CORPORATE FINANCE /BUSINESS BANKING
ARK's ideology has been to offer complete Banking solutions pertaining to almost all the Credit Facilities available primarily with Nationalized Banks to MSME sector, Wholesale traders, Manufacturing Units, Industrial houses and Corporates who are either in the process of establishing their new ventures or are already running successful businesses.
Under the gamut of Corporate Finance ARK provides a wide spectrum of services which are best negotiated with Banks & FI's for its valuable clients .The services start with Debt Syndication and go further with various compliance and other advisory roles for the completion of the process.
Under this head ARK provides the guidance for the following products – I.PROJECT LOANS-While setting up a Greenfield project in India, ARK has a special recognition among its clients since it plays an important and crucial role ,right from the stage of conceptualization till its commencement. Alongside this, it also gathers updated information about various Government aids, subsidies and other lending policies available from various Nationalized Banks in India.
ARK provides assistance for arranging the following categories of loans under this head-
• Term Loans-(Machinery Purchase & Building Construction)
• Mortgage Loans
• Corporate Loans(Short Term)
• ECB(External Commercial Borrowing)
• Lease Rental Discounting
II.WORKING CAPITAL LOANS(WC Loans)-Working Capital plays a vital role for running a successful business, therefore assessment of appropriate structure, suitable amount and exact timing is very crucial for a particular business.ARK plays a significant role for its clients to achieve the same as and when required with a lowest possible cost.This includes mainly two categories-
A. FUND BASED - ARK represents for the following credit facilities-
• Cash Credit
• Overdraft
• Working Capital Term Loan
• Bill Discounting
• Export/Import Finance- which include-
1. Packing Credit Limit (PCL)
2. Buyers' Credit
3. Foreign Bill Purchase/Discounting
4.LC Discounting
• Factoring Services
B. NON-FUND BASED – This includes the following facilities -
• Letter of Credit (Inland/Foreign) {ILC/FLC}
• Standby Letter of Credit (SBLC)
• Letter of Comfort (Mainly for ECB)
• Bank Guarantees (BG)
III. FINANCIAL RISK MANAGEMENT
Corporate Debt Restructuring
CDR is a reorganization of a company's outstanding obligations, often achieved by reducing the burden of the debts on the company by decreasing the rates paid and increasing the time the company has to pay the obligation back. This allows a company to increase its ability to meet the obligations. Also, some of the debt may be forgiven by creditors in exchange for an equity position in the company.
The need for a Corporate Debt Restructuring often arises when a company is going through financial hardship and is having difficulty in meeting its obligations. If the troubles are enough to pose a high risk of the company going bankrupt, it can negotiate with its creditors to reduce these burdens and increase its chances of avoiding bankruptcy.
CDR facilitates Corporate identities that are in financial crisis but are outside the preview of BIFR(BOARD OF INDRUSTRIAL & FINANCIAL RECONSTRUCTION), DRT(DEBT RECOVERY TRIBUNAL) & other legal proceedings to renegotiate overdue debts in order to improve their financial standings and harmonize its operations. The framework aims at a coordinated restructuring to minimize the losses to the creditors & other stakeholders.
The CDR usually includes an agreement to repay at a certain interest rate within a set number of months or years.CDR is used in times of crisis to make payments easier, but it does not involve the facility of non-payment of the concerned loans.
The request by the company may include extension or lengthening of the original loan plan involving –
1. Reduction of current payments to manageable levels
2. Skipping number of payments & paying at the end of the loan
3. Consolidating number of different loans into one large Debt package with a single payment.
The services provided by ARK include –
1. Preparation of Project Proposals considering the following important aspects-
• Capacity utilization of the client
• Price of Product offered
• Profit Margin
• Demand
• Availability of raw material
• Input -Output ratio
• Likely Impact of Imports
• International Cost competitiveness
2. Deciding acceptable viability benchmarks based on following parameters on case by case basis, based on merits of each case-
• ROCE-Return on Capital Employed
• DSCR-Debt Service Coverage Ratio
• Gap between IRR(International Rate of Return) & COF(Cost of Fund)
• Extent of Sacrifice
CDR scheme will only apply to accounts involving more than one Financial Institution or Bank. It covers –
• Multiple Bank Account
• Syndication
• Consortium Account of Corporate borrowers with outstanding fund- based & non-fund based exposure of 10CR & above by Banks & Institutions.
Due to an unstable business environment in our country the request for Restructuring is on the rise .More and more Corporates as well as MSME's are feeling the need for Restructuring to run their ventures successfully.ARK boasts of team of experts with rich experience in this segment who dedicatedly offer their services to the desired clients with the sole aim to bring maximum negotiated benefit to them so that business runs smoothly after the approval of the CDR .
Under the head of Restructuring, ARK also offers the service of Corporate Recapitalization & Restructuring. Recapitalization refers to reorganization of the Corporate Capital Structure by imbibing substantial modifications in it.
There can be many reasons behind Recapitalization such as –
•Defending against hostile takeover
•Minimizing taxes
•Implementing an Exit strategy in case of a Venture Capitalist
•Reorganizing the legal/ ownership/ operational or other structures of the company for the purpose of making it more profitable
•To make the organization better organized for its present needs
•To accommodate the change in the ownership or ownership structure or Demerger
•To handle the crisis or major changes in the business
It is extremely important to understand the reason behind such recapitalization and see how the same can be executed. There may be a requirement of Restructuring of the financial assets of the firm/company in order to increase its value and create a beneficial financial environment .
After a detailed analysis of the company, the further steps of the process of recapitalization are accordingly framed in order to ensure that the aim of bringing stability in the company's Capital structure is achieved. The main step in this process is converting one form of finance for e.g. Preference shares with another for e.g. Bonds.
ARK plays an important role in this field in order to help its client carry out the Recapitalization process smoothly. ARK's services include-
•Analysing whether the company actually needs Recapitalization & Restructuring or not
•Whether Recapitalization has to be done to diversify the company's Debt-Equity Ratio
•Deciding the steps that need to be taken in this respect
•Decisions on whether to issue Stocks in order to buy back the Debt Structure or conversion of Preference shares into Bonds/ Debentures in order to achieve the improved level of Debt- Equity ratio
The professionals at ARK ensure that the company in such a situation is able to get the Restructuring done successfully with available resources. If the company has excessive Debts in comparison with their own Funds, ARK tries to make a negotiation with the company's Vendors/ Creditors for creating a repayment plan on a mutual consent basis.
By limiting the Asset Liquidation and Accounts Receivable funding, ARK ensures that the Capital Security is maintained which can be further used for the expansion and growth of the company. We also draft various business plans that give a detailed view of the financial direction of the company and the steps required to achieve the goals.
Financial Assistance & Management
Financial management is defined as that area or a set of administrative functions which relates with arrangement of cash and credit for the organization so that it can carry out its objective of successfully running its operations.
The Financial management team at ARK helps the Corporates in the underline areas-
• To automate and accelerate the consolidation process
• Improve cash flow
• Streamline processes
• Optimize their cost base
• Increase the relevance and promptness of communication and financial information
• Measuring and managing their business performance
• Transforming their support service operations
With the efficient support and assistance of the ARK team, the clients are benefitted in the following manner as it assists them to-
• Build an efficient and effective financial management function focusing on people, processes and technology.
• Design and implement financial consolidation,
• Streamline management reporting and business intelligence tools to provide quality financial and non-financial information to support planning, decision making and control.
• Design and implement effective management processes.
• Specify, select and implement financial consolidation, accounting and reporting information systems.
ARK's focus thus is on the assisting the client in managing its finances for running of smooth business operations, meeting various demands for growth and expansion. ARK also advises its clients in reviving its operations in case of a financial crisis or in any difficulty it faces due to the highly competitive and evolving economic scenario.
Under the preview of Financial Assistance & Management, ARK provides the services of Banking Compliance also.
Banking compliance is the method with which the bank stipulates various conditions like filing of regular information/documentation which is used by the Bank in assessing the progress of the borrower Company. Each Bank is responsible for developing a sound and safe compliance program that takes into account the risks involved for the protection of the Bank's clients and overall business efforts. Banks appoint management-level compliance officers in order to develop compliance policies and procedures, monitor and test programs.
The chief compliance officer is responsible for developing policies and procedures that are in conformity with legal and regulatory guidelines for all aspects of the Bank's business. Compliance is a major risk, if seen from the creditor's point of view. The main concern of creditors before issuing credit to any business is to make sure whether the business is worth the risk. Business credit rating agencies gauge the credit worthiness of a business with the help of compliance checks.
The number of factors that affect the credit compliance of a business are-
1. The Business Plan:
A professional and complete business plan is a must before seeking business credit. If an entrepreneur is serious about his business then he should work out a thorough action plan. Every aspect of the business should be planned, right from its inception to its working.
2. A separate Business Bank account:
Many small businesses fail to take the simple step of maintaining a separate business bank account. The intermingling of business and personal finances sends a red signal to the creditors. It indicates a non committal attitude towards the business. At least one business bank account is essential before beginning to build business credit. There should be sufficient balance in your account so that checks get cleared as too many returned checks might reduce your chances of being approved for a business loan.
3. A Business Address and Business Phone number: In order to save money, some people might run their businesses from home which makes your business look suspicious. Using your home address as your business address can also cause a great deal of damage as running a business from home might create a feeling of non-commitment in the eyes of the creditors.
5. Permits and Licenses: Make sure that you obtain all the permits and licenses required to operate your business. Not having even one of these licenses can make a bad impression on creditors/bankers.
6. Financial Statements of the business: The credit worthiness of the company depends a great deal on the financial statements of the business. Generally the balance sheet and the profit and loss statement of the last three years is seen but if the business is new then the books from the time of starting the business are seen.
The basic elements of an effective compliance framework are-
• Compliance Policy
• Compliance Structure
• Compliance Manual/ checklist
• Compliance Personnel
• Compliance Audit.
The compliance process involves identifying the level of compliance risk in each business line, products & processes, suitably advising the operational functionaries and formulating instructions for mitigation of such risk. The integrity of the compliance process depends upon how well the compliance program has been built up within the organization and whether there is clear identification of responsibility and accountability for the compliance function.
ARK plays an important advisory role in guiding its clients about the Banks' requirements and updated guidelines so that the client is able to run its existing as well as future operations in the most ideal business situations without facing any financial difficulty.
Filing of Bank Compliance documentation is an integral and important part of every entity running its business with banking support. The regular filing of various undertakings, stock and book debt statements, quarterly reports, audited financials, reply to stock audit and other special audits conducted by Bank, compliance of pre-disbursement and post-disbursement stipulations need special care and professional approach. ARK advises its clients and also prepares a blue-print for the same which is an effective tool for finance managers in fulfilling the compliance stipulations of the lending institution.
Retail Financing
The word Retail refers to offering services to the direct customer or the end user rather than to organizations or other corporations. Similarly, Retail Banking is a service provided by the Banks wherein they execute transactions directly with the customers rather than Corporations or other Banks.
Retail Banking covers a wide spectrum of services provided by the Bank to its customers. Most of the customers are unaware of such services provided by the Banks and even if they are aware of such services, the complete knowledge is missing. This is where ARK plays a crucial role of educating their clients of such services and providing them with the insight into the benefits of such services.ARK in the past has provided its guidance to a lot of MSME's as well as to group of employees of Corporates who are in need of Finances to run their operations and and for Employee Welfare respectively.
The major areas that ARK covers under Retail Financing are-
• Providing assistance in sanctioning of Home loans
• Personal finance
• CGTMSE loan schemes for MSME's etc.
• Providing Bulk Deals for Employee Vehicle Loans
• Commercial Vehicle loans
• Mortgage Loans
• Approval of Builders Projects for extending Home Loans to Home Buyers
• Approval of Courses conducted by Universities for extending Education loans to their students
ARK undertakes a detailed study on the requirement of its customers, analysis its feasibility and develops a road map for the proper execution of the plan so that its clients gets the maximum benefits of the facilities provided by the Banks.
The team of experts at ARK also ensure that all the statutory requirements of Banks are complied with for the smooth commissioning of the services it intends to provide to its clients. Rather than striving for its own profitability ARK's constant endeavor is to provide flawless services to its valued customers so that they can achieve what they strive for without any hindrance.
Detailed Project Report
Detailed Project Report (DPR) is a detailed chronicle focusing on the objectives of a Project, the modus operandi for its execution and for the achievement of the desired results. The basic idea behind a Detailed Project Report is that it should reflect the vision and the approach of the Management in the area of Capital Budgeting and Project Management and understanding its implication in the working of the organization.
As per the norms the company seeking Financial Assistance for implementation of its Business idea, is required to prepare a Detailed Project Report. ARK provides its valuable guidance and support and helps its client in preparing such a Report taking into consideration all important aspects of the Project which are listed below-
• Promoters background/experience
• Product with capacity to be built up and processes involved
• Project location
• Cost of the Project and Means of financing thereof
• Availability of utilities
• Technical arrangements
• Market Prospects and Selling arrangements
• Environmental aspects
• Profitability projections and Cash flows for the entire repayment period of financial assistance.
• Investor Guidance Inputs.
ARK also does a complete Management Evaluation for the same which includes the study of the following-
• Memorandum and Articles of Association : Object, Authorised and Paid-up Share Capital, Promoter's contribution, Borrowing powers, list of Directors on the Board, terms of appointment of Directors
• The company as the Promoter : Corporate plan of the Company, Projects promoted/implemented/under implementation, Bankers' report on dealings and Repayment of past loan assistance, details of Group companies and its Operations, Balance sheet and Profit & loss account
• New Promoters: Educational background, Previous Industrial experience, Family background, Sources of income, details of Personal Properties, Banker's reference, Income tax/ Wealth tax returns
• Management and Organisation set up : Broad composition of the Board, details of full time Directors and their responsibilities, details of Chief executive and Functional Executives including their qualification, experience, organisation set-up for existing company and during project implementation for new company.
ARK also undertakes a detailed study in order to upraise itself in the following areas-
Technical Feasibility-
• Technology and Manufacturing process : Proven/new Technology, basis of selection of Technology, competing Technologies, performance data of plants based on the technology, details of licensor of technology, process flow chart and description.
• Location of the Project : Locational advantages, availability of raw material and other utilities, infrastructure facilities, availability of labour, environmental aspects.
• Plant and Machinery : List of machinery & equipment, details of suppliers, competitive quotations, technical & commercial evaluation of major equipments.
• Raw material, Utilities and Manpower : Details of raw materials and suppliers, electricity and water supply, basis of manpower estimates, details of manpower eg. managerial, supervisory, skilled/unskilled, training needs.
• Contracts : Agreement with contractors detailing on know-how, engineering, procurement, construction, financial soundness and experience of contractors.
• Project monitoring and implementation: Mode of implementation, details of monitoring team, detailed schedule of implementation.
• Study of all above factors and their effect on financials and commercial aspect of the project.
Environmental Aspects-
• Air, Water and Soil Pollution,
• List of pollutants / Hazardous substances, their safety, handling and disposal arrangements,
• Compliance with National and International Standards,
• Clearances and No objection certificates required and already obtained ,
• Covering these aspects clearly so that financials are not affected due to absence of these studies.
Commercial Viability-
• Existing and potential market demand and supply for the proposed product in respect of volume and pattern
• Share of the proposed product of the company in the total market through Marketing Strategy
• Selling price of the product and Export potential, if any.
• Buy-back arrangements, if any.
• Detailed note on Scalability
• Sensitivity of the Trade
Financial Appraisal
• Cost of the Project : This includes the cost of Land & Site development, Building, Plant & Machinery, Technical know-how & Engineering fees, miscellaneous Fixed assets, Preliminary & Preoperative expenses, contingencies, Margin money for Working Capital.
• Means of Financing : Means of financing shall have to conform to proper mix of share Capital and Debt. This includes Share Capital, Unsecured loans from Promoters/Associates, Internal accruals, Term loans, Government subsidy/Grant. Reasonableness of Promoters' contribution in the form of Equity and Interest-free Unsecured loans
• Profitability Projections :Past records of financial performance of the company, profitability estimates, Cash flow and projected Balance sheet for the project and for the Company as a whole. Based on the projections, various financial ratios such as Debt -Equity ratio, Current ratio, Fixed asset coverage ratio, Gross profit, Operating profit, Net profit ratios, Internal rate of return(over the economic life of the project), Debt Service Coverage ratio, Interest Service Coverage Ratio, Earning per share, Dividend payable etc. would be worked out to ascertain financial soundness of the Project.
Economic Viability
• Study of real value of input as against the value accounted in Financial analysis for the purpose of Economic evaluation of the project.
• Study of Social Cost Benefit analysis as a measure of the costs and benefits of the project to Society and the Economy.
• Economic analysis therefore helps to understand the inherent strength of the Project so that it withstands the International competition on its own.
For Project Financing through Debt (specifically loan from Banks and FI's), a DPR is a basic and the most important document that must be attached to a loan application. From the point of view of a lender, a Project Report is a very decisive document as it forms the basis for him to decide whether he shall engage his funds in that particular Project or not.
This is where ARK plays an extremely important role in guiding and assisting its client in the most appropriate and professional manner in order to achieve assured success in acquiring the required funds through design and making of a Project Report covering technical as well as financial aspects of the Project.
SUBSIDY ASSISSTANCE REPORTS AND FILINGS
To augment Industrial Production activity and also to increase the presence of Commercial Units various Governmental programs are initiated by Central as well as State Governments. Apart from relaxation in Direct/Indirect Taxes, Tax Holidays, the Government invites Entrepreneurs to set up industry at specific locations and/or specific type of industries with Capital Subsidy Schemes as well as Other Subsidy Schemes. The prospective as well as existing Entrepreneurs always like to take benefit of these schemes and implement their projects by encashing the opportunities available under these Subsidy schemes.
Here ARK plays an extremely important role in guiding and assisting its client in the most appropriate and professional manner in order to achieve assured success in filing requisite reports and forms with the Nodal Agencies for taking the benefit of Centre/State sponsored Subsidy Schemes. It involves designing and making of a Project Report covering regulatory, technical as well as financial aspects of the projects which make an essential elements of these schemes.