SUMMER INTERNSHIP REPORTON

CREDIT APPRAISAL

(IN FULFILLMENT OF MASTER OF BUSINESS ADMINISTRATION)

WITH SPECIAL REFERENCE TO

DENA BANKREGIONAL OFFICE

BY:

MBA, CLASS OF 2006-09 AB SHARMA

JIMS

JAGAN INSTITUTE OF MANAGEMENT STUDIES ROHINI, DELHI

ACKNOWLEDGEMENT

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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

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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

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CERTIFICATE 3

CHAPTER 1 INTRODUCTION 1.1 BANKING INDUSTRY

OBJECTIVE OF STUDY 5

1.2 CORPORATE PROFILE 6

CHAPTER 2 INTRODUCTION & EMERGENCE OF CREDIT APPRAISALN 102.1 MEANING OF CREDIT APPRAISAL 132.2 CREDIT RATING SYSTEM 162.3 CREDIT RESTRICTIONS 172.4 CREDIT MONITORING POLICY 20 CHAPTER 3 RELEVANCE OF SME

3.1 INTRODUCTION TO SMALL & MEDIUM ENTERPRISE (SME) 233.2 SME PROCESS OF DENA BANK 253.3 MSMED ACT 273.4 SWOT ANALYSIS OF SMES IN INDIA 33

CHAPTER 4 RETAIL LENDING POLICY4.1 INTRODUCTION 344.2 NEED OF RETAIL BANKING 354.3 STRETEGIES OF RETAIL BANKING 36 4.4 RISK MITIGATION 384.5 SCHEMES 40

CHAPTER 5 CASE STUDY 41

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

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 STANDARDS OF CUSTOMER SERVICE. IN THIS DIRECTION, THE BANK HAD DRAWN DENA VISION 2010. VISION GOAL ENVISAGE ACHIEVING ADVANCE

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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 AMONG SIX PUBLIC SECTOR BANKS SELECTED BY THE WORLD BANK FOR SANCTIONING A LOAN OF RS.72.3 CRORES FOR AUGMENTATION OF TIER-II CAPITAL UNDER FINANCIAL SECTOR DEVELOPMENTAL PROJECT IN THE YEAR 1995.

ONE AMONG THE FEW BANKS TO RECEIVE THE WORLD BANK LOAN FOR TECHNOLOGICAL UPGRADATION AND TRAINING.

LAUNCHED A BOND ISSUE OF RS.92.13 CRORES IN NOVEMBER 1996.

MAIDEN PUBLIC ISSUE OF RS.180 CRORES IN NOVEMBER 1996.

INTRODUCED TELE BANKING FACILITY OF SELECTED METROPOLITAN CENTERS.

DENA BANK HAS BEEN THE FIRST BANK TO INTRODUCE:

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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 OF GREAT VALUE,    STAFF - POSITIVE WORK ENVIRONMENT AND OPPORTUNITY FOR   GROWTH AND ACHIEVEMENT,  SHAREHOLDERS - SUPERIOR FINANCIAL RETURNS,  COMMUNITY - ECONOMIC GROWTH

VISION

  DENA BANK WILL EMERGE AS THE

  MOST PREFERRED BANK OF CUSTOMER CHOICE

  IN ITS AREA OF OPERATIONS, BY ITS

  REPUTATION AND PERFORMANCE

DEPOSIT SCHEMES

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) Dena Samruddhi Deposit Scheme

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(ii) Dena Recurring Deposit Scheme(iii) Dena Minors Saving Scheme(iv) Dena Freedom Deposit Scheme(v) Dena Savifix Deposit Scheme(vi) Dena Senior Citizen Deposit Scheme(vii) Dena Safe Deposit Locker Rent Care Deposits Scheme(viii) Dena Jeevan SB Scheme(ix) Dena Alpa Bachat Khata Deposit Scheme(x) Dena Premium Current Account Scheme(xi) 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.

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

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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 CREDIT APPRAISAL

CREDIT APPRAISAL IS DIVIDED INTO THREE HEADS NAMELY:1.CORPORATE CREDIT

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2.SME’S3.RETAIL

1.1 CORPORATE CREDIT : INCLUDES LIMITS: 1) FUND BASED 2) NON- FUND BASED

1) FUND BASED: A) CASH CREDIT LIMIT – THIS IS ASSESSED ON THE BASIS OF THE FOLLOWING METHODS AS SHOWN BELOW:

METHODS OF ASSESSMENTFOR NBFCS NOF METHOD

FOR CREDIT LIMITS UPTO RS.2 CRORE (RS.5 CRORE IN CASE OF SSIS)

TURNOVER METHOD

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 UNIFORM AND WORKING CAPITAL REMAINS MORE OR LESS STABLE

MODIFIED MPBF METHOD

FOR INDUSTRIES, WHERE OPERATIONS ARE SEASONAL OR PROJECT BASED IN NATURE LIKE, TEA, SUGAR, SOFTWARE, CONTRACTORS, BUILDERS & DEVELOPERS ETC.

CASH BUDGET METHOD

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

1) APPLICANT

2) BENEFICIARY

3) ISSUING/OPENING BANK

4) ADVISING BANK

5) CONFIRMING BANK

6) NOMINATED/ NEGOTIATING BANK

7) REIMBURSING BANK

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TYPES OF LETTER OF CREDIT

1) RECOVRABLE AND IRRECOVERABLE LETTER OF CREDIT

2) SIGHT CREDIT AND ACCEPTANCE (USANCE) CREDIT

3) RED CLAUSE & GREEN CLAUSE LETTERS OF CREDIT

4) REVOLVING LETTER OF CREDIT

5) TRANSFERABLE AND BACK TO BACK LETTER OF CREDIT

6) 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 (THE CLIENT ON WHOSE BEHALF THE GURANTEE IS BEING ISSUED),THE BENEFICIARY (TO WHOM THE GURANTEE ISSUED )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 GURANTEEA 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 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.

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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.

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.

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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 PARAMETERSA 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 BORROWER

INDICATIVETOTAL D/E RATIO

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

A)

B)C)D)E)F)

TOTAL DEBT EQUITY RATIO INDUSTRIES (MEDIUM & LARGE)

INDUSTRIES (SSI)TRADERS SHIP BREAKING SERVICE INDUSTRY

3.5:1

4:15:16:15:15:1

4.5:1

5:16:17:16:16:1

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CURRENT RATIO:

SR. NO. ASSESSMENT METHOD RATIO (INDICATIVE)

1 TURNOVER OVER METHOD 1.10:1

2 MODIFIED MPBF METHOD :-

I)WORKING CAPITAL LIMIT UPTO RS.10.00 CRORE

II)WORKING CAPITAL LIMIT ABOVE RS.10.00 CRORE

1.17:1 #

1.25:1 #

# 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.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.

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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 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; AND4) 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:

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1) FITCH2) MOODYS3) 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 ListPlantation firms in the nature of NBFCsUnregistered NBFCsPartnership 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 ListRegistered NBFCsChits/Chit Funds & Credit/Thrift Cooperative Societies Marriage Hall Film IndustryCinema HallT V SerialsEntertainment & Amusement ParksSolvent Oil Extraction / Soya IndustryVegetable Oil and Vanaspati SectorShip BreakingManufacturing & Trading of LiquorChemical IndustriesFertilizer IndustriesCasting of Iron & Steel, Sponge Iron & Ferro Alloys

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Telecom Cables & EquipmentsTextile – 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, 1949NO BANKING COMPANY SHALL:GRANT ANY LOANS OR ADVANCES ON THE SECURITY OF ITS OWN SHARES, ORENTER INTO ANY COMMITMENTS FOR GRANTING ANY LOAN OR ADVANCE TO OR ON BEHALF OF

i) ANY OF ITS DIRECTORSii) ANY FIRM IN WHICH ANY OF ITS DIRECTORS IS INTERESTED AS

PARTNER, MANAGER, EMPLOYEE OR GUARANTORiii) 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 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 TRANSACTIONSd. 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)

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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 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

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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, NON-SUBMISSION 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.

RELEVANCE OF SMES 3.1 SME

INTRODUCTION TO SME

YEAR 1950

IN THE YEAR 1950, SME WAS DEFINED AS A SIZE OF GROSS INVESTMENT IN FIXED ASSETS (INCL. PLANT & MACHINERY, LAND & BUILDING ETC.) NOT EXCEEDING 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.

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 (ORIGINAL COST) DOES NOT EXCEED 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

19

PLANT AND MACHINERY (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

3.2 SME POLICY OF DENA BANK :

INTRODUCTION

21

MEDIUM

SMALL

MICRO

ENTERPRISES

Manufacturing Enterprises(Ceiling on investment in Plant & Machinery)

Service Enterprises(Ceiling on investment in Equipment)

Rs.25lakhs Rs.10lakhs

Rs.5crore Rs.2crore

Rs.10crore Rs.5crore

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 PER THE FINDINGS OF THE 3RD CENSUS (2002) ON 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.

ABOUT 55 % OF THE TOTAL SSI UNITS WERE LOCATED IN RURAL AREAS. TINY UNITS WITH ORIGINAL INVESTMENT IN PLANT & MACHINERY UPTO RS 25 LAKH NUMBERING 44.26 LAKH FORMED A DOMINATING 99.5 % OF THE TOTAL NUMBER OF SSIS.

ABOUT 10.11 % OF THE SSI UNITS WERE WOMEN ENTERPRISES.

THE 3RD 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. THUS SERVICE SECTOR EMERGED AS THE DOMINANT COMPONENT OF THE TOTAL SSI SECTOR.

AS PER THE 3RD CENSUS REPORT, TOTAL OUTPUT OF THE REGISTERED UNITS IN THE YEAR 2001-02 WAS ESTIMATED TO BE RS 70,861.73 CRORES. THE SSI SECTOR EMPLOYED 2,49,32,763 PERSONS DURING THAT PERIOD. THERE WERE 50606 EXPORTING UNITS ACCOUNTING FOR EXPORTS TO THE TUNE OF RS 14,199.56 CRORES .

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

WITH 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 THE THIRD CENSUS OF SSIS (2002) 39% OF REGISTERED UNITS WERE FOUND CLOSED AND ABOUT 18% OF UNITS HAVING OUTSTANDING LOANS WITH INSTITUTIONAL SOURCES WERE FOUND SICK.

THE PROBLEMS AND CHALLENGES FACED BY THE SMES AND THE FACTORS RESPONSIBLE FOR THEIR SICKNESS ARE SUMMARIZED AS UNDER:

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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 / EQUITY

LACK OF MARKETING SKILLS / POOR MARKETING GOVERNMENT POLICIES

LOW QUALITY IMAGE (LOW ABILITY PERCEIVED) DIFFICULTY IN DEALING WITH GOVT BUYING SYSTEM

MAJOR STRENGTHS OF SME 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 ANOTHER

ENJOYS TAX/DUTY ADVANTAGE

POLICY PACKAGE FOR SMES

CONSIDERING THE ABOVE GOVT OF INDIA ANNOUNCED A POLICY PACKAGE IN AUGUST 2005 TO BOOST ADVANCES TO SME SECTOR. THE PACKAGE ENVISAGED THE FOLLOWING :

PUBLIC SECTOR BANKS WOULD BE ADVISED TO FIX THEIR OWN TARGETS FOR FUNDING SMES IN ORDER TO ACHIEVE A MINIMUM 20% YEAR ON YEAR GROWTH IN CREDIT TO SMES. THE OBJECTIVE IS TO DOUBLE THE FLOW OF CREDIT FROM RS.67,600 CRORE IN 2004-05 TO RS.135,200 CRORE TO THE SME SECTOR BY 2009-10, I.E. WITHIN A PERIOD OF 5 YEARS. PUBLIC SECTOR BANKS WOULD BE ADVISED TO FOLLOW A TRANSPARENT RATING SYSTEM WITH COST OF CREDIT BEING LINKED TO THE CREDIT RATING OF THE ENTERPRISE.SIDBI IN ASSOCIATION WITH CREDIT INFORMATION BUREAU (INDIA) LTD. (CIBIL) WILL EXPEDITE SETTING UP A CREDIT RATING AGENCY.SIDBI IN ASSOCIATION WITH INDIAN BANKS’ ASSOCIATION (IBA) WOULD COLLECT AND POOL COMMON DATA ON RISK IN EACH IDENTIFIED CLUSTER AND DEVELOP AN 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.

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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 OF 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.

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’ EXPOSURE TO SME SECTOR HAS REACHED RS 1,48,651 CRORE BY END MARCH 2008, I.E., IT IS MORE THAN DOUBLED WITHIN A SPAN OF ONLY THREE YEARS AS AGAINST FIVE YEARS AS ENVISAGED IN THE POLICY PACKAGE ANNOUNCED BY GOVT OF INDIA IN AUGUST 2005.

SME 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 ASSOCIATIONS TO ENSURE A STEEP GROWTH PATH FOR THE 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.

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3.3 MSMED ACT

IN LINE WITH THE ANNOUNCEMENTS IN THE POLICY PACKAGE 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. 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 OF THE POLICY:

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. THE POLICY ALSO AIMS TO STRENGTHEN THE ARMS OF FIELD FUNCTIONARIES TO ACQUIRE NEW ACCOUNTS AND THUS INCREASE BORROWER BASE.

APPLICABILITY OF THE POLICY:

OUR BANK’S LOAN POLICY DOCUMENT COVERS POLICY GUIDELINES FOR SANCTIONING FUND BASED CREDIT FACILITIES SUCH AS 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 CAPTIONED POLICY SHALL ALWAYS ACT AS SUPPLEMENTARY AND NOT A SUBSTITUTE FOR OUR BANK’S LOAN POLICY.

25

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 IS AS FOLLOWS : SMALL ENTERPRISES

SMALL (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 SPECIFIED BY THE MINISTRY OF SMALL SCALE INDUSTRIES VIDE ITS NOTIFICATION NO. S.O. 1722(E) DATED OCTOBER 5, 2006 AS FURNISHED IN ANNEXURE I) DOES NOT EXCEED RS. 5 CRORE

SMALL (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 OTHER NOT DIRECTLY RELATED TO THE SERVICE RENDERED OR AS MAY BE UNDER THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT, (MSMED), ACT 2006) DOES NOT EXCEED RS. 2 CRORE.

MICRO (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 SUCH ITEMS AS IN 1.1.1) DOES NOT EXCEED 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 SPECIFIED BY THE MINISTRY OF SMALL SCALE INDUSTRIES VIDE ITS NOTIFICATION

26

NO. S.O. 1722(E) DATED OCTOBER 5, 2006) IS MORE THAN RS. 5 CRORE BUT DOES NOT EXCEED RS. 10 CRORE.

MEDIUM (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) 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 SERVICE SECTOR

ORIGINAL INVESTMENT IN PLANT & MACHINERY

ORIGINAL INVESTMENT IN EQUIPMENTS

MICRO ENTERPRISES UP TO RS.25.00 LACS UP TO RS. 10.00 LACS.SMALL ENTERPRISES FROM RS.25.00 LACS TO

RS.500.00 LACS

FROM RS.10.00 LACS TO RS.200.00 LACS.

MEDIUM ENTERPRISES FROM RS.500.00 LACS TO RS.1000.00 LACS

FROM RS.200.00 LACS TO RS.500.00 LACS.

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] SECTOR WILL INCLUDE CREDIT TO: PERSONS INVOLVED IN ASSISTING THE DECENTRALIZED SECTOR IN THE SUPPLY OF INPUTS AND MARKETING OF OUTPUTS OF ARTISANS, VILLAGE AND COTTAGE INDUSTRIES.COOPERATIVES OF PRODUCERS IN THE DECENTRALIZED SECTOR SECTORS VIZ. ARTISANS, VILLAGE AND COTTAGE INDUSTRIES.FINANCING OF NBFCS OR OTHER INTERMEDIARIES FOR ON-LENDING TO SMALL AND MICRO ENTERPRISES.

GENERAL LENDING METHODS :

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

TURNOVER METHOD. MODIFIED MPBF METHOD.

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CASH FLOW METHOD.

ALL THE FUND BASED EXPOSURES TO THE SME SECTOR UPTO RS.5 CRORES ARE TO BE ASSESSED IN ACCORDANCE WITH THE 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 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 CASE OF WORKING CAPITAL LENDING, THE SANCTIONING AUTHORITIES MAY WAIVE THE BIFURCATION OF FACILITY INTO CASH CREDIT PORTION AND WCDL PORTION.

IN CASE OF FUND BASED WORKING CAPITAL LIMIT A COMBINED LIMIT AGAINST STOCK AND 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 PER RECENT GUIDELINE FROM 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.

RISK MANAGEMENT :

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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 NEW BORROWER HOLDING CREDIT RATING BELOW ‘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. DOWNWARD MIGRATION 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 AUTHORITY / RO.

IN VIEW OF THE FACT THAT EACH BANK IS HAVING SEPARATE RATING PROCESSES AND DISCLOSURE REQUIREMENTS FOR THE PURPOSE OF DISBURSING LOANS, SMES FIND THEMSELVES SPENDING SIGNIFICANT TIME, EFFORT AND MONEY WHILE APPROACHING DIFFERENT BANKS FOR CREDIT. HENCE, TO PROVIDE SMES FASTER ACCESS TO TIMELY AND ADEQUATE CREDIT, A RATING SCHEME FOR SMALL 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 BASED ON THE GUIDELINES OF 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.

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 CONTRIBUTE TO NATIONAL ECONOMIC GROWTH.THEY GENERATE EMPLOYMENT AND HELP IN VITALIZING INDIAN BRAND TO THE WORLD

HELPS IN THE REGIONAL DEVELOPMENT

EXPORT MARKET EXPANSION.TECHNOLOGICAL INNOVATION

WEAKNESS

ENCOUNTERS PROBLEMS DUE TO LACK OF FUNDS.SMES LACK MARKETING SKILLS

SMES ARE NOT FAST IN ADAPTING THE CHANGING TRADE TRENDS

NON AVAILABILITY OF TECHNICALLY TRAINED HUMAN RESOURCES

POOR MANAGEMENT SKILLS

THEY LACK IN TECHNOLOGICAL INFORMATION AND CONSULTANCY SERVICES

OPPORTUNITIES

BILATERAL AND MULTILATERAL TRADE AGREEMENTS

CREDIT SUPPORT IS ENHANCED THEY GET SUPPORT FOR TECHNOLOGICAL UP-GRADATION

COMPREHENSIVE SUPPORT FOR CLUSTER DEVELOPMENT

MARKETING ASSISTANCE AND EXPORT PROMOTION SUPPORT

GROWING DOMESTIC AND INTERNATIONAL MARKETS

THREATS

DUMPING FROM DEVELOPED COUNTRIES

LOT OF DISTRUST BETWEEN SMES AND FINANCIAL INSTITUTIONS

SLOW IMPROVEMENTS IN QUALITY TO MEET THE INTERNATIONAL STANDARDS

VIRTUAL ABSENCE OF ENTERPRISE EDUCATION

POOR INCENTIVE STRUCTURES FOR ENTREPRENEURS

NON-TARIFF BARRIERS FROM DEVELOPED COUNTRIES

30

CHAPTER 4

RETAIL LENDING POLICY

4.1 INTRODUCTION

Definition

RETAIL LENDING IS BASICALLY LENDING TO INDIVIDUALS AS OPPOSED TO INSTITUTIONS/ COMPANIES.

BANKING DEVELOPMENT LEADING TO EMERGENCE OF RETAIL BANKING

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

BANKS TODAY ARE CONCENTRATING ON RETAIL LENDING MAINLY DUE TO FOLLOWINGADVANTAGES:(1) MITIGATE CONCENTRATION RISK

31

(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

ALMMECHANISMS

(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 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

32

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 PROPOSAL.

AFTER SANCTION, THE CPC WILL SEND THE SANCTIONED PROPOSAL TO THE

34

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.

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.

35

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 .

4.DENA AUTO FINANCE SCHEME.

5.DENA RENT SCHEME

6.DENA MORTGAGE LOAN SCHEME

7.DENA TRADE FINANCE SCHEME

36

8.DENA VIDYA LAXMI EDUCATIONAL LOAN SCHEME FOR STUDIES IN INDIA/ ABROAD

9.DENA NIWAS SCHEME.

CHAPTER 5CASE STUDY

CREDIT DEPARTMENT, NEW DELHI REGION

For ApprovalEXECUTIVE DIRECTOR

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.

iii) TO PERMIT LC SUB LIMIT OF RS 15 CRORES (SUB-

37

LIMIT UNDER TERM LOAN FOR IMPORT OF MACHINERIES) SUBJECT TO SIMILAR APPROVAL BY OTHER MEMBER BANKS.

CONCESSIONS IN RATE OF INTEREST

APPLICABLE RATE OF INTEREST AS PER CREDIT RATING EXERCISE

RATE OF INTEREST PROPOSED

CONCESSION ALLOWED

BPLR + 1.75 % +0.50 % (T.P)

BPLR - 0.25 % + 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.

2 %

CONCESSIONS IN PROCESS FEES/ UPFRONT FEES

APPLICABLE FEES AS PER LOAN POLICY

FEES PROPOSED CONCESSION ALLOWED

1.25 % OF THE SANCTIONED LIMIT

0.75% OF THE SANCTIONED TERM LOAN AMOUNT + APPLICABLE TAXES

0.50 %

2. PROFILE

NAME OF BORROWER M/S ALLIED STRIPS LTD.

BRANCH: NAZAFGARH BRANCH REGION: NEW DELHI REGION

ESTABLISHED ON AUGUST 5, 1992WHETHER APPEARING IN

DEALING WITH US SINCE

NEW ACCOUNT STANDARD B LIST N.A

GROUP: NO MAJOR GROUP

WILLFUL DEFAULTER LIST

NO

LINE OF ACTIVITY

MANUFACTURING OF COLD ROLLED CLOSE ANNEALED (CRCA) STEEL

DEFAULTER / CIBIL LIST NO

KEY PERSON/PROMOTER

KEY PERSON MR. MOHINDER KUMAR AGGARWAL, MANAGING DIRECTOR

38

PROMOTER MR. MOHINDER KUMAR AGGARWAL

MULTIPLE / CONSORTIUM

CONSORTIUM EXISTING PROPOSED

LEADER BANK CANARA BANKASSET CLASSIFICATION

N.A STANDARD

OUR SHARE: IN RS. RS. 34 CRORES ASSET CATEGORY AS PER CMC GUIDELINES

N.A P1OUR SHARE: % WISE 20.73 %

FB - % N.A D2K CODES & DESCRIPTION

NFB- %

N.A

ACTIVITY

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

STL- N.A SECTOR NPS

TL-

TOTAL LOAN OF RS. 164 CRORES OUR SHARE – RS. 34 CRORES

SPECIAL CATEGORY

SYNDCATE –M 43

PRIORITY NO

BSR CODE: BASEL II CODE:

RISK WEIGHTAGE PROVISIONING:

CREDIT RISK RATING “BB”, BEST RISK GRADE AS PER ABS DT 31/3/2009

3. NAMES OF DIRECTORS/ PARTNERS / PROPRIETOR & NET WORTH (RS. IN CRORES)

SR. NAME NET WORTH AS ON 31/3/2009

BASED ON CA CERTIFICATE AS ON

1MR. MOHINDER KUMAR AGGARWAL

RS. 1.38 CRORES 31/3/2009

2 MRS. SUNITA AGGARWAL RS. 0.83 CRORES 31/3/2009

39

3 MR. GAURAV AGGARWAL RS. 0.39 CRORES 31/3/2009

4. SHAREHOLDING PATTERN AS ON 31.03.2009SR. NAME NO. OF SHARES HELD PERCENTAGE

HOLDING1 PROMOTERS/FRIENDS &

RELATIVES, RELATED PARTIES/BODY CORPORATE

2934000 75.94 %

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: [RS IN CRORES]BORROWER EXPOSURE EXISTING PROPOSED VARIATION(+/

-)FUND BASED 0.00 34.00 + 34.00NON FUND BASED* 0.00 (15.00) + (15.00)FORWARD COVER 0.00 0.00 0.00TOTAL CREDIT EXPOSURE 0.00 34.00 + 34.00INVESTMENTS 0.00 0.00 0.00OTHER COMMITMENTS 0.00 0.00 0.00TOTAL EXPOSURE 0.00 34.00 + 34.00

GROUP EXPOSUREFUND BASED 0.00 34.00 + 34.00NON FUND BASED* 0.00 (15.00) + (15.00)FORWARD COVER 0.00 0.00 0.00TOTAL CREDIT EXPOSURE 0.00 34.00 + 34.00INVESTMENTS 0.00 0.00 0.00OTHER COMMITMENTS 0.00 0.00 0.00TOTAL 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 OF CONSORTIUM/ MULTIPLE BANKING ARRANGEMENTS (RS. IN CRORES)PARTICULARS % SHARE EXISTING PROPOSED

FB NFB* FB NFBOUR BANK 20.73 % 0.00 0.00 34.00 0.00OTHER MEMBER

40

BANKSCANARA BANK 48.78 % 0.00 0.00 80.00 0.00UCO BANK 30.49 % 0.00 0.00 50.00 0.00TOTAL 100 % 0.00 0.00 164.00 0.00CONSORTIUM MEETING HELD FOR APPROVING THE ABOVE ASSESSMENT –

NO MEETING HAS BEEN HELD

EXISTING LIMITS AND LIABILITIES OF ASL AS PER THE IM BY CANARA BANK, SYNDICATION & NEW PRODUCTS GROUP CANARA BANK

(RS. IN CRORES)

SL. NO FACILITYSANCTIONED

OUTSTANDING – AS ON 30.06.2009

1. TERM LOAN 7.80 4.172. OCC 18.00

19.293. ADHOC# 2.004. WCDL 18.00 18.17*5. BG 9.00 8.796. LC -- 9.00 (100% MARGIN)*OVERDRAWING DUE TO INTEREST.# ADHOC SINCE LIQUIDATED.

UCO BANK (RS. IN CRORES)

SL. NO FACILITYSANCTIONED

OUTSTANDING – AS ON 30.06.2009

1. OCC 24.00 24.19**OVERDRAWING DUE TO INTEREST

THE LIMITS ARE PRESENTLY ASSESSED AT RS. 60.00 CRORES DURING 2009-10.

6 COMPLIANCE TO PRUDENTIAL / INTERNAL EXPOSURE LIMITSAS PER RBI GUIDELINES

AS PER INTERNAL GUIDELINES

INDIVIDUAL 378.29 300.00GROUP 1008.77 600.00WHETHER THE LIMITS PROPOSED EXCEED THE PRUDENTIAL EXPOSURE NORMS (INDIVIDUAL / GROUP)

NO NO

IN CASE OF EXCEEDING, DETAILS OF PERMISSION FROM THE COMPETENT AUTHORITY

N.A

41

7. BRIEF HISTORY OF SANCTIONS INCLUDING REVIEWS AND ADHOCS DURING THE PAST TWELVE MONTHS – N.A

8. PRESENT PROPOSAL:

TO PERMIT 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 (SUB-LIMIT FOR IMPORT OF MACHINERIES) SUBJECT TO SIMILAR APPROVAL BY OTHER MEMBER BANKS.

iii) 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.

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

FACILITY EXISTING OUTSTANDING AS ON

DRAWING POWER

IRREGULAR/ OVERDUE AMOUNT

PROPOSED VARIATION

LIMIT MARGIN (%)

LIMIT MARGIN (%)

A)

FUND BASED

1 LONG TERM LOAN

0.00 0.00 0.00 N.A N.A 34.00 34.14 % + 34.00

TOTAL 0.00 0.00 0.00 N.A N.A 34.00 34.14 % + 34.00B) NON - FUND

BASEDLC SUB - LIMIT UNDER THE TERM LOAN (DA/DP) 90 DAYS

0.00 0.00 0.00 N.A N.A (15.00)

10 % ON DP 10 % ON DA AND FURTHER 10 % ON ACCEPTANCE OF DOCUMENTS

+(15.00)

42

FCNR LOAN/BUYER’S CREDIT – SUBLIMIT UNDER THE TERM LOAN

0.00 0.00 0.00 N.A N.A (15.00)

NIL +(15.00)

TOTAL 0.00 0.00 0.00 N.A N.A 34.00 + 34.00C)

FORWARD COVER

NIL

D) GRAND TOTAL (A+B+C)

0.00 0.00 0.00 N.A N.A 34.00 + 34.00

E)

INVESTMENT EXPOSURE

NIL

TOTAL EXPOSURE 0.00 0.00 0.00 N.A N.A 34.00 + 34.00

* 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

43

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

PERSONAL GUARANTEE OF THREE DIRECTORS

SL. NO. NAME NW AS ON

31.03.2009

1. MR. MOHINDER KUMAR

AGARWAL

RS.1.38 CRORE

2. MRS. SUNITA AGARWAL RS.0.83 CRORE

3. MR. GAURAV AGARWAL 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

ii) REASONS IN CASE OF DILUTION OF SECURITY COVERAGE: N.A

C) DATE OF CREATION OF CHARGE: WILL BE DONE

D) 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 WORTH

AS ON BASED ON CA CERTIFICATE AS

44

31/3/2009 ON

MR. MOHINDER KUMAR AGGARWAL

DIRECTOR RS. 1.38 CRORES

31/3/2009

MRS. SUNITA AGGARWAL DIRECTOR RS. 0.83 CRORES

31/3/2009

MR. GAURAV AGGARWAL DIRECTOR RS. 0.39 CRORES

31/3/2009

NOTE: NET WORTH OF THE GUARANTORS INCLUDE THEIR INVESTMENT IN THE SUBJECT COMPANY AND GROUP COMPANIES.

(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 EXISTIN

GPROPOSED

CREDIT RATING SCORE BASED ON AUDITED BALANCE SHEET FOR THE YEAR ENDING 31ST MARCH 2009

N.A 56 OUT OF 74 I.E 75.68 %

APPLICABLE INTEREST RATE AS PER CREDIT RATING

N.A BPLR + 1.75 % + 0.50 % (T.P)

INTEREST RATE PRESENTLY CHARGED AND PROPOSED

N.A 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 BANK

N.A BPLR+0.75% PA PRESENTLY 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.APROCESSING CHARGES/ UPFRONT FEES 0.75% OF THE SANCTIONED

TERM LOAN AMOUNT + APPLICABLE TAXES

- CREDIT RATING WORK SHEET FURNISHED AS ANNEXURE 1

a) FACTORS CONTRIBUTING TO THE UPGRADATION / SLIPPAGE IN CREDIT RATING: N.A

45

b) 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 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 PROCESS FEES/ UPFRONT FEES

APPLICABLE FEES AS PER LOAN POLICY

FEES PROPOSED CONCESSION ALLOWED

1.25 % OF THE SANCTIONED LIMIT

0.75% OF THE SANCTIONED TERM LOAN AMOUNT + APPLICABLE TAXES

0.50 %

TO BE IN LINE WITH THE LEAD BANK, WE ARE PROPOSING AND RECOMMENDING THE PROCESS FEES/ UPFRONT FEES AS STATED ABOVE.

IV. PERMISSIONS FOR DEVIATIONS, ISSUE OF NOCS ETC & CONCESSIONS IN SERVICE CHARGES – N.A

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, HARYANA-124507.

46

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.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.

47

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, 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

48

FOCUSED ON STRATEGIC GROWTH ASPECTS OF THE COMPANY AND WORKING TO ACHIEVE THE SAME.

KEY MANAGEMENT PERSONNEL

THE PROFESSIONAL TEAM MEMBERS OF COMPANY ARE MENTIONED BELOW:

NAME DESIGNATION QUALIFICATIONEXPERIENCE ( YEARS)

SH. MAHESH SHARMA

G.M. (MARKETING) M.B.A. 24

SH. RAVINDER GUPTA

MANAGER (MARKETING) M.B.A. 18

SH. KULDEEP SINGH

G.M. (PRODUCTION & PLANNING)

B.TECH (MECHANICAL)

20

SH. SUDHIR JANGRA

MANAGER (WORKS)B.TECH. (ELECTRICAL)

18

SH. B.M. SHARMA MANAGER (ELECTRICALS)DIPLOMA IN ELECTRICAL

21

SH. N.K. PANDEYMANAGER (PRODUCTION & PLANNING)

B.TECH (MECHANICAL)

15

SH. DINESH JAIN MANAGER (ADMN.) MBA 14SH. 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 STEEL-CONSUMING SECTORS LIKE CONSTRUCTION

49

AND AUTOMOBILES REFLECTED IN AN IMPROVEMENT IN PRODUCTION AND CONSUMPTION OF STEEL.

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 SECTORGROWTH FORECASTED

(2007-08-2012-13 CAGR)PIPES AND TUBES 14%CR UNITS & GALVANISED SECTOR 9.40%AUTOMOBILES 8.50%RAILWAYS 15%LPG CYLINDERS 8%PORT & SHIP BUILDING 10%ENGINEERING 12%CONSTRUCTION 15%GOVERNMENT 8%OTHERS 8%OVERALL 11.40%SOURCE: CRISIL RESEARCH

THE CONSTRUCTION SECTOR INVESTMENTS ARE EXPECTED TO DOUBLE FROM RS 17 TRILLION TO RS 34 TRILLION OVER THE 5-YEAR PERIOD ENDING 2011-12 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)

DESCRIPTION2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

BHUSHAN STEEL LTD.           -             -             -   1.9 1.9 3.8 3.8BHUSHAN POWER & STEEL           -   0.9 0.9 0.9 0.9 0.9 0.9ESSAR STEEL 3.6 4.6 4.6 4.6 4.6 4.6 4.6ISPAT INDUSTRIES 3 3 3.6 3.6 3.6 3.6 4.8JSW STEEL LTD. 2.8 3.5 3.5 5.5 8.5 12.5 12.5JSPL           -   1 1 1 1 1 5LLOYDS STEEL INDUSTRIES LTD.

0.6 0.6 0.6 0.6 0.6 0.6 0.6

POSCO (INDIA)           -             -             -             -             -             -   2.5STEEL AUTHORITY OF INDIA LTD

7.1 7.2 8.1 8.5 10.4 11 11

 TATA STEEL 3.2 4.5 7 9 9 11 12.3 OTHERS 2 2 2 2 2 2 2 TOTAL 22.3 27.3 31.3 37.6 42.5 51 60SOURCE: CRISIL RESEARCH

11. INDUSTRY SCENARIOa. INDUSTRY CATEGORISATION MANUFACTURINGb. DEMAND AND SUPPLY SITUATION OF

THE PRODUCT – PRESENT AND PROJECTED (SOURCE OF INFORMATION)

AS EXPLAINED ABOVE

c. MAJOR PLAYERS & THEIR MARKET SHARE

AS EXPLAINED ABOVE

d. BANK’S EXPOSURE IN THIS INDUSTRY

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 %.

e. NPA POSITION NPA % IS 0.003 %.f. CYCLICAL TRENDS NOg. GOVT. POLICIES FAVOURABLEh. 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

N.A

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i. AVAILABILITY OF RAW MATERIALS, LABOUR, INFRASTRUCTURAL ADVANTAGES

EASILY AVAILABLE AS THE NEW PROJECT IS BEING INSTALLED NEAR TO THE EXISTING MANUFACTURING UNIT

j. WHAT ARE INTERNAL & EXTERNAL ADVANTAGES OF THE BORROWER/TECHNOLOGY USED

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 OPPORTUNITIES

GROWING DOMESTIC DEMAND IN THE AUTOMOTIVE AND INFRASTRUCTURE SEGMENT

m. WHAT ARE THE THREATS NO THREAT AS SUCHn. 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 EXISTINGINSTALLED CRCA 40000

CR MILL 60000HRPO 100000

THE INSTALLED CAPACITY OF MAJOR MANUFACTURING FACILITIES OF PROPOSED PROJECT IS AS FOLLOWS:

MANUFACTURING FACILITY INSTALLED CAPACITY

PICKLING LINE 350000 TPA

COLD ROLLING MILL 300000 TPA

ANNEALING FURNACE 300000 TPA

14. FINANCIAL INDICATORS DESCRIPTION (RS. IN CRORES)YEAR - > 2007-08 2008-09 2009-10 2010-11  AUDITED AUDITED (ESTIMATES) (PROJECTIONS)CURRENT LIABILITIESBANK BORROWINGS - 60.31 60.34CANARA BANK 32.87 35.91UCO BANK - 23.91

53

TERM LOAN INSTALLMENTS DUE WITHIN ONE YEAR.DEPOSIT / UNSECURED LOANSUNDRY CREDITORS 0.28 0.31 3.32 3.32PROVISION/ADVANCE PAYMENT 0.96 2.76 0.66 0.66OTHER CURRENT LIABILITIES 1.67 1.65 3.15 3.15TOTAL (A) 35.78 64.54 67.44 67.47 TERM LOAN-CANARA BANK 4.03 4.61 30.82 125.67UNSECURED LOAN - VEHICLE LOAN 1.04 1.20 0.95 0.71UNSECURED LOAN - FROM SHAREHOLDERS AND DIRECTORS 17.11 18.98 18.99 18.99PROVISION FOR GRATUITYCREDITORS FOR CAPITAL GOODS 0.46 0.29DEFERRED TAX LIABILITY 0.85 0.83 0.83 0.83TERM LIABILITIES 23.49 25.91 51.59 146.20TOTAL OUTSIDE LIABILITIES 59.27 90.45 119.03 213.67 NET WORTHCAPITAL 3.19 3.86 43.42 65.00RESERVE & SURPLUS 5.40 9.24 12.88 16.86SHARE PREMIUM 3.81 16.63 16.63 16.63REVALUATION RESERVEMISC. EXPEND. NOT WRITTEN OFFNET WORTH (C) 12.40 29.73 72.93 98.49 TOTAL LIABILITIES (A+B+C) 71.67 120.18 191.96 312.16 CURRENT ASSETSCASH & BANK BALANCE 0.08 1.24 20.23 21.28RECEIVABLES- DOMESTICS 31.91 68.75 52.31 52.31EXPORTSINVENTORY 25.99 29.67 33.81 33.85LOANS & ADVANCES 1.64 5.70 3.28 3.28OTHER CURRENT ASSETS 2.91 2.91

54

TOTAL (E) 59.62 105.36 112.54 113.63NET FIXED ASSETS 11.24 13.73 12.28 198.51RECEIVABLE MORE THAN 6 MONTHS 0.47 0.59INVESTMENT IN SHARES 0.01 0.01 0.01 0.01CAPITAL WORK IN PROGRESS - - 67.12 -OTHER NON-CURRENT ASSETS 0.33 0.49 TOTAL ASSETS: ( E+F+G+H ) 71.67 120.18 124.83 312.15FINANCIAL PERFORMANCENET SALES DOMESTICS 181.58 204.73 193.16 193.16EXPORTSEXPORTS INCENTIVESLESS EXCISE DUTY 26.11 22.72 14.97 14.97GROSS SALES 155.47 182.01 178.19 178.19GROWTH #REF! 0.13 (0.13) -GROSS PROFIT 3.36 7.67 6.30 6.28DEPRECIATION 1.30 1.54 1.45 1.49TAXATION 0.58 2.10 1.22 0.81NET PROFIT 1.48 4.03 3.63 3.98INTEREST 4.20 7.31 7.40 7.22PROFIT RETAINEDPBDIT 7.56 14.98 13.70 13.50RATIO ANALYSISCURRENT RATIO 1.67 1.63 1.67 1.68TOTAL DEBT EQUITY RATIO 4.78 3.04 1.63 2.17GROSS PROFIT /SALES % 1.85 3.75 3.26 3.25NET PROFIT / SALES % 0.82 1.97 1.88 2.06DEBTORS / SALES (DAYS) 2.14 4.06 3.25 3.25NET WORKING CAPITAL 23.84 40.82 45.10 46.16INTEREST COVERAGE RATIO 1.66 1.76 1.69 1.76CREDITORS/PURCHASE (DAYS) 0.02 0.02 0.25 0.25CURRENT ASSETS TO TURNOVER RATIO 3.11 2.07 2.24 2.24

15. COMMENTS ON FINANCIAL INDICATORS, IN BRIEF:

55

SALES

NET SALES INCREASED BY 17.07 % IN FY 2008-09 AS COMPARED TO FY 2007-08. 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% 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

56

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)

PARTICULARS31.03.2006(ABS)

31.03.2007(ABS)

31.03.2008(ABS)

31.03.2009(PBS)

SHARE CAPITAL 421.06 421.06 421.06 421.06RESERVES & SURPLUS 3779.64 3779.23 3778.85 3778.41TNW 4200.70 4200.29 4199.91 4199.47INVESTMENTS 4196.50 4196.50 4196.50 4196.50TOTAL INCOME 0.33 0.27 0.29 0.23PAT (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 OF THE COMPANY. THE MAIN OBJECT OF THE COMPANY IS TO CARRY ON THE BUSINESS OF TRADING OF SHARES.

(RS. IN LAKHS)

PARTICULARS31.03.2006(ABS)

31.03.2007(ABS)

31.03.2008(ABS)

31.03.2009(PBS)

SHARE CAPITAL 106.00 106.00 106.00 106.00RESERVES & SURPLUS 2124.00 2123.95 2124.00 2124.00TNW 2230.00 2229.95 2230.00 2230.00INVESTMENTS 2229.00 2229.00 2219.10 2229.00TOTAL INCOME 0.06 -- 0.69 0.49PAT 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)

PARTICULARS31.03.2006(ABS)

31.03.2007(ABS)

31.03.2008(ABS)

31.03.2009(PBS)

SHARE CAPITAL 72.42 72.42 72.42 72.42

57

RESERVES & SURPLUS 1714.08 1714.31 1714.47 1714.51TNW 1786.50 1786.73 1786.89 1786.93INVESTMENTS 1784.50 1784.50 1784.93 1784.50TOTAL INCOME 0.10 0.45 0.55 0.35PAT 0.00 0.24 0.16 0.03

LIMITS ENJOYED BY ASSOCIATE / GROUP CONCERNS: - N.A AS THESE ARE ONLY INVESTMENT COMPANIESWITH 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.

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: (RS IN CRORES)ESTIMATED SALES TURNOVER FOR THE YEAR 2009-10 193.16ACHIEVEMENT TILL 31/7/2009 AS PER THE OFFICE NOTE OF CANARA BANK

83.60

PRO-RATA ACHIEVEMENT 43.28 %

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

C COMMENTS ON ASSESSMENT OF WORKING CAPITAL WITH JUSTIFICATION – N.A

16. ASSESSMENT OF TERM LOAN –

a. PROJECT IN BRIEF –

58

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 MANUFACTURING FACILITIES OF PROPOSED PROJECT IS AS FOLLOWS:MANUFACTURING FACILITY INSTALLED CAPACITY

PICKLING LINE 350000 TPA

COLD ROLLING MILL 300000 TPA

ANNEALING FURNACE 300000 TPA

THE PROPOSED PROJECT WOULD MANUFACTURE THE FOLLOWING FINAL PRODUCTS;

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.

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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.

d. COST OF THE PROJECT AND MEANS OF FINANCE

a. 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 4.40BUILDINGS & CIVIL WORKS 12.59PLANT & MACHINERY 120.81MISCELLANEOUS FIXED ASSETS 32.00TOTAL HARD COST 169.80PRE-OPERATIVE EXPENSES 3.14IDC 12.34CONTINGENCY 8.49

WORKING CAPITAL MARGIN MONEY 55.23

TOTAL PROJECT COST 249.00

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

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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 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:

SI PARTICULARS AREA (SQ. M)

1MAIN PLANT FACILITIES – PICKLING, COLD ROLLING, ANNEALING, MOTORING & FINISHING BAYS

10250

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2AUXILIARY FACILITIES – C/R , SUBSTATION, WTP, PUMP HOUSE, MAINTENANCE SHOP ETC.

1,350

3ANCILLARY FACILITIES – ADMINISTRATIVE OFFICE, CANTEEN, STORES, WEIGHBRIDGE, SECURITY OFFICE ETC.

340

TOTAL 11,940

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

1MAIN PLANT FACILITIES INCLUDING - PICKLING, COLD ROLLING, ANNEALING, MOTORING & FINISHING BAYS

10.54

2AUXILIARY FACILITIES INCLUDING – C/ROOM, S/S, WTP, PUMP HOUSE, MAINTENANCE SHOP ETC.

1.56

3ANCILLARY FACILITIES INCLUDING – ADMIN OFFICE, CANTEEN, STORES, WEIGHBRIDGE, SECURITY OFFICE

0.49

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 RATED CAPACITYHR SLITTER 350000 TPASEMI CONTINUOUS PICKLING LINE 350000 TPA

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4 HI COLD ROLLING MILL (OLD M/C) 300000 TPABELL TYPE ANNEALING FURNACE 300000 TPA4 HI SKIN PASS MILL 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.

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 3.00 SEMI CONTINUOUS PICKLING LINE 9.00 ANNEALING FURNACES 16.00 CRANES & MATERIAL HANDLING EQUIPMENTS 8.00TOTAL 36.00 FREIGHT & INSURANCE @ 5% 1.80 TAXES & DUTIES @ 11% 4.16 SUB TOTAL LOCAL EQUIPMENT COST 41.96 SPARES 2.09 EQUIPMENT FOUNDATION & ERECTION 9.71

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SUB TOTAL 120.81

THE ORDERING STATUS OF THE PLANT AND MACHINERY FOR THE PROPOSED PROJECT IS GIVEN BELOW:

SL.NO

EQUIPMENTNEW/OLD STATUS SUPPLIER

1.4 HI REVERSING COLD ROLLING MILL

OLD ORDEREDM/S SHERMAN INTERNATIONAL (USA)

2. ROLL GRINDER OLD ORDERED

3. ANNEALING FURNACES NEW ORDEREDALLIED FURNACES, MUMBAI

4. SKIN PASS MILLTO BE ORDERED IN 1 MONTH5. CR SLITTER

6. CUT-TO-LENGTH LINE7. HR SLITTER

TO BE ORDERED IN 1 MONTH8.

SEMI-CONTINUOUS PICKLING 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 AMOUNTPOWER DISTRIBUTION SYSTEM INCL. DG SET 17.00FUEL & OTHER UTILITIES 2.00WATER SYSTEM 2.00LABORATORY WORKSHOP 1.00

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MISC. EQUIPMENT 7.00PIPING, ERECTION OF UTILITIES 3.00TOTAL 32.00

CONTINGENCY

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 2011-12 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 34.14LONG TERM DEBT – FROM BANKS 164.00 65.86TOTAL 249.00 100.00

EQUITY - PROMOTERS’ CONTRIBUTION

PROMOTERS INCLUDING GROUP COMPANIES, FAMILY MEMBERS, RELATIVES, FRIENDS AND ASSOCIATES WOULD CONTRIBUTE EQUITY CAPITAL OF RS. 85 CRORE TOWARDS

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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. LONG TERM DEBT EQUITY

YEAR - > 2007-08 2008-09 2009-10 2010-11 DESCRIPTION AUDITED AUDITED (ESTIMATES) (PROJECTIONS)LONG TERM DEBT EQUITY RATIO 1.89 0.87 0.71 1.48

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)

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

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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 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:

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SYSTEM MAKE-UP (CU M / HR) MAKE-UP (MLD)DIRECT COOLING 45 1.08INDIRECT COOLING 36 0.86POTABLE WATER 9 0.22TOTAL 90 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 SCMD / MT ANNUAL CONSUMPTION (MSCM)PICKLING LINE 10 3.5ANNEALING 30 9.0TOTAL 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 PRE-DISBURSEMENT 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,

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“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

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

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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 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)

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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 START DATE END DATELAND ACQUISITION ALREADY ACQUIREDSITE DEVELOPMENT STARTED JULY 2009BUILDING & CIVIL WORKS STARTED JULY 2010PLANT AND MACHINERYPLACEMENT OF ORDER STARTED AUGUST 09DELIVERY AT SITE JANUARY 2010 SEPTEMBER 2010ERECTION FEBRUARY 2010 NOVEMBER 2010COMMISSIONING & INTERLINKING NOVEMBER 2010 JANUARY 2011TRIAL RUNS FEBRUARY 2011 MARCH 2011SCHEDULED COMMERCIAL OPERATIONS DATE (SCOD)

APRIL 1, 2011

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

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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;

(RS. IN CRORES)

DESCRIPTION AMOUNT LAND 3.90CONSTRUCTION OF SHED AND EXPENSES FOR BUILDING AND SITE DEVELOPMENT

4.74

ADVANCE FOR PLANT & MACHINERY 10.43

ADVANCE TO CONSULTANTS 0.70OTHER EXPENSES 0.36TOTAL EXPENDITURE INCURRED TILL DATE 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 ITEM AGENCYSTATUS / LIKELY APPROVAL

1. LAND ACQUISITION PRIVATE LAND ACQUIRED BY ASL2. WATER BOREWELL AVAILABLE

3. POWER HARYANA STATE ELECTRICITY BOARD

TO BE OBTAINED FOR PROPOSED PROJECT

4.POLLUTION CLEARANCE

HARYANA STATE POLLUTION CONTROL BOARD

TO BE OBTAINED FOR PROPOSED PROJECT

5. GAS AVAILABILITY IOCLAPPLIED FOR ADDITIONAL GAS

6.CENTRAL EXCISE REGISTRATION

CENTRAL EXCISE DEPT. AVAILABLE

7.FACTORIES ACT REGISTRATION

FACTORIES, HARYANA AVAILABLE

8. FACTORY LICENSE FACTORIES, HARYANATO BE OBTAINED FOR THE PROPOSED PROJECT

9.SALES TAX REGISTRATION

SALES TAX DEPARTMENT

AVAILABLE

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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)

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

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

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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

l. CAPACITY UTILISATION (%)

THE INSTALLED CAPACITY OF MAJOR MANUFACTURING FACILITIES OF PROPOSED PROJECT IS AS FOLLOWS:

MANUFACTURING FACILITY INSTALLED CAPACITY

PICKLING LINE 350000 TPA

COLD ROLLING MILL 300000 TPA

ANNEALING FURNACE 300000 TPA

m. 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 OVERALL DSCR

DECREASE IN CAPACITY UTILIZATION BY 5% 1.50

INCREASE IN RATE OF INTEREST OF PROPOSED TERM LOAN BY 2%

1.46

INCREASE IN RAW MATERIAL COST BY 5% AND INCREASE IN FINISHED PRODUCTS COST BY 2%

1.11

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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.

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. ASSESSMENT OF NON-FUND BASED LIMITS –

A. 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 NON- FUND 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

19.VIEWS/COMMENTS ON THE CONDUCT OF THE ACCOUNT – N.A

a. A. ADVERSE FEATURES AFFECTING CREDIT DECISION AND ACTION PROPOSED (INCLUDING NON COMPLIANCE TO TERMS AND CONDITIONS OF SANCTION AND PRESENT POSITION) - N.A

b. MAJOR INSPECTION / AUDIT IRREGULARITIES POINTED OUT IN THE LAST INSPECTION REPORT - N.A

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c. 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

d. POSITION OF STATUTORY DUES AND INCENTIVES RECEIVABLES

PROVIDENT FUND, ESI AND SUPERANNUATION CONTRIBUTION PAID UPTO

CA CERTIFICATE TO BE OBTAINED AND KEPT ON RECORD AS STIPULATED IN THE TERMS AND CONDITIONS

WAGES AND SALARIES PAID UPTOSALES TAX PAID UPTOSERVICE TAX PAID UPTOINCOME TAX ASSESSMENT COMPLETED UPTO AND FOR THE YEAR ENDING #ADVANCE TAX PAID FOR THE YEAR ENDINGEXCISE DUTY PAID UPTOMUNICIPAL TAX, OCTROI ETC.INCENTIVES FROM THE GOVERNMENT AND OTHER AGENCIESDISPUTES NOT ACKNOWLEDGED AS DEBTSCONTINGENT LIABILITIES (LIKELY TO TURN INTO LIABILITIES)RECONCILIATION OF DEBTORS/ CREDITORS

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. GROUP DEALINGS/EXPERIENCE & DESIRABILITY OF FURTHER EXPOSURE: N.A

f. RISK ASSESSMENT

RISK ANALYSISTHE 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.

AS SUCH THE MARKET RISK IS CONSIDERED AS NORMAL.

PROJECT IMPLEMENTATION RISK

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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.A22. VIEWS/RECOMMENDATIONS OF THE CREDIT COMMITTEE: CREDIT COMMITTEE MEETING WILL TAKE PLACE AT THE HO LEVEL

23. DISCRETIONARY POWER FOR SANCTION AND FOR APPROVAL OF DEVIATION, IF ANY: EXECUTIVE DIRECTOR

24. 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 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.

78

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 (SUB-LIMIT UNDER TERM LOAN FOR IMPORT OF MACHINERIES) SUBJECT TO SIMILAR APPROVAL BY OTHER MEMBER BANKS.

iii) 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.

ON THE TERMS AND CONDITIONS GIVEN IN ANNEXURE II AND ON THE BASIS OF THE FOLLOWING,

i) 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,

ii) FINANCIALS OF THE COMPANY BEING SATISFACTORY,iii) 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.

(RS IN CRORES) FACILITY EXISTING PROPOSED VARIATION

LIMIT MARGIN (%)

LIMIT MARGIN(%)

A) FUND BASED1 LONG TERM LOAN 0.00 0.00 34.00 34.14 % + 34.00

TOTAL 0.00 0.00 34.00 34.14 % + 34.00B) NON - FUND

BASED

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LC (DA/DP) SUB – LIMIT UNDER TERM LOAN

0.00 0.00 (15.00) 10 % ON DP10 % ON DA AND FURTHER 10 % ON ACCEPTANCE OF DOCUMENTS

+(15.00)

FCNR LOAN/BUYER’S CREDIT - SUB LIMIT UNDER TERM LOAN

0.00 0.00 (15.00) NIL +(15.00)

TOTAL 0.00 0.00 (15.00) + (15.00)D) TOTAL EXPOSURE 0.00 0.00 34.00 + 34.00* AVAILABILITY OF FCNR LOAN DEPENDS ON AVAILABILITY OF FUNDS AT THAT TIME.

WE ALSO RECOMMEND THE FOLLOWING CONCESSIONS AND OTHER APPROVALS REQUIRED AS SHOWN BELOW,

CONCESSIONS IN RATE OF INTEREST

APPLICABLE RATE OF INTEREST AS PER CREDIT RATING EXERCISE

RATE OF INTEREST PROPOSED

CONCESSION ALLOWED

BPLR + 1.75 % +0.50 % (T.P)

BPLR - 0.25 % + 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.

2 %

CONCESSIONS IN PROCESS FEES/ UPFRONT FEES

APPLICABLE FEES AS PER LOAN POLICY

FEES PROPOSED CONCESSION ALLOWED

1.25 % OF THE SANCTIONED LIMIT

0.75% OF THE SANCTIONED TERM LOAN AMOUNT + APPLICABLE TAXES

0.50 %

PROPOSED TERMS OF SANCTION AS PER ANNEXURE 2

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ANNEXURE- 1 DENA BANKFOR EXISTING BORROWERS AND NEW BORROWERS FOR EXISTING UNITS FOR FUND BASED LIMITS ABOVE RS.10.00 LACCREDIT RATING REPORT

BRANCH AND REGION NAZAFGARH BRANCHBORROWER M/S ALLIED STRIPS LTD.SANCTIONING AUTHORITY EDDATE OF SANCTION / RENEWAL FRESHCREDIT RATING AS ON 21/4/2009 “BB”, BESTANALYSIS FOR CREDIT RATING DONE BASED ON THE AUDITED BALANCE SHEET AND PROFIT & LOSS A/C OF THE BORROWER FOR THE PERIOD ENDING

31/3/2009

EXISTING BORROWERS WITH EXISTING UNITS MARKS SECURED CREDIT RISK

RATINGGRADE INTEREST SLAB

95% AND ABOVE AAA HIGH – PRIME BPLR90% TO 94% AA MEDIUM – PRIME BPLR + 0.5085% TO 89% A LOW – PRIME BPLR + 1.0080% TO 84% BBB EXCELLENT BPLR + 1.2575% TO 79% BB BEST BPLR + 1.7570% TO 74% B BETTER BPLR + 2.0065% TO 69% C VERY GOOD BPLR + 2.5060% TO 64% D GOOD BPLR + 3.0055% TO 59% E SATISFACTORY BPLR + 3.50

SR. NO.

PARAMETERS MAX. SCORE MAX SCORE OF APPLICABLE PARAMETER

SCORE OBTAINED

1 EXTERNAL / GOVT. POLICY / ENVIRONMENTAL RISK

5 5 3

2 INDUSTRY/ BUSINESS/ SECTOR RISK

20 20 16

3 MANAGEMENT RISK 15 12 114 SECURITY (COLLATERAL) 5 5 15 INCOME VALUE TO BANK 5 0 06 PAST PERFORMANCE 40 32 257 CONDUCT OF THE ACCOUNT 10 0 0

TOTAL MARKS 100 74 5675.68 %

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* 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 MODELFOR EXISTING BORROWERS AND NEW BORROWERS FOR EXISTING UNITS FOR FUND BASED LIMITS ABOVE RS.10.00 LAC

PARAMETERS / RISK FACTORS TO BE RATED FOR EXISTING PROJECTS /UNITS

MAXIMUM SCORE

MAX. SCORE OF APPLICABLE PARAMETER

SCORE ALLOTTED

1 EXTERNAL RISK/ GOVT. POLICY RISK/ ENVIRONMENTAL RISK

5 5 3

2 INDUSTRY / BUSINESS / SECTOR RISK 20 20 16 2.1 INTENSIVENESS OF COMPETITION 2 2 1 2.2 PRESENCE OF SUBSTITUTE ETC. 2 2 1 2.3 BARRIERS TO ENTRY FOR NEW PLAYERS 1 1 1 2.4 BUSINESS RETURNS % 3 3 2 2.5 CYCLICALITY IN EARNINGS, SUBJECT TO

VAGARIES OF NATURE TECHNOLOGICAL OBSOLESCENCE

2 2 2

2.6 TECHNOLOGY ADOPTED BY BORROWER 3 3 3 2.7 DEPENDENCE ON A FEW SUPPLIERS FOR

RAW MATERIAL1 1 1

2.8 BORROWER’S DEPENDENCE ON A FEW CUSTOMERS

1 1 1

2.9 FOREIGN EXCHANGE COMPONENT OF TOTAL BUSINESS

1 1 1

2.10

WHETHER BORROWER DEALING IN PERISHABLE COMMODITY

1 1 1

2.11

DEMAND/SUPPLY GAP IN THE BUSINESS 3 3 2

3 MANAGEMENT RISK 15 12 11 3.1 OWNERSHIP PATTERN 2 2 2 3.2 PAST TRACK RECORD OF THE MANAGEMENT:

- A. SALES 1 1 1 B. FINANCIAL DISCIPLINE 1 1 1 C. FURNISHING INFORMATION 1 0 0 3.3 QUALITY OF THE MANAGEMENT PERSONNEL 1 1 1 3.4 EXPERIENCE OF THE MANAGEMENT 2 2 2

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3.5 PAYMENT RECORD WITH BANKS 2 0 0 3.6 FINANCIAL CONSERVATISM 1 1 1 3.7 MARKET STANDING / CREDIBILITY 2 2 1 3.8 SUPPORT FROM GROUP COMPANIES 1 1 1 3.9 SUCCESSION RISK/PLAN 1 1 14 SECURITY (COLLATERAL) 5 5 15 INCOME VALUE TO THE BANK 5 0 0

6 PAST OPERATING PERFORMANCE VIS-À-VIS

PROJECTIONS AND FINANCIAL POSITION REPRESENTED BY RATIOS/TRENDS

40 32 25

6.1 ACHIEVEMENTS OF BORROWER’S PROJECTIONS OF SALES / GROSS RECEIPTS

5 0 0

6.2 CURRENT RATIO 5 5 5 6.3 TREND ANALYSIS - VARIATION IN CURRENT

RATIO1 1 0

6.4 INTEREST COVERAGE RATIO 5 5 5 6.5 CURRENT ASSET TO TURNOVER RATIO 3 3 3 6.6 DEBT EQUITY RATIO 5 5 2 6.7 TREND ANALYSIS - VARIATION IN DEBT

EQUITY RATIO2 2 2

6.8 ACHIEVEMENT OF PROFIT PROJECTIONS 3 0 0 6.9 PROFITABILITY TO NET WORTH (NET

PROFIT/NET WORTH) I.E RETURN ON NET WORTH

2 2 1

6.10

PROFITABILITY TO SALES (NET PROFIT/SALES)

2 2 0

6.11

CONTINGENT LIABILITIES OF THE BORROWER (TOTAL CONTINGENT LIABILITIES TO TANGIBLE NET WORTH)

2 2 2

6.12

QUALIFICATIONS IN AUDIT REPORT ON THE BORROWER’S BALANCE SHEET AND PROFIT & LOSS A/C.

1 1 1

6.13

DIVERSION OF FUNDS - NO DIVERSION 2 2 2

6.14

GUARANTEE TO GROUP COMPANIES 1 1 1

6.15

INVESTMENT IN GROUP COMPANIES 1 1 1

7 CONDUCT OF THE ACCOUNT 10 0 0 7.1 TIMELY SUBMISSION OF STOCK AND/OR

BOOK DEBTS STATEMENT1 0 0

7.2 COMPLIANCE WITH TERMS AND CONDITIONS OF SANCTION

2 0 0

7.3 TIMELY RENEWAL/REVIEW OF THE ACCOUNT

2 0 0

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7.4 REGULARITY/IRREGULARITY OF TERM LOAN A/C.

1 0 0

7.5 REGULARITY / IRREGULARITY OF THE WORKING CAPITAL FACILITIES

2 0 0

7.6 SUBMISSION OF FFR-I & FFR-II 1 0 0 7.7 CONDUCT OF THE GROUP ACCOUNT, IF ANY 1 0 0 TOTAL MARKS (A) 100 (B) 74 (C) 56 PERCENTAGE OF MARKS SCORED (C/B) X 100 75.68 %

ANNEXURE 2

M/S ALLIED STRIPS LIMITED

TERMS AND CONDITIONS

PURPOSE & TOTAL PROJECT COST

TO SET UP A NEW PROJECT WITH FACILITIES TO 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 RS. 34 CRORES

PROJECT MARGIN 34.14% OF THE PROJECT COST. (50% EQUITY TO BE BROUGHT IN UPFRONT.)

RATE OF INTEREST SENIOR TERM LOANBPLR+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 0.75% OF THE SANCTIONED TERM LOAN AMOUNT + APPLICABLE TAXES

MORATORIUM 6 MONTHS FROM ENVISAGED SCOD. (CONSTRUCTION PERIOD: 24 MONTHS)

REPAYMENT PERIOD- SENIOR DEBT AND

DOOR TO DOOR TENOR OF 9 YEARS (CONSTRUCTION PERIOD 2 YEARS, MORATORIUM 6 MONTHS & REPAYMENT PERIOD 7 YEARS).

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SUB DEBTSECURITY-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 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 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

PERSONAL GUARANTEE OF THREE DIRECTORS

SL.NO NAME NW AS ON 31.03.2009

1. MR. MOHINDER KUMAR AGARWAL

RS.1.38 CRORES

2. MRS. SUNITA AGARWAL RS.0.83 CRORES3. MR. GAURAV AGARWAL RS.0.39 CRORES

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PREPAYMENT PENALTY

2%. NIL IF THE PREPAYMENT IS MADE IN FULL FROM THE INTERNAL ACCRUALS ONLY.

PENAL INTEREST 2% IN CASE OF DEFAULT.LEAD BANK BANK TAKING UP THE HIGHEST SHARE EXPOSURE OR AS

DECIDED BY THE CONSORTIUM.COMMITMENT FEE 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.

OTHER CONDITIONS 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 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.

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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 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.

DOCUMENTATION 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

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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.

TERM LOAN REPAYMENT SCHEDULE (RS. IN CRORES)

PARTICULARS2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

2017-18

2018-19

FIRST QUARTER                  OPENING BALANCE 0.00 27.57 123.64 152.29 128.86 105.43 82.00 58.57 35.14 11.71ADD: DISBURSEMENT 0.00 17.99 40.36 0.00 0.00 0.00 0.00 0.00 0.00 0.00SUB TOTAL 0.00 45.56 164.00 152.29 128.86 105.43 82.00 58.57 35.14 11.71LESS: REPAYMENT DURING THE QUARTER 0.00 0.00 0.00 5.86 5.86 5.86 5.86 5.86 5.86 5.86CLOSING BALANCE 0.00 45.56 164.00 146.43 123.00 99.57 76.14 52.71 29.29 5.86INTEREST 0.00 1.45 5.23 4.85 4.11 3.36 2.61 1.87 1.12 0.37SECOND QUARTER                    OPENING BALANCE 0.00 45.56 164.00 146.43 123.00 99.57 76.14 52.71 29.29 5.86ADD: DISBURSEMENT 0.00 31.03 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00SUB TOTAL 0.00 76.59 164.00 146.43 123.00 99.57 76.14 52.71 29.29 5.86LESS: REPAYMENT DURING THE QUARTER 0.00 0.00 0.00 5.86 5.86 5.86 5.86 5.86 5.86 5.86CLOSING BALANCE 0.00 76.59 164.00 140.57 117.14 93.71 70.29 46.86 23.43 0.00INTEREST 0.00 2.44 5.23 4.67 3.92 3.17 2.43 1.68 0.93 0.19THIRD QUARTER                    OPENING BALANCE 0.00 76.59 164.00 140.57 117.14 93.71 70.29 46.86 23.43  ADD: 10.15 27.35 0.00 0.00 0.00 0.00 0.00 0.00 0.00  

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DISBURSEMENTSUB TOTAL 10.15 103.94 164.00 140.57 117.14 93.71 70.29 46.86 23.43  LESS: REPAYMENT DURING THE QUARTER 0.00 0.00 5.86 5.86 5.86 5.86 5.86 5.86 5.86  CLOSING BALANCE 10.15 103.94 158.14 134.71 111.29 87.86 64.43 41.00 17.57  INTEREST 0.32 3.31 5.23 4.48 3.73 2.99 2.24 1.49 0.75  FOURTH QUARTER                    OPENING BALANCE 10.15 103.94 158.14 134.71 111.29 87.86 64.43 41.00 17.57  ADD: DISBURSEMENT 17.42 19.71 0.00 0.00 0.00 0.00 0.00 0.00 0.00  SUB TOTAL 27.57 123.64 158.14 134.71 111.29 87.86 64.43 41.00 17.57  LESS: REPAYMENT DURING THE QUARTER 0.00 0.00 5.86 5.86 5.86 5.86 5.86 5.86 5.86  CLOSING BALANCE 27.57 123.64 152.29 128.86 105.43 82.00 58.57 35.14 11.71  INTEREST 0.88 3.94 5.04 4.29 3.55 2.80 2.05 1.31 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

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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

A. 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.

B. BUILDING TO BE FULLY INSURED AGAINST FIRE, FLOOD, EARTHQUAKE OR

NATURAL CALAMITY, SRCC WITH BANK'S CLAUSE

C. 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.

D. 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.

E. 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).

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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 MACHINERIES,

READING AS "HYPOTHECATED TO DENA BANK, NAZAFGARH BRANCH."

C. 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.

D. 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 ANY.

2. IN CASE OF BORROWER ENJOYING CC HYPN. FACILITIES, DRAWING POWER TO

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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,

WITHOUT PRIOR PERMISSION OF CONCERNED GENERAL MANAGER.

B. CREDIT REPORT ON THE OVERSEAS SUPPLIER TO BE OBTAINED BEFORE OPENING OF L/C.

IN CASE OF LARGE VALUE L/C.

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

93

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. NATURE OF THE ARRANGEMENT : BUYER’S CREDIT LIMIT

2. SUB – LIMIT OF TERM LOAN : RS. 15 CRORES

OTHER GENERAL TERMS AND CONDITIONS

1. THE PRESCRIBED DOCUMENTS TO BE EXECUTED UNDER THE COMMON SEAL OF THE

COMPANY BACKED BY PROPER RESOLUTION.

2. CHARGE OVER THE ASSETS OF THE COMPANY TO BE FILED/REGISTERED WITHIN 30 DAYS OF CREATION.

3. ALL THE ASSETS CHARGED TO THE BANK TO BE FULLY INSURED AGAINST FIRE, SRCC, FIOOD,

BREAKDOWN OF MACHINERY WITH BANK CLAUSE.

4. THE ADVANCE IS RESTRICTED TO MANUFACTURING/TRADING ACTIVITIES.

5. 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.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.

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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 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

95

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 22/5/200416. 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.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.

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LIST OF ANNEXURES

SL.NO DESCRIPTIONANNEXURE NO.

1.ASSUMPTIONS UNDERLYING PROFITABILITY PROJECTIONS

ANNEXURE I

2.DETAIL OF TOP TEN SHAREHOLDERS OF THE COMPANY AS ON 31.03.2009

ANNEXURE II

3. DETAILS OF EXISTING PLANT & MACHINERY ANNEXURE III4. UTILITY OF PRODUCTS ANNEXURE IV5. PROCESS FLOW DIAGRAM ANNEXURE V6. PROFILE OF M/S LAGAN CONSULTANTS ANNEXURE VI

7.DETAILS OF EQUIPMENTS WITH SPECIFICATIONS AND PROSPECTIVE SUPPLIERS

ANNEXURE VII

8. MANPOWER REQUIREMENTANNEXURE VIII

9. DETAILED PROJECT COST ANNEXURE IX

10.PROJECT COST/ MEANS OF FINANCE- YEAR WISE DETAILS

ANNEXURE X

11.PROJECTED PROFITABILITY (COMPANY AS A WHOLE)

ANNEXURE XI

12. PROJECTED FUND FLOW(COMPANY AS A WHOLE)ANNEXURE XII

13.PROJECTED BALANCE SHEET (COMPANY AS A WHOLE)

ANNEXURE XIII

14. TERM LOAN REPAYMENT SCHEDULEANNEXURE XIV

15.STATEMENT OF DEBT SERVICE COVERAGE RATIO (COMPANY AS A WHOLE)

ANNEXURE XV

16.STATEMENT OF WORKING CAPITAL ASSESSMENT (COMPANY AS A WHOLE)

ANNEXURE XVI

17. TERM SHEETANNEXURE XVII

18. NAMES OF SHAREHOLDER OF GROUP COMPANIESANNEXURE XVIII

19. OTHER DETAILS - MANUFACTURING PROCESSANNEXURE XIX

20. CALCULATION OF IRR AND COST OF FUNDSANNEXURE XX

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ANNEXURE XIX

MANUFACTURING PROCESS

THE MANUFACTURING PROCESS CONSISTS OF THE FOLLOWING:

1. HOT ROLLED COIL SLITTING.2. HOT ROLLED COIL PICKLING IN ACID.3. COLD ROLLING.4. ANNEALING.5. REWINDING.6. TEMPER ROLLING.7. TENSION LEVELING.8. 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 CHEMICAL SECTION, WHERE THE COIL IS UNCOILED WITH A UN-COILER AND FED INTO THE CHEMICAL SECTION AND RECOILED AND DISPATCHED FOR COLD ROLLING.

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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 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

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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 AND OTHER MECHANICAL PROPERTIES.2. TO IMPROVE THE STRIP SHAPE.3. TO IMPROVE SURFACE FINISH.4. MASKING OF YIELD POINT.

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 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

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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:

SI PARTICULARS AREA (SQ. M)

1MAIN PLANT FACILITIES – PICKLING, COLD ROLLING, ANNEALING, MOTORING & FINISHING BAYS

10250

2AUXILIARY FACILITIES – C/R , SUBSTATION, WTP, PUMP HOUSE, MAINTENANCE SHOP ETC.

1,350

3ANCILLARY FACILITIES – ADMINISTRATIVE OFFICE, CANTEEN, STORES, WEIGHBRIDGE, SECURITY OFFICE ETC.

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TOTAL 11,940

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.

PLANT & MACHINERY

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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 RATED CAPACITYHR SLITTER 350000 TPASEMI CONTINUOUS PICKLING LINE 350000 TPA4 HI COLD ROLLING MILL (OLD M/C) 300000 TPABELL TYPE ANNEALING FURNACE 300000 TPA4 HI SKIN PASS MILL 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 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.

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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.

ANNEXURE XX

IRR AND COST OF FUNDS CALCULATION

               PARTICULARS     MAR-10 MAR-11 MAR-12 MAR-13 MAR-14CASH OUTFLOW/INFLOW     -84.01 -115.14 30.85 40.19 44.17               

MAR-15 MAR-16 MAR-17 MAR-18 MAR-1942.36 40.52 38.66 36.74 34.63

MAR-20 MAR-21 MAR-22 MAR-23 MAR-2439.93 33.80 27.44 20.82 18.17

IRR     14.30%        

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COST OF CAPITAL     10.69%        IRR ( SPREAD)     3.61%                 

COST OF FUNDS AMOUNTCOST (POST TAX)    

COST OF CAPITAL        EQUITY 89.78 15% 13.47  DEBT 169.80 8.42% 14.29    259.58   27.76  WEIGHTED AVERAGE COST       10.69%EXCESS OF IRR OVER COST OF EQUITY AND DEBT       3.61%

CONCLUSION:

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

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REFERENCES

CIRCULARS, MANUALS OF DENA BANK, LOAN POLICY DENA BANK WEBSITE

DENA BANK CREDIT DEPARTMENT STAFF SUPPORT

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