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SOURCES OF FUNDING DABUR
Group 2 Sec. M
AVNI KANT RAI
SHURMILA SEN ROY
SACHIN R.
NIVEDITA RAJU
TIRTHANKAR S.
AAMITOJ MONGA
SOURCES USED
3%
1%
37%
41%
0%3%
6%
9%
Proportion Of Funding Sources Used
Share Cap
Share warrants & Outstandings
Total Reserve
Shareholder's Funds
Minority Interest
Secured Loans
Unsecured Loans
Total Debts
Share Capital
Share capital (or capital stock in US English) refers to the portion of a company's equity that has
been obtained by trading stock to a shareholder for cash.
In its strict sense, as used in accounting, share capital comprises the nominal values of all shares
issued (that is, the sum of their par values, as printed on the share certificates). If the allocation
price of shares is greater than their par value, e.g. as in a rights issue, the shares are said to sold
at a premium (called share premium, additional paid-in capital or paid-in capital in excess of
par). Commonly, the share capital is the total of the aforementioned nominal share capital and
the premium share capital.
Various Sources Used:
1. EQUITY AUTHORISED
The number of stock units that a publicly traded company can issue as stated in its articles of
incorporation, or as agreed upon by shareholder vote. Authorized share capital is often not fully
used by management in order to leave room for future issuance of additional stock in case the
company needs to raise capital quickly. Another reason to keep shares in the company treasury is
to retain a controlling interest in the company.
Also be called "authorized stock," "authorized shares" or "authorized capital stock."
In case of our company DaburEquity - Authorised 207.00 for the year ended 2013-14.
86.5 86.76
174.07 174.21 174.29 174.38
00
50
100
150
200
2009 2010 2011 2012 2013 2014
Share Capital
Amount Raised
Advantages
1. Authorised capital, you can increase the capital of promoters/issue shares.
2. Banks prefer to give loan depending on the authorised capital. The ideal debt equity ratio is
2:1. So if you increase the authorised capital, you will get the loans in the above proportion.
Disadvantages
1. Certain costs are incurred at the ROC for increasing the share capital.
2. EQUITY ISSUED
Issued (share) capital is the amount of nominal value of share held by the shareholders. It is the
face value of the shares that have been issued to the shareholders. Issued share capital and share
premium represent the amount invested by the shareholders in the company. It is also known as
the subscribed capital or subscribed share capital.
In case of dabur issued capital is 174.38 for the year ended 2013-14.
Advantage
1. Company can refund the applications if the subscription is more than issued share capital.
Disadvantage
1. It limits a company’s share subscription to the extent to which the capital is issued as
shares.
1. EQUITY SUBSCRIBED
cribed share capital is that part of issued share capital for which investors have subscribed. It
means when a company issues a part of its authorized share capital, investors may or may not
subscribe for all shares. The part of issued share capital which is subscribed by investors is
known as subscribed share capital.
In case of Dabur subscribed capital is 174.38 for the year ended 2013-14.
This shows that all the issued capital was duly subscribed, in due course of time.
EQUITY CALLED UP
Called up share capital is the total amount of issued capital for which the shareholders are
required to pay. This may be less than the subscribed capital as the company may ask
shareholders to pay by instalments. Paid up share capital is the amount of share capital paid by
the shareholders.
In case of Dabur subscribed capital is 174.38 for the year ended 2013-14.
This shows that all the calls that the company made was duly paid up by the customers and there
were no calls in arrears.
EQUITY PAID UP
he amount of a company's capital that has been funded by shareholders. Paid-up capital can be
less than a company's total capital because a company may not issue all of the shares that it has
been authorized to sell. Paid-up capital can also reflect how a company depends on equity
financing.
Paid-up capital is money that a company has received from the sale of its shares, and
represents money that is not borrowed. A company that is fully paid-up has sold all available
shares, and thus cannot increase its capital unless it borrows money through debt or is authorized
to sell more shares.
Paid up share capital in case Daburis 174.38 for th year ended 2013- 2014.
SHARE WARRANT and OUTSTANDING
A share warrant is a bearer document of title to shares and can be issued only by public limited
companies and that to against fully paid up shares only.
A share warrant cannot be issued by a private company, because the share warrant states that its
bearer is entitled to a number of shares mentioned there in. It is a negotiable document and is
easily transferable by mere delivery to another person. The holder of the share warrant is entitled
to receive dividend as decided by the company.
A share warrant is accompanied by attached coupons for the payment of future dividends
Daburholds 88.92 as share warrants in their capital structure.
There are three parts of a share warrant:
(1) The counter foil.
(2) Share Warrant proper.
(3) The dividend coupons.
Total Reserve
Sum of all deposits that a depository institution (bank, building society, credit union, finance
company, insurance company) is allowed to take into account as a part of its legal reserve
requirements. It includes cash in vault, adjusted for cash in transit to or from the central bank,
and current reserve account balance with the central bank.
Various Sources Used:
Securities Premium or share premium
Excess amount received by a firm over the par value of its shares. This amount forms a part of
the non-distributable reserves of the firm which usually can be used only for purposes specified
under corporate legislation. Also called paid-in surplus.
Purpose
Share premium is a non-distributable reserve. The company can use it only for the purposes that
are defined in the bylaws of that company. It cannot be used for purposes not defined in the
company’s laws. Usually the companies are not allowed to use the share premium for payment of
dividends to the shareholders and to set off the operating losses.
704.7 833.41102.23
1438.9
1854.7
2400.8
0
500
1000
1500
2000
2500
3000
2009 2010 2011 2012 2013 2014
Total Reserve
Amount Raised
Advantages:
Share premium can usually be used for paying equity related expenses such as underwriter’s
fees.
It can also be used to issue bonus shares to the shareholders.
The costs and expenses relating to issuance of new shares can also be paid from the share
premium.
Amount Raised: 37.95 INR.
Capital Reserve
A reserve which is created out of the capital profit is known as capital reserve. It is not created
out of the profit earned in normal course of the business. Capital reserve is created out of the
profit earned from some specific transactions of capital nature. Capital reserve is not available
for the distribution to the shareholders. The examples of capital profit from which capital reserve
is created are as follows:
Profit on sale of fixed assets
Profit on sale of investment
Profit on revaluation of assets and liabilities
Premium on issue of shares and debentures
Profit on re-issue of forfeited shares
Discount on redemption of debentures
Profit on purchase of an existing business
Objectives And Advantages
Capital reserve helps in making the organization financially strong.
Capital reserve helps in writing off the capital losses arising from the sale of fixed assets,
shares and debentures.
Capital reserve helps in the issue of fully paid bonus shares to the existing shareholders.
Disadvantages
Capital reserve is not available for the distribution to shareholders.
Capital reserve does not give any indication of operating efficiency of the business.
Capital reserve does not help in making the management responsible to sale old assets at
satisfactory price.
Amount Raised: 21.59 INR.
General Reserves
When any amount is kept separate by a company out of its profit for future purpose then that is called as
general reserves. In other words the general reserves are the retained earnings of a company which are
kept aside out of company’s profits to meet future known or unknown obligations. General reserves are
the part of Profit and Loss Appropriation Account.
In other words the general reserve is a free reserve which can be utilized for any purpose after fulfilling
certain conditions.
On the basis of above definitions general reserve may be utilized for following purposes:-
To settle any unknown future contingencies
To increase the working capital
To strengthen the financial position of the company
To pay dividends to shareholders more than specified limits
General reserves kept to offset some specific future losses.
General reserves include the money kept aside for litigation or revaluation.
General reserves are shown in liabilities side of balance sheet.
Amount Raised: 180.82 INR.
EXCHANGE FLUCTUATION RESERVE
These are assets held by central banks and monetary authorities, usually in different reserve
currencies, mostly the United States dollar, and to a lesser extent the Euro, the Pound sterling,
and the Japanese yen, and used to back its liabilities, e.g., the local currency issued, and the
various bank reserves deposited with the central bank, by the government or financial
institutions.
PURPOSE
Official international reserves assets allow a central bank to purchase the domestic currency,
which is considered a liability for the central bank (since it prints the money or fiat currency as
IOUs). Thus, the quantity of foreign exchange reserves can change as a central bank implements
monetary policy, but this dynamic should be analyzed generally in the context of the level of
capital mobility, the exchange rate regime and other factors.
ADVANTAGE
Price stability
Economic stability and prosperity
DISADVANTAGE
Imports of other countries unemployment and inflation rates
Increase in precious metal reserves.
Potential influence of precious metal producers
Amount Raised: -140.62 INR.
SPECIAL RESERVES
In many countries, you are allowed to use tax depreciation rates for book depreciation. However,
the person reading the balance sheet should still be able to recognize that a different approach
was used. For this purpose, book depreciation is carried out according to the appropriate
requirements, and the depreciation allowed by tax law, which exceeds book depreciation, is
shown as special reserves on the liabilities side of the balance sheet.
PURPOSE
The "special reserves" component allows you to show the difference between book depreciation
and tax depreciation in a derived depreciation area. You can use the values from this derived
depreciation area to create special depreciation reserves for the balance sheet.
Advantages
To stabilize the share's market value.
Legal Requirement for creating special reserves.
Payment of Company Expenditures on Time.
Security of All Types of Financial Risks.
Everything may be in Reserves.
DISADVANTAGES
Special reserve makes the information of financial statement false and inaccurate.
It maybe the strong cause of losing trust and confidence of the shareholders and
outsiders.
Amount Raised: Statutory Reserves 14.93
STATUTORY RESERVES
Statutory reserves are the amount of liquid assets that firms must hold in order to remain solvent
and attain partial protection against a substantial investment loss.
PURPOSE
Statutory reserves lead insurance companies to lose some potential profits as they are unable to
invest these funds into mutual funds or other forms of high yield investments.
ADVANTAGE
Holding statutory reserves reduces the risk of insurance.
DISADVANTAGES
Statutory reserves lead insurance companies to lose some potential profits as they are
unable to invest these funds into mutual funds or other forms of high yield investments.
Amount Raised: Special Reserve 3.14
Other Reserves
Other reserves record the cumulative amount in respect of options granted but not exercised to
acquire shares in a company, less, where applicable, the cost of shares purchased to satisfy share
options exercised.
Purpose or Reason for using that particular source:
Other reserves includes the amount which represents the difference between the nominal value
and issue price of the shares issued arising from a company's rights issue completed in a period
of time.
Advantages
Records the cumulative amount in respect of options granted but not exercised to acquire shares
in a company. Amount Raised: Other Reserves 6.09
Revaluation reserve
An accounting term used when a company has to enter a line item on their balance sheet due to a
revaluation performed on an asset. It arises when the value of an asset becomes greater than the
value at which it was previously carried on the balance sheet, increasing shareholders’ funds.
Purpose or Reason for using that particular source:
Revaluation reserve is used when the revaluation finds the current and probable future value of
the asset is higher than the recorded historic cost of the same asset.
Advantages:
o It records the surplus created when assets are revalued.
Disadvantages:
Because of this revaluation reserves typically are not counted as capital that can be
leveraged for financial institutions, such as a banks, contractual provisions.
Amount Raised: Reserve excluding Revaluation Reserve 2400.80
Shareholder's Funds
Shareholders' funds refers to the amount of equity in a company, which belongs to the
shareholders. The amount of shareholders' funds yields an approximation of theoretically how
much the shareholders would receive if a business were to liquidate.
Purpose or Reason for using that particular source:
Shareholders equity has a major use as it comes from two main sources. The first and original
source is the money that was originally invested in the company, along with any additional
investments made thereafter. The second comes from retained earnings which the company is
able to accumulate over time through its operations.
Advantages:
Shareholders’ funds keeps a track on the following accounts:
Common stock
Preferred stock
Retained earnings
Treasury stock
Disadvantages:
The items within shareholders' funds (share capital, reserves and retained profit) are
usually of little importance, although the amount of distributable reserves might matter to
shareholders if it is too low, and (even more rarely) to creditors if it is too high.
Amount Raised: Shareholder's Funds 2664.10
Minority Interest A significant but non-controlling ownership of less than 50% of a company's voting shares by
either an investor or another company.
A non-current liability that can be found on a parent company's balance sheet that represents the
proportion of its subsidiaries owned by minority shareholders.
Purpose or Reason for using that particular source:
In accounting terms, if a company owns a minority interest in another company but only has a
minority passive position (i.e. it is unable to exert influence), then all that is recorded from this
investment are the dividends received from the minority interest. If the company has a minority
active position (i.e. it is able to exert influence), then both dividends and a percent of income are
recorded on the company's books.
Advantages:
Minority interest is reported on the consolidated income statement as a share of profit
belonging to minority shareholders.
Disadvantages:
It is no longer acceptable to report minority interest in the mezzanine section of the
balance sheet.
Some investors have expressed concern that the minority interest line items cause
significant uncertainty for the assessment of value, leverage and liquidity.
A key concern of investors is that they cannot be sure what part of the reported cash
position is owned by a 100% subsidiary and what part is owned by a 51% subsidiary.
Amount Raised: Minority Interest 7.77
Secured Loans
A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as
collateral for the loan, which then becomes a secured debt owed to the creditor who gives the
loan. The debt is thus secured against the collateral — in the event that the borrower defaults, the
creditor takes possession of the asset used as collateral and may sell it to regain some or all of the
amount originally loaned to the borrower, for example, foreclosure of a home. From the
creditor's perspective this is a category of debt in which a lender has been granted a portion of
the bundle of rights to specified property. If the sale of the collateral does not raise enough
money to pay off the debt, the creditor can often obtain a deficiency judgment against the
borrower for the remaining amount. The opposite of secured debt/loan is unsecured debt, which
is not connected to any specific piece of property and instead the creditor may only satisfy the
debt against the borrower rather than the borrower's collateral and the borrower. Generally
speaking, secured debt may attract lower interest rates than unsecured debt due to the added
security for the lender; however, credit history, ability to repay, and expected returns for the
lender are also factors affecting rates.
90.8 70.2
376.5 403.4
539.1
194.9
0
100
200
300
400
500
600
2009 2010 2011 2012 2013 2014
Secured Loans
Amount Raised
Term Loans
Term loans are the standard commercial loan, often used to pay for a major investment in the
business or an acquisition. The loans often have fixed interest rates, with monthly or quarterly
repayment schedules and a set maturity date.
Bankers tend to classify term loans into two categories:
Intermediate-term loans: This kind of loans usually run less than three years, and are
generally repaid in monthly instalments (sometimes with balloon payments) from a
business's cash flow.
Long-term loans: This type of loans can run for as long as 10 or 20 years and include
additional requirements such as collateral and limits on the amount of additional financial
commitments the business may take on.
Benefits
Term loans are often the best option for established small businesses. If your financial
statements are sound and you're willing to make a substantial down payment, you can receive
financing with minimal monthly payments and total loan costs. The loans are best used for
construction, major capital improvements, large capital investments, such as machinery, working
capital and purchases of existing businesses.
Drawbacks
Term loans require collateral and a relatively rigorous approval process but can help reduce risk
by minimizing costs. Before deciding to finance equipment, borrowers should be sure they can
they make full use of ownership-related benefits, such as depreciation, and should compare the
cost with that leasing.
Also note that when it comes to loans more than $100,000, you need a complete set of financial
statements and must undergo a complete financial analysis by the lending institution.
Banks consider the following "five C's" when making decisions about term loans:
Character: How have you managed other loans (business and personal)? What is your business
experience.
Credit capacity: The bank will conduct a full credit analysis, including a detailed review of
financial statements and personal finances to assess your ability to repay.
Collateral: This is the primary source of repayment. Expect the bank to want this source to be
larger than the amount you're borrowing.
Capital: The bank does not want to be left holding the bag. So what assets do you own that can
be quickly turned into cash if necessary? The bank wants to know what you own outside of the
business -- bonds, stocks or apartment buildings -- that might be an alternate repayment source.
Comfort/confidence with the business plan: How accurate are the revenue and expense
projections? Expect the bank to make a detailed judgment.
Amount Raised: 194.92
Unsecured Loans
A loan that is issued and supported only by the borrower's creditworthiness, rather than by a type of
collateral. An unsecured loan is one that is obtained without the use of property as collateral for the loan.
Borrowers generally must have high credit ratings to be approved for an unsecured loan.
Other Unsecured Short Term Loans
A loan in which the borrowed money provides the mechanism through which the loan is repaid.
Banks lend unsecured, short-term funds in three basic ways: through single-payment notes, lines
of credit, and revolving credit agreements.
PURPOSE
These loans are intended merely to carry the firm through seasonal peaks in financing needs that
are due primarily to buildups of inventory and accounts receivable.
DISADVANTAGE
Because an unsecured loan is not guaranteed by any type of property, these loans are bigger risks
for lenders and, as such, typically have higher interest rates than secured loans (such as a
mortgage).
131.9 109.1
918.5851.5
322.5 379.5
0
200
400
600
800
1000
2009 2010 2011 2012 2013 2014
Unsecured Loans
Amount Raised
ADVANTAGE
An unsecured loan may be a good option for individuals who do not have enough equity in their
homes to be approved for a home equity loan.
Amount Raised: Other Unsecured Loan 379.10
SOURCES NOT USED
Share capital
EQUITY SHARES FORFEITED
A share in a company that the owner loses (forfeits) by failing to meet the purchase
requirements. Requirements may include paying any allotment or call money owed, or avoiding
selling or transferring shares during a restricted period. When a share is forfeited, the shareholder
no longer owes any remaining balance, surrenders any potential capital gain on the shares and
the shares become the property of the issuing company. The issuing company can re-issue
forfeited shares at par, a premium or a discount as determined by the board of directors.
Advantages
This enables the company to forfeit the application money without issue of shares against
them.
This increases the balance of capital reserve of the company.
PREFERENCE CAPITAL PAID UP
A preference share that can be converted into common shares at a set conversion price.
Preference or preferred shares entitle a holder to a prior claim on any dividend paid by the
company before payment to ordinary shares. Buying stocks always poses the risk of losing
money, but avoiding stocks altogether means missing out on the opportunity to make good
profits. There is one security, however, that may help solve this dilemma for some investors:
convertible preferred shares give the assurance of a fixed rate of return plus the opportunity
for capital appreciation. Here we review what these securities are, how they work and how to
determine when a conversion is profitable.
Advantages
This is preferred over and above the equity share capital , and company is liable to give
only specified amount of dividend on them.
Disadvantage
The company has to return the cash to preference share holder first as compared to equity
share during winding up of the company.
CONVERTIBLE PREFERENCE SHARES
These shares are corporate fixed-income securities that the investor can choose to turn into a
certain number of shares of the company's common stock after a predetermined time span or on a
specific date. The fixed-income component offers a steady income stream and some protection
of the investors' capital. However, the option to convert these securities into stock gives the
investor the opportunity to gain from a rise in the share price.
Advantages
Company can retain the shares and investment in either form , so that it need not return
rather convert them with promising more percentage of interest .
Disadvantage
Company will have to divide the profit amongst more number of share holders and
division would be according to the profit earned.
NON CONVERTIBLE PREFRENCE SHARES
These are those preference shares which do not contain nay clause to convert into equity shares. These shares cannot be converted into equity shares after the maturity of preference shares.
Dabur doesn’t contain any amount of non convertible preference shares in there capital
structure.
RESERVES
Investment Fluctuation Reserve(
Reserves built up within many accumulation-style superannuation funds, for the purpose of
smoothing the year-to-year returns credited to member accounts.
\\
Investment reserves are established by not distributing some of the investment income when
fund earnings are high. They are then used to top up the rates credited to member accounts
when earnings are low. In this way, the rate credited to members on a year-to-year basis is
not absolutely dependent on the market cycle. The Superannuation Industry (Supervision)
legislation permits such reserves to be maintained, provided trustees establish and follow a
strategy for their prudential management.
Hedging Reserve
The hedging reserve records gains or losses on cash flow hedges that are recognized initially in equity.
Purpose or Reason for using that particular source:
Hedge reserve is created for Cash Flow hedges where a decision is made by entities to
protect their cash flows of future. Since it would be an unrealized money (movements in the
value of hedges), it is shown through Hedge reserve. Like any other reserve, the value of the
underlying asset is increased, and a corresponding reserve is created.
Advantages:
Records gains or losses on cash flow hedges.
Disadvantages:
Unrealized money is shown through Hedge reserve. Hence, not always trackable.
Link for references:
http://www.caclubindia.com/forum/hedge-reserve
Contingency Reserve(
A company's retained earnings that are not reinvested but set aside to protect against future
losses. A company may set up a reserve for contingencies when it is performing well to guard
against the risk that it may eventually perform poorly. A reserve for contingencies allows a
company to maintain its operations smoothly even when it has suffered an operating loss.
Purpose:
To face any unforeseeable risk or future incidence in the company.
Advantage
Increase companies financial vulnerability
Secures from future risk.
Investment in the company increases
Extension of the company.
Disadvantage
The profit earned stays with company not distributed to shareholders.
Revenue Reserve
The portion of a business' profits retained by the company for investment in future growth, and
are not redistributed to the shareholders through regular or special dividends.
Types of Revenue Reserve
There are two types of revenue reserve:
a) General Reserve
A reserve which is created out of the profit not for a specific purpose is known as general
reserve. General reserve is used for general purpose as per the discretion of the management.
Usually, general reserve is used for strengthening the financial position and meeting future
contingencies and losses.
b) Specific Reserve
A reserve which is created out of the profit for a particular purpose is known as specific reserve.
Such reserve cannot be utilized for any purpose other than specified. Specific reserve is created
by debiting the profit and loss appropriation account. It can be invested in outside securities. It
serves for a specific purpose as to equalize dividend or to redeem a fixed liability or to replace a
fixed assets or to conduct a research and development work.
The following are the important types of specific reserve:
Dividend equalization fund
Sinking fund
Research and development fund
SECURED LOANS:
Non-Convertible Debentures (NCD)
Debentures are long-term financial instruments which acknowledge a debt obligation towards
the issuer. This type of debentures can not be converted in to equity shares.
Further there are two types of debenture
Secured NCD: Debentures which are backed by assets of the issuer.
Unsecured NCD: Debentures which are not backed by any kind of assets of the issuer.
Why Used:
Because comapny has to pay higher interest rates to the investors at the maturity of the NCDs.
Otherwise it will be very difficult to attract the investors.
Advantages:
High interest rates, in recent years NCDs offer 11-12% rate of interest.
It can be sold in secondry capital market, depending on the difference between current
rate of interest and the rate of interest on which it was issued investor can earn profit or
loss.
Disadvantages:
There is some risk involved in this type of investment instrument, such as the company
can default on the future payment and if it is unsecured NCD, an investor does not have
any recourse.
Tax implications:- The capital gains have different taxability. Short term capital gains
which arises by selling NCD before one year is taxed as per the income slab of individual
holding the instrument. Any gains which arises by selling NCD after one year and before
maturity is taxable as long term capital gains. The applicable tax rate is 10.30% without
indexation since cost indexation benefit is not available in case of bonds and debentures.
Packing Credit – Bank
PACKING CREDIT is any loan or advance granted or any other credit provided by a bank to an exporter
for financing the purchase, processing, manufacturing or packing of goods prior to shipment, on the basis
of letter of credit opened in his favor or in favor of some other person, by an overseas buyer or a
confirmed and irrevocable order for the export of goods from the producing country or any other evidence
of an order for export from that country having been placed on the exporter or some other person, unless
lodgment of export orders or letter of credit with the bank has been waived.
Pre shipment finance is normally provided by the commercial banks. As in the case of many
other advances the bank takes into consideration a number of factors before making the
necessary other advances to exporters viz., (1) honesty, integrity and capital of the borrower, (2)
exporter’s experience in the line, (3) security offered, (4) the margin of interest (5) the bank’s
experience about the exporter to ensure that his name does not appear on the caution list of the
Reserve Bank.
The security can be provided in the following forms:
Letter of credit
Confirmed order as evidence of having received an order
Relevant policy issued by the Export Credit Guarantee Corporation and
Personal bond in the case of party(ies) already known to the banker
Why Used
This type of funding source is used by export firms since Dabur is not a exporting firm it does
not use this source.
Advantages:
The credit helps you cover production costs like raw materials and wages for employees.
Packing credit provides you with an extended and flexible finance period most commonly
90 days prior to the shipment date.
You can structure the credit terms as per the suitability of your business.
It becomes easier to attract new business by proffering more viable terms to trading
partners.
Packing credit avails for you the cash flow during the process of packing goods and while
waiting for shipment.
Interest rates are in between 11-12%.
Interest rates are also in accord with the international interest rates.
banks have been allowed to extend Pre-shipment Credit in Foreign Currency (PCFC) at
rates linked to LIBOR (London Inter-bank Offer Rates).
Cash Credit Bank
Cash credit is an arrangement under which a customer of a bank or financial institution is
allowed an advance up to certain limit against credit granted by bank. That means a loan may be
granted say for Rs. 1 Lakh however the customer/borrower of the loan may take the amount of
loan to the extent required by him but not exceeding the limit of Rs. 1 Lakhs.
Why used:
The purpose for which loan is required is essential to ascertain, as for different purposes different
types of loan can be taken. Eg. In case the loan is required to purchase fixed assets like plant and
machinery, term loan must be taken as plant and machinery are long term assets it will take time
in repayment of the loan and repayment can be done in EMI’s (Equated Monthly Installments).
Whereas a loan required for working capital needs a long term loan is not required as repayment
does not require long period, hence cash credit may be availed.
Advantages
Purchase Power and Ease of Purchase.
Protection of Purchases.
Building a Credit Line
Emergencies
Disadvantages:
Higher interest rates.
Sometimes this facility can distort the annual budget.
Overdrafts – Bank
A credit agreement made with a financial institution that permits an account holder to use or
withdraw more than they have in their account, without exceeding a specified maximum negative
balance. Establishing an overdraft facility with a bank can help an individual or small business
with short term cash flow problems, although the negative balance typically needs to be repaid
within a month.
Banks offer overdraft facility to individuals against assets such as property, securities and life
insurance policies. The individuals have to pay interest on the amount depending on the period.
Advantages
Interest rates is dependent on the assets kept as collateral.
The interest rate is also dependent on the time period.
Best possible way to face any emergency.
Disadvantages:
Banks charge one percent more than the rate payable on the fixed deposits for the
overdraft against fixed deposits.
High risk factor involved.
Inter Corporate & Security Deposit
This comes under the Sec. 372A of Companies act 2013, guarantees and securities i.e
guarantees provided and securities given by the company in connection with the loan given :-
By any person to anybody corporate
Anybody corporate to any person
For the purpose of 372A guarantees at least one party i.e lender or borrower must be body
corporate otherwise 372A will not apply.
For the purpose of Sec. 372A inter corporate guarantee or securities should be in connection
with the loan. In respect of other type of guarantee like performance guarantee Sec. 372A
will not be applicable.
In respect to corporate guarantee and security provided a company has to comply the
provision of this section and also take care of the provision of Sec. 295(1)(d)/(e)., if and
when applicable.
Purpose:-
The companies enter in this inter-corporate securities and deposit market in order to reconcile
the temporary money mismatch.
Term Loans – Institutions
Also referred to as a Term B Loan or an institutional term loan.
Also referred to as a Term B Loan or an institutional term loan. A term loan made by
institutional investors whose primary goals are maximizing the long-term total returns on
their investments. TLBs typically mature within six to seven years and have a small
repayment schedule (usually about 1.0% of the principal amount of the loan per year, payable
quarterly) during the term of the loan, with the remainder due on the maturity date. TLBs
may provide that the Term B Lenders have the right not to accept prepayments of the loans.
They may also have a prepayment penalty of between 1.0% and 2.0% if repaid within the
first year. Interest rate margins on TLBs are typically higher than the interest rate margin on
the initial Term Loan A (TLA) and any revolving credit loan under the same loan agreement,
Same loan agreement.
Key Features:
Though the features are not same for all the Institutional term loans but overall generic features
of this type of funding are as follows:
Size: Deals of less than USD 100m to USD 200m
Interest Rates: Floating interest rates.
Tenor: It can range from 2 to 7 years.\
Ratings: Ratings done by two agencies required for two debentures.
Security: Generally secured on ‘Pari-Passu’ basis with other landers.
Amortisation: Nil or Minimal ammortisation.
Advantages:
Benefit of Tax:
Cheaper Source of Finance
No Dilution of Control
No Dilution in Share of Profits
Benefit of Financial Leverage
Disciplinary Effect
Disadvantages:
Rigid Obligation
Enlarge Leverage Ratios
Restrictive Covenants
Bad for Low Inflationary Conditions
Working capital loans-Bank
A working capital loan is money borrowed from a bank to pay for the day-to-day business of
producing and selling goods and services.
Purpose
A working capital loan is not used to buy long term assets or investments. Instead it's used to clear up accounts payable, wages.
Advantages:
Absolutely no pledge of personal assets
Loans for bad credit
Loans for poor FICO scores
Simple paperwork
Renewable working capital options available
Bridge Loan
A short-term loan that is used until a person or company secures permanent financing or
removes an existing obligation. This type of financing allows the user to meet current
obligations by providing immediate cash flow. The loans are short-term (up to one year)
with relatively high interest rates and are backed by some form of collateral such as real
estate or inventory.
Purpose:
Bridge loans are often used for commercial real estate purchases to quickly close on a
property, retrieve real estate from foreclosure, or take advantage of a short-term opportunity
in order to secure long-term financing. Bridge loans on a property are typically paid back
when the property is sold, refinanced with a traditional lender, the borrower's
creditworthiness improves, the property is improved or completed, or there is a specific
improvement or change that allows a permanent or subsequent round of mortgage financing
to occur. The timing issue may arise from project phases with different cash needs and risk
profiles as much as ability to secure funding.
Benefits of Bridge Loan Financing
The financing they provide is strictly short-term. Most other loans are geared towards long-term
expenditures such as mortgage and college tuition. Those expenses require the borrower to pay
the loan off over a long period of time. The longer the loan lasts, the more likely it is the
borrower will suffer from some form of financial hardship that will make repaying the loan
difficult. This, in turn, can compound the borrower's financial problems as penalty fees rise and
the borrower struggles to get more funds to cover the mounting debt. Bridge loans, on the other
hand, are designed to be repaid in full by the time long-term form of financing is secured.
This dovetails into another major benefit of bridge loan financing--the ability to choose
repayment options. Borrowers can choose to repay the bridge loan before the permanent
financing is secure or after. In the former case, the payments are structured in a way that allow
the borrower to repay the loan in full over a certain limited period of time. If the borrower makes
all the payments on time, his or her credit rating will improve significantly, allowing them to
qualify for long-term loans they would otherwise be ineligible for. In the later case, the portion
of the permanent funding is used to repay the bridge loan in full.
Drawbacks
The biggest benefit of bridge loan financing is also it's biggest drawback. Because the borrower
has to repay the loan quickly than he or she would a more long-term loan, the payments will be
larger. This isn't an issue if the borrower has enough money to make all the payment, but if the
borrower doesn't, he or she will have even harder time paying it back. Because of the length of
their loan, the lenders are less likely to be flexible when it comes to late payments. They will
charge larger fees and penalties, making it all that much harder for the borrower to repay the
bridge loan.
The borrower can get around that by choosing to have the loan repaid once permanent financing
is secured, but that has it's own drawback. For every month the loan isn't repaid, it gathers
interest. This means that the actual payment will wind up larger (sometimes significantly so)
than what the borrower would have paid if he or she made payments during the loan's actual
term.
External Commercial Borrowings
External Commercial Borrowings (ECB) refer to commercial loans [in the form of bank
loans, buyers’ credit, suppliers’ credit, securitised instruments (e.g. floating rate notes and
fixed rate bonds)] availed from non-resident lenders with minimum average maturity of 3
years.
ECB can be accessed under two routes:
(i) Automatic Route outlined in Paragraph I (A)
(ii) Approval Route outlined in paragraph I (B).
ECB for investment in real sector –industrial sector, especially infrastructure sector-in India,
are under Automatic Route, i.e. do not require RBI/Government approval. In case of doubt as
regards eligibility to access Automatic Route, applicants may take recourse to the Approval
Route.
Purpose:
Government Permits the ECB as an additional source of financing for expanding the
existing capacity and as well as for fresh investments.
There is also emphasis on small and medium scale enterprises.
Benefits:
The ECB funding helps in many purposes such as paying suppliers in foreign
countries.
The cost of funds borrowed from external sources at times is cheaper than
domestic funds.
The borrower can diversify the investor base.
UNSECURED LOANS
Public deposits
Public deposits are an important source of financing the medium-term and long-term
requirements of a company. The term 'public deposit' implies any money received by a company
through the deposits or loans collected from the public. The public includes the general public,
employees and shareholders of the company but excludes the money received in the form of
shares and debentures.
In India, this method of raising finance has gained a lot of importance because of the several
advantages relating to public deposits:-
It is an easier method of mobilising funds, especially during periods of credit squeeze.
The administrative cost of deposits for the company is lower than that involved in the
issue of shares and debentures. The procedure of inviting public deposits is also simpler
and involve lesser formalities.
The rate of interest payable by the company on public deposits is lower than the interest
on loans from banks and other financial institutions. Such an interest is a tax deductible
expense.
It helps the company to borrow funds from a larger segment of public and thus reduces
the dependence of the company upon financial institutions.
It also enables the company to create contact with a large number of investors.
It ensures the availability of funds for a longer duration and provides flexibility to the
financial structure of the company. There is no risk of over-capitalisation and the deposits
can be repaid when they are not required.
There is no dilution of shareholders' control as the depositors have no voting rights and
cannot interfere with the internal management of the company.
But this mode of financing through public deposits has its own limitations:-
As the public deposits are more likely to be affected by the uncertain conditions in the
economy, the depositors’ response may vary accordingly. They may also tend to
withdraw their deposits if the company is not performing well.
Public deposits with the companies may cause a diversion of resources into non-priority
and undesirable areas.
Professional investors may not like to invest in such deposits as there is no or less chance
for capital appreciation.
As public deposits are unsecured, the depositors may have to bear the risk of loss of
money in the event of failure of the company.
Their widespread use restricts the growth of a healthy capital market. They also tend to
distort the interest rate pattern of the economy and may result in the dearth of sound
industrial securities.
Loans and Advances against subsidiaries
The term ‘loan’ refers to the amount borrowed by one person from another. The amount is in the
nature of loan and refers to the sum paid to the borrower. Thus. from the view point of borrower,
it is ‘borrowing’ and from the view point of bank, it is ‘lending’. Loan may be regarded as ‘credit
’granted where the money is disbursed and its recovery is made on a later date. It is a debt for the
borrower. While granting loans, credit is given for a definite purpose and for a predetermined
period. Interest is charged on the loan at agreed rate and intervals of Payment. ‘Advance’ on the
other hand, is a ‘credit facility’ granted by the bank. Banks grant advances largely for short-term
purposes, such as purchase of goods traded in and meeting other short-term trading liabilities.
There is a sense of debt in loan, whereas an advance is a facility being availed of by the
borrower. However, like loans, advances are also to be repaid. Thus a credit facility- repayable in
instalments over a period is termed as loan while a credit facility repayable within one year may
be known as advances.
Inter Corporate Deposits
Inter-corporate deposits are deposits made by one company with another company, and usually
carry a term of six months. The three types of inter-corporate deposits are: three month deposits,
six month deposits, and call deposits.
Three month deposits are the most popular type of inter-corporate deposits. These deposits are
generally considered by the borrowers to solve problems of short-term capital inadequacy. This
type of short-term cash problem may develop due to various issues, including tax payment,
excessive raw material import, breakdown in production, payment of dividends, delay in
collection, and excessive expenditure of capital.
The annual rate of interest given for three month deposits is 12%. Six month deposits are usually
made with first class borrowers, and the term for such deposits is six months.
The annual interest rate assigned for this type of deposit is 15%. The concept of call deposit is
different from the previous two deposits. On giving a one day notice, this deposit can be
withdrawn by the lender. The annual interest rate on call deposits is around 10%.
Advantages
The biggest advantage of inter-corporate deposits is that the transaction is free from bureaucratic and
legal hassles. The business world otherwise is regulated by a number of rules and regulations.
The existence of the inter-corporate deposits market shows that the corporate world can be regulated
without rules.
Disadvantages
The market of inter-corporate deposits maintains secrecy. The brokers in this market never reveal their
lists of lenders and borrowers, because they believe that if proper secrecy is not maintained the rate of
interest can fall abruptly.
The market of inter-corporate deposits depends crucially on personal contacts. The decisions of lending in
this market are largely governed by personal contacts.
'FOREIGN CURRENCY CONVERTIBLE BOND - FCCB'
A type of convertible bond issued in a currency different than the issuer's domestic currency. In
other words, the money being raised by the issuing company is in the form of a foreign currency.
A convertible bond is a mix between a debt and equity instrument. It acts like a bond by making
regular coupon and principal payments, but these bonds also give the bondholder the option to
convert the bond into stock.
Advantages
These types of bonds are attractive to both investors and issuers. The investors receive the safety of
guaranteed payments on the bond and are also able to take advantage of any large price appreciation in
the company's stock. (Bondholders take advantage of this appreciation by means warrants attached to the
bonds, which are activated when the price of the stock reaches a certain point.) Due to the equity side of
the bond, which adds value, the coupon payments on the bond are lower for the company, thereby
reducing its debt-financing costs.
Security Deposit
In deposit terminology, the term Security Deposit refers to an amount of money paid in advance
and held in reserve in the event of the depositor failing on a contractual obligation. It is used by
banks to secure credit cards for questionable borrowers as well a substantial security deposit
when you open your Internet merchant account. Security Deposits are also commonly provided
by tenants to help protect the landlord in a real estate lease.
Security Deposit Example:
For example, a Security Deposit will often be put down on a new lease of a property or home.
The Security Deposit would consist of an advance amount of money which is required by the
leaser of the property from the tenant in order to cover any expenses the landlord might incur
after the lease was up, and the tenant moved out. These expenses would consist of repairs to
damages done to the property which would not be considered normal “wear and tear.” The
Security Deposit is not considered rent and in some states is illegal to use for the last month’s
rent. Some states have a limit on the amount of Security Deposit a landlord may charge.
UNSECURED SHORT TERM LOANS
A loan in which the borrowed money provides the mechanism through which the loan is repaid.
Banks lend unsecured, short-term funds in three basic ways: through single-payment notes, lines
of credit, and revolving credit agreements.
PURPOSE
These loans are intended merely to carry the firm through seasonal peaks in financing needs that
are due primarily to buildups of inventory and accounts receivable.
DISADVANTAGE
Because an unsecured loan is not guaranteed by any type of property, these loans are bigger risks
for lenders and, as such, typically have higher interest rates than secured loans (such as a
mortgage).
ADVANTAGE
An unsecured loan may be a good option for individuals who do not have enough equity in their
homes to be approved for a home equity loan.
GOVERNMENT LOANS
A mortgage loan insured or backed by the Department of Veterans Affairs, the
Rural Housing Service, or the Federal Housing Administration.
PURPOSE
A government loan is a loan subsidized by the government, which protects lenders against
defaults on payments, thus making it a lot easier for lenders to offer potential borrowers lower
interest rates. Its primary aim is to make home ownership affordable to lower income households
and first-time buyers.
ADVANTAGE
Low interest rates.
Fast approvals.
DISADVANTAGE
Cannot write off debt.
More Red Tape: Government agencies are held to a standard by the public
and lawmakers, so they are usually more thorough with their loan
application processes. When applying for a government loan, you will
probably be met with more steps, more paperwork, and tighter requirements
in order to be approved. The government has to be 100% assured that you
are eligible for the loan before releasing any funds.
SHORT TERM LOANS
A short term loan is a loan that must be repaid or refinanced within one year. Short-term loans
are recorded on a balance sheet as current liabilities
ADVANTAGES
They are quick and easy to apply for. You can apply for them online in just minutes.
You will receive your money the same day you apply - sometimes in as little as one hour.
You can apply for up to $1000.
DISADVANTAGES
Short term loans come with fees and high interest rates. If you fall behind on a short term loan
you may end up paying more money in fees and interest than the total amount you originally
borrowed.
Dividend History of Dabur
For the year ending March 2014, Dabur India has declared an equity dividend of 175.00% amounting to Rs 1.75 per share. At the current
share price of Rs 229.35 this results in a dividend yield of 0.76%.
The company has a good dividend track report and has consistently declared dividends for the last 5 years.
* As per the Profit & Loss account
Announcement
Date
Effective
Date
Dividend
Type
Dividend
(%)
Remarks
08-09-14 19-09-14 Interim 125.00 Rs.1.2500 per share(125%)Interim Dividend
29-04-14 27-06-14 Final 100.00 Rs.1.0000 per share(100%)Final Dividend
14-10-13 05-11-13 Interim 75.00 Rs.0.7500 per share(75%)Interim Dividend
30-04-13 21-06-13 Final 85.00 Rs.0.8500 per share(85%)Final Dividend
12-10-12 31-10-12 Interim 65.00 Rs.0.6500 per share(65%)Interim Dividend
30-04-12 27-06-12 Final 75.00 -
14-10-11 04-11-11 Interim 55.00 -
27-04-11 29-06-11 Final 65.00 -
13-10-10 02-11-10 Interim 50.00 -
18-06-10 03-08-10 Final 125.00 -
14-10-09 30-10-09 Interim 75.00 -
29-04-09 29-06-09 Final 100.00 -
13-01-09 02-02-09 Interim 75.00 -
30-04-08 19-06-08 Final 75.00 AGM
10-10-07 29-10-07 Interim 75.00 -
05-03-07 16-03-07 Interim 75.00 -
09-10-06 03-11-06 Interim 100.00 -
25-04-06 21-06-06 Final 100.00 AGM
29-09-05 28-10-05 Interim 150.00 -
28-04-05 29-06-05 Final 150.00 AGM
01-10-04 02-11-04 Interim 100.00 -
05-05-04 15-06-04 Final 140.00 AGM & Scheme of Arrangement
Reference: http://monetarysection.com/dictionary/definition-of-subscribed-
share-capital
Subs
REF: http://www.investopedia.com/terms/p/paidupcapital.asp
T
REF:
https://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=10&c
ad=rja&uact=8&ved=0CEgQFjAJ&url=https%3A%2F%2Faccountancyxii.fi
les.wordpress.com%2F2012%2F09%2Fmeaning.doc&ei=1H1oVMGDG46zu
ATk5ICQDg&usg=AFQjCNGz7nZun7PitOvtRDt4JHA-ZycK4w
(Read more: http://www.businessdictionary.com/definition/share-
premium.html#ixzz3JFAuRAFd&http://www.readyratios.com/reference/acco
unting/share_premium.html)
(http://accountlearning.blogspot.in/2010/07/capital-reserve-its-objectives.html
)
http://en.wikipedia.org/
http://www.marketskeptics.com/
http://help.sap.com/
http://accountlearning.blogspot.in/
http://www.investopedia.com/terms/s/statutory-reserves.asp
http://en.wikipedia.org/wiki/Statutory_reserve
http://www.investopedia.com/terms/r/revaluationreserves.asp
http://moneyterms.co.uk/shareholders-funds/
http://en.wikipedia.org/wiki/Minority_interest
(http://www.entrepreneur.com/article/52728)
http://www.finweb.com/loans
http://www.investopedia.com/terms/p/paidupcapital.asp
http://glossary.reuters.com/index.php?title=Convertible_Preference_Share
http://www.investopedia.com/articles/stocks/05/052705.asp
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190718.asp#.VGW9xj_IDRY )
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