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Sources of finance
 

Sources of finance

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    Sources of finance Sources of finance Presentation Transcript

    • Sources of finance EQUITY – Equity, preference, internal accruals DEBT – Term Loans, Debentures, Working Capital Advances
    • Methods of raising Equity Capital
      • IPO
      • Seasoned Offering
      • Rights issue
      • Private placement
      • Preferential allotment
    • Long-term Debt
      • Term Loans-
        • Currency flexibility
        • Security
          • First equitable mortgage on all immovable properties of borrower
          • Hypothecation of all movable properties of borrower
        • Interest payment & principal repayment
        • Restrictive covenants
    • Term Loan Procedure
      • Submission of loan application
        • Promoter’s background
        • Particulars of the industrial concern
        • Particulars of the project
        • cost of the project
        • Means of financing
        • Marketing and selling arrangements
        • Profitability and cash flow
        • Govt. consent and economic considerations
        • …………………..
      • Initial processing of loan application
      • Appraisal of the proposed project
      • Issue of the letter of sanction
      • Acceptance of the terms and conditions
      • Execution of loan agreement
      • Creation of security
      • Disbursement of loans
      • Monitoring
    • Debentures
      • FCDs and PCDs
      • Floating rate bonds
      • Secured premium Notes (issued by TISCO) : The principal amount of the SPN is to be repaid in 4 equal annual instalments with an equivalent additional amount with each instalment
      • Structured Notes : A debt obligation which is derived from another debt obligation. They can also be securitized debt instruments.
        • Pass Through Certificates (PTCs)
        • Collateralised Mortgage Obligations (CMOs)
      • ………………… .
      • Indexed Bonds : the payoff of a indexed bond consists of – (1) a fixed amount
      • (2) a variable component whose value depends on some index
    • Working Capital finance
      • Forms of bank finance
        • Cash credits / ODs
        • Loans, purchase / discount of bills
        • LOCs
      • Other sources
        • Deferred credit
        • Lease and hire purchase finance
        • Unsecured loans and deposits
        • Short-term loans from FIs, CPs
        • Factoring
    • Raising capital in International financial markets
      • Euromarkets – a collection of international banks that help firms in raising capital in global market
      • Eurocurrency loans – the most common instrument of external borrowing
      • It is a deposit of currency in a bank outside the country of the currency
      • Eurocurrency loans are syndicated loans, wherein a group of lenders(banks) participate jointly in the process of lending under a single loan agreement. The syndicate of lenders is represented by the lead bank.
      • Floating rate is applicable on eurocurrency loans which is linked to LIBOR (London Inter bank Offer Rate)
      • The borrower often enjoys the multi-currency option which enables it to denominate the interest and principal in the new currency opted for.