REPORT ON SUMMER TRAINING

TOPIC: STUDY AN INDUSTRIAL CLUSTER TO FIND OUT FINANCIAL POTENTIAL EXTERNAL FUNDING AND SBI SHARES IN

THE CLUSTER.

AT “STATE BANK OF INDIA”, SUNDER NAGAR BRANCHLUDHIANA

FROM 10 JUNE 2013 TO 10 AUGUST 2013

Internship report submitted to SBI in completion of the requirement of Summer internship at STATE BANK OF INDIA

Submitted by:

ANMOL VASHISHAT

L-2012-BS-07 –MBA

PAU

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INTRODUCTION

Name of the Student : ANMOL VASHISHAT

FATHER’S NAME : SHYAM LAL VASHISHAT

QUALIFICATION : DOING M.B.A. FROM PAU, LUDHIANA

ADDRESS : H.NO. 447, PHASE 1A, SHIVALIK AVENEU, NAYA NANGALDIST. ROPAR (PUNJAB)

MOBILE NO. : 7814998967

ABOUT MENTOR NAME OF MENTOR : P.K. BHATIA DESIGNATION : CHIEF MANGER, SME

BRANCH : SUNDER NAGAR, LUDHIANA RESPONSIBILITY : LINK WITH HOSIERY INDUSTRIES IN LUDHIANA ABOUT WORK The project mentor gave me a target of 100 hosiery industries, and visit there and collect information related to hosiery industries and also finds out the shares of SBI in cluster. I visited there and gaining some knowledge about how they prepare yarns, and collect raw material from local market. This was my great experience in industry. Thanks to mentor who guide me and gave me a chance to visit there.

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ACKNOWLEDGEMENT

I avail this opportunity to acknowledge the academic interaction, exchange of views and participation of all those who directly or indirectly contributed towards the completion of this project.

I wish to express my heartfelt thanks to my project guide CHIEF MANAGER P.K. BHATIA for his continuous guidance, helpful criticism and supervision through course of this project and all other members of S.B.I. who helped me a lot in completion of my project.

I am highly thankful to Dr. Sandeep Kapur (Director, SBS, PAU) and Dr. Mohit Gupta

(Assistant Professor, SBS, PAU) for giving me this opportunity of getting such valuable exposure by

organizing internship.

Although there may be many who remain unacknowledged in this humble note of gratitude there are none

who remain unappreciated.

ANMOL VASHISHAT

(MBA TRAINEE, PAU)

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ABSTRACT

I did my internship in State Bank of India. I t is the largest bank in India in termsadvances and number of branches. I was working in the sunder nagar branch of S.B.I. . The bank deals with the SME industry. It has many companies under this branch.I was assigned to figure out the reasons for the non-functioning of the products belonging to SME. My project is related to find out the shares of S.B.I. in hosiery industries.My research was carried in a span of 2 months. It was a good exposure to my learnings. I visited 100 companies and most of the belonged to the hosiery industries. It was nice experience visiting the companies to know how operation and procedures work in reality. The work I did was to know different kinds of products and problems associated with the products offered to these companies. And also I did a comparative study with the banks present in the same area and belonging to the same sector about the products.

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TABLE OF CONTENTS

1 Indian banking sector

2 Definition of banking and bank

3 Structure of banking industry

4 Major banking operations

5 State bank of India

6 History

7 Vision and mission

8 SWOT analysis

9 Product service profile

10 Financial performance

11 Shareholding pattern

12 Organisation structure

13 Delivery channels in SBI

14 Subsidiaries and joint ventures

15 Introduction to SME

16 Brief history

17 SME’s in India

18 Performance & contribution of SME’s

19 Broad categorisation of products

20 NO. of SME’s

21 Research methodology( design, objective & limitations)

22 Ludhiana

23 Hosiery-cluster

24 Case study

25 Credit rating

Suggestions, Findings, conclusion, annexure

INTRODUCTION OF BANKING

1.1)INDIAN BANKING SECTOR

Banking- is the business of providing financial services to consumers. The basic services a bank provides are saving account, Time deposit, Loans that consumers can use to purchase goods and services and basic cash management services such as foreign currency exchange.

Definition of a bank: is any financial institution that receives, collects, transfers, pays exchanges, lends or safeguards money for its consumers. Section 5(b) of the BR Act defines banking as, 'accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdraw able, by cheque, draft, and order or otherwise.’ This definition points to the three primary activities of a commercial bank which distinguish it from the other financial institutions. These are: (i) maintaining deposit accounts including current accounts, (ii) issue and pay cheques, and (iii) collect cheques for the bank's customers

STRUCTURE OF BANKING INDUSTRY

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Scheduled

Banks

Scheduled Commercial Scheduled Co-operative Banks

Urban Co-operative Banks

State Co-operative Banks

Foreign Banks

Public Sector Banks

Regional Rural Banks

Private Sector Banks

Nationalized Banks

SBI & its subsidiarie

Old Private Sector

New Private Sector

Major Banking Operations

Balancing Profitability with Liquidity ManagementBanks are commercial concerns which provide various financial services to customers in return for payments in one form or another, such as interest, discount fees, commission and so on. Their objective is to make profits. However, what distinguishes them from other business concerns is the degree to which they have to balance the principle of profit maximization with certain other principles. Banks in general have to pay much more attention in balancing the profitability with liquidity. Therefore, they have to devote considerable attention to liquidity management. Banks deal in other people’s money, a substantial part of which is repayable on demand. That is why, for banks unlike other business concerns liquidity management is as important as profitability management.

Management of ReservesBanks are expected to hold voluntarily a part of their deposits in the form of ready cash which is known as cash reserves and the ratio of cash reserves to deposits is known as Cash Reserve Ratio (CRR). The Central Bank in every country is empowered to prescribe the reserve ratio that all banks must maintain. The Central Bank also undertakes as the lender of last resort, to supply reserves to banks in times of genuine difficulties. Since the banks are required to maintain a fraction of their deposit liabilities as reserves, the modern banking system is also known as the fractional reserve banking.

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Operations of Bank

Balancing Profitability with Liquidity Management

Management of Reserves

Creation of Credit

Creation of CreditUnlike other financial institutions, banks are not merely financial intermediaries but “they can create as well as transfer money”. Banks are set to create deposits or credit or money or it can be said that every loan given by bank creates a deposit. This has given rose to the concept of deposit multiplier or credit multiplier. The importance of this is that banks add to the money supply in the economy and hence, banks become responsible in a major way for changes in the economic activities.

STATE BANK OF INDIA

2.1)HISTORY

 The roots of the State Bank of India lie in the first decade of 19th century, when the Bank of Calcutta, later renamed the Bank of Bengal, was established on 2 June 1806. The Bank of Bengal was one of three Presidency banks, the other two being the Bank of Bombay (incorporated on 15 April 1840) and the Bank of Madras (incorporated on 1 July 1843). All three Presidency banks were incorporated as joint stock companies and were the result of the royal charters. These three banks received the exclusive right to issue paper currency till 1861 when with the Paper Currency Act, the right was taken over by the Government of India. The Presidency banks amalgamated on 27 January 1921, and the re-organised banking entity took as its nameImperial Bank of India. The Imperial Bank of India remained a joint stock company but without Government participation.

Pursuant to the provisions of the State Bank of India Act of 1955, the Reserve Bank of India, which is India's central bank, acquired a controlling interest in the Imperial Bank of India. On 1 july 1955, the Imperial Bank of India became the State Bank of India. The government of India recently acquired the Reserve Bank of India's stake in SBI so as to remove any conflict of interest because the RBI is the country's banking regulatory authority.

In 1959, the government passed the State Bank of India (Subsidiary Banks) Act, which made eight state banks associates of SBI. A process of consolidation began on 13 September 2008, when the State Bank of Saurashtra merged with SBI.

SBI has acquired local banks in rescues. The first was the Bank of Behar (est. 1911), which SBI acquired in 1969, together with its 28 branches. The next year SBI acquired National Bank of Lahore (est. 1942), which had 24 branches. Five years later, in 1975, SBI acquired KrishnaramBaldeo Bank, which had been established in 1916 in Gwalior State, under the patronage of Maharaja MadhoRaoScindia. The bank had been the DukanPichadi, a small moneylender, owned by the Maharaja. The new banks first manager was Jall N. Broacha, a Parsi. In 1985, SBI acquired the Bank of Cochin in Kerala, which had 120 branches. SBI was the acquirer as its affiliate, the State Bank of Travancore, already had an extensive network in Kerala.

The State Bank of India and all its associate banks are identified by the same blue keyhole logo. The State Bank of India wordmark usually has one standard typeface, but also utilises other typefaces.

State Bank of India (SBI) is a multinational banking and financial services company based in India. It is a government-owned corporation with its headquarters in Mumbai, Maharashtra. As of December 2012, it had assets of US$501 billion and 15,003 branches, including 157 foreign offices, making it the largest banking and financial services company in India by assets.

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The bank traces its ancestry to British India, through the Imperial Bank of India, to the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. Bank of Madras merged into the other two presidencies banks—Bank of Calcutta and Bank of Bombay—to form the Imperial Bank of India, which in turn became the State Bank of India.Government of India nationalised the Imperial Bank of India in 1955, with Reserve Bank of India taking a 60% stake, and renamed it the State Bank of India. In 2008, the government took over the stake held by the Reserve Bank of India. SBI was ranked 285th in the Fortune Global 500 rankings of the world's biggest corporations for the year 2012.

SBI provides a range of banking products through its network of branches in India and overseas, including products aimed at non-resident Indians (NRIs). SBI has 14 regional hubs and 57 Zonal Offices that are located at important cities throughout the country.

SBI is a regional banking behemoth and has 20% market share in deposits and loans among Indian commercial banks.

The State Bank of India was named the 29th most reputed company in the world according to Forbes 2009 rankings and was the only bank featured in the "top 10 brands of India" list in an annual survey conducted by Brand Finance and The Economic Times in 2010.

Current Board of Directors

As on 14 January 2013, there are fifteen members in the SBI board of directors:- 

PratipChaudhuri  (Chairman) Hemant G. Contractor (Managing Director) Arundhati Bhattacharya (Managing Director) A. Krishna Kumar (Managing Director) S. Visvanathan (Managing Director) S. Venkatachalam (Director) D. Sundaram (Director) Thomas Mathew (Director) S.K. Mukherjee (Officer Employee Director) Rajiv Kumar (Director) JyotiBhushanMohapatra (Workmen Employee Director) Deepak Amin (Director) HarichandraBahadur Singh (Director)

Associate banks

SBI has five associate banks; all use the State Bank of India logo, which is a blue circle, and all use the "State Bank of" name, followed by the regional headquarters' name:

State Bank of Bikaner & Jaipur State Bank of Hyderabad State Bank of Mysore State Bank of Patiala State Bank of Travancore

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Branches ATM’s Customer Base

26500 21000 13.7 crores

2.2)VISION AND MISSION

Vision

"To be a Leading Global Bank with Pan India footprints and become a household brand in the Indo-Gangetic Plains providing entire range of financial products and services under one roof"

To evolve and position the bank as a world class, progressive institution providing comprehensive financial and related services.

Integrating frontiers of technology and servicing various segments o society especially weaker section.

Committed to excellence in serving the public and also excelling in corporate values.

Mission

"Banking for the unbanked"

To provide excellent professional services and improve its position as a leader in financial and related services.

Build and maintain teams of motivated workforce with high work ethos.

Use latest technology aimed at customer and act as an effective catalyst for socio economic developed.

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2.3)SWOT ANALYSIS

SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favourable and unfavourable to achieve that objective. 

Strength

1.  The biggest bank in the country2.   Has a separate act for itself. Thus, a special privilege.3.  Biggest branch network in the country4.  First public sector to move to CBS

Weakness

1.  Huge amount of staff2.  Expected to experience high level of attrition due to retirement of its top management3.  Still carries the image of the old Govt. sector bank

Opportunity

1.  Pool in talent to replace the going top management to serve the next generation2.  Make better use of its CRM3.  Expansion into rural areas

Threats

1.  Consolidation among private banks2.  New bank licenses by RBI3.  Foreign banks that have sophisticated products

2.4)Products, Service Profile

Bank offers a large no. of services to customers. Broad categorisation of services is as below:

Personal banking Social banking MSME Agricultural banking Corporate banking International banking/ NRI Financial services

2.5)FINANCIAL PERFORMANCE

S.B.I. continues to maintain its frontline position in the Indian Banking Industry. The impressive operational and financial performance has been brought about by the bank’s focus on customer based business with thrust on SME, agriculture, asset liability management and efficiency in core operations. The financial performance of the bank can be seen in the table below

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Table 1

March 2010(rs/crores)

March 2011(rs./crores)

March 2012(rs./crores)

March 2013(rs/crores)

0 500000 1000000 1500000

AdvancesDepositsNet ProfitOperating Profit

SHARE HOLDING PATTERN:Organisation structure

The bank has its head office at mumbai. The delegation of power is decentralized up to the branch level for quick decision making. The top-down approach at SBI can be classified as follows:-

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Parameters

March 2010(rs/crores)

March 2011(rs./crores)

March 2012(rs./crores)

March 2013(rs/crores)

Operating Profit

305550 311657 315735 310817

Net Profit 98564 106055 117073 141050Deposits 139860 166457 209760 233,109Advances 631914.15 756719.45 867578.89 1045616.55

Organizational Structure at SBI

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58.00%

3.08%4.50%

5.20%

9.89%

19.33%

Share Holding Pattern (%)

GovernmentBanks/Financial InstitutionsMutual Funds & UTI Non-InstitutionsInsurance CompanyFII's

Delivery Channels in SBI:

INTRODUCTION OF SMALL AND MEDIUM

ENTERPRISES

3.1) BRIEF HISTORY

Small and medium enterprises (also SMEs, small and medium businesses, SMBs, and variations thereof) are companies whose investment in P&M or turnover falls below certain limits.

The abbreviation SME occurs commonly in the European Union and in international organizations, such as the World Bank, the United Nations and the WTO. The term small and medium-sized businesses or SMBs is predominantly used in the USA.

EU Member States traditionally have their own definition of what constitutes an SME, for example the traditional definition in Germany had a limit of 250 employees, while, for example, in Belgium it could have been 100. But now the EU has started to standardize the concept. Its current definition categorizes companies with fewer than 50 employees as "small", and those with fewer than 250 as "medium”. By contrast, in the United States, when small business is defined by the number of employees, it often refers to those with fewer than 100 employees, while medium-sized business often refers to those with fewer than 500 employees.

In most economies, smaller enterprises are much greater in number. In many sectors, SMEs are also responsible for driving innovation and competition. Globally SMEs account for 99% of business numbers and 40% to 50% of GDP.

In South Africa the term SMME, for Small, Medium and Micro Enterprises, is used. Elsewhere in Africa, MSME is used, for Micro, Small and Medium Enterprises. Size thresholds vary from country to country.

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Corporate Office (HO)

Circle Office (CO) Circle Office (CO)Branch Office (BO)

Large Corpor

ate Branches

Mid

Corpor

ate Branches

Retail Hub

Specialized branc

hes e.g

. Agriculture

Circle office (CO)

3.2) SME IN INDIA

According to MSME act 2006, MSME can be defined as follows:

Classification Manufacturing sector Services sector Micro enterprises Units engaged in industrial activity

with original investment in plant and machinery uptoRs. 25 lacs

Units engaged in industrial activity with original investment in plant and machinery upto Rs.10 lacs

Small enterprises Units engaged in industrial activity with original investment in plant and machinery up to Rs. 5 crore

Units engaged in industrial activity with original investment in plant and machinery up to Rs. 2 crore

Medium enterprises Units engaged in industrial activity with original investment in plant and machinery up to Rs. 10crore

Units engaged in industrial activity with original investment in plant and machinery up to Rs. 5 crore

3.3)Performance and contribution of SME’s

Z

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Constitute 90% of total enterprises

SME 45% of manufacturing outputEmployee’s 59.7 million persons

Contributes to 40% of total exports

Based on products, SMEs in India can be broadly classified into the following groups

Food products

Chemicals and chemical products

Hosiery and garments

Electrical machinery and parts

Paper products and Printing

Cotton textiles

Nonmetallic mineral products

Rubber and plastic products

Machinery and parts excluding electrical goods

Others

3.4)Increase in no. of SME’s from 2009-2013

2009 2010 2011 2012 20130

50

100

150

200

250

300

350

400

SME IN INDIA

SME IN INDIA

Figure 1

MSME annual report 2012-1316

Research Methodology

Meaning of research

  Research is defined as a systematic, gathering recording and analysis of data about problem relating

to any particular field. 

Once can also define research as a scientific and systematic search for pertinent information on a specific topic

It determines strength reliability and accuracy of the project

Research Design

Research Design pertains to the great research approach or strategy adopted for a particular project. A research project has to be the conducted scientifically making sure that the data is collected adequately and economically.

There are various type of research designs:

1) Exploratory research design:

It is a type of research conducted for a problem that has not been clearly defined. Exploratory research helps determine the best research design, data collection method and selection of subjects.

2)Descriptive Research design:It is to describe market characteristics or functions Specific predictions. Descriptive Design requires clear specifications of :

Who

What

When

Where

Why

Way

3) Experimental research design:

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The research design is used to provide a strong basis for the existence of casual relationship between two or

more variables.

Research design used for study

Research design used in study is descriptive and analytical in nature as for descriptive design researcher has to be already equipped with basic information like facts and figures etc. in this study also facts and figures were already present and research and analysis was conducted based on this information. So descriptive and analytical is best research design according to information available.

Sources of data

Secondary sources of data are used for study.It is the data which is already collected by someone else. Researcher has to analyze the data and interprets the results. It involves:

1) Annual reports of SBI2) MSME annual report3) Websites4) Prowess5) Board note of bank6) Credit policy book of bank7) Various files on loans

Objectives of study:

1)To learn about SME’s in India

2) To learn about financing to SME (in general)

3)To study industrial cluster to find out financing potential external funding and SBI share in the cluster.

4) To study the hosiery cluster special product to improve SBI share in the cluster.

5) To study financial position and ratio-analysis of SBI.

Limitations of study

1) All cases related to hosiery industries SME cannot be studied because of shortage of time

2) Not able to calculate all ratios

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3) Only ratios cannot fully analyze the positives or negatives of bank.

4) Study of hosiery cluster is too difficult to know about profitability and turnover ratio ofthe industries.

LUDHIANA

Ludhiana- a dynamic cityLudhiana occupies a place of pride in the industrial map of Punjab. Apart from a wide variety of engineering products, Ludhiana is famous for textile products, both for consumer and industrial use. It is prime centre for hosiery knitwears and woolen shawl industry in india producing woolen, blended and cotton based fashion oriented products for both domestic and export markets. The city has a concentration of more than 5000 knitwears and allied business entities. The estimated annual turnover of knitwear and shawls from Ludhiana is more than rupees 10000 crores. The cluster can be classified in following segments:

Core industry

Sweater manufacturing for winter wears. Knitted garments manufacturing for ummer wear. Shawls manufacturing.

Allied industry

Cotton & blended yarns manufacturing Wool & acrylic yarns manufacturing. Knitted fabrics manufacturing units.

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Service industry

Fabrics processing & printing units. Yarn dyeing units. Embroidery units.

LUDHIANA-HOSIERY CLUSTER

Ludhiana's hosiery sector has recorded an over 40% jump in sales this winter season over the same period last year and manufacturers are forced to prolong their production schedules due to unprecedented increase in demand."This year's winter season has been quite good for the Ludhiana's hosiery cluster after a very long period..intense cold has led to a jump in demand for winter garments which in result has pushed up the sales of hosiery makers by at least 40-45% in ongoing (winter) season so far," Ludhiana-based Duke Group chairman Komal Jain said.With heavy demand for winter garments, Ludhiana-based hosiery companies have extended their production schedules for at least two months to meet the rising demand from their retailers."Normally, we stop producing winter garments till October every year. But this winter season, we have to continue our production till the middle of December in order to fulfill the requirements of our dealers," said Jain, whose company is an established player in winter garments.Mercury has been hovering five to 10 degrees below normal in northern region and even Chandigarh recorded coldest ever on Wednesday amid intense cold conditions.According to hosiery makers, the demand for winter garments like jackets, sweaters, thermals, has mainly originated from Punjab, Haryana, Delhi, Himachal Pradesh, Uttar Pradesh and Jammu and Kashmir."We have run out of our stock of winter garments in the month of December itself...last winter season, we managed to supply our stock till February, which means there is sudden jump in demand," OWM (famous for its Montecarlo).

Hosiery, also referred to as leg wear, describes garments worn directly on the feet and legs. The term originated as the collective term for products of which a maker or seller is termed a hosier; and those

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products are also known generically as hose. The term is also used for all types of knitted fabric, and its thickness and weight is defined in terms of denier or opacity. Lower denier measurements of 5 to 15 describe a hose which may be sheer in appearance, whereas styles of 40 and above are dense, with little to no light able to come through on 100 denier items.

The first references to hosiery can be found in works of Hesiod, where Romans are said to have used leather or cloth in forms of strips to cover their lower body parts. Even the Egyptians are speculated to have used hosiery as socks have been found in certain tombs.

Roller derby athletes shortly after a bout in Boise, Idaho wearing fishnet and patterned pantyhose

Most hosiery garments are made by knitting methods. Modern hosiery is usually tight-fitting by virtue of stretchy fabrics and meshes. Older forms include binding to achieve a tight fit. Due to its close fit, most

hosiery can be worn as an undergarment, but it is more commonly worn as a combined under/outer garment.

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Why focus on clusters??

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Cluster Profile

1 Name Of Cluster Ludhiana Hosiery cluster2 Place Ludhiana3 District Ludhiana4 State Punjab5 No of firms (by type) 12000 6 No. of workers 500000 7 Turnover(Rs in Million's) 50000 Million

8 Associations in cluster

Federation of Knitwear, Textile and Allied Industries Associations Knitwear Club, Readymade Hosiery Manufacturers Association (REHMA), Apparel Exporters Association of Ludhiana (APPEAL), Knitwear Development Group, Knitters Association, BhadurKe Textile and Knitwear Association, Shawl Club, Dyeing Factories Association (Regd.), Garment Machinery Manufacturers and Suppliers Association and Ludhiana Dyeing Associations (Cotton Division) 

9 Major product

 T-shirts, Cotton and blended socks,Under garments, Knitted bed sheet, Knitted skirts, Knitted tops, Sportswear, Night suits Winter wear Sweaters, Woollen socks, Pullovers, Cardigans, Thermal wear, Gloves, Muffler, Baret caps, Shawls, Jackets, Jersey and Blankets 

10 Specific and relevant technical institutions (R&D, Testing Lab accredited)

Industrial Training Institute (ITI) Government Polytechnic for Women Government Institute of Textile Chemistry and

Knitting Technology Knitwear facility 

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Central tool room MERADO NIIFT at Mohali NIFT, Delhi Pearl Academy of Fashion at Delhi 

11 Major markets

Exports: U.S.A., Canada, South Africa, U.K., Germany, France and U.A.E 

12 Major problems/prospects

Spinners They can t change their process to keep with

the changes in fashion Are unable to introduce innovative yarn varieties Import of cheaper yarn for China Information and financial assistance required to

adopt new technology Exporters Delivery schedules. There is no international airportt nearby.

No exhibition halls. Quality of garment produced at Ludhiana is poor. Problems with social, ethical and environmental compliances. Pilferage and corruption present in the customs

departments. 

Entry of China in Angora woolen market

at low price Machinery manufacturers No R&D related to metal blends. The machinery related to machine manufacturing

is not covered under TUFS. Huge finance required for technology up-gradation Dyers/ Finisher Unable to maintain proper standards for dyeing. Export market demands uniformity and high

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quality that the dyers find difficult to meet,

especially for repeat orders. Most of the units

use manual colour matching methods. Information on new technologies and financial

assistance to change the dyeing system. Disposal of fly ash Non-consistency in the quality of local dyes and

chemicals Disposal of effluent Tightening of environmental issues Knitters/ Garment manufacturer Skill development of the machine operators High import duty on machine and their spare parts Indigenous machinery lacking technological

up-gradation Training of second line managers Poor infrastructure NOC from the pollution board while they fall

under green category, if having machines costing

more then Rs.25 lacs Capital subsidy for

modernization not being released by the State

Government even after clearance from the centre. No resource center to keep them updated with

latest trends and designs. Frequent change of laws. 

13 Data source and updated onDSR by SME Cluster Development in India, 2002-2005 Year 2003

CASE STUDY

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.

Name of the company: XYZ Co.

BO : Branch Ldh

Circle Office : Ludhiana

Whether fresh/renewal/ enhancement

Sanction of fresh term loan of Rs.90 lac and enhancement in FBWC limit from Rs.45 lac to 150 lac

Asset Classification as on_31.3.2013

Standard

Whether Agriculture/Retail/ SME/Large

SME

a) Whether Sensitive Sector –

Real Estate/Capital Market

b) Applicable Risk weight

NO

100%

Consortium/Multiple Banking NA

Lead Bank NA

SBI’s Share % 100%

Date of Receipt of Proposal at

BO/CO/HO

05.05. 2013

Date of last sanction and authority 05.05.2013 Branch Manager

Case study related to the targets of 100 hosiery industries, so I considered two items i.e. t-shirts and undergarments of these industries and compare the profitability and turnover ratios in different ways.

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1. PRODUCTION TARGETS

Basis of estimation: 300 Working Days in a Year

Single Shift basis

8 hours per shift

t-shirts undergarments

Quantity(per dozen) 4800 3600

Dozen(rs) 1155000 8150000

t-shirts57%

under-garments

43%

Quantity(per dozen)

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2. MANUFACTURING PROCESS

The fabric in different colours/ designs is cut with scissors as per required design size and product. The cut pieces are stitched with the help of stitching/ interlocking machine.

Elastic tape would also stitch\ Fix incase of underwear. These stitch pieces are packed after inspection for dispatch.

3. QUALITY CONTROL STANDARD

Product must have following qualities:

a. Colour of cloth must be uniform and strong enough so it would not

change within first few washing.

b. Elastic qualities must be good it may not loose its elastic property.

c. Stitching / Interlocking must be strong enough.

4 . Machinery and equipment

S.N. DESCRIPTION QTY VALUE(RS)

1 5 thread flat Lock Sewing machines 1 2000000

2 4 thread flat Lock Sewing machines 1 1500000

3 8 thread flat Lock Sewing machines 1 2500000

4 3 thread flat Lock Sewing machines 1 1000000

5 Rib cutting Machine 1 1500000

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6 Overlock machines threads with motors 1 1000000

7 Electric irons 250000

8 Pressing tables, cutting tables, stools, office furniture, racks tools etc.

25000

9 Sales Tax, Freight & Insurance etc 10000

10 Total 10100000

5 . RAW MATERIAL (PER MONTH)

Particulars QTY. VALUES

1 Bleached cloth suitable for T-SHIRTS 4000 600000

2 Bleached cloth suitable for UNDERGARMENTS 2000 250000

3 Sewing thread, Elastic and packing materials like

polythene and boxes etc

60000

4 Packaging Material 30000

5 TOTAL 840000

6.Other expenses

SR NO.

DESCRIPTION AMOUNT

1 Rent of Land & Building(if any) 50000

2 Electricity Charges(one month) 10000

3 Fuel Exp.(if not for rented) 0

4 Advertisement & Travelling 20000

5 Transport(export goods) 20000

6 Consumable & stores etc 30000

7 Potage expenses/ telephones 5000

8 Stationery 15000

9 TOTAL 175000

7.WORKING CAPITAL(per month)

S.NO. DESCRIPTION AMOUNT

1 Raw material 250000

2 Other Expenses 175000

3 Total 325000

8.TOTAL CAPITAL INVESTMENT

SR.NO. DESCRIPTION AMT

1 Building & Other Civil Works(if rented) 0

2 Machinery & Equipment 8100000

3 Working capital for one month 425000

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4 TOTAL 8525000

9.Cost of production

Sr.no. description Amount

1 Total recurring cost per year 25000000

2 Depreciation on machinery &equipment

1010000

3 Interest on total investment @ 10% 852500

4 total 26862500

10.Sales proceed(PER ANNUM)

Sr.no. description Qty (Dz. Nos) Rate Rs./ Dz. No.

Amount

1 T-SHIRTS 4800 2400 11550000

2 UNDERGARMENTS 3600 2260 8150000

3 TOTAL 19700000

11.PROFITABILITY (BEFORE INCOME TAX)

1 Annual Gross Profit 43520000

2 % of Profit on Sales 20.25%

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3 Break Even Analysis

3.1 Annual Fixed Cost 4044000

3.2 Annual Sales 19700000

3.3. Annual Variable Cost 10560000

3.4 Break Even Point 44.25%

Break-Even Analysis

(% of Total Production envisaged) Annual fixed cost X 100 -------------- ---------------- ------------- = % Annual sales – Annual variable costs

1.Jain Amar Hosiery Pvt Ltd

B-24, 4719, Sunder Nagar, Ludhiana - 141007

2.Nagesh Knitwear LTD Exporte

G T Road West, Ludhiana, Ludhiana – 141005

3.Sweety KnitwearsHouse No-275,B-6, Old Madhopuri, St No-3, Ludhiana, Ludhiana – 141003

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4.Mercury Knits423, Kabir Complex 7, Industrial Area A, Ludhiana – 141003

4.Radiant Knitwears4, Preet Palace, Jammu Colony, Jammu Colony, Ludhiana – 141003

5.Bubly Hosiery MillsHouse Number .381, Purana Bazar, VakilanGali, Ludhiana, Ludhiana – 141005

6.UNIQUE HOSIERYShop No-1, SubhashNgr,DawarMkt, Kuldeep Nagar, LUDHIANA – 141007

7.R L Oswal HosieryB - 24 - 2813 /2 Sunder Nagar, Back Side Retubhra Public School, Sunder Nagar, Ludhiana – 141007

8.Self Knitting Works1108/10 Farid Nagar, BastiJodhewal Ludhiana, BastiJodhewal, Ludhiana – 141007

9.Oswal SudhirKnitwearsPlot No 14, Near Fire Station, Subder Nagar, Sunder Nagar, Ludhiana – 141007

10.Singh & Singh Trading CoSardar Tower, Gandhi NgrMkt, Nr Sdp College Gate, Backside Chand Cinema, St No-15, Ludhiana, Ludhiana – 141007

11.Jain Sons18,Sant Nirankari Colony, Sunder Nagar, BombeyTyre Road, Sunder Nagar, Ludhiana - 141007

12.S K SanjeevKnitwearsB-III-1208/A, KalyanNagar,NearBajvaNegar, Sunder Nagar, Ludhiana - 141007

13.A K Sachdeva Hosiery1, Sunder Nagar, Ludhiana - 141007

Best Deal14.Dhawan KnitwearH No B-33-311 LaxmiPuri, Salem Tabri, Salem Tabri, Ludhiana - 141005

15.Jainson Hosiery IndustriesPlot No 210, 211, Oswal Road, Industrial Area A, Ludhiana - 141003

12. Suppliers of Raw Materials

From Local cloth market of the area.

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13. IMPLEMENTATION PERIOD

Proposed Project can commence production with in 6-8 weeks after sanction and firstdisbursement of term loan.

14.ASSUMPTION FOR GENERATING PROFITABILITY

1 Number of Working Days in a year 300 Days

2 Number of Shifts in a day 1 One

3 Hours in a Shift 8 hours

4 Plant Capacity Consider on Average production capacitiesof plant

5 Raw material Estimates Based upon product Mix

6 Raw Material Availability All districts of PUNJAB

7 Depreciation Straight Line Method

8 Manpower According to project Requirement

9 Rent estimate On the basis of current market prize of theArea

10 Potential Area of Marketing theproducts

Households demand of the area

11 If project is funded, term loanwould be

60-80% of Total investment

12 Moratorium Period 6- 12 months

13 Repayment Period 5-7 years

14 Project may be established under UPTECH BY SBI(SME)

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CREDIT RATING

Credit rating is a qualified assessment and formal evaluation of company’s credit history and capability of repaying obligations. It measures the default probability of the borrower, and its ability to repay fully and timely its financial debt obligations.

The main purpose of credit rating is to provide investors with comparable information on credit risk based on standard rating scale, regardless of specifics of companies, separate sector of the economy and country as a whole.

Credit rating reflects financial, sartorial, operational, legal and organizational sides of companies, which characterize ability and willingness duly and in full amount to repay obligations.

For evaluating the loan proposal (new and existing) under SME two methods are used by bank i:e SBI score SME and credit rating.

1) SBI score SME: under this 5 credit scoring models are there and is used for amount upto rs 50 lacs

Credit scoring models Amount

SME manufacturing(new case including takeover)

Above rs 10 lacs up to rs 50 lacs

SME service(new case including takeover) Above rs 10 lacs up to rs 50 lacs

SME manufacturing and service(new case including takeover)

Rs 10 lacs and below

SME manufacturing and service

( renewal/enhancement)

Above rs 10 lacs up to rs 50lacs

SME manufacturing and service( renewal/enhancement)

Rs 10 lacs and below

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Credit decisions : The score generated by above models will facilitate the sanction and rejection of loan application as per following scoring and risk category.

S.no Score as per scoring model

Risk category Implications

1 0-30 D Application rejected

2 Above 30-40 C

3 Above 40-50 B Application considered by higher authority

4 Above 50-60 BB Application considered at branhes/hub.

5 Above 60-70 A

6 Above 70-80 AA

7 Above 80 AAA

2. Borrower’s Profile

a. Group Name NA

b. Address of Regd. Office JKL Ludhiana

b. Works/Factory 315, Focal point phase 4 ludhiana

c. Constitution Sole proprietorship

d. Date of incorporation/

Establishment

1990

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e. Dealing with PNB since 1992

f. Industry/Sector Hosiery

g. Business Activity (Product)/

Installed Capacity.

Manufacturing of shawls, lohis etc.

NA

3. Sole-Proprietor:Sh. XYZ

a) If any of them, in the list of Caution Advices circulated by the Bank from time to time/RBI's/Wilful defaulters' list/Caution List of ECGC/CIBIL Database:

We confirm that none of the liable party ever appears in such category &it has been verified from CIBIL database.

b) If any one of them connected in the past with any NPA/OTS/Compromise/unscrupulous defaulters

We confirm that none of them is connected in the past with any NMA/OTS/compromise unscrupulous defaulters.

c) If any of them, related to Directors/Senior Officers of SBI:

NO

d) Management Change since last sanction, if any

NO

FINDINGS:

Most of the export houses in Ludhiana are dealing in garments, woolen and yarn sector.

Majority of the exporters of Ludhiana find South Africa as their potential export market followed by European countries.

Strength of the hosiery industries is abundant raw material and the weakness is govt. policies.

China is the major competitor of Indians hosiery industries.

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There is 50% increase in price of acrylic yarn as compared to last year.

Price charged by vardhman is highest as compared to other mills.

Price and quality are the major factors that dealers consider important while purchasing yarn.

Exporters face problem of exchange rate fluctuation in foreign market.

Cost of production is increased due to increase in exports of textile and clothing.

Export sales in between 10-15% and rest of the produced material consumed in domestic market.

SUGGESTONS:

More designs and wider market penetration at cheaper rates through better quality products.

Try to adopt new and modern design to sustain in market.

Providing the technical knowledge for the staff.

Competitive pricing to market requirement.

Providing transportation, good work environment to employees.

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Improvement in technology and training.

Government should take steps to provide better infrastructure, technology, innovations, and govt. policies to boost hosiery industries in near future.

CONCLUSION:

Studying the project we came to know that hosiery industries are one of the biggest industries in all over India. State bank of India in Ludhiana having special branch of hosiery industries in sundernagarbranch(SME). I concluded that in hosiery cluster,Colour of cloth must be uniform and strong enough so it would not change within first few washing. I targeted 100 hosiery industries, they produced different products i.e. t-shirts, undergarments, etc. After studying the SWOT analysis,we came to know various strengths of SBI such as quality customer service, greater reach, and weakness of SBI such as they provide loans to hosieries industries for higher interest rates. So,Government should take steps to provide better infrastructure, technology, innovations, and govt. policies to boost hosiery industries in near future.

SOURCES OF DATA:

Annual reports of SBI MSME annual report Websites Board note of bank Credit policy book of bank Various files on loans

ANNEXURE

NAME OF UNIT:-

NAME OF CEO:-

CONCERN:- PARTERSHIP/COMPANY/SOLE-PROPRIETORSHIP

EXPORTS:-

PRESENT BANKER:-

FACILITIES AVAILED:-

RATE OF INTEREST:-

CONTRAINTS FACED:-

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FURTHER REQUIREMENT:-

EXTERNAL RATING:- YES/NO

TURNOVER (LAST 3 YEARS):-

PROFIT:-

RAW MATERIAL:-

FINISHED GOODS:-

CREDIT PERIOD:-

DEBIT PERIOD:-

WORK IN PROGRESS/PERIOD:-

POLLUTION CONTROL (CERTIFICATE):- YES/NO

PREMISES RENTED OR OWNED:-

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