and other seasonal industries.
SECTION-III: INDUSTRY PERCEPTION
It indicates the overall environment in which the industry is operating. In industry profile various parameters on which scores have been given. First and foremost all the details of the industry are given i.e. the various sub
sectors of the industry, updates covering the analysis of the critical issues and recent developments. Details regarding the industry are given in the following way:
Background consists of >Industry segmentation >Domestic industry size >Industry critical factors like power/fuel cost, International competitiveness, cyclicality/ seasonality, input or raw material availability and affordability, global scenario.
Major events in the industry consists of >Mergers and acquisitions >Announcements by industry associations like FICCI/CCI/ASSOCHEM etc.
Bank experience/ Position on exposure: Over here the list of major borrowers along with their details has to be mentioned.
The following parameters are looked into for an industry sub sector:
A) Background: This head contains details regarding the background of the sector like inputs used, production process, quality of finished products and capacity utilization.etc.
B) Assessment under industry risk parameter: This head contains details like
Demand Supply gap:- This head contains details of the gap between demand and supply. It contains details like the reasons for increasing or decreasing demand ,availability of raw materials, price scenario, details of capacity utilization etc.
Government Policies:- This head contains details of the various of the Govt. policies implemented like the increase or reduction in import duty, Govt. protection etc and its effect.
Input related risk:-This head gives us the details regarding the various inputs required and the risk attached to them like the effect of increase or decrease in their domestic as well as international prices, consequences of over and under supply.etc
Extent of competition: - this head tells us of the major players operating in the particular industry. It also tells us about the threats of the new entrants, future scenario, impact of price and profitability. Through this head a company can get important details which can help the company to divert risk. Financial risk:- This is a very important section. It contains the key ratios like ROCE, operating profit margin. It contains sector aggregates like current ratio, DE ratio, net profit margin etc and cost aggregates like raw material cost. power cost, selling cost etc also through this head we can know about
the various companies used for calculating the sector aggregates. All these information are taken from CRIS INFAC.
Then a business risk evaluation is done (out of the total marks of 100).This is divided into two sections namely: Parent Operating Efficiency: This head contains entity like capacity utilization, management of price volatility, availability of raw material, integration of operation etc. On all these risk entity certain weight-age is assigned and remarks are written.
Parent-Market Position: This head contains risk entity like longterm contracts, diversified market, proximity to markets, financial ability to withstand price competition etc. Again on all these risk entity certain weights age is assigned and remarks are written.
SECTION-IV: TECHNO-ECONOMIC VIABILITY (TEV) REPORT TECHNO-ECONOMIC VIABILITY (TEV) ANALYSIS
After a Credit Rating report is generated, the loan proposal is sent for TEV analysis. In TEV analysis the project report submitted by the borrower is thoroughly studied by the industry manager. The TEV analysis either done internally by the officers in the bank or it can be done externally also through some hired agency. In this analysis each and every aspect of the proposal is verified and necessary documents are gathered. In case of Green-Field or Brown-Field project the representative of the bank personally visits the site of the project and verifies the details, according to the proposal submitted by the borrower. After going through the above mentioned process the bank prepares a TEV analysis according to its prescribed format.
I went through a couple of life case file of a few companies, the TEV report of which was done by BANK OF BARODA. The parameters which are generally looked into by the bank are to carry out a TEV analysis are: 1) Introduction: This head contains sections like:
Background: Over here details of the company and its group companies right from its address to its current and proposed projects are looked into.
Detailed Project Report (DPR): The details of the project along with its constitutions, promoters and the different phases of the project are looked into in details. Also details like the acceptability of project cost, technology involved, and implementation schedule, basic assumptions in assessing cost etc. are looked into.
Others: The details of the company, its management and other group companies are also looked into.
2) The proposed project, promoters, brief history of the company and group companies: This head contains details like the –
Proposed project: It contains details like installed capacity, the products to be manufactured, the promoters of the company etc.
Project cost and means of finance: This section contains the cost of the project in details and contains its various means of finance which is either through share capital or term loan.
The Promoters: This leads every possible detail about the promoters and the directors are provided. Details like name, age, qualification, experience, etc. are given. Through this information a lot can be known about the capabilities of the promoters and directors.
Group companies: This head contains the names of the various group companies, their respective date of incorporation, address, details of existing manufacturing capacity and financial position along with other relevant details.
Location: This head gives us the details of the exact location of the land. It tells us about the various factors which were kept in mind before choosing that particular location i.e. availability of raw material, transportation, infrastructure and ready market. It also gives us the construction details.
3) Technology and Manufacturing process: This head gives us the details of the various technical consultants