPECTIVE OF THEIR SIZE AND SECTOR IN WHICH THEY OPERATE, WOULD GENERATE RETAIL BUSINESS AND CONTRIBUTE TO THE GROWTH IN THE RETAIL PORTFOLIO, APART FROM BRINGING MORE CUSTOMERS INTO OUR FOLD. A CUSTOMER'S ABILITY TO SERVICE THE LIABILITIES IN TIME WILL BE THEMOST IMPORTANT CONSIDERATION IN THE POLICY FRAMEWORK. IN CASE OF FINANCING TO INDIVIDUALS FOR HOUSING, CONSUMER DURABLES & OTHER RETAIL BANKING AREAS, BORROWERS' SAVINGS AND PRESENT INCOME WILL BE A PRIMARY FACTOR [NOT FUTURE PROJECTIONS
32

EXCEPT IN CASE OF TRADE FINANCE OR HOUSING LOANS UNDER PROPOSED STEP UP SCHEME OR EDUCATIONAL LOANS WHERE THE FUTURE PROSPECTS OF JOB / INCOME ARE CONSIDERED]. IT IS EXPECTED THAT THIS ASPECT WILL BE EXAMINED EFFECTIVELY BY THE SANCTIONING AUTHORITY/IES BEFORE CREDIT DECISIONS ARE MADE. THE RETAIL BANKING DEPARTMENT, HEAD OFFICE, WILL MONITOR THE ACTUAL PERFORMANCE VIS-A-VIS THE STIPULATIONS AS ABOVE AND APPRISE THE TOP MANAGEMENT OF THE BANK ON A CONTINUOUS BASIS

4.3 RETAIL BANKING –STRATEGIES

SCHEMATIC APPROACH - FAVOURS FAST DECISION MAKING IN A STANDARDISED FRAMEWORK PRESENTLY, BRANCHES/ FIN MARTS ARE THE ONLY DELIVERY CHANNELS TO CATER NEED OF CUSTOMERS. NEW DELIVERY CHANNELS SUCH AS DSAS & MARKETING OFFICERS WILL ALSO BE ESTABLISHED. THE BANK WILL EXPLORE AND REVAMP DELIVERY SYSTEM FOR EFFICIENT AND SPEEDY PROCESSING. THE NEW DELIVERY SYSTEM (APPROVED BY BOARD IN ITS MEETING HELD ON 26/5/2005) IS AS UNDER: DIRECT SELLING AGENTS, BRANCHES, FIN MARTS AND MARKETING OFFICERS (CHANNELS) WILL GENERATE LEAD AND PREPARE FILES. THEY WOULD ALSO ENSURE THAT THE DOCUMENTS ARE AS PER CHECKLIST. THE FILE WILL BE SENT TO CENTRAL PROCESSING CENTRE (CPC) SET UP AT PROMINENT PLACES ACROSS THE COUNTRY. CENTRAL PROCESSING CENTRE (CPC) WOULD ENSURE KYC NORMS. THE CPC WILL PRIMA FACIE ENSURE THAT THE FILE IS COMPLETE AS PER CHECKLIST.

33

THE CPC WILL REFER THE CASE TO FIELD INVESTIGATION TEAM (OUTSOURCED). FIELD INVESTIGATION TEAM WILL CARRY OUT VERIFICATION OF THE INFORMATION GIVEN IN APPLICATION FORM AND WILL ALSO ENSURE THE GENUINELY OF THE DOCUMENTS SUCH AS SALARY SLIP, STATEMENT OF BANK'S ACCOUNTS, INCOME TAX RETURNS ETC. THE CPC WILL FORM A PANEL OF ADVOCATES FOR CARRYING OUT THE NON-ENCUMBRANCE ETC., AND PANEL OF APPROVED VALUERS. THE PANEL OF ADVOCATES AND VALUERS WILL BE REQUIRED TO ADHERE TIME BOUND LIMITS FOR SUBMISSION OF THE INFORMATION AT COMPETITIVE RATE. THE APPROVED VALUER WILL FURNISH THE LATEST MARKET VALUE AND REALISABLE VALUE OF THE IMMOVABLE PROPERTY. ADVOCATES ON THE PANEL WILL SUBMIT NON ENCUMBRANCES CERTIFICATE AND VERIFY THE TITLE DEED ETC FOR THE PURPOSE OF CREATION OF EQUITABLE MORTGAGE. HE WILL ALSO CERTIFY THE GENUINELY OF TITLE DEED. AFTER RECEIPT OF THE REPORTS FROM FIELD INVESTIGATION TEAM, APPROVED VALUER AND ADVOCATES, THE CPC WILL SANCTION /REJECT THE

34

PROPOSAL. AFTER SANCTION, THE CPC WILL SEND THE SANCTIONED PROPOSAL TO THE BRANCH OF CUSTOMERS' CONVENIENCE FOR DISBURSEMENT. THE DISBURSING BRANCH WILL OBTAIN DOCUMENT, POST DATED CHEQUES (PDC) AND COMPLY WITH ALL THE TERMS AND CONDITIONS OF SANCTION. THE POST DISBURSAL SCRUTINY WHEREVER APPLICABLE WILL ALSO BE CARRIED OUT BY THE DISBURSING BRANCH. WITH THE STABILIZATION IN THE NEW CREDIT DELIVERY SYSTEM AS DESCRIBED ABOVE, THE BANK WOULD ENDEAVOUR TO DISPOSE OFF LOAN APPLICATION FOR RETAIL PRODUCTS, OTHERWISE COMPLETE IN ALL RESPECTS, WITHIN A MAXIMUM PERIOD OF PREFERABLY 6-7 DAYS, ON MERITS AS PER DIFFERENT PRODUCTS. 4.4 RISK MITIGATION THE BANK WILL USE MULTIPLE TECHNIQUES FOR CREDIT MITIGATION PURPOSES THAT HELP TO AVOID UNDESIRABLE CREDIT I.E. ADHERENCE TO KYC NORMS, PORTFOLIO REVIEW AT REGULAR INTERVALS, DUE CARE TAKEN WHILE FORMULATING BUDGET OF EACH YEAR AND REDUCE RISK IN EXPOSURES ETC. FOR THIS PURPOSE, THE BANK WILL CONTINUE TO DEFINE TARGET MARKETS, RISK ACCEPTANCE CRITERIA, CREDIT APPROVAL AUTHORITY, CREDIT ORIGINATION/ MAINTENANCE PROCEDURES ETC. ON ANNUAL BASIS. MECHANISM FOR RISK MITIGATION COMPLIANCE WITH KYC (KNOW YOUR CUSTOMER) GUIDELINES WILL BE THE MAIN PLANK FOR CREDIT RISK MITIGATION. THE BANK SHALL MAKE AN INDEPENDENT ASSESSMENT OF THE CREDIT REQUIREMENTS OF THE BORROWER BY CALLING FOR COMPLETE RELEVANT INFORMATION RELATING TO THE CREDIT REQUIREMENT, PERSONAL INFORMATION OF THE APPLICANT, PRODUCTION OF FINANCIAL / SALES DATA AS ALSO LATEST ANNUAL ACCOUNTS OF THE APPLICANT [WHEREVER APPLICABLE].

OPTIMUM USE OF CIBIL DATABASE CIBIL IS A REPOSITORY OF INFORMATION, WHICH CONTAINS THE CREDIT HISTORY OF COMMERCIAL AND CONSUMER BORROWERS. CIBIL'S CONSUMER BUREAU PROVIDES THIS INFORMATION TO ITS MEMBERS IN THE FORM OF CREDIT INFORMATION REPORTS.

35

BEING A MEMBER OF CIBIL, VARIOUS DELIVERY CHANNELS UNDER RETAIL LENDING WILL BE ADVISED TO USE CREDIT INFORMATION REPORT FOR PROCESSING NEW CREDIT APPLICATIONS. CREDIT INFORMATION REPORT (CIR) IS A FACTUAL RECORD OF A BORROWER'S CREDIT PAYMENT HISTORY COMPILED FROM INFORMATION RECEIVED FROM DIFFERENT CREDIT GRANTORS. IT IS QUITE HELPFUL FOR ASSURING QUALITY BORROWERS AT APPLICATION STAGE ITSELF. POLICY ON PRIME & COLLATERAL SECURITIES THE BANK'S POLICY WITH REGARD TO SECURITY AGAINST CREDIT WILL BE ONE OF OBTAINING A CHARGE (BY WAY OF CHARGE/LIEN/MORTGAGE AS THE CASE MAY BE) ON THE ASSETS CREATED OUT OF BANK CREDIT / OWNED BY THE BORROWER. THE BANK WILL PREFER TO HAVE ITS CREDIT EXPOSURE COVERED BY TANGIBLE SECURITY (EITHER PRIMARY OR COLLATERAL) TO THE FULL EXTENT OF ITS LIABILITY UNLESS THERE IS A PROVISION IN THE SCHEME OBVIATING THE NEED FOR OBTAINING SUCH SECURITY. IN ANY CASE, ASSETS TO BE ACQUIRED OUT OF CREDIT EXPOSURE MUST, AS A GENERAL RULE BE CHARGED TO THE BANK BY WAY OF FIRST CHARGE. COLLATERAL SECURITY WILL BE OBTAINED, WHEREVER REQUIRED, FOR ADDITIONAL COMFORT IN CASE OF EXISTING BORROWERS AND IN THE CASE OF NEW BORROWERS. THE VALUATION OF THE PROPERTIES MORTGAGED TO THE BANK BE CARRIED OUT AS PER THE GUIDELINES PREVAILING FROM TIME TO TIME.

SCHEMES IN RETAIL BANKING
1.“DENA SUVIDHA (Personal Loan) Scheme".

3.DENA SENIOR CITIZEN (Pensioner's) SCHEME 3.DENA CONSUMER DURABLE LOAN SCHEME: Direct Finance.

36

4.DENA AUTO FINANCE SCHEME. 5.DENA RENT SCHEME 6.DENA MORTGAGE LOAN SCHEME 7.DENA TRADE FINANCE SCHEME
8.DENA VIDYA LAXMI EDUCATIONAL LOAN SCHEME FOR STUDIES IN INDIA/ ABROAD

9.DENA NIWAS SCHEME.

CHAPTER 5
CASE STUDY

CREDIT DEPARTMENT, NEW DELHI REGION For Approval EXECUTIVE DIRECTOR

37

1. GIST OF THE PROPOSAL – M/s Allied Strips Ltd. PROPOSAL FOR i) FRESH SANCTION OF LONG TERM LOAN OF RS 34 CRORES ii) TO PERMIT FCNR- LOAN/BUYER’S CREDIT OF RS 15 CRORES (SUB-LIMIT UNDER TERM LOAN FOR IMPORT OF MACHINERIES) SUBJECT TO SIMILAR APPROVAL BY OTHER MEMBER BANKS. TO PERMIT LC SUB LIMIT OF RS 15 CRORES (SUB-LIMIT UNDER TERM LOAN FOR IMPORT OF MACHINERIES) SUBJECT TO SIMILAR APPROVAL BY OTHER MEMBER BANKS. RATE OF INTEREST CONCESSION ALLOWED PROPOSED

iii)

APPLICABLE RATE OF INTEREST AS PER CREDIT CONCESSIONS IN RATING RATE OF EXERCISE INTEREST BPLR + 1.75 % +0.50 % (T.P)

CONCESSIONS IN APPLICABLE ALLOWED PROCESS FEES/ FEES AS PER UPFRONT FEES LOAN POLICY 1.25 % OF THE 0.75% OF THE 0.50 % SANCTIONED SANCTIONED TERM LIMIT LOAN AMOUNT + APPLICABLE TAXES 2. PROFILE NAME BORROWER BRANCH: BRANCH ESTABLISHED ON OF

BPLR - 0.25 % + 0.50 2 % % (T.P) P.A PRESENTLY 12.75% P.A (FLOATING), INTEREST PAYABLE MONTHLY. RATE OF INTEREST TO BE SET AS ON DATE OF DOCUMENTATION. CONCESSION FEES PROPOSED

M/S ALLIED STRIPS LTD.

NAZAFGARH REGION: NEW DELHI REGION AUGUST 1992 5, WHETHER APPEARING IN

38

DEALING WITH USNEW SINCE ACCOUNT GROUP:

STANDARD B LIST DEFAULTER

N.A NO

NO MAJOR WILLFUL GROUP LIST

LINE OF ACTIVITY

MANUFACTUR ING OF COLD ROLLED DEFAULTER / CIBIL LIST CLOSE ANNEALED (CRCA) STEEL KEY PERSON PROMOTER / CONSORTIUM MR. MOHINDER KUMAR MANAGING DIRECTOR

NO

KEY PERSON/PROMOT ER

AGGARWAL,

MR. MOHINDER KUMAR AGGARWAL

MULTIPLE CONSORTIUM LEADER BANK

EXISTING

PROPOSED

CANARA BANK RS. CRORES %20.73 % N.A N.A

OUR SHARE: IN RS. OUR SHARE: WISE FB - %

ASSET N.A STANDARD CLASSIFICATION 34 ASSET CATEGORY ASN.A P1 PER CMC GUIDELINES D2K CODES & DESCRIPTION MANUFACTURING OF COLD ROLLED CLOSE ANNEALED (CRCA) STEEL, PROPOSED – TO SET UP A NEW PROJECT TO MANUFACTURE WIDER WIDTH COLD ROLLED CLOSE ANNEALED COILS/SHEETS NPS SYNDCATE –M 43

NFB- %

ACTIVITY

STLTLPRIORITY

N.A

SECTOR

TOTAL LOAN OF RS. 164 SPECIAL CRORES OUR CATEGORY SHARE – RS. 34 CRORES NO

39

BSR CODE: RISK WEIGHTAGE CREDIT RATING RISK “BB”, BEST

BASEL II CODE: PROVISIONING: RISK GRADE AS PER ABS DT 31/3/2009

3. NAMES OF DIRECTORS/ PARTNERS / PROPRIETOR & NET WORTH (RS. IN CRORES) SR. NAME NET WORTH BASED ON CA AS ON CERTIFICATE AS ON 31/3/2009 1 RS. 1.38 31/3/2009 MR. MOHINDER KUMAR CRORES AGGARWAL 2 MRS. SUNITA AGGARWAL RS. 0.83 31/3/2009 CRORES 3 MR. GAURAV AGGARWAL RS. 0.39 31/3/2009 CRORES 4. SHAREHOLDING PATTERN AS ON 31.03.2009 SR. NAME NO. OF SHARES PERCENTAGE HELD HOLDING 1 PROMOTERS/FRIENDS & RELATIVES, RELATED 2934000 75.94 % PARTIES/BODY CORPORATE 2 NON PROMOTERS HOLDING 929750 24.06 % 3 TOTAL 3863750 100.00 % DETAIL OF TOP TEN SHAREHOLDERS OF THE COMPANY AS ON 31.03.2009 IS GIVEN AS PER ANNEXURE II 5 EXPOSURE: CRORES] BORROWER EXPOSURE FUND BASED NON FUND BASED* FORWARD COVER TOTAL CREDIT EXPOSURE INVESTMENTS OTHER COMMITMENTS TOTAL EXPOSURE [RS IN EXISTING 0.00 0.00 0.00 0.00 0.00 0.00 0.00 PROPOSED 34.00 (15.00) 0.00 34.00 0.00 0.00 34.00 VARIATION( +/-) + 34.00 + (15.00) 0.00 + 34.00 0.00 0.00 + 34.00

40

GROUP EXPOSURE FUND BASED 0.00 34.00 + 34.00 NON FUND BASED* 0.00 (15.00) + (15.00) FORWARD COVER 0.00 0.00 0.00 TOTAL CREDIT EXPOSURE 0.00 34.00 + 34.00 INVESTMENTS 0.00 0.00 0.00 OTHER COMMITMENTS 0.00 0.00 0.00 TOTAL EXPOSURE 0.00 34.00 + 34.00 * THE NON- FUND BASED EXPOSURE OF THE CONSORTIUM HAS NOT BEEN DECIDED UPON TILL NOW. AS PER THE REQUEST OF THE COMPANY AND TELEPHONIC DISCUSSION WITH THE CANARA BANK, WE ARE RECOMMENDING THE ABOVE SUB – LIMITS FOR NON – FUND BASED FACILITIES. PROPOSED DETAILS ARRANGEMENTS PARTICULARS OF CONSORTIUM/ EXISTING FB NFB* 0.00 0.00 MULTIPLE BANKING

OUR BANK OTHER MEMBER BANKS CANARA BANK 48.78 % 0.00 0.00 80.00 0.00 UCO BANK 30.49 % 0.00 0.00 50.00 0.00 TOTAL 100 % 0.00 0.00 164.00 0.00 CONSORTIUM MEETING HELD FOR NO MEETING HAS BEEN HELD APPROVING THE ABOVE ASSESSMENT –

% SHARE 20.73 %

(RS. IN CRORES) PROPOSED FB NFB 34.00 0.00

EXISTING LIMITS AND LIABILITIES OF ASL AS PER THE IM BY CANARA BANK, SYNDICATION & NEW PRODUCTS GROUP CANARA BANK SANCTION SL. NO FACILITY ED 1. TERM LOAN 7.80 2. OCC 18.00 # 3. ADHOC 2.00 4. WCDL 18.00 5. BG 9.00 6. LC -*OVERDRAWING DUE TO INTEREST. # ADHOC SINCE LIQUIDATED. (RS. IN CRORES) OUTSTANDING 30.06.2009 4.17 19.29 18.17* 8.79 9.00 (100% MARGIN) – AS ON

41

UCO BANK SANCTION SL. NO FACILITY ED 1. OCC 24.00 *OVERDRAWING DUE TO INTEREST (RS. IN CRORES) OUTSTANDING – AS ON 30.06.2009 24.19*

THE LIMITS ARE PRESENTLY ASSESSED AT RS. 60.00 CRORES DURING 200910. COMPLIANCE TO PRUDENTIAL / INTERNAL EXPOSURE LIMITS AS PER RBI AS PER GUIDELINES INTERNAL GUIDELINES INDIVIDUAL 378.29 300.00 GROUP 1008.77 600.00 WHETHER THE LIMITS PROPOSED NO NO EXCEED THE PRUDENTIAL EXPOSURE NORMS (INDIVIDUAL / GROUP) IN CASE OF EXCEEDING, DETAILS OF N.A PERMISSION FROM THE COMPETENT AUTHORITY 7. BRIEF HISTORY OF SANCTIONS INCLUDING REVIEWS AND ADHOCS DURING THE PAST TWELVE MONTHS – N.A 8. PRESENT PROPOSAL: TO PERMIT THE FOLLOWING:: i) ii) FRESH SANCTION OF LONG TERM LOAN OF RS 34 CRORES TO PERMIT FCNR- LOAN/BUYER’S CREDIT OF RS 15 CRORES (SUBLIMIT FOR IMPORT OF MACHINERIES) SUBJECT TO SIMILAR APPROVAL BY OTHER MEMBER BANKS. TO PERMIT LC SUB LIMIT UNDER THE TERM LOAN OF RS 15 CRORES (SUB-LIMIT FOR IMPORT OF MACHINERIES) SUBJECT TO SIMILAR APPROVAL BY OTHER MEMBER BANKS. 6

iii)

THE PROPOSED LIMITS ARE AS SHOWN UNDER, (RS IN CRORES)

42

FACILITY

EXISTING

OUTS TANDI NG AS ON

LIMIT MARG IN (%) A FUND ) BASED 1 LONG TERM 0.00 LOAN TOTAL 0.00 B NON - FUND ) BASED LC SUB - 0.00 LIMIT UNDER THE TERM LOAN (DA/DP) 90 DAYS 0.00 0.00 0.00 0.00

DRA WIN G POW ER

IRREG ULAR/ OVER DUE AMOU NT

PROPOSED

VARIATI ON

LIMI T

MARGIN (%)

N.A N.A

N.A N.A

34.00 34.0 0 (15.0 0)

34.14 % 34.14 %

+ 34.00 + 34.00

0.00

0.00

N.A

N.A

FCNR 0.00 LOAN/BUYE R’S CREDIT – SUBLIMIT UNDER THE TERM LOAN TOTAL 0.00 C FORWARD ) COVER D) GRAND TOTAL (A+B+C) E INVESTMEN ) T EXPOSURE TOTAL EXPOSURE NIL 0.00 NIL 0.00

0.00

0.00

N.A

N.A

(15.0 0)

10 % ON +(15.00) DP 10 % ON DA AND FURTHER 10 % ON ACCEPTAN CE OF DOCUMEN TS NIL +(15.00)

0.00

0.00

N.A

N.A

34.0 0 34.0 0

+ 34.00

0.00

0.00

N.A

N.A

+ 34.00

0.00

0.00

N.A

N.A

34.0 0

+ 34.00

43

* AVAILABILITY OF FCNR LOAN DEPENDS ON AVAILABILITY OF FUNDS AT THAT TIME. II. SECURITY / DOCUMENATION SECURITY-TERM LOAN 1. FIRST PARI-PASSU CHARGE ON ALL THE MOVEABLE AND IMMOVEABLE ASSETS, OF THE BORROWER. 2. SECOND PARI-PASSU CHARGE ON THE CURRENT ASSETS OF THE COMPANY. 3. FIRST PARI-PASSU CHARGE ON THE ESCROW OF ALL THE RECEIVABLES, ALL PROJECT CONTRACTS, INSURANCES ETC. PRESENT AND FUTURE OF THE BORROWER. 4. FIRST PARI-PASSU CHARGE/ ASSIGNMENTS AND/OR CREATION OF SECURITY INTEREST IN FAVOR OF THE LENDERS ON ALL THE RIGHTS, TITLE, INTEREST BENEFITS, CLAIMS AND DEMANDS WHAT SO EVER OF THE BORROWER IN THE PROJECT DOCUMENTS, INSURANCES, ANY LETTER OF CREDIT, GUARANTEE OR PERFORMANCE BOND THAT MAY BE PROVIDED BY ANY PARTY UNDER ANY PROJECT DOCUMENT IN FAVOR OF THE BORROWER, ALL AS AMENDED, VARIED OR SUPPLEMENTED FROM TIME TO TIME AND ALL THE RIGHTS, TITLES, INTEREST, BENEFITS, CLAIMS AND DEMANDS WHATSOEVER OF THE BORROWER IN OR UNDER THE AUTHORIZATION. 5. FIRST PARI-PASSU CHARGE/ ASSIGNMENTS AND/OR CREATION OF SECURITY INTEREST IN FAVOR OF THE LENDERS ON THE ESCROW ACCOUNT AND ALL OTHER BANK ACCOUNTS ESTABLISHED/ TO BE ESTABLISHED BY THE BORROWERS. 6. DSRA: THE BORROWER SHALL MAINTAIN A DEBT SERVICE RESERVE ACCOUNT EQUIVALENT TO ONE QUARTER’S DEBT SERVICE OBLIGATION DURING THE FIRST YEAR OF COMMERCIAL OPERATION TO BE ENHANCED TO TWO QUARTER’S DEBT OBLIGATIONS FROM THE SECOND YEAR ONWARDS. 7. BORROWER MAY HAVE A CHOICE TO PROVIDE AN LC OR BANK GUARANTEE OF EQUIVALENT AMOUNT IN LIEU OF THE AMOUNT TO BE KEPT IN DSRA. 8. SENIOR TERM LENDERS TO HAVE PRIORITY OVER ALL THE SECURITIES AND PAYMENTS. PERSONAL GUARANTEE OF THREE DIRECTORS
44

PERSONAL

GUARANTEE SL. NO. 1. 2. 3. NAME MR. NW AS ON 31.03.2009 MOHINDER RS.1.38 CRORE

KUMAR AGARWAL MRS. SUNITA RS.0.83 CRORE AGARWAL MR. AGARWAL GAURAV RS.0.39 CRORE

COLLATERAL SECURITY – NIL DETAILS OF PROPERTIES/ASSETS ETC. UNDER COLLATERAL SECURITY VIZ. VALUER, VALUATION DATE, ENCUMBRANCE & MARKETABILITY STATUS ETC. ARE AS PER ANNEXURE – 7 i) PERCENTAGE COVERAGE OF COLLATERAL SECURITY: NIL IN CASE OF DILUTION OF SECURITY

ii) REASONS COVERAGE: N.A C) D)

DATE OF CREATION OF CHARGE: WILL BE DONE DATE OF SUBSEQUENT MODIFICATION OF CHARGE: N.A

E) DATE OF VETTING OF DOCUMENTS BY LEGAL OFFICER /PANEL ADVOCATE: WILL BE DONE PRIOR TO DISBURSEMENT F) NAME OF GUARANTORS & THEIR NET WORTH (RS. IN CRORES) NAME RELATIONSHIP NET BASED ON CA WORTH AS CERTIFICATE ON AS ON 31/3/2009 DIRECTOR RS. 1.38 31/3/2009 MR. MOHINDER KUMAR CRORES AGGARWAL MRS. SUNITA AGGARWAL DIRECTOR RS. 0.83 31/3/2009 CRORES MR. GAURAV AGGARWAL DIRECTOR RS. 0.39 31/3/2009 CRORES NOTE: NET WORTH OF THE GUARANTORS INCLUDE THEIR INVESTMENT IN THE SUBJECT COMPANY AND GROUP COMPANIES.

45

(DECLARATION FROM BORROWER TO BE OBTAINED AND KEPT ON RECORD, THAT NO COMMISSION OR REMUNERATION IS PAID TO THEM FOR PROVIDING GUARANTEE.) III. CREDIT RATING & PRICING: PRICING EXISTI NG CREDIT RATING SCORE BASED ON N.A AUDITED BALANCE SHEET FOR THE YEAR ENDING 31ST MARCH 2009 APPLICABLE INTEREST RATE AS PER N.A CREDIT RATING INTEREST RATE PRESENTLY CHARGED N.A AND PROPOSED PROPOSED 56 OUT OF 74 I.E 75.68 %

BPLR + 1.75 % + 0.50 % (T.P) BPLR - 0.25 % + 0.50 % P.A PRESENTLY 12.75% P.A (FLOATING), INTEREST PAYABLE MONTHLY. RATE OF INTEREST TO BE SET AS ON DATE OF DOCUMENTATION. CONCESSION IF ANY N.A CONCESSION IN RATE OF INTEREST OF 2 % INTEREST RATE CHARGED BY LEAD N.A BPLR+0.75% PA PRESENTLY BANK 12.75% PA FLOATING. INTEREST PAYABLE MONTHLY. RATE OF INTEREST TO BE SET AS ON DATE OF DOCUMENTATION. COMMISSION ON NFB LIMITS N.A N.A PROCESSING CHARGES/ UPFRONT FEES 0.75% OF THE SANCTIONED TERM LOAN AMOUNT + APPLICABLE TAXES - CREDIT RATING WORK SHEET FURNISHED AS ANNEXURE 1 a) b) FACTORS CONTRIBUTING TO THE UPGRADATION / SLIPPAGE IN CREDIT RATING: N.A JUSTIFICATION FOR PROPOSING LOWER RATE OF INTEREST/CONCESSION IN CHARGES/PROCESS FEES

CONCESSIONS IN RATE OF INTEREST AS PER CREDIT RATING EXERCISE, THE COMPANY IS ELIGIBLE FOR RATE OF INTEREST OF BPLR+1.75 + 0.50 (T.P) = 14.75 %.( AT PRESENT). HOWEVER, AS THE PROJECT IS SYNDICATED BY CANARA BANK, THEY HAVE PROPOSED INTEREST RATE OF BPLR + 0.75% P.A. PRESENTLY 12.75% P.A. (RATE OF

46

INTEREST TO BE SET AS ON DATE OF DOCUMENTATION). TO BE IN LINE WITH THE LEAD BANK, WE ARE PROPOSING THE INTEREST RATE OF BPLR - 0.25 % + 0.50 %. HENCE, CONCESSIONS IN RATE OF INTEREST OF 2 % IS BEING RECOMMENDED. CONCESSIONS IN PROCESS FEES/ UPFRONT FEES CONCESSIONS IN APPLICABLE PROCESS FEES/ FEES AS PER UPFRONT FEES LOAN POLICY 1.25 % OF THE SANCTIONED LIMIT FEES PROPOSED
CONCESSION ALLOWED

0.75% OF THE 0.50 % SANCTIONED TERM LOAN AMOUNT + APPLICABLE TAXES AND &

TO BE IN LINE WITH THE LEAD BANK, WE ARE PROPOSING RECOMMENDING THE PROCESS FEES/ UPFRONT FEES AS STATED ABOVE. IV. PERMISSIONS FOR DEVIATIONS, ISSUE CONCESSIONS IN SERVICE CHARGES – N.A OF NOCS

ETC

9. RATIFICATIONS REQUIRED FOR ACTIONS, EXCEEDING PERMITTED ETC. BEYOND DISCRETIONARY POWERS: - N.A VI. TERMS AND CONDITIONS AS SPECIFIED PER ANNEXURE II

10. COMPANY PROFILE (IN BRIEF) ALLIED STRIPS LTD (ASL) IS A CLOSELY HELD PUBLIC LIMITED COMPANY PROMOTED AND MANAGED BY MR. MOHINDER KUMAR AGGARWAL. ASL WAS INCORPORATED ON AUGUST 5, 1992 WITH ITS REGISTERED OFFICE AT ALLIED MANSION, 14-B, MANOHAR PARK, ROHTAK ROAD, NEW DELHI-110 026 AND WORKS AT 42 KM STONE, DELHI ROHTAK ROAD, BAHADURGARH, HARYANA124507. ASL STARTED OPERATIONS BY SETTING UP A COLD ROLLED CLOSE ANNEALED (CRCA) STEEL PLANT AT BAHADURGARH, HARYANA. THE COMPANY IS HAVING AN EXISTING CAPACITY OF 40000 TPA OF CRCA (NARROW WIDTH) AND 60000 TPA OF COLD ROLLING CAPACITY. PRESENTLY THE ASL IS INTO THE BUSINESS OF MANUFACTURING AND MARKETING OF CRCA STEEL TO AUTOMOTIVE AND WHITE GOODS INDUSTRY.

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ASL ENVISAGES SETTING UP A NEW PROJECT WITH FACILITIES TO MANUFACTURE WIDER WIDTH COLD ROLLED CLOSE ANNEALED (CRCA) COILS/SHEETS, CRFH SHEETS, HRPO COILS. WITH AN INSTALLED CAPACITY OF 300000 TPA AT AN ESTIMATED PROJECT COST OF RS.249.00 CRORES WHICH IS TO FUNDED BY A TERM LOAN OF RS.164.00 CRORES AND PROMOTERS INCLUDING GROUP COMPANIES, FAMILY MEMBERS, RELATIVES, FRIENDS AND ASSOCIATES WOULD CONTRIBUTE EQUITY CAPITAL OF RS. 85 CRORE TOWARDS DEVELOPMENT OF THIS PROJECT. THE PROPOSED PROJECT WILL BE LOCATED ADJACENT TO ITS EXISTING FACILITIES IN BAHADURGARH, HARYANA. ASL HAS APPROACHED CANARA BANK TO SYNDICATE THEIR TERM LOAN REQUIREMENT WHICH WORKS OUT TO RS.164.00 CRORES FOR THE PROPOSED PROJECT AND ACCORDINGLY CANARA BANK, SYNDICATION & NEW PRODUCTS GROUP HAS PREPARED THE INFORMATION MEMORANDUM. THE IM IS PREPARED BASED ON THE SITE VISIT AND DISCUSSIONS WITH THE MANAGEMENT TEAM OF ASL, THEIR ORAL AND WRITTEN SUBMISSIONS AND VARIOUS PUBLISHED INFORMATION / DATA ASSUMED TO BE AUTHENTIC. AS PER LETTER NO. DEL MBD PCB – II 0709 ASL-SYND 2009 DATED 7/9/2009 OF CANARA BANK THE PROJECT IS FINANCIALLY APPRAISED AND TECHNICALLY VETTED BY OUR PROJECT APPRAISAL GROUP AND THEY HAVE COMMENTED THAT THE OVERALL RISK ASSOCIATED WITH THE PROJECT IS NORMAL SUBJECT TO THE DOCUMENTS AND INFORMATION MADE AVAILABLE BY THE COMPANY, VARIOUS COMMENTS MADE IN THE IM, RISK ANALYSIS AND THE IMPACT OF VARIOUS SCENARIOS ENVISAGED UNDER SENSITIVITY ANALYSIS. AS PER THE IM REPORT, THE DER OF THE PROJECT WORKS OUT TO 1.93. THE OVERALL DSCR WORKS OUT TO 1.53, WHICH INDICATES ADEQUATE REPAYMENT CAPACITY. SENSITIVITY ANALYSIS SHOWS THAT THE COMPANY IS SENSITIVE TO RAW MATERIAL AND SELLING PRICES. HOWEVER AS PER THE INDUSTRY TRENDS ANY INCREASE IN INPUT PRICES ARE ACCOMPANIED BY AN INCREASE IN THE SELLING PRICE OF THE FINISHED PRODUCTS. THE PROMOTERS RISK, TECHNOLOGICAL RISK, PROJECT IMPLEMENTATION RISK, MARKET RISK, FINANCE RISK ARE CONSIDERED AS NORMAL AS SHOWN LATER IN RISK ANALYSIS SECTION. HENCE, THE REPORT CONCLUDES AS UNDER, SUBJECT TO THE DOCUMENTS AND INFORMATION MADE AVAILABLE BY THE COMPANY, VARIOUS COMMENTS MADE IN THE IM, VARIOUS OPERATING,
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FINANCING & REGULATORY ASSUMPTIONS, THE RISK ANALYSIS CARRIED OUT AND THE IMPACT OF VARIOUS SCENARIOS ENVISAGED UNDER THE SENSITIVITY ANALYSIS, BARRING UNFORESEEN CIRCUMSTANCES THE OPERATIONS OF THE COMPANY ARE EXPECTED TO ACHIEVE THE PROJECTED PROFITABILITY. FURTHER, A JOINT VISIT OF THE PARTICIPATING MEMBERS OF THE CONSORTIUM WAS ALSO DONE ON 25/8/2009. THE VISIT WAS MADE BY DR. MANORAMA MISHRA (AGM – SCOPE BRANCH), MR. SUNIL TIWARY (CHIEF MANAGER – SPECIAL CREDIT CELL) AND MR. K.D.SHARMA (CHIEF MANAGER – NAZAFGARH ROAD BRANCH) FROM OUR BANK. DURING SITE VISIT OF THE FACTORY PREMISES, IT WAS NOTICED THAT COMMERCIAL PRODUCTION OF COMPANY’S PRODUCT WAS TAKING PLACE, SOME CIVIL WORK I.E CONSTRUCTION OF ONE ADDITIONAL INDUSTRIAL SHED AND LEVELING WORK IN THE ADJOINING PIECE OF LAND (PURCHASED FOR EXPANSION PURPOSE) WAS ALSO IN PROGRESS. THE PROJECT PROGRESS REPORT AS ON 14/8/2009 RECEIVED FROM THE BORROWER IS ALSO ENCLOSED FOR REFERENCE. BRIEF PROFILE OF PROMOTERS/ DIRECTORS MR. MOHINDER KUMAR AGGARWAL MR. AGGARWAL, A BACHELOR IN COMMERCE, IS A FIRST GENERATION ENTREPRENEUR INVOLVED IN BUSINESS ACTIVITIES FOR LAST 30 YEARS. HE STARTED HIS CAREER IN 1980 BY SETTING UP CHEMICAL PLANTS AT MULTIPLE LOCATIONS NAMELY BARODA, ALWAR AND BAHADURGARH. AS PER FAMILY SETTLEMENT OF BUSINESSES IN EARLY 1990S, MR. M.K. AGGARWAL MOVED AWAY FROM CHEMICAL BUSINESS AND SET UP ALLIED STRIPS LTD AND HAS BEEN RUNNING HIS STEEL BUSINESS SUCCESSFULLY THEREAFTER. MRS. SUNITA AGGARWAL MRS. SUNITHA AGGARWAL, WIFE OF MR. MK AGGARWAL, IS A GRADUATE AND CONDUCTS THE DAY TO DAY ADMINISTRATIVE FUNCTIONS OF THE COMPANY. MR. GAURAV AGGARWAL MR. GAURAV AGGARWAL, SON OF MR. M.K. AGGARWAL, HOLDS A B. TECH. DEGREE IN COMPUTER SCIENCE FROM MONASH UNIVERSITY, MELBOURNE, AUSTRALIA. AFTER COMPLETING HIS STUDIES IN 2004, HE HAS BEEN INDUCTED AS DIRECTOR IN THE COMPANY AND SINCE THEN, HAS BEEN DEEPLY INVOLVED WITH ALL THE CRITICAL AREAS OF BUSINESS OF ASL NAMELY PRODUCTION, MARKETING AND FINANCE. AFTER SUCCESSFULLY HELPING THE COMPANY GROW OVER LAST THREE YEARS, HE IS NOW FOCUSED ON STRATEGIC GROWTH ASPECTS OF THE COMPANY AND WORKING TO ACHIEVE THE SAME.
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KEY MANAGEMENT PERSONNEL THE PROFESSIONAL TEAM MEMBERS OF COMPANY ARE MENTIONED BELOW: EXPERIEN NAME DESIGNATION QUALIFICATION CE ( YEARS) SH. MAHESH G.M. (MARKETING) M.B.A. 24 SHARMA SH. RAVINDER MANAGER (MARKETING) M.B.A. 18 GUPTA SH. KULDEEP G.M. (PRODUCTION & B.TECH 20 SINGH PLANNING) (MECHANICAL) SH. SUDHIR B.TECH. MANAGER (WORKS) 18 JANGRA (ELECTRICAL) SH. B.M. DIPLOMA IN MANAGER (ELECTRICALS) 21 SHARMA ELECTRICAL MANAGER (PRODUCTION & B.TECH SH. N.K. PANDEY 15 PLANNING) (MECHANICAL) SH. DINESH JAIN MANAGER (ADMN.) MBA 14 SH. H.K. GUPTA MANAGER (F& A) F.C.A. 20 IN ADDITION TO THE ABOVE, COMPANY WOULD RECRUIT MORE PEOPLE AS AND WHEN REQUIRED FOR THE PROPOSED PROJECT. INDUSTRY SCENARIO AS PER CRISINFAC REPORTS, THE GLOOM FOR THE GLOBAL STEEL INDUSTRY CONTINUED AS THE PRODUCTION OF CRUDE STEEL DECLINED YET AGAIN IN MAY 2009 BY 21 PER CENT YEAR-ON-YEAR (Y-O-Y). THERE IS STILL NO SIGN OF RECOVERY ACROSS MAJOR STEEL-CONSUMING REGIONS IN DEVELOPED COUNTRIES, WHICH HAS LED TO SUBSTANTIAL DECLINE IN PRODUCTION. THE SITUATION IN THE INDIAN STEEL INDUSTRY IS OPTIMISTIC WHEN COMPARED TO THE GLOBAL SCENARIO. ACCORDING TO JPC, INDIA PRODUCED 4.5 MILLION TONNES OF CRUDE STEEL IN APRIL 2009, WHICH IS A GROWTH OF 3.5 PER CENT COMPARED TO APRIL 2008. RECOVERY IN MAJOR STEELCONSUMING SECTORS LIKE CONSTRUCTION AND AUTOMOBILES REFLECTED IN AN IMPROVEMENT IN PRODUCTION AND CONSUMPTION OF STEEL.

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OWING TO THE STABLE DOMESTIC DEMAND, DOMESTIC STEEL PRICES REMAINED AT A PREMIUM OF 20 TO 30 PER CENT AS COMPARED TO THE LANDED COST OF IMPORTS. DOMESTIC PRICES ARE LIKELY TO REMAIN STABLE ON ACCOUNT OF FIRM DOMESTIC DEMAND, IMPORT DUTY AND RESTRICTIONS ON IMPORTS OF FLAT STEEL PRODUCTS. AS PER CMIE REPORTS, THE AUTOMOBILE INDUSTRY WHICH USES STEEL IN VEHICLE BODIES ALSO SHOWED A REVIVAL FROM THE DECEMBER QUARTER LEVELS. PRODUCTION AND SALES OF PASSENGER CARS GREW BY 22 PER CENT AND 59 PER CENT, RESPECTIVELY AS PER DATA PROVIDED BY SOCIETY OF INDIAN AUTOMOBILE MANUFACTURER’S ASSOCIATION (SIAM). PRODUCTION AND SALES OF COMMERCIAL VEHICLES ROSE BY 25 PER CENT AND 36 PER CENT, RESPECTIVELY. THE MACHINERY EQUIPMENT SEGMENT ALSO DEPICTED A SIMILAR TREND AS PER DATA PROVIDED BY THE CENTRAL STATISTICAL ORGANIZATION. THE IMPROVED DEMAND SCENARIO IN THE STEEL INDUSTRY WILL CONTINUE IN 2009-10. SUSTAINED GROWTH IN INFRASTRUCTURE WILL DRIVE STEEL DEMAND. LONG STEEL ITEMS COMPRISING BARS, RODS AND STRUCTURALS, ARE ESSENTIALLY USED IN CONSTRUCTION AND ACCOUNT FOR A SIGNIFICANT 50 PER CENT OF THE TOTAL FINISHED STEEL CONSUMPTION. A PICKUP IN HOUSING CONSTRUCTION ACTIVITY IN THE SECOND HALF OF 2009-10 DUE TO LOW INTEREST RATES AND FALL IN PROPERTY PRICES WILL ALSO CREATE NEW DEMAND FOR LONG PRODUCTS. STEEL COMPANIES ARE REVIEWING THEIR PRODUCT MIX WHICH IS EXPECTED TO SHIFT MORE TOWARDS LONG PRODUCTS. ADDITIONALLY, FRESH CAPACITY TO THE TUNE OF 4.8 MILLION TONNES WILL COME ON STREAM IN 2009-10 TAKING THE TOTAL STEEL CAPACITY OF THE INDUSTRY TO AROUND 70 MILLION TONNES. THIS COUPLED WITH HEALTHY DEMAND PROSPECTS IN THE LONG PRODUCTS SEGMENT WILL SCALE UP FINISHED STEEL PRODUCTION DURING THE YEAR. CMIE EXPECTS FINISHED STEEL PRODUCTION TO GROW BY 6.5 PER CENT IN 2009-10. CMIE EXPECTS FINISHED STEEL PRODUCTION TO GROW BY 6.5 PER CENT IN 2009-10.

FINISHED STEEL PRODUCTION GROWTH (%)

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THE GROWTH RATES EXPECTED FOR VARIOUS END USER SECTORS FOR FLAT PRODUCTS ARE AS UNDER: END-USER SECTOR PIPES AND TUBES CR UNITS & GALVANISED SECTOR AUTOMOBILES RAILWAYS LPG CYLINDERS PORT & SHIP BUILDING ENGINEERING CONSTRUCTION GOVERNMENT OTHERS OVERALL SOURCE: CRISIL RESEARCH GROWTH FORECASTED (2007-08-2012-13 CAGR) 14% 9.40% 8.50% 15% 8% 10% 12% 15% 8% 8% 11.40%

THE CONSTRUCTION SECTOR INVESTMENTS ARE EXPECTED TO DOUBLE FROM RS 17 TRILLION TO RS 34 TRILLION OVER THE 5-YEAR PERIOD ENDING 201112 AS COMPARED TO THAT IN THE PREVIOUS 5 YEARS. THIS WOULD BE ON ACCOUNT OF FAVOURABLE DEMOGRAPHICS, WHICH WOULD DRIVE THE DEMAND FOR HOUSING AND RETAILING. THE GOVERNMENT'S INCREASED FOCUS ON KEY INFRASTRUCTURE PROJECTS WILL DRIVE THE DEMAND FROM INFRASTRUCTURE SEGMENT. PROJECT CONSTRUCTION WILL GET A BOOST DUE TO ROBUST DEMAND GROWTH AND HIGH OPERATING RATES ACROSS MANY SECTORS OF THE ECONOMY.

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MOST OF THE CAPACITY EXPANSIONS HAVE BEEN ANNOUNCED BY THE EXISTING LARGE PLAYERS AS GIVEN BELOW: (IN MILLION TONNES) 2006- 2007- 2008- 2009- 2010- 2011- 2012DESCRIPTION 07 08 09 10 11 12 13 BHUSHAN STEEL LTD. BHUSHAN POWER & STEEL ESSAR STEEL ISPAT INDUSTRIES JSW STEEL LTD. JSPL 3.6 3 2.8 0.9 4.6 3 3.5 1 0.6 7.2 4.5 2 27.3 0.9 4.6 3.6 3.5 1 0.6 8.1 7 2 31.3 1.9 0.9 4.6 3.6 5.5 1 0.6 8.5 9 2 37.6 1.9 0.9 4.6 3.6 8.5 1 0.6 10.4 9 2 42.5 3.8 0.9 4.6 3.6 12.5 1 0.6 11 11 2 51 3.8 0.9 4.6 4.8 12.5 5 0.6 2.5 11 12.3 2 60

LLOYDS STEEL INDUSTRIES 0.6 LTD. POSCO (INDIA) STEEL AUTHORITY OF INDIA 7.1 LTD TATA STEEL 3.2 OTHERS 2 TOTAL 22.3 SOURCE: CRISIL RESEARCH

11. INDUSTRY SCENARIO a. INDUSTRY CATEGORISATION b. DEMAND AND SUPPLY SITUATION OF THE PRODUCT – PRESENT AND PROJECTED (SOURCE OF INFORMATION) c. MAJOR PLAYERS & THEIR MARKET SHARE d. BANK’S EXPOSURE IN THIS INDUSTRY

MANUFACTURING AS EXPLAINED ABOVE

AS EXPLAINED ABOVE THE NPA EXPOSURE IS CONSIDERED FOR HR SHEETS AND CR SHEETS. THE TOTAL EXPOSURE IS 37203.26 LACS, OUT OF WHICH NPA EXPOSURE IS 1.33 LACS. HENCE, THE NPA % IS 0.003 %. NPA % IS 0.003 %. NO

e. NPA POSITION f. CYCLICAL TRENDS

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g. GOVT. POLICIES h. WHETHER THE PRODUCT IS AN IMPORT SUBSTITUTE, IF SO, WHAT IS THE LANDED COST OF IMPORT AND WHAT IS THE PRODUCTION COST OF THE INDIGENOUS MANUFACTURE i. AVAILABILITY OF RAW MATERIALS, LABOUR, INFRASTRUCTURAL ADVANTAGES j. WHAT ARE INTERNAL & EXTERNAL ADVANTAGES OF THE BORROWER/TECHNOLOGY USED

FAVOURABLE N.A

EASILY AVAILABLE AS THE NEW PROJECT IS BEING INSTALLED NEAR TO THE EXISTING MANUFACTURING UNIT I) ALREADY HAVING GOOD EXPOSURE IN THE FIELD OF MANUFACTURING COILS AND SHEETS, II) LOCATION OF THE PROJECT BEING CONVENIENT k. WHAT ARE THE WEAKNESSES STIFF COMPETITION FROM OTHER MAJOR PLAYERS IN STEEL SECTOR l. WHAT ARE THE RELATIVE GROWING DOMESTIC DEMAND IN OPPORTUNITIES THE AUTOMOTIVE AND INFRASTRUCTURE SEGMENT m. WHAT ARE THE THREATS NO THREAT AS SUCH n. ANY OTHER INFORMATION NIL 12. PRODUCTION CAPACITY THE INSTALLED CAPACITIES OF ASL OF VARIOUS FACILITIES AS ON 31.03.2009 IS AS UNDER: THE DETAILS OF THE VARIOUS PLANT AND MACHINERY IN THE EXISTING FACILITY ARE GIVEN IN ANNEXURE-III. PRODUCTION CAPACITY INSTALLED CRCA CR MILL HRPO THE INSTALLED CAPACITY OF MAJOR PROPOSED PROJECT IS AS FOLLOWS: MANUFACTURING FACILITY PICKLING LINE COLD ROLLING MILL ANNEALING FURNACE EXISTING 40000 60000 100000 MANUFACTURING FACILITIES OF

INSTALLED CAPACITY 350000 TPA 300000 TPA 300000 TPA

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14. FINANCIAL INDICATORS DESCRIPTION 2007YEAR - > 08 AUDITE D CURRENT LIABILITIES BANK BORROWINGS CANARA BANK 32.87 UCO BANK TERM LOAN INSTALLMENTS DUE WITHIN ONE YEAR. DEPOSIT / UNSECURED LOAN SUNDRY CREDITORS 0.28 PROVISION/ADVANCE PAYMENT 0.96 OTHER CURRENT LIABILITIES 1.67 TOTAL (A) 35.78 TERM LOAN-CANARA BANK UNSECURED LOAN VEHICLE LOAN UNSECURED LOAN FROM SHAREHOLDERS AND DIRECTORS PROVISION FOR GRATUITY CREDITORS FOR CAPITAL GOODS DEFERRED TAX LIABILITY TERM LIABILITIES TOTAL OUTSIDE LIABILITIES NET WORTH CAPITAL RESERVE & SURPLUS SHARE PREMIUM REVALUATION RESERVE MISC. EXPEND. NOT 4.03 1.04 17.11

(RS. IN CRORES) 2008-09 AUDITE D 35.91 23.91 2009-10 2010-11 (ESTIMATE (PROJECTION S) S) 60.31 60.34

0.31 2.76 1.65 64.54 4.61 1.20 18.98

3.32 0.66 3.15 67.44 30.82 0.95 18.99

3.32 0.66 3.15 67.47 125.67 0.71 18.99

0.46 0.85 23.49 59.27 3.19 5.40 3.81

0.29 0.83 25.91 90.45 3.86 9.24 16.63

0.83 51.59 119.03 43.42 12.88 16.63

0.83 146.20 213.67 65.00 16.86 16.63

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WRITTEN OFF NET WORTH (C) TOTAL (A+B+C) LIABILITIES

12.40 71.67 0.08 31.91 25.99 1.64 59.62 11.24 0.47 0.01 0.33 71.67 181.58 26.11 155.47 #REF! 3.36 1.30 0.58 1.48 4.20 7.56 1.67 4.78

29.73 120.18 1.24 68.75 29.67 5.70 105.36 13.73 0.59 0.01 0.49 120.18 204.73 22.72 182.01 0.13 7.67 1.54 2.10 4.03 7.31 14.98 1.63 3.04

72.93 191.96 20.23 52.31 33.81 3.28 2.91 112.54 12.28 0.01 67.12

98.49 312.16 21.28 52.31 33.85 3.28 2.91 113.63 198.51 0.01 -

CURRENT ASSETS CASH & BANK BALANCE RECEIVABLESDOMESTICS EXPORTS INVENTORY LOANS & ADVANCES OTHER CURRENT ASSETS TOTAL (E) NET FIXED ASSETS RECEIVABLE MORE THAN 6 MONTHS INVESTMENT IN SHARES CAPITAL WORK IN PROGRESS OTHER NON-CURRENT ASSETS TOTAL ASSETS: ( E+F+G+H ) FINANCIAL PERFORMANCE NET SALES DOMESTICS EXPORTS EXPORTS INCENTIVES LESS EXCISE DUTY GROSS SALES GROWTH GROSS PROFIT DEPRECIATION TAXATION NET PROFIT INTEREST PROFIT RETAINED PBDIT RATIO ANALYSIS CURRENT RATIO TOTAL DEBT EQUITY

124.83 193.16 14.97 178.19 (0.13) 6.30 1.45 1.22 3.63 7.40 13.70 1.67 1.63

312.15 193.16 14.97 178.19 6.28 1.49 0.81 3.98 7.22 13.50 1.68 2.17

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RATIO GROSS PROFIT /SALES % NET PROFIT / SALES % DEBTORS / SALES (DAYS) NET WORKING CAPITAL INTEREST COVERAGE RATIO CREDITORS/PURCHASE (DAYS) CURRENT ASSETS TO TURNOVER RATIO

1.85 0.82 2.14 23.84 1.66 0.02 3.11

3.75 1.97 4.06 40.82 1.76 0.02 2.07

3.26 1.88 3.25 45.10 1.69 0.25 2.24

3.25 2.06 3.25 46.16 1.76 0.25 2.24

15. SALES

COMMENTS ON FINANCIAL INDICATORS, IN BRIEF:

NET SALES INCREASED BY 17.07 % IN FY 2008-09 AS COMPARED TO FY 200708. THIS IS ON ACCOUNT OF HIGHER VALUE ADDITION AND GREATER SALES REALIZATION EVEN THOUGH THE TOTAL SALES QUANTITY REDUCED. ALTHOUGH THE COMPANY HAS PROJECTED ITS SALES LEVEL AT 193.16 CRORES WHICH IS ON A LOWER SIDE, BUT THE COMPANY HAS ACHIEVED A SALES LEVEL OF 83.60 CRORES AS ON 31/7/2009 AS MENTIONED IN THE OFFICE NOTE OF CANARA BANK. HENCE, THE TARGETED FIGURES ARE ACCEPTABLE AND ACHIEVABLE. NET WORTH TANGIBLE NET WORTH WHICH WAS RS.12.40 CRORES AS ON 31/3/2008 INCREASED TO RS. 29.73 CRORES AS ON 31/3/2009. THERE HAS BEEN 139.76% INCREASE IN THE YEAR 2008-09 AS COMPARED TO 2007-08. THIS IS ON ACCOUNT OF INCREASE IN SHARE PREMIUM AND RETAINED PROFITS. THE NET WORTH IS PROJECTED AT RS. 72.93 CRORES AS ON 31/3/2010 AND RS. 98.49 CRORES AS ON 31/3/2011. THE INCREASE IS MORE ON ACCOUNT OF INCREASE IN ESTIMATED/ PROJECTED SHARE CAPITAL OF THE COMPANY WHICH WAS RS.3.86 CRORES AS ON 31/3/2009 AND ESTIMATED AT RS. 43.42 CRORES AS ON 31/3/2010 AND RS. 65 CRORES AS ON 31/3/2011. PBDIT NET PROFIT WAS RS.1.48 CRORES IN THE YEAR 2007-08 AND RS. 4.03 CRORES IN THE YEAR 2008-09. NET PROFIT MARGIN HAS IMPROVED AS THE RAW MATERIAL EXPENSES AS % OF SVOP REDUCED FROM 90.60% TO 86.92%

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THEIR BY REDUCING THE OVERALL MANUFACTURING COST FROM 94.19% TO 90.40%. ALSO DUE TO AVAILABILITY OF GAS FROM IOCL, COMPANY HAS BEEN ABLE TO REDUCE THE POWER AND FUEL EXPENDITURE. THE ESTIMATED/ PROJECTED NET PROFIT IS RS. 3.63 CRORES IN THE YEAR 2009-10 AND RS. 3.98 CRORES IN THE YEAR 2010-11. TOTAL DEBT EQUITY RATIO THE DEBT EQUITY RATIO WAS 4.78 AS ON 31/3/2008 BUT HAS SUITABLY IMPROVED TO 3.04 AS ON 31/3/2009 (AUDITED FIGURES). THE RATIO IS WELL WITHIN THE BANK’S NORMS OF 3.5:1. THE RATIO HAS IMPROVED MAINLY ON ACCOUNT OF INCREASE IN NET WORTH EVEN THOUGH THE TERM LIABILITY AND BANK BORROWINGS INCREASED. CASH FLOW POSITION THE PROJECTED FUNDS FLOW STATEMENT IS GIVEN IN ANNEXURE XII WHICH SHOWS THAT THERE ARE SUFFICIENT CASH FLOWS AVAILABLE FOR REPAYMENT OF THE LOAN. GROUP COMPANIES AND THEIR BRIEF FINANCIALS DIKSHA VINIYOG PVT. LTD. DIKSHA VINIYOG PRIVATE LTD IS INCORPORATED ON 19.05.1997 WITH ITS REGISTERED OFFICE AT SECTOR-III, H 33, SALT LAKE, KOLKATA-700 002. MS. RESHMI SINHA AND MR.SUBHENDU DEY ARE THE PRESENT DIRECTORS OF THE COMPANY. THE MAIN OBJECT OF THE COMPANY IS TO CARRY ON THE BUSINESS OF TRADING OF SHARES & OTHER COMMODITIES. (RS. IN LAKHS) 31.03.200 31.03.200 31.03.200 31.03.200 PARTICULARS 6 7 8 9 (ABS) (ABS) (ABS) (PBS) SHARE CAPITAL 421.06 421.06 421.06 421.06 RESERVES & SURPLUS 3779.64 3779.23 3778.85 3778.41 TNW 4200.70 4200.29 4199.91 4199.47 INVESTMENTS 4196.50 4196.50 4196.50 4196.50 TOTAL INCOME 0.33 0.27 0.29 0.23 PAT (0.36) (0.41) (0.38) (0.44) AB AGROCHEM PVT. LIMITED AB AGROCHEM PVT. LTD WAS INCORPORATED ON 20.02.1996 WITH ITS REGISTERED OFFICE AT 3, SAKLAT PLACE, KOLKATA. MR.PAWAN KUMAR TIBREWAL AND MR. MANOJ KUMAR AGARWAL ARE THE PRESENT DIRECTORS
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OF THE COMPANY. THE MAIN OBJECT OF THE COMPANY IS TO CARRY ON THE BUSINESS OF TRADING OF SHARES. (RS. IN LAKHS) 31.03.200 31.03.200 31.03.200 31.03.200 PARTICULARS 6 7 8 9 (ABS) (ABS) (ABS) (PBS) SHARE CAPITAL 106.00 106.00 106.00 106.00 RESERVES & SURPLUS 2124.00 2123.95 2124.00 2124.00 TNW 2230.00 2229.95 2230.00 2230.00 INVESTMENTS 2229.00 2229.00 2219.10 2229.00 TOTAL INCOME 0.06 -0.69 0.49 PAT 0.00 (0.05) 0.05 0.01 SURVI COMMOTRADE PVT. LTD. SURVI COMMOTRADE PRIVATE LIMITED WAS INCORPORATED ON 05.03.2004 WITH ITS REGISTERED OFFICE AT 3, SAKLAT PLACE, KOLKATA-700072. MR. SHANKAR AGARWAL AND MR. MANOJ KUMAR AGARWAL ARE THE PRESENT DIRECTORS OF THE COMPANY. THE COMPANY IS INTO THE BUSINESS OF INVESTMENTS IN SHARES. NO MAJOR TRADING ACTIVITY IS OBSERVED DURING THE PERIOD UNDER REVIEW. (RS. IN LAKHS) 31.03.200 31.03.200 31.03.200 31.03.200 PARTICULARS 6 7 8 9 (ABS) (ABS) (ABS) (PBS) SHARE CAPITAL 72.42 72.42 72.42 72.42 RESERVES & SURPLUS 1714.08 1714.31 1714.47 1714.51 TNW 1786.50 1786.73 1786.89 1786.93 INVESTMENTS 1784.50 1784.50 1784.93 1784.50 TOTAL INCOME 0.10 0.45 0.55 0.35 PAT 0.00 0.24 0.16 0.03 LIMITS ENJOYED BY ASSOCIATE / GROUP CONCERNS: - N.A AS THESE ARE ONLY INVESTMENT COMPANIES WITH OTHER BANK/FIS/OTHERS - N.A AS THESE ARE ONLY INVESTMENT COMPANIES ADDITIONAL COMMENTS, IF ANY ALONG WITH INVESTMENTS DETAILS IN ASSOCIATE /SISTER CONCERNS, COMMENTS ON BALANCE SHEET, AUDITORS REMARKS ETC. ARE AS PER ANNEXURE. HOWEVER, IF SUCH COMMENTS WILL HAVE MATERIAL EFFECT ON FINANCIALS OF THE COMPANY, THAT SHOULD BE PART OF THE MAIN PROPOSAL NOTE.

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I. AUDITOR’S REMARKS AND MANAGEMENT REPLIES. (POINTS TO COVER INTERNAL CONTROLS, ADHERENCE TO STATUTORY PROVISIONS, ACCOUNTING STANDARDS) II. CONTINGENT LIABILITIES – BANK GUARANTEE OF RS. 890 LACS (MARGIN MONEY OF RS 89 LACS) AND INLAND LETTER OF CREDIT OF RS. 7.63 LACS (MARGIN MONEY OF RS 7.63 LACS) III. CURRENT PERFORMANCE TRENDS: CRORES) ESTIMATED SALES TURNOVER FOR THE YEAR 2009-10 ACHIEVEMENT TILL 31/7/2009 AS PER THE OFFICE NOTE OF CANARA BANK PRO-RATA ACHIEVEMENT IV. COMMENT ON CURRENT PERFORMANCE TRENDS: V. INTER-FIRM COMPARISON (PEER GROUP) N.A 16. ASSESSMENT OF WORKING CAPITAL REQUIREMENTS – N.A B INVENTORY AND RECEIVABLE LEVELS – N.A (RS IN 193.16 83.60 43.28 %

C COMMENTS ON ASSESSMENT OF WORKING CAPITAL WITH JUSTIFICATION – N.A 16. a. ASSESSMENT OF TERM LOAN – PROJECT IN BRIEF –

ALLIED STRIPS LTD PROPOSES TO SET UP A NEW PROJECT WITH FACILITIES TO MANUFACTURE WIDER WIDTH COLD ROLLED CLOSE ANNEALED (CRCA) COILS/SHEETS. THE INSTALLED CAPACITY OF MAJOR PROPOSED PROJECT IS AS FOLLOWS: MANUFACTURING FACILITY PICKLING LINE COLD ROLLING MILL ANNEALING FURNACE MANUFACTURING FACILITIES OF

INSTALLED CAPACITY 350000 TPA 300000 TPA 300000 TPA

THE PROPOSED PROJECT WOULD MANUFACTURE THE FOLLOWING FINAL PRODUCTS;

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 COLD ROLLED CLOSE ANNEALED (CRCA) SHEETS.  COLD ROLLED FULL HARD (CRFH) SHEETS.  HOT ROLLED PICKLED OILED (HRPO) COILS. b. PROJECT APPRAISED BY –

ASL HAS APPROACHED CANARA BANK TO SYNDICATE THEIR TERM LOAN REQUIREMENT WHICH WORKS OUT TO RS.164.00 CRORES FOR THE PROPOSED PROJECT AND ACCORDINGLY CANARA BANK, SYNDICATION & NEW PRODUCTS GROUP HAS PREPARED THE INFORMATION MEMORANDUM. PROJECT CONSULTANTS - TECHNICAL THE COMPANY HAS APPOINTED M/S LAGAN CONSULTANTS, A REPUTED STEEL SECTOR TECHNICAL CONSULTANT FOR DESIGN AND TECHNICAL ASSISTANCE IN SETTING UP THE PROPOSED PROJECT. THE SCOPE OF SERVICES AND A BRIEF PROFILE OF M/S LAGAN CONSULTANT ARE GIVEN IN ANNEXURE – VI. c. PROJECT LOCATION –

THE PROPOSED PROJECT WILL BE LOCATED ADJACENT TO THE EXISTING PREMISES OF THE COMPANY IN BAHADURGARH, HARYANA. BAHADURGARH IS LOCATED IN THE NORTHWEST DIRECTION OF THE NATIONAL CAPITAL DELHI ON NATIONAL HIGHWAY NO. 10. CONNECTIVITY: o ROAD – ON NH 10 AND 1 KM FROM UNDER CONSTRUCTION KUNDLI MANESAR PALWAL HIGHWAY. o RAIL – 5 KMS FROM BAHADURGARH RAILWAY STATION. o AIRPORT – 35 KMS FROM DELHI AIRPORT. o PORT - KANDLA, JNPT / NHAVA SHEVA ETC THROUGH RAIL NETWORK.

OPTIMAL TRANSPORTATION COST – o RAW MATERIAL – BAHADURGARH BEING A SAIL YARD, THE TRANSPORTATION COST FOR PROCUREMENT OF RAW MATERIAL BY ASL WOULD BE VERY LOW. o FINAL PRODUCT – TARGET CUSTOMERS OF CRCA (PRIMARILY AUTO SECTOR) AND PICKLED & SKIN PASSED HR END USERS BEING LOCATED IN THE VICINITY I.E. DELHI & NCR, THE TRANSPORTATION COST FOR FINISHED PRODUCT WOULD ALSO BE OPTIMAL FROM PROPOSED LOCATION. THE FINISHED PRODUCT CAN BE DISPATCHED BY BOTH RAIL AND ROAD.
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d. a.

COST OF THE PROJECT AND MEANS OF FINANCE COST OF PROJECT

THE TOTAL PROJECT COST IS ESTIMATED AT RS. 249.00 CRORES WITH COST FOR DIFFERENT ITEMS IS SUMMARIZED IN THE TABLE GIVEN BELOW: (RS. IN CRORES) PARTICULARS COST LAND & SITE DEVELOPMENT COST 4.40 BUILDINGS & CIVIL WORKS 12.59 PLANT & MACHINERY 120.81 MISCELLANEOUS FIXED ASSETS 32.00 TOTAL HARD COST 169.80 PRE-OPERATIVE EXPENSES 3.14 IDC 12.34 CONTINGENCY 8.49 WORKING CAPITAL MARGIN MONEY TOTAL PROJECT COST LAND PROJECT WOULD BE LOCATED ADJACENT TO EXISTING UNIT OF THE COMPANY AT BAHADURGARH, HARYANA. AROUND 3.50 ACRES OF LAND IS ALREADY AVAILABLE WITH COMPANY WITHIN THE EXISTING PREMISES OF THE COMPANY. FURTHER, THE COMPANY HAS ACQUIRED ADDITIONAL 3.90 ACRES OF LAND ADJACENT TO ITS EXISTING PREMISES FOR RS. 4 CRORES. THE SAME IS UNDER POSSESSION OF THE COMPANY. ACCORDINGLY, THE LAND COST FOR THIS ADDITIONAL LAND BOUGHT HAS BEEN INCLUDED IN PROJECT CAPITAL COST. FURTHER SITE DEVELOPMENT IS ESTIMATED TO COST RS. 0.40 CRORES WHICH WOULD INCLUDE SITE LEVELING, DEVELOPMENT OF ROADS WITHIN THE PLANT BOUNDARY WALL, GATES, WATCH TOWER ETC. THE COMPANY HAS INFORMED THAT THEY HAVE APPLIED FOR THE CONVERSION OF THE ADDITIONAL 3.90 ACRES OF LAND FOR INDUSTRIAL USE. AS A PRE-DISBURSEMENT CONDITION “THE COMPANY HAS TO OBTAIN NECESSARY PERMISSION FROM THE APPROPRIATE AUTHORITIES FOR THE CONVERSION OF EXISTING/PROPOSED LAND FOR INDUSTRIAL PURPOSE”. THE FOLLOWING CONDITION WAS GIVEN IN THE TERMS AND CONDITIONS AS PER THE IM OF CANARA BANK. HOWEVER AS PER DISCUSSION WITH THE OFFICIALS OF CANARA BANK AND AS PER THEIR OFFICE NOTE, THE CONDITION WOULD BE MODIFIED TO “THE COMPANY HAS TO OBTAIN NECESSARY PERMISSION 55.23 249.00

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FROM THE APPROPRIATE AUTHORITIES FOR THE CONVERSION OF EXISTING/PROPOSED LAND FOR INDUSTRIAL PURPOSE WITHIN 3 MONTHS OF FIRST DISBURSEMENT.” AND HENCE WE ARE PROPOSING THE SAME IN THE TERMS AND CONDITIONS. THE OFFICE NOTE OF THE CANARA BANK STATES AS FOLLOWS, “THE COMPANY HAS ALREADY INITIATED THE PROCESS FOR CONVERSION OF LAND USE .THE COMPANY’S CASE HAS BEEN RECOMMENDED FROM SENIOR TOWN PLANNER, ROHTAK CIRCLE TO THE DIRECTOR, TOWN & COUNTRY PLANNING, CHANDIGARH (HARYANA).(COPY OF LETTER ATTACHED).FURTHER, THE ADJOINING LAND IS ALREADY CONVERTED INTO INDUSTRIAL LAND AND THUS THE ZONE IS FOR INDUSTRIAL USE (PROOF OF ADJOINING INDUSTRIAL AREAS ATTACHED). WHILE THE COMPANY HAS ALREADY MOVED THE NECESSARY PAPERS, PROCEDURAL FORMALITIES IN GOVT. DEPARTMENTS TAKE TIME, WE MAY ADD THAT ELECTIONS IN THE STATE OF HARYANA ARE ANNOUNCED. COMPANY IS HOPEFUL TO GET THE CONVERSION WITHIN 3 MONTHS OF FIRST DISBURSEMENT. WE HAVE VISITED THE SITE ON 25.08.2009. THE MAJOR PLANT IS COMING UP IN THE EXISTING LAND FOR WHICH CLU IS ALREADY AVAILABLE. THE COMPANY IS PLANNING PICKING LINE AT THE NEW LAND. WE EVEN DISCUSSED WITH THE COMPANY REGARDING THE EVENTUALITY OF CLU NOT IN PLACE EVEN AFTER 3 MONTHS. TO THIS THE COMPANY INFORMED THAT THEY CAN SHIFT THE NEW PICKING LINE TO THE OLD PICKING LINE. ONCE THE NEW PICKING LINE COMES, THE OLD PICKING LINE WILL BECOME REDUNDANT AND HENCE AMPLE SPACE IS AVAILABLE WITH THE COMPANY TO SHIFT NEW PICKING LINE TO THE LAND FOR WHICH CLU IS AVAILABLE. FURTHER, THE COMPANY IS AGREEABLE TO BEAR THE COST OF THE SHIFT IN CASE SUCH EVENTUALITY HAPPENS. IN VIEW OF THE ABOVE, WE RECOMMEND MODIFYING THE CLAUSE AS RECOMMENDED.” CIVIL & STRUCTURAL WORKS THE LAYOUT FOR THE FACTORY SHEDS, PLANT AND MACHINERY INCLUDING THOSE REQUIRED FOR UTILITIES AND SUPPORTING INFRASTRUCTURE HAS BEEN PREPARED BY LAGAN CONSULTANTS. THE TOTAL CONSTRUCTION AREA IS ESTIMATED AT ABOUT 11,940 SQ. METERS TO HOUSE MAIN PROCESSING LINES, UTILITIES AND ANCILLARY FACILITIES AS PER DETAILS BELOW: S I 1 2 3 PARTICULARS MAIN PLANT FACILITIES – PICKLING, COLD ROLLING, ANNEALING, MOTORING & FINISHING BAYS AUXILIARY FACILITIES – C/R , SUBSTATION, WTP, PUMP HOUSE, MAINTENANCE SHOP ETC. ANCILLARY FACILITIES – ADMINISTRATIVE OFFICE, CANTEEN, STORES, WEIGHBRIDGE, SECURITY OFFICE ETC. TOTAL AREA M) 10250 1,350 340 11,940 (SQ.

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ADEQUATE AREA HAS BEEN PROVIDED IN EACH BAY, CONSIDERING THE RAW MATERIAL AND FINISHED PRODUCT STORAGE AREA REQUIREMENT, EASE OF MATERIAL HANDLING, OPERATIONS AND MAINTENANCE OF THE EQUIPMENT. THE BUILDINGS ARE PROPOSED TO BE EARTH QUAKE RESISTANT AND SHEDS WOULD BE MADE UP OF STEEL COLUMNS, STEEL TRUSSES, STEEL CRANE GANTRY AND COLOR COATED GALVANIZED SHEETS WITH OPTIMUM CRANE RAIL HEIGHT FOR MAINTAINABILITY. WHILE MAIN SHOP BUILDING WILL BE DESIGNED FOR NATURAL VENTILATION, FORCED VENTILATION HAS BEEN PLANNED FOR THE BASEMENT, TUNNELS AND ELECTRICAL CONTROL ROOMS. INSTRUMENT CONTROL ROOMS, CONTROL PULPITS AND COMPUTER CENTER ARE PROPOSED TO BE AIR-CONDITIONED. CIVIL AND BUILDING WORKS ARE PROPOSED TO BE CARRIED OUT UNDER SUPERVISION OF COMPANY MANAGEMENT AND LAGAN CONSULTANTS. THE TOTAL COST OF THE BUILDING AND CIVIL WORKS ESTIMATED AT RS. 12.59 CRORES, WHICH INCLUDES CIVIL WORKS FOR FACTORY SHED & OFFICE, COST OF STRUCTURAL STEEL, SHEET WORKS ETC AS SUMMARIZED BELOW. (RS. IN CRORES) SI PARTICULARS AMOUNT MAIN PLANT FACILITIES INCLUDING - PICKLING, COLD 1 10.54 ROLLING, ANNEALING, MOTORING & FINISHING BAYS AUXILIARY FACILITIES INCLUDING – C/ROOM, S/S, WTP, 2 1.56 PUMP HOUSE, MAINTENANCE SHOP ETC. ANCILLARY FACILITIES INCLUDING – ADMIN OFFICE, 3 0.49 CANTEEN, STORES, WEIGHBRIDGE, SECURITY OFFICE TOTAL 12.59 PLANT & MACHINERY THE COMPANY PROPOSES TO PROCURE ALL THE EQUIPMENTS AND MACHINERY (NEW/OLD) FROM REPUTED DOMESTIC / INTERNATIONAL MANUFACTURERS AS PER THE SPECIFICATIONS GIVEN IN THE TECHNO ECONOMIC FEASIBILITY REPORT (TEFR) PREPARED BY LAGAN CONSULTANTS. THE MAJOR MACHINERIES FOR THE PROPOSED PROJECT ARE GIVEN BELOW: MACHINERY HR SLITTER SEMI CONTINUOUS PICKLING LINE 4 HI COLD ROLLING MILL (OLD M/C) BELL TYPE ANNEALING FURNACE 4 HI SKIN PASS MILL RATED CAPACITY 350000 TPA 350000 TPA 300000 TPA 300000 TPA 300000 TPA

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A BRIEF LIST OF EQUIPMENTS WITH DETAILS OF PROSPECTIVE SUPPLIERS, SPECIFICATIONS ETC IS GIVEN IN ANNEXURE – VII. PROCUREMENTS WOULD BE MADE FROM THE PROSPECTIVE SUPPLIERS AS MENTIONED ABOVE/ OPEN MARKET AS PER THE IMPLEMENTATION SCHEDULE. A SUITABLE PRE-DISBURSEMENT CONDITION TO THE EFFECT THAT THE COMPANY TO SUBMIT A CHARTERED ENGINEER'S CERTIFICATE FOR THE OLD MACHINES PURCHASED STATING THE RESIDUAL LIFE, FITNESS VALUE ETC IS STIPULATED IN THE TERM SHEET. THE TOTAL COST OF PLANT & MACHINERY HAS BEEN ESTIMATED AT RS. 120.81 CRORES (INCLUSIVE OF ALL EXPENSES) WHICH INCLUDES IMPORTED AS WELL AS LOCAL SUPPLIES. THE DETAILED COST OF PLANT OF MACHINERY IS GIVEN BELOW: (RS. IN CRORES) PLANT & MACHINERY COST IMPORTED EQUIPMENT COLD ROLLING MILL 27.50 SKIN PASS MILL 15.00 SLITTING LINE 2.50 CUT-TO-LENGTH LINE 2.50 ROLL GRINDING MACHINE 1.50 REWINDING AND TENSION LEVELING LINE 10.00 FOB IMPORTED EQUIPMENT 59.00 FREIGHT & INSURANCE @ 5% 2.95 TAXES & DUTIES @ 3.09% 1.91 CLEARING & FORWARDING @ 5% 3.19 SUB TOTAL IMPORTED EQUIPMENT COST 67.05 LOCAL EQUIPMENT HR SLITTER SEMI CONTINUOUS PICKLING LINE ANNEALING FURNACES CRANES & MATERIAL HANDLING EQUIPMENTS TOTAL FREIGHT & INSURANCE @ 5% TAXES & DUTIES @ 11% SUB TOTAL LOCAL EQUIPMENT COST SPARES EQUIPMENT FOUNDATION & ERECTION SUB TOTAL

3.00 9.00 16.00 8.00 36.00 1.80 4.16 41.96 2.09 9.71 120.81

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THE ORDERING STATUS OF THE PLANT AND MACHINERY FOR THE PROPOSED PROJECT IS GIVEN BELOW: SL.N O 1. 2. 3. 4. 5. 6. 7. 8. EQUIPMENT 4 HI REVERSING ROLLING MILL ROLL GRINDER ANNEALING FURNACES COLD NEW/OLD OLD OLD NEW STATUS ORDERE D ORDERE D ORDERE D ALLIED FURNACES, MUMBAI SUPPLIER M/S SHERMAN INTERNATIONA L (USA)

SKIN PASS MILL CR SLITTER TO BE ORDERED IN 1 MONTH CUT-TO-LENGTH LINE HR SLITTER SEMI-CONTINUOUS PICKLING TO BE ORDERED IN 1 MONTH LINE

THE COMPANY IS YET TO FINALIZE THE PROCUREMENT OF SOME OF THE PLANT AND MACHINERY FOR THE PROPOSED PROJECT. A SUITABLE UNDERTAKING FROM THE COMPANY TO THE EFFECT THAT IN THE EVENT OF REDUCTION IN PROJECT COST ON ACCOUNT OF ANY SAVINGS ON ACCOUNT OF DUTIES/OTHER TAXES, PRICE NEGOTIATIONS OR OTHERWISE, THERE WOULD BE A PRO-RATA REDUCTION IN ALL COMPONENTS OF MEANS OF FINANCE IS STIPULATED IN THE TERM SHEET THE DETAILED BREAK-UP OF PROJECT COST IS GIVEN IN ANNEXURE IX. UTILITIES & MISCELLANEOUS FIXED ASSETS UTILITIES & MISCELLANEOUS FIXED ASSETS ARE ESTIMATED TO COST RS. 32.00 CRORES WHICH PRIMARILY INCLUDES ELECTRICAL POWER DISTRIBUTION SYSTEM, WATER SUPPLY SYSTEM, FUEL OIL SYSTEM, MOBILE / LABORATORY/WORKSHOP EQUIPMENT, DG SET, ETP ETC. THE DETAILS OF COST OF MISCELLANEOUS FIXED ASSETS ARE GIVEN BELOW: (RS. IN CRORES) PARTICULARS AMOUNT POWER DISTRIBUTION SYSTEM INCL. DG SET 17.00 FUEL & OTHER UTILITIES 2.00 WATER SYSTEM 2.00

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LABORATORY WORKSHOP MISC. EQUIPMENT PIPING, ERECTION OF UTILITIES TOTAL CONTINGENCY

1.00 7.00 3.00 32.00

CONTINGENCY OF RS. 8.49 CRORES HAS BEEN PROVIDED @ 5% OF THE PROJECT HARD COST OF RS. 169.80 CRORES. THE PROVISION IS PRIMARILY TO TAKE CARE OF TIME RELATED ESCALATION IN COST OF ITEMS ALREADY ESTIMATED AND ANY ADDITIONAL WORK AS MAY BE REQUIRED DURING IMPLEMENTATION OF THE PROJECT. PREOPERATIVE EXPENSES PREOPERATIVE EXPENSES ARE ESTIMATED AT RS. 3.14 CRORES WHICH MAINLY INCLUDES, MANPOWER COST, CONSULTANCY, KNOW-HOW AND UPFRONT CHARGES ETC. MARGIN MONEY MARGIN MONEY HAS BEEN WORKED OUT AT RS.55.23 CRORES. THIS IS BASED ON THE WORKING CAPITAL REQUIREMENT FOR THE FINANCIAL YEAR FY 201112 WHEN THE PROJECT IS OPERATIONAL. INTEREST DURING CONSTRUCTION [IDC] IDC FOR THE PROJECT COST WORKS OUT TO BE RS. 12.34 CRORES AS PER THE IMPLEMENTATION SCHEDULE AND PROJECT COST PHASING. b. MEANS OF FINANCE

THE PROJECT IS PROPOSED TO BE FUNDED BY MEANS OF PROMOTER’S EQUITY OF RS.85 CRORES AND TERM LOAN OF RS.164.00 CRORES THE FINANCING ARRANGEMENT FOR THE PROJECT IS ENVISAGED THROUGH A MIX OF DEBT AND EQUITY AT DER OF 1.93:1 DEPICTED BELOW: (RS. IN CRORES) MEANS AMOUNT % EQUITY – PROMOTERS’ CONTRIBUTION 85.00 34.14 LONG TERM DEBT – FROM BANKS 164.00 65.86 TOTAL 249.00 100.00 EQUITY - PROMOTERS’ CONTRIBUTION

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PROMOTERS INCLUDING GROUP COMPANIES, FAMILY MEMBERS, RELATIVES, FRIENDS AND ASSOCIATES WOULD CONTRIBUTE EQUITY CAPITAL OF RS. 85 CRORE TOWARDS DEVELOPMENT OF THIS PROJECT. THE PROMOTERS HAVE ALREADY BROUGHT IN RS. 20.13 CRORES BY WAY OF SHARE CAPITAL (INCL. SHARE PREMIUM) AND UNSECURED LOANS. THE REMAINING EQUITY CONTRIBUTION OF RS.65 CRORES WILL BE BROUGHT IN BY THE THREE INVESTMENT COMPANIES DIKSHA VINIYOG PVT. LTD, AB AGROCHEM PVT. LTD, SURVI COMMOTRADE PVT. LTD WHICH ARE HAVING A TOTAL INVESTIBLE SURPLUS OF RS.77.45 CRORES AS ON 31.05.2009. A SUITABLE PRE-DISBURSEMENT CONDITION TO THE EFFECT THAT THE COMPANY TO MODIFY ITS MEMORANDUM OF ASSOCIATION AND ARTICLES OF ASSOCIATION, FOR ENHANCEMENT OF THE AUTHORIZED SHARE CAPITAL AND BORROWING POWER AS PER THE ENVISAGED FINANCING PLAN AND ANY OTHER CHANGE IF REQUIRED BY THE LENDERS. A SUITABLE PRE-DISBURSEMENT CONDITION TO THE EFFECT THAT THE INVESTMENTS FROM THE THREE INVESTMENT COMPANIES DIKSHA VINIYOG PVT. LTD, AB AGROCHEM PVT. LTD, SURVI COMMOTRADE PVT. LTD MAY BE LIQUIDATED AND DEPOSITED IN THE ESCROW ACCOUNT TO BE OPENED WITH THE LEAD BANK. LONG TERM DEBT THE PROJECT COST IS PROPOSED TO BE FINANCED THROUGH A RUPEE TERM LOAN OF RS.164.00 CRORES. COMPANY PROPOSES TO RAISE RS.164.00 CRORES TERM LOAN FROM DOMESTIC BANKS. THE DETAILED TERM SHEET IS FURNISHED IN THE ANNEXURE-XVII.

c. YEAR - >

LONG TERM DEBT EQUITY 200708 AUDITE D DEBT 1.89 0.87 0.71 1.48 2008-09 AUDITE D 2009-10 2010-11 (ESTIMATE (PROJECTION S) S)

DESCRIPTION LONG TERM EQUITY RATIO

THE LONG TERM DEBT EQUITY RATIO OF THE COMPANY IS SATISFACTORY. IT IS DECREASING IN THE YEAR 2008-09 DUE TO INCREASE IN NET WORTH. e. UTILITIES (IN BRIEF)
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RAW MATERIAL PRINCIPAL RAW MATERIAL FOR THE PROJECT IS HR COILS WITH GROSS ANNUAL REQUIREMENT ESTIMATED AT AROUND 286000 TPA CORRESPONDING TO 80% CAPACITY UTILIZATION. HR COILS ARE READILY AVAILABLE IN DOMESTIC MARKET AND THERE ARE MULTIPLE SUPPLIERS FOR THE SAME. PRICE OF THE RAW MATERIAL IS MARKET DETERMINED GIVEN THE MULTIPLE MANUFACTURERS AND LINKAGES WITH INTERNATIONAL PRICES. COMPANY PROPOSES TO CONTINUE WITH ITS PRESENT PROCUREMENT PRACTICE OF SOURCING THESE FROM FOLLOWING SUPPLIERS:      STEEL AUTHORITY OF INDIA. M/S ISPAT INDUSTRIES LTD. TATA IRON & STEEL CO LTD. ESSAR STEEL LTD. M/S JINDAL IRON & STEEL INDUSTRIES LTD.

AS SAIL HAS A YARD AT BAHADURGARH ITSELF, COMPANY HAS BEEN PROCURING BULK OF ITS REQUIREMENT FROM SAIL OWING TO LESSER TRANSPORTATION COST AND LONG STANDING RELATIONSHIP. THE SAME SHALL BE THE PREFERRED SUPPLIER FOR THE PROPOSED PROJECT ALSO.

POWER THE TOTAL POWER REQUIREMENT FOR PROPOSED PLANT AT 100% CAPACITY UTILIZATION IS ESTIMATED AT 63 MILLION UNITS WHILE THE PEAK LOAD IS ESTIMATED AT 10 MVA. THE EXISTING 11 KV RECEIVING STATION WITHIN PLANT AREA IS NOT ADEQUATE TO MEET THE POWER REQUIREMENTS OF NEW PROJECT. ACCORDINGLY, A NEW POWER LINE IS PROPOSED TO BE BROUGHT FROM 33 KV SUB STATION OF STATE GRID AND A NEW MRSS (MAIN RECEIVING SUBSTATION) WOULD BE INSTALLED ADJACENT TO THE EXISTING RECEIVING STATION. TWO LOAD CENTER SUBSTATIONS ARE PLANNED FOR DISTRIBUTION OF THE POWER FOR DIFFERENT CONSUMERS IN THE PLANT. EMERGENCY POWER SUPPLY CONTINUOUS SOURCE OF POWER SUPPLY IS REQUIRED FOR HR SLITTER, PICKLING LINE, ANNEALING FURNACES, COOLING WATER CIRCULATION SYSTEM ETC. TOTAL REQUIREMENT OF EMERGENCY POWER REQUIREMENT

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FOR THE SAME IS ESTIMATED AT 3.2 MVA. IT IS PROPOSED TO INSTALL DG SETS OF 2 X1.6 MVA TO SUPPORT UNINTERRUPTED OPERATION OF REQUIRED UNITS. WATER SYSTEM WATER IS REQUIRED FOR DIRECT & INDIRECT COOLING SYSTEMS AT THE PLANT. THE INDIRECT COOLING SYSTEMS INCLUDE EQUIPMENT COOLING FOR ANNEALING FURNACES, MILL ETC. THE TOTAL REQUIREMENT OF MAKE UP WATER FOR THE DIRECT & INDIRECT COOLING IS ESTIMATED AT ABOUT 90 M3 / HR OR 2.16 MLD (MILLION LITERS / DAY) AT 100% CAPACITY UTILIZATION OF THE 300000 TPA CRCA PLANT AS FOLLOWS: SYSTEM DIRECT COOLING INDIRECT COOLING POTABLE WATER TOTAL MAKE-UP (CU M / HR) 45 36 9 90 MAKE-UP (MLD) 1.08 0.86 0.22 2.16

WATER WILL BE RECEIVED AT THE RAW WATER STORAGE RESERVOIR WITHIN THE PLANT BOUNDARY. THE RAW WATER STORAGE RESERVOIR WILL HAVE A CAPACITY OF 10 MILLION LITRES. THE COMPANY PROPOSES TO USE THE BORE WELL FOR WATER TO BE UTILIZED WITHIN PLANT. WATER RECEIVED AT THE PLANT SITE WILL HAVE TO BE TREATED BEFORE IT IS USED IN THE PLANT. DE-MINERALIZED WATER IS ALSO REQUIRED IN LITTLE QUANTITY AND A 0.5 CUM/HR CAPACITY DM PLANT WILL BE SET UP FOR THE SAME. FUEL SYSTEM FUEL IS REQUIRED FOR HEATING OF THE COILS AT ANNEALING FURNACES AND NATURAL GAS IS PROPOSED TO BE USED FOR THE SAME BEING A RELATIVELY ECONOMICAL AND CLEAN FUEL. THE TOTAL REQUIREMENT OF NATURAL GAS IS ESTIMATED AT AROUND 40,000 SCMD/DAY FOR THE PROPOSED FACILITIES. THE COMPANY ALREADY HAS A GAS CONNECTION FROM INDIAN OIL CORPORATION LTD. (IOCL) WHICH IS BEING USED AT THE EXISTING FACILITIES. THE COMPANY HAS FURTHER APPLIED TO IOCL TO INCREASE THE GAS SUPPLY TO 50000 SCMD/DAY WHICH SHALL BE ADEQUATE FOR THE EXISTING AS WELL AS PROPOSED FACILITIES SO AS TO RUN AT FULL CAPACITY. THE ESTIMATED REQUIREMENT OF ANNUAL GAS FOR VARIOUS UNITS OF THE PROPOSED PROJECT IS AS FOLLOWS: PROCESS UNITS PICKLING LINE SCMD / MT 10 ANNUAL CONSUMPTION (MSCM) 3.5

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PROCESS UNITS ANNEALING TOTAL

SCMD / MT 30

ANNUAL CONSUMPTION (MSCM) 9.0 12.5

AS A PRE-DISBURSEMENT CONDITION “A SUITABLE PRE-DISBURSEMENT CONDITION TO THE EFFECT THAT THE COMPANY TO OBTAIN SUITABLE ENHANCEMENT FOR SUPPLY OF GAS FROM IOCL IS STIPULATED IN THE TERM SHEET”. THE FOLLOWING CONDITION WAS GIVEN IN THE TERMS AND CONDITIONS AS PER THE IM OF CANARA BANK. HOWEVER, AS PER DISCUSSION WITH THE OFFICIALS OF CANARA BANK AND AS PER THEIR OFFICE NOTE, THE CONDITION WOULD BE MODIFIED TO “A SUITABLE PREDISBURSEMENT CONDITION TO THE EFFECT THAT THE COMPANY TO OBTAIN SUITABLE ENHANCEMENT FOR SUPPLY OF GAS FROM IOCL BEFORE COD OF THE PROJECT” AND HENCE WE ARE PROPOSING THE SAME IN THE TERMS AND CONDITIONS. THE OFFICE NOTE OF THE CANARA BANK STATES AS FOLLOWS, “THE COMPANY HAS APPLIED TO IOCL FOR GAS SUPPLY ENHANCEMENT AND THE CASE IS UNDER CONSIDERATION. (LETTER ATTACHED FROM IOCL). AS GAS IS REQUIRED IN FURNACE WHICH IS CAPABLE OF DUAL FUEL OPERATION, GAS IS NOT A NECESSITY FOR OPERATIONS OF THE PLANT. FURTHER, COMPANY IS HOPEFUL THAT ENHANCEMENT OF GAS SHALL BE RECEIVED CLOSE TO COD OF THE PROJECT AND THUS CLAUSE MAY BE MODIFIED AS RECOMMENDED.” COMPRESSED AIR COMPRESSED AIR IS REQUIRED OPERATION OF PNEUMATICALLY OPERATED EQUIPMENT AND OTHER GENERAL PURPOSE USAGES IN THE PLANT. COMPRESSED AIR SYSTEM CONSISTING OF COMPRESSORS, AIR DRYERS, AIR RECEIVERS AND AIR DISTRIBUTION PIPING WITH PRESSURE / FLOW CONTROL / SAFETY BYPASS VALVES WOULD BE SET UP TO SUPPLY 1500 M3/HR AIR AT 7 KG/CM2 PRESSURE. IT IS PROPOSED TO INSTALL 4 NUMBER OF 500 CU. M /HR SCREW COMPRESSORS AT THE PLANT WITH THREE WORKING CONTINUOUSLY AND ONE ON STANDBY. STEAM ABOUT 4 TPH OF STEAM IS REQUIRED FOR THE PICKLING LINE. ONE NUMBER OF NATURAL GAS FIRED BOILER OF ADEQUATE CAPACITY HAS BEEN ENVISAGED AT THE PLANT. MANPOWER

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COMPANY PROPOSES TO RECRUIT SKILLED STAFF FOR THE PROPOSED PROJECT FROM THE SURROUNDING INDUSTRIALLY DEVELOPED AREAS. PROJECT WOULD BE HEADED BY A VICE PRESIDENT RESPONSIBLE FOR OVERALL DAY TO DAY OPERATIONS INCLUDING PRODUCTION, QUALITY CONTROL AND MAINTENANCE FUNCTIONS AND WOULD REPORT TO THE PRESIDENT. COMMERCIAL AND ADMINISTRATIVE FUNCTIONS WOULD BE LOOKED AFTER BY RESPECTIVE DEPARTMENTAL HEADS WORKING CLOSELY WITH VICE PRESIDENT. OVERALL REQUIREMENT OF MANPOWER FOR GENERAL SHIFT ADMINISTRATIVE FUNCTIONS AND THREE SHIFTS OPERATIONS IS ESTIMATED AT 197. DETAILS OF THE MANPOWER ESTIMATION ARE PROVIDED AT ANNEXURE – VIII. NO DIFFICULTY IS ENVISAGED IN RECRUITING THE REQUIRED MANPOWER. THE COMPANY PROPOSES TO RECRUIT THE MANPOWER IN A PHASED MANNER AS PER IMPLEMENTATION SCHEDULE OF THE PROJECT. f. MARKETING ARRANGEMENTS (IN BRIEF)

ASL'S PRIMARY TARGET MARKET FOR THE PROPOSED PROJECT IS ENVISAGED TO BE NCR. AUTOMOBILE / AUTOMOBILE COMPONENT MANUFACTURERS, CONSUMER DURABLES / WHITE GOODS MANUFACTURERS AND CONSTRUCTION RELATED COMPANIES ARE THE TARGETED CONSUMERS WITHIN NCR. IN ADDITION, COMPANY WOULD SELL PART OF ITS PRODUCT TO OTHER DOMESTIC MARKETS IN NORTHERN AND WESTERN REGION WHICH HAVE HIGH INDUSTRY DENSITY. COMPANY MAY EXPLORE THE OPTION OF EXPORTING PART OF ITS PRODUCTION TO INTERNATIONAL MARKET AFTER STABILIZING THE SALES WITHIN NCR AND OTHER DOMESTIC REGION. POTENTIAL COUNTRIES FOR EXPORT OF CRCA PRODUCTS MAY INCLUDE MIDDLE EAST AREA, NORTH AFRICA AND EUROPEAN COUNTRIES. AS PER THE PLAN DRAWN, COMPANY WOULD PRIMARILY ADOPT A DIRECT SALES STRATEGY FOR ALL THE ORGANIZED SECTOR COMPANIES WITHIN ITS CONSUMING SECTORS. DIRECT SALES WOULD BE SUPPLEMENTED BY SALES THROUGH FINANCIALLY STRONG & INDEPENDENT DISTRIBUTORS WITH WHOM ASL HAS ESTABLISHED AND MAINTAINED A CREDIBLE AND LONG TERM ASSOCIATION. DOMESTIC DISTRIBUTION NETWORK THE COMPANY PROPOSES TO ADOPT A CENTRALLY MONITORED ZONE-WISE DISTRIBUTION STRATEGY LED BY VICE PRESIDENT - MARKETING. OEM SECTOR AND EXPORT MARKETS WILL BE REACHED OUT THROUGH ITS OWN NETWORK OF BRANCHES WHILE COMPANY SALES DEPOT, ESTABLISHED AT STRATEGIC LOCATIONS THROUGHOUT THE COUNTRY, WILL CATER TO THE TRADE SEGMENT AND CLOSELY MONITOR LOCAL MARKETS THROUGH INTERACTIONS

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WITH THE DISTRIBUTORS / TRADERS. THESE NETWORKS WILL ALSO ACT AS A SUPPORT FOR OEM SECTOR ALONG WITH SUPPORT PROVIDED BY A SEPARATE TEAM OF PROFESSIONALS. IN ADDITION TO THE ABOVE MENTIONED MARKETING SET UP, COMPANY WILL ALSO HAVE A CORE TEAM OF PROFESSIONALS TO FOCUS ON THE FOLLOWING: a) SUBSTITUTION PRODUCT BY COMPANY – THROUGH IDENTIFICATION OF IMPORTED PRODUCTS WHICH COULD BE SUBSTITUTED BY THE COMPANY’S PROPOSED PRODUCTS. b) EXPORT STRATEGY - IDENTIFICATION OF EXPORT MARKET, INFORMATION ON MAJOR SUPPLIERS, FORMULATION OF QUALITY AND PRICING STRATEGY TO ENTER THESE MARKETS. c) IDENTIFICATION OF LATENT POTENTIAL IN THE PRICE SENSITIVE TRADE SEGMENT. ASL IS SUPPLYING TO SOME OF WELL KNOWN COMPANIES IN THE NCR REGION NAMELY M/S ATLAS CYCLES, M/S AVON INDUSTRIES, M/S BAJAJ MOTORS LTD, M/S MAGNUM STRIPS, M/S MILTON CYCLES, M/S OMAX FUSION, M/S SUPREME ENTERPRISES ETC. g. INTER FIRM COMPARISON, WITH SIMILAR PROJECTS: - N.A h. IMPLEMENTATION SCHEDULE (MONTH OF COMMENCEMENT/ COMPLETION) PROJECT IMPLEMENTATION & CURRENT STATUS THE IMPLEMENTATION TIMELINE FOR THE PROJECT IS ENVISAGED TO BE 24 MONTHS FROM ZERO DATE I.E. APRIL 1, 2009 AND ACCORDINGLY, THE SCHEDULED COMMERCIAL OPERATIONS DATE IS APRIL 2011. THE IMPLEMENTATION SCHEDULE IS FURNISHED BELOW: PARTICULARS LAND ACQUISITION SITE DEVELOPMENT BUILDING & CIVIL WORKS PLANT AND MACHINERY PLACEMENT OF ORDER DELIVERY AT SITE ERECTION COMMISSIONING & INTERLINKING TRIAL RUNS START DATE END DATE ALREADY ACQUIRED STARTED JULY 2009 STARTED JULY 2010 STARTED JANUARY 2010 FEBRUARY 2010 NOVEMBER 2010 FEBRUARY 2011 AUGUST 09 SEPTEMBER 2010 NOVEMBER 2010 JANUARY 2011 MARCH 2011

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PARTICULARS START DATE SCHEDULED COMMERCIAL APRIL 1, 2011 OPERATIONS DATE (SCOD)

END DATE

PROJECT IMPLEMENTATION IS PROPOSED TO BE CARRIED OUT & MANAGED AS PER FOLLOWING FRAMEWORK: PROJECT MANAGEMENT & SUPERVISION – BY KEY TECHNICAL AND COMMERCIAL PERSONNEL OF ASL. COMPANY ALREADY HAS EXPERIENCED POOL OF PERSONNEL FOR THE PROJECT AND HAS RECRUITED MORE FOR THE SAME. FURTHER, MORE PERSONNEL SHALL BE RECRUITED SHORTLY AS AND WHEN REQUIRED. TECHNICAL CONSULTANCY & PROJECT ENGINEERING – M/S LAGAN CONSULTANTS SUPPLY OF EQUIPMENT – MAJOR EQUIPMENT INCLUDING CR MILL AND ANNEALING FURNACE HAVE ALREADY BEEN ORDERED. OTHER MACHINERY SHALL BE ORDERED SOON. ERECTION & COMMISSIONING – MAJOR WORK AWARDED TO RESPECTIVE SUPPLIERS WHICH SHALL BE SUPERVISED BY M/S LAGAN CONSULTANTS AND IN-HOUSE TEAM TO MANAGE PERIPHERAL WORK. TRIAL RUN & COMMISSIONING – UNDER THE SUPERVISION OF LAGAN CONSULTANTS, SUPPLIERS’ ENGINEERS AND IN-HOUSE TECHNICAL STAFF. CURRENT STATUS I) PROJECT IMPLEMENTATION ASL HAS ALREADY BOUGHT LAND ADJACENT TO THEIR PREMISES AT BAHADURGARH, HARYANA AND HAS POSSESSION OF THE SAME. COMPANY HAS PLACED ORDERS FOR CR MILL, SKIN PASS MILL AND ANNEALING FURNACE. COMPANY HAS INCURRED AN EXPENDITURE OF RS. 20.13 CRORE TILL MAY 31, 2009 TOWARDS PROJECT ACTIVITIES IN RESPECT OF THE FOLLOWING; DESCRIPTION LAND CONSTRUCTION OF SHED AND EXPENSES FOR BUILDING AND SITE DEVELOPMENT ADVANCE FOR PLANT & MACHINERY ADVANCE TO CONSULTANTS (RS. IN CRORES) AMOUNT 3.90 4.74 10.43 0.70

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DESCRIPTION OTHER EXPENSES TOTAL EXPENDITURE INCURRED TILL DATE

AMOUNT 0.36 20.13

THE ABOVE EXPENDITURE HAS BEEN MET OUT THROUGH FUNDS CONTRIBUTED BY THE PROMOTERS IN FORM OF SHARE CAPITAL AND UNSECURED LOANS IN THE COMPANY. II) CLEARANCES & APPROVALS THE DETAILS OF MAJOR STATUTORY/REGULATORY APPROVALS AND CLEARANCES REQUIRED FOR THE PROJECT AND STATUS THEREOF ARE GIVEN BELOW: SI 1. 2. 3. 4. 5. 6. 7. 8. 9. STATUS / LIKELY APPROVAL LAND ACQUISITION PRIVATE LAND ACQUIRED BY ASL WATER BOREWELL AVAILABLE HARYANA STATE TO BE OBTAINED FOR POWER ELECTRICITY BOARD PROPOSED PROJECT HARYANA STATE POLLUTION TO BE OBTAINED FOR POLLUTION CONTROL CLEARANCE PROPOSED PROJECT BOARD APPLIED FOR ADDITIONAL GAS AVAILABILITY IOCL GAS CENTRAL EXCISE CENTRAL EXCISE AVAILABLE REGISTRATION DEPT. FACTORIES ACT FACTORIES, HARYANA AVAILABLE REGISTRATION TO BE OBTAINED FOR FACTORY LICENSE FACTORIES, HARYANA THE PROPOSED PROJECT SALES TAX SALES TAX AVAILABLE REGISTRATION DEPARTMENT ITEM AGENCY

CLEARANCES FOR WATER, POWER AND POLLUTION WILL BE GIVEN BY THE COMPANY PRIOR TO COD IN LINE WITH CANARA BANK AS MENTIONED IN THE OFFICE NOTE OF CANARA BANK. i. REPAYMENT PERIOD SPECIFYING MORATORIUM IF ANY –

DOOR TO DOOR TENOR OF 9 YEARS (CONSTRUCTION PERIOD 2 YEARS, MORATORIUM 6 MONTHS & REPAYMENT PERIOD 7 YEARS) MORATORIUM 6 MONTHS FROM ENVISAGED SCOD. (CONSTRUCTION PERIOD: 24 MONTHS)

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j. POLLUTION CONTROL CERTIFICATE STATE/CENTRAL AUTHORITY AND ITS TENABILITY

ISSUED

BY

COPY OF POLLUTION CONTROL CERTIFICATE ISSUED BY STATE/CENTRAL AUTHORITY WILL BE GIVEN BY THE COMPANY PRIOR TO COD IN LINE WITH CANARA BANK AS MENTIONED IN THE OFFICE NOTE OF CANARA BANK. ENVIRONMENT & POLLUTION MAJOR POLLUTANTS FROM THE INDUSTRIAL PLANTS INCLUDE WATER POLLUTION, AIR POLLUTION AND NOISE POLLUTION. COMPANY PROPOSES TO TAKE ADEQUATE STEPS TO CONTROL POLLUTION AS DISCUSSED BELOW: WATER POLLUTION IT IS PROPOSED TO INSTALL MODERN EFFLUENT TREATMENT PLANT (ETP) WITHIN THE PLANT TO TREAT THE ACID PRIOR TO RELEASING THE LIQUID TO ATMOSPHERE. THE SOLID WASTES ARE PROPOSED TO BE DISPATCHED OUT OF THE PLANT PERIODICALLY THROUGH TRUCKS.

AIR POLLUTION MAJOR AIR POLLUTION FROM THE PLANT INCLUDES ACID FUMES GENERATED FROM THE PICKLING LINE. THE PICKLING LINE PROPOSED AT THE PLANT IS BASED ON GRANITE LINING AND RELEASES NEGLIGIBLE FUMES OUT OF THE TANKS. THE TANK HOODS ARE CONNECTED WITH THE FUME EXHAUST SYSTEM WHICH PASSES THE ACID FUME LADEN AIR THROUGH WET SCRUBBERS TO REMOVE THE ACID FUMES COMPLETELY PRIOR TO THE RELEASE OF AIR TO ATMOSPHERE. THE DUST CONTENT IN THE AIR OUTLET FROM THE PLANT SHALL BE MUCH BELOW THE PERMISSIBLE LIMITS OF 120 MG/NM3. NOISE POLLUTION ADEQUATE MEASURES ARE PROPOSED TO MAINTAIN THE NOISE POLLUTION WELL BELOW THE PERMISSIBLE LIMITS OF 85 DB WITH THE HELP OF PROVIDING NOISE ABSORBING PADS AT REQUIRED LOCATIONS SUCH AS DG SETS ETC. k. AVERAGE DSCR –

THE OVERALL DSCR IS 1.53, WHICH IS SATISFACTORY AND WITHIN THE BANK NORMS OF 1.50 - 2 AS CALCULATED IN ANNEXURE XV

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l.

CAPACITY UTILISATION (%) MANUFACTURING FACILITIES OF

THE INSTALLED CAPACITY OF MAJOR PROPOSED PROJECT IS AS FOLLOWS: MANUFACTURING FACILITY PICKLING LINE COLD ROLLING MILL ANNEALING FURNACE m.

INSTALLED CAPACITY 350000 TPA 300000 TPA 300000 TPA

BREAK EVEN POINT % (SALES VOLUME/AMOUNT) – N.A

n. INTERNAL RATE OF RETURN – THE IRR WORKS OUT TO 14.30% FOR AN ASSUMED LIFE OF 15 YEARS. THE COST OF FUND IS ASSUMED AT 10.69% (POST TAX). AS SUCH THE IRR IS MORE THAN THE COST OF FUNDS BY 3.61%. THE CALCULATION IS SHOWN IN ANNEXURE XX. o. SENSITIVITY ANALYSIS (COMMENTS IN BRIEF)

SENSITIVITY ANALYSIS HAS ALSO BEEN CARRIED OUT TO ASSESS THE IMPACT OF VARIOUS STRESS SCENARIOS ON PROJECT FINANCIALS AS MENTIONED BELOW: a. DECREASE IN CAPACITY UTILIZATION BY 5%. b. INCREASE IN RATE OF INTEREST OF TERM LOAN BY 2%. c. INCREASE IN RAW MATERIAL COST BY 5% AND INCREASE IN SELLING PRICE OF FINISHED PRODUCTS BY 2%. PARTICULARS DECREASE IN CAPACITY UTILIZATION BY 5% OVERALL DSCR 1.50

INCREASE IN RATE OF INTEREST OF PROPOSED TERM 1.46 LOAN BY 2% INCREASE IN RAW MATERIAL COST BY 5% AND INCREASE 1.11 IN FINISHED PRODUCTS COST BY 2% IT IS ASSUMED THAT ANY INCREASE IN RAW MATERIAL PRICE IS ACCOMPANIED BY AN INCREASE IN SELLING PRICE WHICH IS AS PER THE TREND IN THE STEEL INDUSTRY. FOR AN INCREASE IN RAW MATERIAL PRICE BY 5% THE SELLING PRICE HAS TO INCREASE IN THE RANGE OF 1.5% TO 2% FOR THE OVERALL DSCR TO BE OVER 1.00.

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THE SENSITIVITY ANALYSIS SHOWS THAT THE COMPANY WILL BE ABLE TO SERVICE THE DEBT IN EACH OF THE ADVERSE SCENARIOS. IN CASE OF DPG LIMIT RELEVANT DATA / INFORMATION TO BE FURNISHED AS PER ANNEXURE IN ADDITION TO THE ABOVE PARTICULARS. DSCR/ BREAK EVEN COMPUTATION/IRR/SENSITIVITY ANALYSIS IS AS PER ANNEXURE 18. A. ASSESSMENT OF NON-FUND BASED LIMITS – LETTER OF CREDIT

THE COMPANY HAS REQUESTED FOR LC SUB – LIMIT FOR THE PROJECT. THE COMPANY IS GOING TO IMPORT MACHINERIES OF HIGH VALUE. THE NONFUND BASED EXPOSURE OF THE CONSORTIUM HAS NOT BEEN DECIDED UPON TILL NOW. AS THE LC LIMIT IS REQUIRED FOR IMPORT OF MACHINERIES, WE ARE RECOMMENDING LC SUB - LIMIT UNDER THE TERM LOAN OF RS 15 CRORES FROM OUR BANK. FCNR LOAN/ BUYER’S CREDIT – TOTAL IMPORTED COMPONENTS ARE IN THE RANGE OF USD 15-20 MILLION. THE COMPANY HAS ALSO REQUESTED TO PROVIDE FCNR LOAN/ BUYER’S CREDIT SUB LIMIT UNDER THE TERM LOAN TO THE TUNE OF RS 75 CRORES APPROX. THE COMPANY IS LIKELY TO IMPORT MAJOR MACHINERIES FROM OVERSEAS MARKET, HENCE IT WILL BE BENEFICIAL FOR THEM TO AVAIL FCLR TO GAIN ON FOREX SPREAD. WE ARE RECOMMENDING FCNR LOAN/ BUYER’S CREDIT SUB - LIMIT UNDER THE TERM LOAN OF RS 15 CRORES FROM OUR BANK. B. BANK GUARANTEE – N.A 111 N.A a. VIEWS/COMMENTS ON THE CONDUCT OF THE ACCOUNT –

A. ADVERSE FEATURES AFFECTING CREDIT DECISION AND ACTION PROPOSED (INCLUDING NON COMPLIANCE TO TERMS AND CONDITIONS OF SANCTION AND PRESENT POSITION) - N.A MAJOR INSPECTION / AUDIT IRREGULARITIES POINTED OUT IN THE LAST INSPECTION REPORT - N.A DIRECTORS’ NAME FIGURING IN RBI/ WILFUL DEFAULTERS’ / CIBIL / SAL – ECGC LIST AND COMMENTS THEREON. IMPACT ON TAKING EXPOSURE WHERE NAMES ARE APPEARING IN THE DEFAULTERS LIST - NO

b. c.

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d. RECEIVABLES

POSITION

OF

STATUTORY

DUES

AND

INCENTIVES

PROVIDENT FUND, ESI AND SUPERANNUATION CONTRIBUTION PAID UPTO WAGES AND SALARIES PAID UPTO SALES TAX PAID UPTO SERVICE TAX PAID UPTO INCOME TAX ASSESSMENT COMPLETED UPTO AND FOR THE YEAR ENDING # ADVANCE TAX PAID FOR THE YEAR ENDING EXCISE DUTY PAID UPTO MUNICIPAL TAX, OCTROI ETC. INCENTIVES FROM THE GOVERNMENT AND OTHER AGENCIES DISPUTES NOT ACKNOWLEDGED AS DEBTS CONTINGENT LIABILITIES (LIKELY TO TURN INTO LIABILITIES) RECONCILIATION OF DEBTORS/ CREDITORS

CA CERTIFICAT E TO BE OBTAINED AND KEPT ON RECORD AS STIPULATED IN THE TERMS AND CONDITION S

CA CERTIFICATE TO BE OBTAINED AND KEPT ON RECORD # WHEREVER BORROWERS ENCOUNTER TAX DISPUTES, SEARCHES, RAIDS BY TAX AUTHORITIES, DETAILS ALONG WITH PROCEEDINGS AND PRESENT STATUS SHOULD BE REPORTED. e. f. GROUP DEALINGS/EXPERIENCE & DESIRABILITY OF FURTHER EXPOSURE: N.A RISK ASSESSMENT

RISK ANALYSIS THE PROPOSED PROJECT OF ASL WOULD BE EXPOSED TO THE TYPICAL RISKS RELEVANT FOR SUCH PROJECTS AND AN ANALYSIS FOR THE SAME IS PRESENTED BELOW. PROMOTERS/ MANAGEMENT RISK: M/S ALLIED STRIPS LIMITED (ASL) IS A CLOSELY HELD PUBLIC LIMITED COMPANY PROMOTED AND MANAGED BY MR. MOHINDER KUMAR AGGARWAL. ASL, INCORPORATED IN 1992 IS HAVING FACILITIES FOR MANUFACTURE COLD ROLLED CLOSE ANNEALED (CRCA) STEEL PRODUCTS. MR. MOHINDER KUMAR AGGARWAL IS THE PROMOTER DIRECTOR OF THE COMPANY AND IS HAVING VAST EXPERIENCE IN STEEL AND STEEL PRODUCTS. FURTHER THE COMPANY IS MANAGED BY PROFESSIONALS HAVING VAST EXPERIENCE IN THE FIELD.

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AS SUCH THE PROMOTERS/MANAGEMENT RISK IS CONSIDERED AS NORMAL. TECHNOLOGY RISK/ OPERATIONAL RISK ASL HAS FACILITIES TO MANUFACTURE NARROW WIDTH COLD ROLLED CLOSED ANNEALED COILS. THE LOCATION IS IDEAL WITH REGARD TO SOURCING OF RAW MATERIALS AS IT IS CLOSE TO THE SAIL YARD AT BAHADURGARH. THE PROPOSED PROJECT FOR WIDER WIDTH COLD ROLLED CLOSE ANNEALED (CRCA) COILS/SHEETS IS OF NATURE SIMILAR TO EXISTING OPERATIONS OF ASL. THE PROMOTERS ARE IN STEEL BUSINESS FOR THE PAST 15 YEARS AND THEY HAVE ADEQUATE UNDERSTANDING OF VALUE CHAIN OF THIS BUSINESS. ASL IS ALSO HAVING QUALIFIED MANPOWER ASSOCIATED WITH COMPANY FOR LAST MANY YEARS AND QUALIFIED MANPOWER IS BEING RECRUITED TO SUPPLEMENT IN-HOUSE EXPERTISE. AS SUCH TECHNOLOGY RISK/ OPERATIONAL RISK IS CONSIDERED AS NORMAL. PRICE RISK THE STEEL SECTOR TENDS TO BE CYCLICAL WITH IMBALANCES IN DEMAND AND SUPPLY LEADING TO VOLATILITY IN STEEL PRICES THUS RESULTING IN MARGIN PRESSURE. AS WITH ANY STEEL MANUFACTURER, ASL WOULD HAVE TO MANAGE THIS RISK BY PASSING THIS VOLATILITY TO CUSTOMERS. BEING A SECONDARY STEEL MANUFACTURER, ASL DOES NOT REQUIRE RAW STEEL MANUFACTURING CAPACITY AS IT PROCURES HR STEEL FROM DOMESTIC MARKETS. THIS PROTECTS THE COMPANY MARGINS AS ANY SALE PRICE INCREASE/DECREASE IS LINKED TO THE UNDERLYING COMMODITY PRICE, ESSENTIALLY PERMITTING A PASS THROUGH OF ANY INCREASED COSTS. AS SUCH PRICE RISK IS CONSIDERED AS NORMAL. MARKET RISK AS PER CMIE REPORTS, THE REVIVAL IN STEEL DEMAND IN THE MARCH QUARTER WILL SUSTAIN IN 2009-10. CMIE EXPECTS THE SALES GROWTH WILL PICK-UP IN THE SECOND HALF OF 2009-10. THE INDUSTRY WILL BENEFIT FROM THE FALL IN CONTRACT PRICES OF INPUTS LEADING TO IMPROVEMENT IN MARGINS. OWING TO THE STABLE DOMESTIC DEMAND, DOMESTIC STEEL PRICES REMAINED AT A PREMIUM OF 20 TO 30 PER CENT AS COMPARED TO THE LANDED COST OF IMPORTS. DOMESTIC PRICES ARE LIKELY TO REMAIN STABLE ON ACCOUNT OF FIRM DOMESTIC DEMAND, IMPORT DUTY AND RESTRICTIONS ON IMPORTS OF FLAT STEEL PRODUCTS.

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AS SUCH THE MARKET RISK IS CONSIDERED AS NORMAL. PROJECT IMPLEMENTATION RISK ASL HAS ALREADY ACQUIRED LAND FOR THE PROPOSED PROJECT AND IS IN THE PROCESS OF CONVERSION OF SAME FOR INDUSTRIAL USE. THE COMPANY HAS ALREADY COMPLETED PART OF THE FACTORY BUILDING IN THE EXISTING LAND. ALSO ASL HAS ALREADY PLACED ORDERS FOR SOME OF THE MAJOR MACHINERIES AND THEY ARE IN THE PROCESS OF FINALIZING THE PROCUREMENT OF REMAINING EQUIPMENTS AND MACHINERIES. AS SUCH THE PROJECT IMPLEMENTATION RISK IS CONSIDERED AS NORMAL. FINANCE RISK THE OVERALL DEBT-EQUITY RATIO AND THE OVERALL FACR ARE 0.71 AND 2.50 RESPECTIVELY FOR FY 2010 AND 1.48 AND 1.57 FOR FY 2011 WHICH IS SATISFACTORY. OVERALL FACR IS 1.22 FOR FY 2012. FACR IS IMPROVING FROM FY 2012 AND IS COMFORTABLE FROM FY 2014 ONWARDS. THE AVERAGE PBDIT OVER THE PROJECT IMPLEMENTATION/REPAYMENT PERIOD IS 8.16%. THE OVERALL DSCR OF THE PROJECT IS 1.53. THIS INDICATES THE ADEQUATE DEBT SERVICING CAPABILITY OF THE PROJECT. AS SUCH THE FINANCE RISK IS CONSIDERED AS NORMAL. 20. COMPLIANCE OF RBI / BANK LOAN POLICY GUIDELINES DEVIATION IF ANY WITH JUSTIFICATION – N.A 21. MODIFICATION IN EXISTING TERMS OF SANCTION IF ANY: N.A 22. VIEWS/RECOMMENDATIONS OF THE CREDIT COMMITTEE: CREDIT COMMITTEE MEETING WILL TAKE PLACE AT THE HO LEVEL 23. 24. DISCRETIONARY POWER FOR SANCTION AND FOR APPROVAL OF DEVIATION, IF ANY: EXECUTIVE DIRECTOR RECOMMENDATION

BRANCH RECOMMENDATION ALLIED STRIPS LTD (ASL) IS A CLOSELY HELD PUBLIC LIMITED COMPANY INTO THE BUSINESS OF MANUFACTURING AND MARKETING OF CRCA STEEL TO AUTOMOTIVE AND WHITE GOODS INDUSTRY. IT IS WELL ESTABLISHED AND PROFITABLE COMPANY. THE PROMOTERS AND THE MANAGEMENT ARE WELL EXPERIENCED PERSONS. ASL IS FURTHER EXPANDING ITS BUSINESS BY
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SETTING UP A NEW PROJECT WITH FACILITIES TO MANUFACTURE WIDER WIDTH COLD ROLLED CLOSE ANNEALED (CRCA) COILS/SHEETS, CRFH SHEETS, HRPO COILS. THE PROPOSED PROJECT WILL BE LOCATED ADJACENT TO ITS EXISTING FACILITIES IN BAHADURGARH, HARYANA. AS THE FINANCIALS OF THE COMPANY ARE SATISFACTORY AND CANARA BANK IS SYNDICATING THE TERM LOAN. BRANCH HAS RECOMMENDED THE LIMITS PROPOSED AS UNDER. RO RECOMMENDATION IN VIEW OF THE ABOVE AND BASED ON BRANCH RECOMMENDATION, WE RECOMMEND THE FOLLOWING, i) FRESH SANCTION OF LONG TERM LOAN OF RS 34 CRORES ii) TO PERMIT FCNR- LOAN/BUYER’S CREDIT OF RS 15 CRORES (SUBLIMIT UNDER TERM LOAN FOR IMPORT OF MACHINERIES) SUBJECT TO SIMILAR APPROVAL BY OTHER MEMBER BANKS. TO PERMIT LC SUB LIMIT OF RS 15 CRORES (SUB-LIMIT UNDER TERM LOAN FOR IMPORT OF MACHINERIES) SUBJECT TO SIMILAR APPROVAL BY OTHER MEMBER BANKS.

iii)

ON THE TERMS AND CONDITIONS GIVEN IN ANNEXURE II AND ON THE BASIS OF THE FOLLOWING, 11 ALLIED STRIPS LTD (ASL) BEING AN ALREADY ESTABLISHED COMPANY IN ITS FIELD OF BUSINESS I.E MANUFACTURING AND MARKETING OF CRCA STEEL TO AUTOMOTIVE AND WHITE GOODS INDUSTRY BACKED BY EXPERIENCED PROMOTERS AND MANAGEMENT, 111FINANCIALS OF THE COMPANY BEING SATISFACTORY, 1111 THE NEW PROJECT BEING EXPANSION OF THE ESTABLISHED BUSINESS AND LOCATION ADJACENT TO ITS EXISTING FACILITIES IN BAHADURGARH, HARYANA, THE COMPANY WILL FACE LESS PROBLEMS RELATING TO IMPLEMENTATION OF THE PROJECT. FACILITY (RS IN CRORES) EXISTING PROPOSED LIMIT A) FUND BASED 1 LONG TERM 0.00 LOAN MARGI LIMIT N (%) 0.00 34.00 MARGIN (%) 34.14 % + 34.00 VARIATIO N

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TOTAL 0.00 B) NON - FUND BASED LC (DA/DP) 0.00 SUB – LIMIT UNDER TERM LOAN

0.00 0.00

34.00 (15.00)

34.14 %

+ 34.00

FCNR 0.00 0.00 (15.00) LOAN/BUYER’S CREDIT - SUB LIMIT UNDER TERM LOAN TOTAL 0.00 0.00 (15.00) + (15.00) D) TOTAL 0.00 0.00 34.00 + 34.00 EXPOSURE * AVAILABILITY OF FCNR LOAN DEPENDS ON AVAILABILITY OF FUNDS AT THAT TIME. WE ALSO RECOMMEND THE FOLLOWING CONCESSIONS APPROVALS REQUIRED AS SHOWN BELOW, APPLICABLE RATE OF INTEREST RATE OF PROPOSED INTEREST AS PER CREDIT CONCESSIONS IN RATING RATE OF EXERCISE INTEREST BPLR + 1.75 % BPLR - 0.25 % + +0.50 % (T.P) 0.50 % (T.P) P.A PRESENTLY 12.75% P.A (FLOATING), INTEREST PAYABLE MONTHLY. RATE OF INTEREST TO BE SET AS ON DATE OF DOCUMENTATION. CONCESSIONS IN APPLICABLE FEES PROPOSED PROCESS FEES/ FEES AS PER UPFRONT FEES LOAN POLICY 1.25 % OF THE 0.75% OF THE AND OTHER

10 % ON +(15.00) DP 10 % ON DA AND FURTHER 10 % ON ACCEPTAN CE OF DOCUMENT S NIL +(15.00)

CONCESSION ALLOWED

2%

CONCESSION ALLOWED 0.50 %

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SANCTIONED LIMIT

SANCTIONED TERM LOAN AMOUNT + APPLICABLE TAXES

PROPOSED TERMS OF SANCTION AS PER ANNEXURE 2

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ANNEXURE- 1 DENA BANK FOR EXISTING BORROWERS AND NEW BORROWERS FOR EXISTING UNITS FOR FUND BASED LIMITS ABOVE RS.10.00 LAC CREDIT RATING REPORT BRANCH AND REGION NAZAFGARH BRANCH BORROWER M/S ALLIED STRIPS LTD. SANCTIONING AUTHORITY ED DATE OF SANCTION / RENEWAL FRESH CREDIT RATING AS ON 21/4/2009 “BB”, BEST ANALYSIS FOR CREDIT RATING DONE BASED ON THE AUDITED BALANCE SHEET AND PROFIT & LOSS A/C OF 31/3/2009 THE BORROWER FOR THE PERIOD ENDING EXISTING BORROWERS WITH EXISTING UNITS MARKS SECURED CREDIT GRADE INTEREST SLAB RISK RATING 95% AND ABOVE AAA HIGH – PRIME BPLR 90% TO 94% AA MEDIUM – PRIME BPLR + 0.50 85% TO 89% A LOW – PRIME BPLR + 1.00 80% TO 84% BBB EXCELLENT BPLR + 1.25 75% TO 79% BB BEST BPLR + 1.75 70% TO 74% B BETTER BPLR + 2.00 65% TO 69% C VERY GOOD BPLR + 2.50 60% TO 64% D GOOD BPLR + 3.00 55% TO 59% E SATISFACTORY BPLR + 3.50 SR . NO . PARAMETERS MAX. SCORE MAX SCORE OF APPLICA BLE PARAME TER 5 20 12 5 0 SCORE OBTAINE D

1 2 3 4 5

EXTERNAL / GOVT. POLICY / ENVIRONMENTAL RISK INDUSTRY/ BUSINESS/ SECTOR RISK MANAGEMENT RISK SECURITY (COLLATERAL) INCOME VALUE TO BANK

5 20 15 5 5

3 16 11 1 0

85

6 7

56 75.68 % * CRIS INFAC RATINGS ARE NOT APPLIED TO THE ABOVE RATING AS THE CRCA STEEL COILS AND SHEETS DO NOT RESULT IN ALLOY FORMATION. AS PER DISCUSSION WITH CANARA BANK, THE STEEL IS NOT STAINLESS STEEL WHICH IS A MIXTURE OF IRON AND COPPER. THE COILS AND SHEETS ARE MADE UP OF IRON. SUMMARY SHEET OF CREDIT RATING MODEL FOR EXISTING BORROWERS AND NEW BORROWERS FOR EXISTING UNITS FOR FUND BASED LIMITS ABOVE RS.10.00 LAC PARAMETERS / RISK FACTORS TO MAXIM BE RATED FOR EXISTING UM PROJECTS /UNITS SCORE MAX. SCORE OF APPLIC ABLE PARAM ETER 5 20 2 2 1 3 2 3 1 1 1 1 3 12 SCO RE ALL OTT ED 3 16 1 1 1 2 2 3 1 1 1 1 2 11

PAST PERFORMANCE CONDUCT OF THE ACCOUNT TOTAL MARKS

40 10 100

32 0 74

25 0

1 2 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.1 0 2.1 1 3

EXTERNAL RISK/ GOVT. POLICY RISK/ ENVIRONMENTAL RISK INDUSTRY / BUSINESS / SECTOR RISK INTENSIVENESS OF COMPETITION PRESENCE OF SUBSTITUTE ETC. BARRIERS TO ENTRY FOR NEW PLAYERS BUSINESS RETURNS % CYCLICALITY IN EARNINGS, SUBJECT TO VAGARIES OF NATURE TECHNOLOGICAL OBSOLESCENCE TECHNOLOGY ADOPTED BY BORROWER DEPENDENCE ON A FEW SUPPLIERS FOR RAW MATERIAL BORROWER’S DEPENDENCE ON A FEW CUSTOMERS FOREIGN EXCHANGE COMPONENT OF TOTAL BUSINESS WHETHER BORROWER DEALING IN PERISHABLE COMMODITY DEMAND/SUPPLY GAP IN THE BUSINESS MANAGEMENT RISK

5 20 2 2 1 3 2 3 1 1 1 1 3 15

86

3.1 3.2

3.3 3.4 3.5 3.6 3.7 3.8 3.9 4 5 6 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 6.1 0 6.1 1 6.1 2 6.1 3

OWNERSHIP PATTERN PAST TRACK RECORD OF THE MANAGEMENT: A. SALES B. FINANCIAL DISCIPLINE C. FURNISHING INFORMATION QUALITY OF THE MANAGEMENT PERSONNEL EXPERIENCE OF THE MANAGEMENT PAYMENT RECORD WITH BANKS FINANCIAL CONSERVATISM MARKET STANDING / CREDIBILITY SUPPORT FROM GROUP COMPANIES SUCCESSION RISK/PLAN SECURITY (COLLATERAL) INCOME VALUE TO THE BANK PAST OPERATING PERFORMANCE VIS-À-VIS PROJECTIONS AND FINANCIAL POSITION REPRESENTED BY RATIOS/TRENDS ACHIEVEMENTS OF BORROWER’S PROJECTIONS OF SALES / GROSS RECEIPTS CURRENT RATIO TREND ANALYSIS - VARIATION IN CURRENT RATIO INTEREST COVERAGE RATIO CURRENT ASSET TO TURNOVER RATIO DEBT EQUITY RATIO TREND ANALYSIS - VARIATION IN DEBT EQUITY RATIO ACHIEVEMENT OF PROFIT PROJECTIONS PROFITABILITY TO NET WORTH (NET PROFIT/NET WORTH) I.E RETURN ON NET WORTH PROFITABILITY TO SALES (NET PROFIT/SALES) CONTINGENT LIABILITIES OF THE BORROWER (TOTAL CONTINGENT LIABILITIES TO TANGIBLE NET WORTH) QUALIFICATIONS IN AUDIT REPORT ON THE BORROWER’S BALANCE SHEET AND PROFIT & LOSS A/C. DIVERSION OF FUNDS - NO DIVERSION

2 1 1 1 1 2 2 1 2 1 1 5 5 40

2 1 1 0 1 2 0 1 2 1 1 5 0 32

2 1 1 0 1 2 0 1 1 1 1 1 0 25

5 5 1 5 3 5 2 3 2 2 2 1 2

0 5 1 5 3 5 2 0 2 2 2 1 2

0 5 0 5 3 2 2 0 1 0 2 1 2

87

6.1 4 6.1 5 7 7.1 7.2 7.3 7.4 7.5 7.6 7.7

GUARANTEE TO GROUP COMPANIES INVESTMENT IN GROUP COMPANIES CONDUCT OF THE ACCOUNT TIMELY SUBMISSION OF STOCK AND/OR BOOK DEBTS STATEMENT COMPLIANCE WITH TERMS AND CONDITIONS OF SANCTION TIMELY RENEWAL/REVIEW OF THE ACCOUNT REGULARITY/IRREGULARITY OF TERM LOAN A/C. REGULARITY / IRREGULARITY OF THE WORKING CAPITAL FACILITIES SUBMISSION OF FFR-I & FFR-II CONDUCT OF THE GROUP ACCOUNT, IF ANY TOTAL MARKS PERCENTAGE OF MARKS SCORED 100

1 1 10 1 2 2 1 2 1 1 (A) 100 (C/B) X

1 1 0 0 0 0 0 0 0 0 (B) 74

1 1 0 0 0 0 0 0 0 0 (C) 56

75.68 %

ANNEXURE 2 M/S ALLIED STRIPS LIMITED TERMS AND CONDITIONS PURPOSE & TOTAL TO SET UP A NEW PROJECT WITH FACILITIES TO PROJECT COST MANUFACTURE WIDER WIDTH COLD ROLLED CLOSE ANNEALED (CRCA) COILS AND SHEETS HAVING A TOTAL PROJECT COST OF RS. 249.00 CRORES AT BAHADURGARH, HARYANA. OUR SHARE PROJECT MARGIN RS. 34 CRORES 34.14% OF THE PROJECT COST. (50% EQUITY TO BE BROUGHT IN UPFRONT.)

88

RATE OF INTEREST SENIOR TERM LOAN BPLR+0.75% P.A I.E. AT PRESENT 12.75% P.A FLOATING. INTEREST PAYABLE MONTHLY. RATE OF INTEREST TO BE SET AS ON DATE OF DOCUMENTATION. UPFRONT FEE MORATORIUM 0.75% OF THE SANCTIONED TERM LOAN AMOUNT + APPLICABLE TAXES 6 MONTHS FROM ENVISAGED SCOD. (CONSTRUCTION PERIOD: 24 MONTHS)

REPAYMENT DOOR TO DOOR TENOR OF 9 YEARS (CONSTRUCTION PERIODPERIOD 2 YEARS, MORATORIUM 6 MONTHS & SENIOR DEBT AND REPAYMENT PERIOD 7 YEARS). SUB DEBT SECURITY-TERM 1. FIRST PARI-PASSU CHARGE ON ALL THE MOVEABLE LOAN AND IMMOVEABLE ASSETS, OF THE BORROWER. 2. SECOND PARI-PASSU CHARGE ON THE CURRENT ASSETS OF THE COMPANY. 3. FIRST PARI-PASSU CHARGE ON THE ESCROW OF ALL THE RECEIVABLES, ALL PROJECT CONTRACTS, INSURANCES ETC. PRESENT AND FUTURE OF THE BORROWER. 4. FIRST PARI-PASSU CHARGE/ ASSIGNMENTS AND/OR CREATION OF SECURITY INTEREST IN FAVOUR OF THE LENDERS ON ALL THE RIGHTS, TITLE, INTEREST BENEFITS, CLAIMS AND DEMANDS WHAT SO EVER OF THE BORROWER IN THE PROJECT DOCUMENTS, INSURANCES, ANY LETTER OF CREDIT, GUARANTEE OR PERFORMANCE BOND THAT MAY BE PROVIDED BY ANY PARTY UNDER ANY PROJECT DOCUMENT IN FAVOR OF THE BORROWER, ALL AS AMENDED, VARIED OR SUPPLEMENTED FROM TIME TO TIME AND ALL THE RIGHTS, TITLES, INTEREST, BENEFITS, CLAIMS AND DEMANDS WHATSOEVER OF THE BORROWER IN OR UNDER THE AUTHORIZATION. 5. FIRST PARI-PASSU CHARGE/ ASSIGNMENTS AND/OR CREATION OF SECURITY INTEREST IN FAVOUR OF THE LENDERS ON THE ESCROW ACCOUNT AND ALL OTHER BANK ACCOUNTS ESTABLISHED/ TO BE ESTABLISHED BY THE BORROWERS. 6. DSRA: THE BORROWER SHALL MAINTAIN A DEBT SERVICE RESERVE ACCOUNT EQUIVALENT TO ONE QUARTER’S DEBT SERVICE OBLIGATION DURING
89

PERSONAL GUARANTEE

THE FIRST YEAR OF COMMERCIAL OPERATION TO BE ENHANCED TO TWO QUARTER’S DEBT OBLIGATIONS FROM THE SECOND YEAR ONWARDS. 7. BORROWER MAY HAVE A CHOICE TO PROVIDE AN LC OR BANK GUARANTEE OF EQUIVALENT AMOUNT IN LIEU OF THE AMOUNT TO BE KEPT IN DSRA. 8. SENIOR TERM LENDERS TO HAVE PRIORITY OVER ALL THE SECURITIES AND PAYMENTS. PERSONAL GUARANTEE OF THREE DIRECTORS SL.N O 1. NAME NW AS ON 31.03.2009 MR. MOHINDER KUMAR RS.1.38 CRORES AGARWAL MRS. SUNITA AGARWAL RS.0.83 CRORES MR. GAURAV AGARWAL RS.0.39 CRORES

PREPAYMENT PENALTY PENAL INTEREST LEAD BANK COMMITMENT FEE

OTHER CONDITIONS

2. 3. 2%. NIL IF THE PREPAYMENT IS MADE IN FULL FROM THE INTERNAL ACCRUALS ONLY. 2% IN CASE OF DEFAULT. BANK TAKING UP THE HIGHEST SHARE EXPOSURE OR AS DECIDED BY THE CONSORTIUM. THE COMPANY WILL, AT THE TIME OF LOAN DOCUMENTATION HAVE TO PROVIDE AN INDICATIVE LOAN DRAWDOWN SCHEDULE. ANY DEVIATIONS FROM THE SCHEDULE WILL ATTRACT COMMITMENT FEE AT 1.0% P.A OF UN-DRAWN AMOUNT AS PER LOAN INDICATIVE DRAWDOWN SCHEDULE. HOWEVER, IN THE EVENT THE COMPANY MODIFIES THE SCHEDULE AT LEAST 30 DAYS PRIOR TO DRAWDOWN – THEN NO COMMITMENT FEE WILL BE PAYABLE. 1. THE INTEREST RATES ARE BASED ON THE CURRENT MARKET CONDITIONS. ANY SIGNIFICANT CHANGE IN THE MARKET CONDITIONS WILL LEAD TO REVISION IN RATE OF INTEREST. 2. IN CASE THE COMPANY IS NOT ABLE TO BRING FUNDS FROM INTERNAL ACCRUALS OR INTERNAL ACCRUALS ARE INSUFFICIENT TO MEET THE PROJECT COST, THE COMPANY/ PROMOTERS TO BRING IN FRESH EQUITY TO THE EXTENT OF SHORTFALL AND THE COMPANY/PROMOTERS TO BRING ADEQUATE EQUITY SUPPORT FOR THE PROPOSED EXPANSION PLAN. 3. PROVIDE AN UNDERTAKING THAT IN CASE OF ANY

90

COST OVER-RUN OR SHORT FALL ON SOME OF FINANCE, THE SAME SHALL BE MET BY THE PROMOTERS FROM FURTHER EQUITY CONTRIBUTION /SUBORDINATED DEBT FROM THE PROMOTERS OR LOANS ARRANGED BY PROMOTERS WITHOUT RECOURSE TO PROJECT ASSETS, IN A MANNER AND TO THE SATISFACTION OF THE LENDERS. 4. LENDERS WILL HAVE THE RIGHT TO APPOINT INDEPENDENT ENGINEER /INDEPENDENT INSURANCE AGENT/LEGAL COUNSEL AND THE COST TO BE BORNE BY THE CLIENT. 5. SOURCE OF EQUITY TO BE ESTABLISHED. 6. THE PROMOTERS TO BRING IN 50% EQUITY UPFRONT. 7. SECURITY TRUSTEE WILL BE APPOINTED, IF REQUIRED, IN CONSULTATION WITH THE COMPANY AT THE COST OF THE COMPANY. 8. MAJOR MACHINERIES PROPOSED FOR THE PROPOSED PROJECT ARE SECOND HAND. A CERTIFICATE FROM THE CHARTERED ENGINEER SHOWING THE RESIDUAL LIFE, AGE AND VALUATION OF THE MACHINERIES IS TO BE OBTAINED. 9. THE COMPANY TO GET RATED FROM AN EXTERNAL CREDIT RATING AGENCY. 10.THE COMPANY TO PROVIDE AN UNDERTAKING TO THE EFFECT THAT IN THE EVENT OF REDUCTION IN PROJECT COST ON ACCOUNT OF ANY SAVINGS ON ACCOUNT OF DUTIES/OTHER TAXES, PRICE NEGOTIATIONS OR OTHERWISE, THERE WOULD BE A PRO-RATA REDUCTION IN ALL COMPONENTS OF MEANS OF FINANCE. 11.THE COMPANY TO PROVIDE AN UNDERTAKING TO THE EFFECT THAT THE COMPANY AGREE TO MODIFY ITS MEMORANDUM OF ASSOCIATION AND ARTICLES OF ASSOCIATION, FOR ENHANCEMENT OF THE AUTHORIZED SHARE CAPITAL AND BORROWING POWER AS PER THE ENVISAGED FINANCING PLAN AND ANY OTHER CHANGE IF REQUIRED BY THE LENDERS. PRE-DISBURSEMENT : a. COMPANY SHALL SUBMIT A CERTIFICATE FROM CHARTERED ACCOUNTANT FOR THE VALUE OF THE WORK DONE. b. THE COMPANY TO OBTAIN NECESSARY

91

DOCUMENTATION

PERMISSION FROM THE APPROPRIATE AUTHORITIES FOR THE CONVERSION OF EXISTING/PROPOSED LAND FOR INDUSTRIAL PURPOSE WITHIN 3 MONTHS OF FIRST DISBURSEMENT. c. THE COMPANY TO SUBMIT A CHARTERED ENGINEER'S CERTIFICATE FOR THE OLD MACHINES PURCHASED STATING THE RESIDUAL LIFE, FITNESS VALUE ETC. AND FOUND IT IS SATISFACTORY. d. THE COMPANY TO OBTAIN SUITABLE ENHANCEMENT FOR SUPPLY OF GAS FROM IOCL BEFORE COD OF THE PROJECT. e. THE COMPANY TO PROVIDE AN UNDERTAKING TO THE EFFECT THAT THE INVESTMENTS FROM THE THREE INVESTMENT COMPANIES DIKSHA VINIYOG PVT. LTD, AB AGROCHEM PVT. LTD, SURVI COMMOTRADE PVT. LTD MAY BE LIQUIDATED AND DEPOSITED IN THE ESCROW ACCOUNT TO BE OPENED WITH THE LEAD BANK. f. ALL MANDATORY APPROVALS ARE TO BE OBTAINED BEFORE ENVISAGED COD. IN ADDITION TO THE TERMS AND CONDITIONS IN THIS TERM SHEET, THE FINAL DOCUMENTATION WILL CONTAIN OTHER CUSTOMARY CLAUSES RELATING TO REPRESENTATION & WARRANTIES FROM THE BORROWER, CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THE FACILITY, CONDITION PRECEDENT TO EXECUTION OF FINANCING DOCUMENTS AND CONDITIONS PRECEDENT TO EXECUTION OF FINANCING DOCUMENTS AND CONDITIONS PRECEDENT TO EACH DISBURSEMENT. AFFIRMATIVE COVENANTS BY BORROWER, NEGATIVE COVENANTS, ADDITIONAL COVENANTS, INFORMATION COVENANTS, EVENTS OF DEFAULTS BY THE BORROWER AND THE CONSEQUENCES OF THE EVENT OF DEFAULT, RBI DISCLOSURE NORMS. (RS. IN CRORES) 201 201 201 201 2012 201 201 5678-13 3-14 4-15 16 17 18 19 105. 43 82.0 58.5 35.1 11.7 0 7 4 1

TERM LOAN REPAYMENT SCHEDULE PARTICULAR 2009 2010 S -10 -11 FIRST QUARTER OPENING BALANCE 0.00 27.57 2011 -12

123.6 152.2 128. 4 9 86
92

ADD: DISBURSEME NT SUB TOTAL LESS: REPAYMENT DURING THE QUARTER CLOSING BALANCE INTEREST SECOND QUARTER OPENING BALANCE ADD: DISBURSEME NT SUB TOTAL LESS: REPAYMENT DURING THE QUARTER CLOSING BALANCE INTEREST THIRD QUARTER OPENING BALANCE ADD: DISBURSEME NT SUB TOTAL LESS: REPAYMENT DURING THE QUARTER CLOSING BALANCE INTEREST FOURTH

0.00 0.00

17.99 40.36 0.00 0.00 164.0 152.2 128. 45.56 0 9 86

0.00 105. 43

0.00 0.00 0.00 0.00 82.0 58.5 35.1 11.7 0 7 4 1

0.00 0.00 0.00

0.00

0.00 164.0 45.56 0 1.45 5.23

5.86 146.4 3 4.85

5.86 123. 00 4.11

5.86 99.5 7 3.36 99.5 7 0.00 99.5 7

5.86 76.1 4 2.61

5.86 52.7 1 1.87

5.86 5.86 29.2 9 5.86 1.12 0.37

0.00 0.00 0.00

164.0 146.4 123. 45.56 0 3 00 31.03 0.00 0.00 0.00 164.0 146.4 123. 76.59 0 3 00

76.1 52.7 29.2 4 1 9 5.86 0.00 0.00 0.00 0.00 76.1 52.7 29.2 4 1 9 5.86

0.00 0.00 0.00

0.00

0.00 164.0 76.59 0 2.44 5.23

5.86 140.5 7 4.67

5.86 117. 14 3.92

5.86 93.7 1 3.17 93.7 1 0.00 93.7 1

5.86 70.2 9 2.43

5.86 46.8 6 1.68

5.86 5.86 23.4 3 0.00 0.93 0.19

0.00 10.1 5 10.1 5

164.0 140.5 117. 76.59 0 7 14 27.35 0.00 0.00 0.00 103.9 164.0 140.5 117. 4 0 7 14

70.2 46.8 23.4 9 6 3 0.00 0.00 0.00 70.2 46.8 23.4 9 6 3

0.00 10.1 5 0.32

0.00 103.9 4 3.31

5.86 158.1 4 5.23

5.86 134.7 1 4.48

5.86 111. 29 3.73

5.86 87.8 6 2.99

5.86 64.4 3 2.24

5.86 41.0 0 1.49

5.86 17.5 7 0.75

93

QUARTER OPENING BALANCE ADD: DISBURSEME NT SUB TOTAL LESS: REPAYMENT DURING THE QUARTER CLOSING BALANCE INTEREST •

10.1 5 17.4 2 27.5 7

103.9 158.1 134.7 111. 4 4 1 29 19.71 0.00 0.00 0.00 123.6 158.1 134.7 111. 4 4 1 29

87.8 6 0.00 87.8 6

64.4 41.0 17.5 3 0 7 0.00 0.00 0.00 64.4 41.0 17.5 3 0 7

0.00 27.5 7 0.88

0.00 123.6 4 3.94

5.86 152.2 9 5.04

5.86 128.8 6 4.29

5.86 105. 43 3.55

5.86 82.0 0 2.80

5.86 58.5 7 2.05

5.86 35.1 4 1.31

5.86 11.7 1 0.56

INTEREST UPTO 4TH QUARTER FY 2010-11 IS CONSIDERED AS INTEREST DURING CONSTRUCTION.

STANDARD TERMS AND CONDITIONS FOR TERM LOAN AGAINST LAND AND BUILDING 1. SECURITY : MORTGAGE OF IMMOVABLE PROPERTY SUPPORTED BY FOLLOWING DOCUMENTS IN ORIGINAL . A. ORIGINAL DOCUMENTS OF TITLE TO THE PROPERTY. B. NON ENCUMBRANCE CERTIFICATE UP TO THE DATE OF CREATION OF MORTGAGE ISSUED BY AN ADVOCATE ON BANK’S PANEL. C. VALIDITY CERTIFICATE ISSUED BY AN ADVOCATE ON BANK’S PANEL EVIDENCING THAT THE OWNER OF THE PROPERTY HAS A VALID TITLE AND MORTGAGE CAN BE CREATED BASED ON TITLE DEEDS HELD. D. IN CASE THE PROPERTY IS LEASE HOLD, A NO OBJECTION CERTIFICATE FROM THE LESSOR CLEARLY STATING THAT THEY HAVE NO OBJECTION IN CREATION OF MORTGAGE IN FAVOUR OF THE BANK AS SECURITY FOR THE LOAN. IN CASE THE LEASE DEED STIPULATES EXECUTION OF TRIPARTITE AGREEMENT THE SAME BE GOT DRAFTED/ VETTED BY BANK’S APPROVED ADVOCATE. 2. OTHER TERMS AND CONDITIONS

94

A.

B. C.

D.

E.

TERM LOAN AGAINST BUILDING TO BE DISBURSED IN SUITABLE INSTALLMENTS AS PER TERMS OF SANCTION SO AS TO LINK THE LAST DISBURSEMENT WITH THE COMPLETION OF THE BUILDING. THE PARTY TO SUBMIT APPROVED ARCHITECT / CHARTERED ENGINEER'S CERTIFICATE AND CA'S CERTIFICATE FOR EXPENDITURE INCURRED AT EACH STAGE OF DISBURSEMENT. BRANCH TO ENSURE THAT THE NECESSARY MARGIN IS MAINTAINED AT EACH STAGE. BUILDING TO BE FULLY INSURED AGAINST FIRE, FLOOD, EARTHQUAKE OR NATURAL CALAMITY, SRCC WITH BANK'S CLAUSE ALL TAXES ARE TO BE PAID REGULARLY BY THE UNIT/ BORROWER. THE ORIGINAL RECEIPTS EVIDENCING PAYMENT OF TAXES TO BE SUBMITTED TO THE BANK. BRANCH TO KEEP SUCH RECEIPTS IN THE LOAN DOCUMENT FILE. THE TITLE DEEDS OF THE PROPERTY SHALL REMAIN IN CUSTODY OF THE BANK AND SHALL NOT BE PARTED WITH TILL LIQUIDATION OF THE LOAN IN FULL. IN CASE OF LIMITED COMPANIES (PUBLIC/PRIVATE) BANK’S CHARGE TO BE REGISTERED WITH REGISTRAR OF COMPANIES WITHIN 30 DAYS OF CREATION AND A PROPER DOCUMENT EVIDENCING THE SAME BE KEPT ON RECORD.

STANDARD TERMS AND CONDITIONS FOR TERM LOAN AGAINST PLANT AND MACHINERY 1. SECURITY : HYPOTHECATION OF THE PLANT AND MACHINERY PURCHASED AS WELL AS EXISTING MACHINERY AND ANY FUTURE ADDITIONS. (IF THE COMPANY HAS ALREADY CHARGED THE EXISTING MACHINERY TO ANY FINANCIAL INSTITUTIONS/BANK, NO OBJECTION LETTER FOR THE FIRST CHARGE ON SPECIFIC MACHINERY TO BE FINANCED BY US IN OUR FAVOUR TO BE OBTAINED FROM THE CONCERNED FINANCIAL INSTITUTION/BANKS BEFORE DISBURSEMENT). 2. OTHER TERMS AND CONDITIONS A. MACHINERY TO BE FULLY INSURED AGAINST FIRE, SRCC AND BREAK DOWN RISK WITH BANK'S CLAUSE. B. NAMEPLATE OF THE BANK TO BE AFFIXED/PAINTED ON THE

95

C.

D.

MACHINERIES, READING AS "HYPOTHECATED TO DENA BANK, NAZAFGARH BRANCH." IN CASE OF MACHINERY FABRICATED BY THE BORROWER, DISBURSEMENT TO BE MADE IN SUITABLE INSTALLMENTS ON THE BASIS OF THE CERTIFICATE OF THE APPROVED CHARTERED ENGINEER. OUR CHARGE TO BE REGISTERED WITH REGISTRAR OF COMPANIES WITHIN 30 DAYS OF CREATION IN CASE OF ADVANCE TO LIMITED COMPANIES.

STANDARD TERMS AND CONDITIONS FOR LETTERS OF CREDIT [ INLAND / FOREIGN ] (DA/DP - 90 DAYS) LIMIT 1. NATURE OF THE ARRANGEMENT : LETTERS OF CREDIT (INLAND/FOREIGN) (DA). 2. SUB – LIMIT OF TERM LOAN : RS. 15 CRORES 3. MARGIN : DA - 10 % AND FURTHER 10 % ON ACCEPTANCE OF DOCUMENTS DP – 10 % 4. COMMISSION : AS PER HO GUIDELINES 5. SECURITY - DA : A. SHIPPING DOCUMENTS ACCOMPANIED BY COMPLETE SET OF BILL OF LADING/ CONSIGNEE COPY OF AIRWAY BILL(S), RAILWAY RECEIPTS/ MOTOR TRANSPORT RECEIPTS OF APPROVED TRANSPORT OPERATORS COVERING THE CONSIGNMENT OF RAW MATERIALS AND OTHER GOODS PURCHASED LOCALLY / IMPORTED TO BE DELIVERED TO THE BORROWER AGAINST ACCEPTANCE. SECURITY – DP SHIPPING DOCUMENTS COVERING SHIPMENT/CONSIGNMENT OF RAW MATERIALS/ OTHER GOODS PURCHASED BY THE MANUFACTURING UNIT/TRADING UNIT UNDER THE ABOVE LIMIT TO BE DELIVERED AGAINST PAYMENT. 6. OTHER TERMS AND CONDITIONS - DA A. 1. UPON ACCEPTANCE OF DOCUMENTS BY THE DRAWEE THE UNIT SHALL ARRANGE TO PAY CUSTOM DUTY AND OTHER CHARGES, IF

96

ANY. 2. IN CASE OF BORROWER ENJOYING CC HYPN. FACILITIES, DRAWING POWER TO BE CALCULATED AFTER REDUCING THE VALUE OF THE GOODS RELEASED ON ACCEPTANCE OF BILL OF EXCHANGE. 3. IN OTHER CASES, TRUST RECEIPTS TO BE OBTAINED TO EXTEND OUR CHARGE ON GOODS RELEASED ON ACCEPTANCE OF BILL OF EXCHANGE. B. GOODS TO BE FULLY INSURED AGAINST FIRE, SRCC WITH BANK CLAUSE. C. AN UNDERTAKING FROM THE PARTY IN WRITING TO BE OBTAINED THAT THEY WILL RETIRE THE DOCUMENTS RECEIVED UNDER L/C. FROM THEIR OWN SOURCES ON THE DUE DATES WITHOUT APPROACHING THE BANK FOR ADDITIONAL FUNDS. D. CREDIT REPORT ON OVERSEAS PARTIES TO BE OBTAINED ONCE IN 6 MONTHS. E. IN CASE OF FOREIGN L/C FOR IMPORTS, COPY OF BILL OF ENTRY SHOULD BE SUBMITTED WITHIN 30 / 90 DAYS.
F. OUR CHARGE TO EXTEND OVER THE GOODS RECEIVED UNDER DA/LC. IN THE CASE OF LIMITED COMPANY OUR CHARGE TO BE REGISTERED WITH THE REGISTRAR OF COMPANIES WITHIN 30 DAYS OF CREATION ALONG WITH OTHER ELIGIBLE ADVANCES.

g.

NO FURTHER L/C TO BE OPENED WITHOUT THE PRIOR APPROVAL OF CONCERNED GENERAL MANAGER, IF EARLIER BILLS UNDER L/C ARE NOT PAID AND UNLESS OVERDUE IBRS ARE CLEARED.

h. IT IS STIPULATED THAT CASH FLOW STATEMENT WILL BE OBTAINED FROM THE PARTY BEFORE ISSUING LC SO AS TO ENSURE ADEQUATE CASH ACCRUALS TO RETIRE THE BILLS UNDER L/C ON FIRST PRESENTATION/ DUE DATES. 6. OTHER TERMS AND CONDITIONS - DP A. AN UNDERTAKING TO BE OBTAINED FROM THE UNIT IN WRITING THAT IT WILL NOT REQUIRE ADDITIONAL FACILITIES TO RETIRE THE DOCUMENTS RECEIVED UNDER L/C. AND ALSO FURTHER THAT IT WILL RETIRE THE DOCUMENTS PROMPTLY ON FIRST PRESENTATION. PARTY SHOULD IRREVOCABLY AUTHORISE THE BANK TO CLEAR THE CONSIGNMENT AT HIS COST AND TAKE POSSESSION OF GOODS, IN CASE DOCUMENTS ARE NOT RETIRED ON ARRIVAL OF THE STEAMER. NO FURTHER L/C. TO BE OPENED IF EARLIER BILLS UNDER L/C ARE OVERDUE,

97

WITHOUT PRIOR PERMISSION OF CONCERNED GENERAL MANAGER. B. C. CREDIT REPORT ON THE OVERSEAS SUPPLIER TO BE OBTAINED BEFORE OPENING OF L/C. IN CASE OF LARGE VALUE L/C. EXCHANGE CONTROL COPY OF BILL OF ENTRY EVIDENCING IMPORT OF GOODS MUST BE SUBMITTED WITHIN 90 DAYS FROM THE DATE OF REMITTANCE AND NO L/C SHOULD BE OPENED IN CASE SUBMISSION OF B/E IS OVERDUE. d. IT IS STIPULATED THAT CASH FLOW STATEMENT WILL BE OBTAINED FROM THE PARTY BEFORE ISSUING LC SO AS TO ENSURE ADEQUATE CASH ACCRUALS TO RETIRE THE BILLS UNDER L/C ON FIRST PRESENTATION/ DUE DATES. STANDARD TERMS AND CONDITIONS FOR BUYER’S CREDIT LIMIT

1. 2.
1. 2. 3. 4.

NATURE OF THE ARRANGEMENT : SUB – LIMIT OF TERM LOAN :

BUYER’S CREDIT LIMIT RS. 15 CRORES

OTHER GENERAL TERMS AND CONDITIONS THE PRESCRIBED DOCUMENTS TO BE EXECUTED UNDER THE COMMON SEAL OF THE COMPANY BACKED BY PROPER RESOLUTION. CHARGE OVER THE ASSETS OF THE COMPANY TO BE FILED/REGISTERED WITHIN 30

DAYS OF CREATION.
ALL THE ASSETS CHARGED TO THE BANK TO BE FULLY INSURED AGAINST FIRE, SRCC, FIOOD, BREAKDOWN OF MACHINERY WITH BANK CLAUSE. THE ADVANCE IS RESTRICTED TO MANUFACTURING/TRADING ACTIVITIES.

INTEREST RATES ARE SUBJECT TO REVISION AS PER RBI/HO GUIDELINES OR AS DECIDED BY CONSORTIUM. 6. BRANCH TO ENSURE THAT THERE ARE NO INTER-FIRM TRANSFER OF FUNDS EXCEPT FOR GENUINE SALES TRANSACTIONS. 7. BANK WILL HAVE A RIGHT TO EXAMINE ALL THE TIMES COMPANY'S (BORROWERS) BOOKS OF ACCOUNTS, ASSETS ETC. AND HAVE THE COMPANY'S WORKINGS AND OPERATIONS EXAMINED FROM TIME TO TIME BY THE OFFICERS OF THE BANK OR TECHNICAL EXPERTS AND/OR MANAGEMENT CONSULTANTS AND/OR C.A AND FEES TO BE BORNE BY THE COMPANY. 8. BANK MAY CHARGE PENAL RATE OF INTEREST OVER AND ABOVE THE RATE APPLICABLE UNDER THE FOLLOWING CIRCUMSTANCES:A. DELAY IN SUBMISSION OF RENEWAL PAPERS. 9. GUIDELINES ISSUED BY HO/RO FROM TIME TO TIME ARE TO BE STRICTLY ADHERED TO. 10. THE BORROWER BE INFORMED OF THE TERMS AND CONDITIONS OF SANCTION AND THE CONFIRMATION BE OBTAINED TO THE EFFECT THEREOF IN WRITING. 5.

98

11. DATE OF RECONSIDERATION - ONE YEAR AFTER SANCTION. 12. THE AUDITED ACCOUNTS OF THE BORROWER SHOULD BE FURNISHED TO THE BANK LATEST BY 31ST OCTOBER OF EACH YEAR WITH REFERENCE TO THE POSITION AS AT 31ST MARCH OF THE SAME YEAR. TAX AUDIT REPORTS DULY AUDITED BY CHARTERED ACCOUNTANTS SHOULD BE SUBMITTED TO THE BANK BEFORE 31ST OCTOBER OF EACH YEAR. SPECIAL CONDITIONS ON CASE TO CASE BASIS 1. SEARCH REPORT FROM REGISTRAR OF COMPANIES TO BE OBTAINED BEFORE RELEASING THE LIMITS. 2. BRANCH TO OBTAIN AN UNDERTAKING FROM THE BORROWER THAT HE IS NOT A DEFAULTER TO ANY BANK/FINANCIAL INSTITUTION AND HAS NOT ANY RELATION WITH ANY OF THE DIRECTORS OF OUR BANK 3. BRANCH TO OBTAIN AN UNDERTAKING FROM THE BORROWER, THAT IN CASE HE COMMIT DEFAULT IN REPAYMENT OF LAON/CREDIT FACILITIES INTEREST ADDITIONAL INTEREST OR ANY OTHER DUES THAT MAY ARISE OUT OF THE LOAN AMOUNT/FINANCIAL ASSISTANCE OF THE BANK RESERVES THE RIGHT TO DISCLOSE OR PUBLISH THE NAME OF THE DIRECTORS OF THE COMPANY/PARTNERS OF THE FIRM/NAME OF THE PROPRIETOR AS DEFAULTERS IN SUCH MANNER AND THROUGH SUCH MEDIA AS HE BANK/RESERVE BANK OF INDIA IN THEIR ABSOLUTE DISCRETION MAY THINK FIT. 4. CA CERTIFICATE TO BE OBTAINED AND KEPT ON RECORD FOR STATUTORY DUES. 5. CERTIFICATE OF COMPLIANCE OF TERMS AND CONDITIONS TO BE SUBMITTED. 6. ALL LEGAL EXPENSES/OTHER EXPENSES INCLUDING INCIDENTAL CHARGES TO BE INCURRED DURING THE COURSE OF OPERATION IN THE ACCOUNT AND FOR COMPLETION OF DOCUMENTATION FORMALITIES WILL BE BORNE BY THE BORROWER. 7. THE BORROWER WILL SUBMIT THE REQUISITE PAPERS/AUDITED ACCOUNTS PERTAINING TO THE LAST FINANCIAL YEAR FOR NEXT RENEWALS AT LEAST ONE MONTH BEFORE THE ANNUAL REVIEW/RENEW OF THE ACCOUNT. 8. THIS SANCTION DOES NOT VEST IN ANY ONE OF THE RIGHT TO CLAIM ANY DAMAGE AGAINST THE BANK FOR ANY REASON WHATSOEVER 9. SEARCH REPORT TO BE OBTAINED FROM ROC BEFORE RELEASE OF THE

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LIMITS. 10. DECLARATION TO THE EFFECT THAT NO COURT CASES ARE PENDING AGAINST THE COMPANY, ITS DIRECTORS AND THE GROUP CONCERNS (AS PER H.O. CIRCULAR NO. 351/02/2003) TO BE SUBMITTED PRIOR TO RELEASE OF THE ENHANCED LIMITS 11. CONSENT CLAUSE TO BE SUBMITTED BY THE BORROWER PERMITTING THE BANK FOR SUBMISSION OF CREDIT INFORMATION TO CREDIT INFORMATION BUREAU (INDIA) LTD 12. DATE OF RECONSIDERATION – ONE YEAR AFTER SANCTION 13. THE COMPANY TO GIVE AN UNDERTAKING THAT THEY ARE NOT A DEFAULTER TO ANY BANK / FINANCIAL INSTITUTION AND HAVE NOT ANY RELATION WITH ANY DIRECTOR OF THE BANK. 14. THE COMPANY HAS TO FURNISH THE FOLLOWING UNDERTAKING :“I/WE HEREBY AGREE AS PRE-CONDITION OF THE LOAN/ADVANCE (FUND BASED AND NON-FUND BASED) GIVEN TO ME/US BY THE BANK THAT IN CASE I/WE COMMIT DEFAULT IN THE REPAYMENT OF LOAN/ADVANCE OR IN THE REPAYMENT OF INTEREST THEREON OR ANY OF THE AGREED INSTALLMENT OF THE LOAN ON DUE DATES THE BANK AND/OR RBI WILL HAVE AN UNQUALIFIED RIGHT TO DISCLOSE OR PUBLISH MY/OUR NAME OR THE NAME OF THE COMPANY/FIRM/UNIT AND IT’S DIRECTORS/PARTNERS/PROPRIETOR AS DEFAULTER IN SUCH MANNER AND THROUGH SUCH MEDIA AS THE BANK OR RBI IN THEIR ABSOLUTE DISCRETION MAY THINK FIT.” 15. GENERAL UNDERTAKING TO BE TAKEN AS PER HO CIRCULAR NO. 54/1/2004 DATED 22/5/2004 16. BANK RESERVES THE RIGHT TO MODIFY/ ALTER TERMS AND CONDITIONS OF THE SANCTION AND CANCEL THE LIMIT AT ANY TIME WITHOUT ASSIGNING THE REASON. 17. PENAL INTEREST ON DEVOLVEMENT OF LC (IBRS) IN ADDITION TO THE NORMAL RATE OF INTEREST AS APPLICABLE TO THE WORKING CAPITAL FACILITIES OR COMMERCIAL RATE WHERE THE CLIENT DOES NOT ENJOY WORKING CAPITAL FACILITY, PENAL INTEREST ON DEVOLVEMENT OF LCS (IBRS) IS TO BE CHARGED AS UNDER:PENAL INTEREST OF 2% ABOVE NORMAL RATE /COMMERCIAL RATE AS THE CASE MAY BE, WHERE THE DEVOLVED LC LIABILITY (IBRS) IS OUTSTANDING FOR A PERIOD OF ONE MONTH. PENAL INTEREST OF 3% ABOVE NORMAL RATE /COMMERCIAL RATE AS THE CASE MAY BE, WHERE THE DEVOLVED L/C LIABILITY (IBRS) IS OUTSTANDING FOR A PERIOD OF MORE THAN ONE MONTH.

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18.

MAXIMUM PENAL INTEREST CHARGEABLE FOR MORE THAN ONE DEFAULT FOR EACH DEFAULT A PENAL INTEREST @2% P.A. TO BE CHARGED. HOWEVER, IF THERE ARE MORE THAN ONE DEFAULT AS MENTIONED ABOVE, THEN MAXIMUM PENAL INTEREST @2% P.A. TO BE CHARGED TO THE BORROWER ON AGGREGATE AMOUNT OF IRREGULARITIES.

LIST OF ANNEXURES SL.N DESCRIPTION O ASSUMPTIONS UNDERLYING PROFITABILITY 1. PROJECTIONS DETAIL OF TOP TEN SHAREHOLDERS OF THE 2. COMPANY AS ON 31.03.2009 3. 4. 5. 6. 7. 8. 9. DETAILS OF EXISTING PLANT & MACHINERY

ANNEXURE NO. ANNEXURE I ANNEXURE II

ANNEXURE III ANNEXURE UTILITY OF PRODUCTS IV ANNEXURE PROCESS FLOW DIAGRAM V ANNEXURE PROFILE OF M/S LAGAN CONSULTANTS VI DETAILS OF EQUIPMENTS WITH ANNEXURE SPECIFICATIONS AND PROSPECTIVE SUPPLIERS VII ANNEXURE MANPOWER REQUIREMENT VIII ANNEXURE DETAILED PROJECT COST IX

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10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

PROJECT COST/ MEANS OF FINANCE- YEAR WISE DETAILS PROJECTED PROFITABILITY (COMPANY AS A WHOLE) PROJECTED FUND FLOW(COMPANY AS A WHOLE) PROJECTED BALANCE SHEET (COMPANY AS A WHOLE)

ANNEXURE X ANNEXURE XI ANNEXURE XII ANNEXURE XIII ANNEXURE TERM LOAN REPAYMENT SCHEDULE XIV STATEMENT OF DEBT SERVICE COVERAGE ANNEXURE RATIO (COMPANY AS A WHOLE) XV STATEMENT OF WORKING CAPITAL ANNEXURE ASSESSMENT (COMPANY AS A WHOLE) XVI ANNEXURE TERM SHEET XVII NAMES OF SHAREHOLDER OF GROUP ANNEXURE COMPANIES XVIII ANNEXURE OTHER DETAILS - MANUFACTURING PROCESS XIX ANNEXURE CALCULATION OF IRR AND COST OF FUNDS XX

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ANNEXURE XIX MANUFACTURING PROCESS THE MANUFACTURING PROCESS CONSISTS OF THE FOLLOWING: 1. 2. 3. 4. 5. 6. 7. 8. HOT ROLLED COIL SLITTING. HOT ROLLED COIL PICKLING IN ACID. COLD ROLLING. ANNEALING. REWINDING. TEMPER ROLLING. TENSION LEVELING. FINISHING OPERATIONS.

THE VARIOUS MANUFACTURING PROCESSES ARE EXPLAINED AS UNDER: HR SLITTER HR ROLLED COILS IS GENERALLY AVAILABLE IN THE MARKET IN WIDTHS UP TO 1550 MM AND COIL WEIGHT UP TO 30 TONS. INCOMING COILS ARE REQUIRED TO BE SLIT TO THE REQUIRED WIDTHS AND COIL WEIGHT TO SUIT THE FINISHED PRODUCTS REQUIREMENT AND THE DOWNSTREAM PROCESSING EQUIPMENT RESPECTIVELY. SLITTING OF THE COILS IS PERFORMED ON CONVENTIONAL HR SLITTER CONSISTING OF UN-COILER, ENTRY PINCH ROLL, SHEAR, SLITTING HEAD, EXIT LOOPER, EDGE TRIM WINDER, FINISH COILER, EXIT COIL CAR WITH SADDLES. THE HR SLITTER AND ASSOCIATED FACILITIES WILL HAVE THE CAPABILITY TO PROCESS INCOMING HR COILS UP TO 1550 MM WIDTH AND 30 TON COIL WEIGHT. HR PICKLING THE HR COILS SLIT WITH REQUIRED WIDTH NEED TO BE PICKLED FIRST BEFORE REDUCING TO DESIRED THICKNESS IN THE COLD ROLLING (CR) MILL. THIS IS DUE TO THE FACT THAT DURING HOT ROLLING METAL SURFACES ARE USUALLY COATED WITH A LAYER OF SCALE WHEN THEY ARE PROCESSED AT HIGHER TEMPERATURES WITHOUT THE PROTECTIVE GAS. THE SCALE HAS TO BE REMOVED BEFORE FURTHER PROCESSING. IF THE METAL SURFACE IS CLEANED BY CHEMICAL OR ELECTROCHEMICAL MEANS, THEN THIS PROCESS IS CALLED PICKLING. FOR CARBON STEEL THE MOST WIDELY USED METHOD IS PICKLING BY HYDROCHLORIC ACID OF 20% CONCENTRATION. IN THIS THE COIL IS PASSED THROUGH A SHALLOW PICKLING TANK CONSISTING OF TWO TO THREE CELLS WHERE THE ACID FLOW COUNTERCURRENT TO THE FLOW OF STRIP. THE ACID IS USUALLY HEATED TO A TEMPERATURE OF ABOUT 80 °C WITH THE HELP OF STEAM COILS OR HOT WATER UNDER HIGH PRESSURE. THE PROPOSED PICKLING LINE MAINLY CONSISTS OF ENTRY & EXIT SECTION AND
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CHEMICAL SECTION, WHERE THE COIL IS UNCOILED WITH A UN-COILER AND FED INTO THE CHEMICAL SECTION AND RECOILED AND DISPATCHED FOR COLD ROLLING.

COLD ROLLING INCOMING HR COIL UPON PICKLING IS TRANSFERRED TO THE COLD ROLLING MILL FOR REDUCING THE THICKNESS TO THE FINISHED PRODUCT AS DESIRED BY THE CUSTOMER. IT IS PROPOSED TO PRODUCE ABOUT 300000 TPA OF CR COILS WHICH WILL BE FURTHER HEAT TREATED TO ACHIEVE THE DESIRED MECHANICAL PROPERTIES THROUGH ANNEALING PROCESS. REWINDING LINE COLD ROLLING IS CARRIED OUT AT COLD ROLLING MILL AT HIGH BACK AND FRONT TENSION APPLIED THROUGH ENTRY AND EXIT TENSION REELS. UPON ROLLING THE COIL TO DESIRED THICKNESS, THE COILS ARE REMOVED FROM THE TENSION REELS. THE COILS HAVE TO BE PASSED THROUGH A REWINDING LINE WHEREIN THE COILS ARE RE-COILED WITH LESS TENSION AT THE EXIT END. THIS IS ESSENTIAL FOR CARRYING OUT BETTER ANNEALING AS THE HEAT HAS TO PENETRATE BETWEEN THE TWO WRAPS DURING ANNEALING. THE REWINDING LINE IS ALSO EQUIPPED TO REMOVE THE COOLANT OIL FROM THE SURFACE OF THE STRIP WHICH OTHERWISE WOULD LEAVE PATCHES ON THE SURFACE DURING ANNEALING.

ANNEALING THE STEEL HARDENS AND BECOMES BRITTLE DURING THE PROCESS OF COLD ROLLING. THE STRIP HAS TO BE ANNEALED PRIOR TO FURTHER PROCESSING SO AS TO SOFTEN THE STEEL TO REMOVE INTERNAL STRESSES. THIS IS ESSENTIAL PARTICULARLY FOR THE STEEL THAT IS FURTHER SUBJECTED TO FORMING OR SIMILAR APPLICATION. ANNEALING OF STEEL IS ACHIEVED BY HEATING IT ABOVE ITS CRITICAL RANGE OF TEMPERATURE BETWEEN 723 DEG C TO 910 DEG C DEPENDING UPON THE CARBON CONTENT OF THE STEEL, HOLDING AND SOAKING AT THE TEMPERATURE AND SUBSEQUENTLY COOLING AT A VERY SLOW RATE BELOW THE CRITICAL TEMPERATURE. ANNEALING OF

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STEEL COILS IS DONE TO IMPART THE FOLLOWING PROPERTIES TO THE FINISHED STEEL: 1. IMPROVED MECHANICAL PROPERTIES SUCH AS MACHINABILITY AND DUCTILITY 2. MODIFY CRYSTALLOGRAPHIC STRUCTURE 3. RELIEVE INTERNAL STRESSES ANNEALING IS CARRIED OUT IN BELL ANNEALING FURNACES, WHICH ESSENTIALLY CONSISTS OF HEATING BASES, PROTECTIVE HOOD, FURNACE AND COOLING HOOD. TEMPER ROLLING AFTER ANNEALING THE STEEL COILS ARE SUBJECTED TO A LIGHT SKIN PASS TO ACHIEVE THE FOLLOWING: 1. TO IMPROVE TOUGHNESS PROPERTIES. 2. TO IMPROVE THE STRIP SHAPE. 3. TO IMPROVE SURFACE FINISH. 4. MASKING OF YIELD POINT. AND OTHER MECHANICAL

TEMPER ROLLING IS ACHIEVED IN 4 HIGH MILLS SIMILAR TO THE REDUCTION MILL EXCEPT THAT THE MILL DOES NOT HAVE ENTRY TENSION REEL. THE MILL IS PROVIDED WITH A LOWER POWER RATING MOTORS AND CAN BE OF NON REVERSING TYPE. SKIN PASS MILLS ARE OFTEN BACK UP ROLL DRIVEN MILLS TO AVOID MILL SKIDDING. TENSION LEVELING AFTER TEMPER ROLLING THE STRIP IS PASSED THROUGH TENSION LEVELER WHERE IN THE STRIP IS STRETCHED ALONG THE LENGTH TO REMOVE ANY CENTER/EDGE WAVES ON THE STRIP. TENSION LEVELING PROCESS THUS MAKES THE SURFACE SMOOTH. THE STRIP IS PASSED THROUGH A SET OF ROLLS LOCATED IN TWO ROWS PLACED ALTERNATIVELY IN THE TOP AND BOTTOM ROW. THE STRIP PASSES THROUGH THE ROLLS UNDER TENSION AND THUS BECOMES FLAT. FINISHING OPERATIONS IN ORDER TO MAXIMIZE THE PRODUCTION CAPACITY OF THE COLD ROLLING MILL, STEEL STRIPS ARE OFTEN ROLLED AT THE MAXIMUM WIDTH AND ARE SUBSEQUENTLY SLIT TO THE WIDTH AS DESIRED BY THE CUSTOMER. IN ADDITION TO THE SLITTING OPERATION, THE COILS ARE OFTEN REQUIRED TO BE CUT TO THE REQUIRED LENGTH. THE FINISHED PRODUCT EITHER IN THE
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FORM OF COIL OR IN THE FORM OF SHEETS IS THEN PACKED AND IS MADE READY FOR THE DISPATCH. TYPICAL EQUIPMENT REQUIRED AT THE FINISHING SECTION INCLUDES A SLITTING LINE AND A CUT-TO- LENGTH. THE PROCESS FLOW DIAGRAM IS GIVEN IN ANNEXURE-V. LAND PROJECT WOULD BE LOCATED ADJACENT TO EXISTING UNIT OF THE COMPANY AT BAHADURGARH, HARYANA. AROUND 3.50 ACRES OF LAND IS ALREADY AVAILABLE WITH COMPANY WITHIN THE EXISTING PREMISES OF THE COMPANY. FURTHER, THE COMPANY HAS ACQUIRED ADDITIONAL 3.90 ACRES OF LAND ADJACENT TO ITS EXISTING PREMISES. THE COMPANY HAS INFORMED THAT THEY HAVE APPLIED FOR THE CONVERSION OF THE ADDITIONAL 3.90 ACRES OF LAND FOR INDUSTRIAL USE. A SUITABLE PRE-DISBURSEMENT CONDITION TO THE EFFECT THAT THE COMPANY TO OBTAIN NECESSARY PERMISSION FROM THE APPROPRIATE AUTHORITIES FOR THE CONVERSION OF EXISTING/PROPOSED LAND FOR INDUSTRIAL PURPOSE IS STIPULATED IN THE TERM SHEET.

CIVIL & STRUCTURAL WORKS THE LAYOUT FOR THE FACTORY SHEDS, PLANT AND MACHINERY INCLUDING THOSE REQUIRED FOR UTILITIES AND SUPPORTING INFRASTRUCTURE HAS BEEN PREPARED BY LAGAN CONSULTANTS. THE TOTAL CONSTRUCTION AREA IS ESTIMATED AT ABOUT 11,940 SQ. METERS TO HOUSE MAIN PROCESSING LINES, UTILITIES AND ANCILLARY FACILITIES AS PER DETAILS BELOW: S I 1 2 3 PARTICULARS MAIN PLANT FACILITIES – PICKLING, COLD ROLLING, ANNEALING, MOTORING & FINISHING BAYS AUXILIARY FACILITIES – C/R , SUBSTATION, WTP, PUMP HOUSE, MAINTENANCE SHOP ETC. ANCILLARY FACILITIES – ADMINISTRATIVE OFFICE, CANTEEN, STORES, WEIGHBRIDGE, SECURITY OFFICE ETC. TOTAL AREA M) 10250 1,350 340 11,940 (SQ.

ADEQUATE AREA HAS BEEN PROVIDED IN EACH BAY, CONSIDERING THE RAW MATERIAL AND FINISHED PRODUCT STORAGE AREA REQUIREMENT, EASE OF MATERIAL HANDLING, OPERATIONS AND MAINTENANCE OF THE EQUIPMENT.

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THE BUILDINGS ARE PROPOSED TO BE EARTH QUAKE RESISTANT AND SHEDS WOULD BE MADE UP OF STEEL COLUMNS, STEEL TRUSSES, STEEL CRANE GANTRY AND COLOR COATED GALVANIZED SHEETS WITH OPTIMUM CRANE RAIL HEIGHT FOR MAINTAINABILITY. WHILE MAIN SHOP BUILDING WILL BE DESIGNED FOR NATURAL VENTILATION, FORCED VENTILATION HAS BEEN PLANNED FOR THE BASEMENT, TUNNELS AND ELECTRICAL CONTROL ROOMS. INSTRUMENT CONTROL ROOMS, CONTROL PULPITS AND COMPUTER CENTER ARE PROPOSED TO BE AIR-CONDITIONED. CIVIL AND BUILDING WORKS ARE PROPOSED TO BE CARRIED OUT UNDER SUPERVISION OF COMPANY MANAGEMENT AND LAGAN CONSULTANTS. PLANT & MACHINERY THE COMPANY PROPOSES TO PROCURE ALL THE EQUIPMENTS AND MACHINERY (NEW/OLD) FROM REPUTED DOMESTIC / INTERNATIONAL MANUFACTURERS AS PER THE SPECIFICATIONS GIVEN IN THE TECHNO ECONOMIC FEASIBILITY REPORT (TEFR) PREPARED BY LAGAN CONSULTANTS. THE MAJOR MACHINERIES FOR THE PROPOSED PROJECT ARE GIVEN BELOW: MACHINERY HR SLITTER SEMI CONTINUOUS PICKLING LINE 4 HI COLD ROLLING MILL (OLD M/C) BELL TYPE ANNEALING FURNACE 4 HI SKIN PASS MILL RATED CAPACITY 350000 TPA 350000 TPA 300000 TPA 300000 TPA 300000 TPA

A BRIEF LIST OF EQUIPMENTS WITH DETAILS OF PROSPECTIVE SUPPLIERS, SPECIFICATIONS ETC IS GIVEN IN ANNEXURE – VII. PROCUREMENTS WOULD BE MADE FROM THE PROSPECTIVE SUPPLIERS AS MENTIONED ABOVE/ OPEN MARKET AS PER THE IMPLEMENTATION SCHEDULE. A SUITABLE PRE-DISBURSEMENT CONDITION TO THE EFFECT THAT THE COMPANY TO SUBMIT A CHARTERED ENGINEER'S CERTIFICATE FOR THE OLD MACHINES PURCHASED STATING THE RESIDUAL LIFE, FITNESS VALUE ETC IS STIPULATED IN THE TERM SHEET. SALIENT FEATURES OF THE MACHINERY ALREADY ORDERED ARE AS FOLLOWS: COLD ROLLING MILL COMPANY HAS IDENTIFIED AND ORDERED A STATE OF THE ART SECOND HAND SINGLE STAND 4 HI REVERSING COLD ROLLING MILL FOR THE PROPOSED PROJECT. THE MILL IS MANUFACTURED BY SUECO, JAPAN WITH MODERN

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ELECTRICS SUPPLIED BY M/S. TOSHIBA JAPAN. THE MILL IS EQUIPPED WITH MODERN TREATMENT SUCH AS AUTOMATIC GAUGE CONTROL (AGC), X-RAY INSTALLATION, AUTOMATIC FLATNESS CONTROL SYSTEM (AFC) ETC. THE COLD ROLLING MILL IS OWNED BY M/S UNION STEEL LTD., A KOREAN COMPANY. THE CONTRACT HAS BEEN GIVEN TO M/S SHERMAN INTERNATIONAL CORPORATION, AN INTERNATIONAL MACHINERY SUPPLIER FOR REFURBISHING AND SUPPLYING THE MACHINERY. M/S ASL HAS ENTERED INTO SALE CONTRACT WITH M/S SHERMAN INTERNATIONAL CORPORATION FOR THE 4 HI REVERSING COLD ROLLING MILL FOR THE PROPOSED PROJECT. AGC BASED ON THE HYDRAULIC SYSTEM AND AFC BASED ON THE HYDRAULIC BENDING OF ROLLS ARE SPECIAL FEATURES USED IN THE MODERN COLD ROLLING MILLS TO CONTROL VERY ACCURATE THICKNESS AND FLATNESS OF THE STRIP DURING ROLLING. UNIFORM AND ACCURATE THICKNESS AND FLATNESS ACHIEVED ON SUCH MILLS COMMAND SPECIAL PREMIUM IN THE HIGH END SEGMENT SUCH AS AUTO INDUSTRY. THE MILL IS CAPABLE OF PRODUCING CRCA OF STRINGENT QUANTITY AND IS CAPABLE OF DELIVERING DESIRED PRODUCTION. NO MAJOR MODIFICATIONS ARE ENVISAGED FOR THE MILL AND CAN BE REINSTALLED AT THE PROPOSED LOCATION WITHOUT ANY DIFFICULTY. ANNEALING FURNACES A SET OF NEW BELL ANNEALING FURNACES ARE PROPOSED TO BE PURCHASED FOR THE PROJECT. HYDROGEN ATMOSPHERE BASED BATCH TYPE ANNEALING FURNACES ARE PROPOSED FOR THE PRESENT PROJECT. HYDROGEN ATMOSPHERE ARE SUPERIOR TO NITROGEN BASED FURNACES IN TERMS OF SURFACE QUALITY AND UNIFORM QUALITY ALONG THE LENGTH OF THE STRIP DUE TO BETTER PENETRATION OF HEAT INSIDE THE WRAPS. HYDROGEN ANNEALING ALSO REDUCES THE HEAT CYCLE TIME AND INCREASES PRODUCTIVITY. LAYING OUT THE MACHINE AND PROCESS LINES WOULD BE CARRIED OUT BY RESPECTIVE SUPPLIERS UNDER SUPERVISION OF COMPANY MANAGEMENT AND LAGAN CONSULTANTS.

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ANNEXURE XX
IRR AND COST OF FUNDS CALCULATION

PARTICULARS CASH OUTFLOW/INFLOW

MAR-10 -84.01 MAR-15 42.36 MAR-20 39.93

MAR-11 -115.14 MAR-16 40.52 MAR-21 33.80

MAR-12 30.85 MAR-17 38.66 MAR-22 27.44

MAR13 40.19 MAR18 36.74 MAR23 20.82

MAR14 44.17 MAR19 34.63 MAR24 18.17

IRR COST OF CAPITAL IRR ( SPREAD) AMOUN T 89.78 169.80 259.58 COST (POST TAX) 15% 8.42%

14.30% 10.69% 3.61%

COST OF FUNDS COST OF CAPITAL EQUITY DEBT WEIGHTED AVERAGE COST EXCESS OF IRR OVER COST OF EQUITY AND DEBT

13.47 14.29 27.76 10.69% 3.61%

CONCLUSION:

THE PROJECT ENTITLED CREDIT APPRAISAL GIVES THE DETAILED KNOWLEDGE OF THE WHOLE PROCESS OF LOANS & ADVANCES WHICH DENA BANK PERFORMS .

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STARTING FROM THE LOAN APPLICATION FROM THE BORROWER AND COMPILATION OF CONFIDENTIAL REPORTS ON HIM AND THE GUARANTOR , THE PROCESS CONTINUES TILL THE
DISBURSEMENT OF LOAN AND AFTER IT THE CLOSING MONITORING TILL THE ADJUSTMENT OF BANK’S LOAN.

THE PROJECT WAS AN ATTEMPT TO UNDERSTAND AND PERFORM THE WORK IN CREDIT TRANSACTION AND CREDIT APPRAISAL PROPOSAL WHICH I HAVE INCLUDED IS JUST AN EXAMPLE OF IT. I HAVE WORKED ON MANY SUCH PROPOSALS, WHICH ARE BEYOND THE SCOPE OF THIS PROJECT. HENCE THE WHOLE EXPERIENCE OF WORKING IN SUCH A RENOWNED PUBLIC SECTOR UNIT WAS VERY GOOD & MADE ME LEARN A LOT OUT OF IT.

REFERENCES

• • •

CIRCULARS , MANUALS OF DENA BANK , LOAN POLICY DENA BANK WEBSITE DENA BANK CREDIT DEPARTMENT STAFF SUPPORT

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