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Saurav Raj Risk Assessment in lending to SME's PPT - Copy


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Saurav Raj Risk Assessment in lending to SME's PPT - Copy

  1. 1. Risk Assessment in lending to SME's At Religare finvest Ltd Presented By: Saurav Raj Saurav Raj
  2. 2. Content  Introduction  Objective of Internship  Credit Analysis Process  Research and methodology  Conclusion Saurav Raj
  3. 3. INTRODUCTON • Religare Finvest Limited (RFL) a subsidiary of Religare Enterprises Limited (REL) is a Small and Medium Enterprise (SME) financing focused NBFC. With a wide network of branches and ISO certification 9001:2008, RFL is committed to providing debt capital to power the growth of the SME’s which constitute as the backbone of India’s economy. The diversified suite of lending solutions include:- - SME Mortgage Loans - SME Working Capital Loans - Loan against Marketable securities • RFL understands that each financial need is unique and offers customized solutions to empower the customer to prosper. With a belief that the customer’s success is their success, its presence in 25 branches across all major cities plays a vital role in nurturing the customers business while growing to a book size of over INR 120.9 billion. (As of December 31st 2014) • Founder of this company is Mr. Sunil Godhwani • CEO of this company is kavi Arora Saurav Raj
  4. 4. Objective of Internship  To Know Basic Risk Assessment Tools  Due Diligence carried out in assessing the Credit Risk of a client  Risk Management post disbursal Saurav Raj
  5. 5. Deal Flow Process Saurav Raj Login Desk Pre Underwriting Process Credit Executive(CAM ,FIN1,Banking, RTR) Yes NO(Reject) Credit Manager (Risk Analysis Of Deal) Query Raised Customer Yes Disbursal of loan Query To customer (If Fulfill Statement) Yes/No Reject Query Resolved
  6. 6. • What is NBFC A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 and is engaged in the business of Loans , Advances, Acquisition of shares/stock/bonds/debentures/ securities issued by Government or local authority or other securities of like marketable nature, Leasing, Hire- purchase, Insurance business, Chit business. • What is Risk Management? The process of determining the likelihood that a specified negative event will occur. Investors and business managers use risk assessments to determine things like whether to undertake a particular venture, what rate of return they require to make a particular investment and how to mitigate an activity's potential losses. Saurav Raj
  7. 7. Credit Analysis Process Saurav Raj  Login: Document (KYC, Property paper) Self Attested - Financial Documents - Bank Documents - Sanction Letters of existing loans  Pre Approval: Credit Executive:  Tele Verification - Telephone Information  Field Investigation – contact point verification, residence & office verification  De-dupe - check on Official MIS  CIBIL- History to know about all loan and how he pay.  Fraud Control Unit – Get Internal Investigation  CET Preparation  CAM - Credit Approval Memo, Customer Details  FIN1- Profit&loss, Balance Sheet  Banking- enter bank statement of client for last 6 months  RTR - To depict & map all exiting Loans
  8. 8. Risk Analysis by Credit Manager (in chronological order)  CET Analysis. Some standard indicators (applicable to many industries) of good credit worthiness are:  DSCR > 1.25  TD / EBITDA < 5  Banking Turnover > 80%  No cash losses in last 3 Financial Years • Personal discussion with Client • Google search – check for pending court cases, negative news • DIN check – check if directors are part of any other company which is defaulting • 5C’s Credit Analysis (explained in next slide) • Ratio Analysis – check whether ratios like EBITDA margin, Net Working Capital Cycle, Debt/equity etc. • Analysis of Bank Statements for debt repayments, banking turnover, inward and outward cheque bounces • Mapping of all the existing loans along with their repayments in the last 6 months • Future growth & EBITDA margin assumptions are taken based on last 3 yrs. CAGR • Market Feedback • Industry analysis • Management analysisSaurav Raj
  9. 9. 5C’s Credit Analysis Saurav Raj  Character: Repayment Background, Social Character, willingness to meet one's obligations  Capacity: Income Statement analysis to repay the loan  Capital: Assets&Liabilities, Equity  Collateral: Tangibility, Marketability, Easily Located  Conditions: Better Security for loan, Future Monitoring of loan
  10. 10. Post-Disbursal Monitoring  Tracking Post Disbursal Documents (in some cases, e.g. Property papers, BT loans)  Escrow Monitoring – whether money inflow regular & from the designated sources  Google Alerts Check – receive alerts on e-mail  Portfolio Delinquency Monitoring - check regular EMI payment Saurav Raj
  11. 11. RESEARCH METHODOLOGY Research Methodology Used In This Project Is Descriptive Research • Primary data sources This data has been obtained directly from discussion with head of finance department of the company. • Secondary data sources Religare finvest ltd. annual report Internet Books ,newspapers, article. Saurav Raj
  12. 12. FINDINGS  Turnover of Religare has increase in 2013-2014 to INR 120.9 billion.  The current ratio is increased in 2014 to INR 120.9 billion. from INR 11484.72 crores in 2013.  The major part of the revenue raised by Religare is from the NBFC’s sector which is 71% of the total revenue. Saurav Raj
  13. 13. Conclusion • The metrics and processes studied during the internship tenure gave a macro as well as a micro level insight into the assessment of credit-worthiness of a client. • Financial institutions use some form of the five C’s in the credit evaluation process • They like to lend money because that is the way that they make money. • They only want to lend money to someone who can repay the loan in full and on time Saurav Raj
  14. 14. Saurav Raj