SVP-Advances (Eastern Zone):

VP & Head (SME Centre-BBSR):

Rameswar Agro Indstr!es Pvt "td
Re#$!es to R!s% &e#artment o'servat!ons
January 21, 2009
('servat!on o) R!s% &e#tt Re#$* to R!s% Comment
('servat!on o) VP +R!s%,:
The sanct!on of takeover of
Corporation Bank Term Loans should
be after compliance all their terms of
sanction letter dt 1!2!200"#includin$
%romoters mar$in of &0!11' for TL2,
repayment(e)istin$ and future,
additional capital infusion for cost
escalation #*s 9 lacs as per
comparative sheet and any other
e)penses, on +ithdra+al of unsecured
for tenor of TL etc! so as to ensure this
is not treated as restructured!
The promoters have already brou$ht in the funds
presently as unsecured loan and *,-.%L has
initiated steps to convert the unsecured loan to
paid(up capital so as to increase the capital to *s
&00 lacs! The process is likely to be completed
+ithin ne)t 2(& days! /e shall ensure obtainin$
Copy of 0orm(2 1 0orm(2 before disbursement of
credit facilities!
Term Loan a3cs +ith Corporation Bank is re$ular
as on date! .ecessary undertakin$ shall be
obtained for continuation of unsecured loan as
ori$inally estimated so as to achieve desired
4nancial levera$e position!
567 Center to con4rm reconciliation
and end use of disbursed TL amounts!
/e have rechecked the TL sanctioned,
repayment schedule stipulated 1 present o3s
+ith Corporation Bank 89etails attached as
anne)ure to ,ppl .ote: and observe that there
are .; irre$ularity in the a3cs as on date!
,s far as end(use is concerned, +e have recently
inspected the unit 1 found that the assets
creation has been in line +ith envisa$ed pro<ect
parameters! The unit has commenced
commercial operation nearly 1= years back! ;ur
overall impression about the unit is satisfactory!
Takeover norms be complied +ith! .oted for compliance!
The pro<ect e)ecution in the last 9
months have been only to the tune of
1" lacs +hich is a point of concern(
reasons be obtained and satis4ed!
,s detailed in our ,ppl .ote, o+in$ to technical
di>culty 8chan$e in scope of pro<ect and startin$
of pro<ect completion3repayment date:, the
residual Term Loan +as not availed from
Corporation Bank! The promoters completed
pro<ect +ork to the e)tent of *s 1" lacs from
their internal sources! ?o+ever, +ith sanction of
the proposed facility, +e e)pect the cape) to be
completed +ithin the revised time frame!
The valuation of property is optimistic
particularly considerin$ @alin$a
?atchery is havin$ ne$ative .et +orth
and likely to be +ound up(only land
price maybe realiAed!
/e have assi$ned the valuation +ork to our
empanelled valuer 1 the report is e)pected
shortly! The unit as +ell as collateral are
strate$ically located 8.ear @handa$iri 5Buare on
.!?(2: and the valuation estimated by the
promoters is considered acceptable! ,s far as
.e$ative .et+orth 8of *s 29 lacs: of @alin$a
1

?atchery is concerned, the promoters have
infused lon$ term unsecured loan of *s 9C lacs
into the Company! -f the same is considered as
Buasi eBuity, then the Company +ould have a
.et +orth of *s &" lacs as on 6arch &1, 200"
+ith Aero term liability!
*atin$ con4rmed at 567(! Thou$h +ith credit enhancement throu$h
mort$a$e of immovable property, the 4nal credit
ratin$ +orks out to 567(&85;:! ?o+ever, as per
the su$$estion, +e have accepted the ratin$ as
567( and accordin$ly, the note is placed to
Competent ,uthority for sanction!
%resent cash Do+ and sources of
capital infusion be ascertained apriori!
The promoters have already infused ma<ority of
the fund as unsecured loan, +hich +ill be
converted to paid(up capital prior to
disbursement of credit facilities! The promoters
are in business for last t+o decades and are
4nancially stron$ 8evident from total funds
invested in *,-.%L 1 @alin$a ?atchery! 0urther,
the promoters have recently sold oE part of their
land holdin$ to raise capital, +hich is bein$
invested in the t+o businesses! Therefore, +e do
not envisa$e any issue +ith re$ards to infusion
of capital!
There is duplication in machineries the
reasons for +hich be ascertained! The
operatin$ e>ciency and mar$ins be
compared +ith similar siAed peers!
%ro<ect cost of TL& be veri4ed!
5ince the Company is settin$ up second rice mill
plant +ith F tph, there is bound to be certain
duplication of machineries! ?o+ever, +e have
rechecked the scope of earlier pro<ects 84nanced
by Corporation Bank: and there is no case of
double 4nancin$ 1 separate assets are bein$
created under the proposed cape)! 9etailed
Chartered 7n$ineer certi4cate +ith re$ards to
cost of TL(& shall be obtained before
disbursement of limits!
,dvance be monitored by 567 Center,
this bein$ a G/atchH account!
.oted for compliance!
.o e)cess borro+in$ be allo+ed!
7nhanced CC be allo+ed after pro<ect
completion! 5hort(term funds be not
used for TL servicin$, or promoters
contribution!
,s per the second method of lendin$, the
Company is eli$ible for CC limit of *s 220 lacs
for 0I 200"(09 and *s &00 lacs for 0I 2009(10!
The Company has reBuested for disbursement of
full limit of *s &00 lacs since this is the main
season for procurement of paddy!
The shortfall is mainly on account of considerin$
term loan installments as part of current liability!
-f the same is e)cluded, the Current *atio +orks
out to above 1!&& 1 there +ould no e)cess
borro+in$!
?o+ever, +e have noted the observations and
shall restrict the CC dra+l to *s 220 lacs till
6arch &1, 2009 87li$ible limit as per 6%B0
2

method: and shall disburse the residual amount
durin$ 0I 2009(10 sub<ect to availability of
dra+in$ po+er!
Rat!ng
The %resent ratin$ assi$ned is
$enerally in order!
0actual!
5ince the 4nancial year 200C(0" +as the 4rst full
year of commercial operation, the sales 1
pro4tability C,J* +ere not available for ratin$
purpose! 9ue to this, the score +ith respect to
$ro+th parameters +ere nil! This also lo+ered
the 4nancial ratin$ of the Company! ?o+ever,
once the Company completes the current
4nancial year, +e e)pect the 4nancial as +ell as
overall ratin$ to improve si$ni4cantly!
The *atin$ ;utlook has some
uncertainties due to the delay in the
pro<ect of the company, +hich is
presently under implementation!
The promoters have a successful track record of
timely implementation of 4rst phase of the
pro<ect, +hose commercial operation started as
per schedule! ;nce the proposed limit is
disbursed, +e e)pect the promoters to
implement the pro<ect as per schedule!
-!nanc!a$ Parameters
The captioned credit proposal is for
takeover of the e)istin$ TL 3 CC limits
of the company +ith Corporation Bank
and some enhancement are also
proposed! ,s per the sanction of
Corporation Bank, the e)pansion
pro<ect undertaken by the company
+as to be completed by 12!02!200"!
?o+ever, the same has yet not been
completed! The reasons for the same
needs to be ascertained and
commented upon!
,s detailed in our ,ppl .ote, there +as no delay
in 4rst pro<ect, +hich +as completed +ell +ithin
time i!e! &1
st
9ecember 200F! The *epayment
+as started in 1
st
January 200C and continuin$
till date as per repayment schedule prescribed
by Corporation Bank! The second pro<ect +as
conceived in the month of 5eptember 200C!
?o+ever, the company $ot the sanction in
0ebruary 200" due to internal process of Corp
Bank! 9ue to shorta$e of pro<ect implementation
period 8from " months to months:, the
Company could complete part of pro<ect by June
200" 8payment started:! -n the meantime
promoters revised their ori$inal plan and
proposed a ne+ boiled plant instead of a F T%?
ra+ plant! Therefore the total loan reBuired a
revision +ith fresh enhancement! The chan$e in
scope of pro<ect is considered as <usti4ed 1
hence accepted for our sanction!
The companyKs $ross block as on
6arch &1, 200C +as *s! 2" lacs,
+hich +ere in line +ith the pro<ect cost
of *s! &1 lacs considered under TL -
by Corporation Bank!
The company added 4)ed assets
+orth *s! C0 lacs in 0I 200C(0" and
C/-% as on 6arch &1, 200" +as *s!
20 lacs! This indicates that an
amount of *s! &10 lacs has been spent
on the e)pansion pro<ect of the
company +here the total pro<ect cost
+as *s! FC lacs! The company is no+
indicatin$ pro<ect investment as *s!
0actual!
;+in$ to technical di>culty 8chan$e in scope of
pro<ect and startin$ of pro<ect
completion3repayment date:, the residual Term
Loan +as not availed from Corporation Bank!
The promoters completed pro<ect +ork to the
e)tent of *s 1" lacs from their internal sources!
?o+ever, +ith sanction of the proposed facility,
+e e)pect the cape) to be completed +ithin the
revised time frame!
3

22" lacs till 9ecember 12, 200", +hich
means only *s! 1" lacs, has been
further added in the pro<ect in last
nine months! This indicates some
problem in the pro<ect implementation
and needs to be probed further!
The pro<ect components may be
reconciled on item(to(item basis! ,ny
overrun in the individual head should
be funded by additional promoters
contribution, +hich has been
stipulated by Corporation Bank!
/e have already reconciled item +ise pro<ect
cost 8details attached as anne)ure to our ,ppl
.ote: and no cost overrun has been considered
for our assistance! The Company has a$reed to
meet the additional fund3./C reBuirements if
any!
The $earin$ position of the company is
improvin$ mainly by conversion of the
e)istin$ unsecured loan into eBuity as
also treatment of a part as Buasi
eBuity! The compliance of this
stipulation be ensured strictly and
before disbursement! The 5hare
application money should also be
converted into paid up capital
immediately!
0actual!
,s detailed above, the promoters have proposed
increase in paid up capital to *s &20 lacs 8*s &00
lacs prior to disbursement: and lon$ term
unsecured loan of *s 1F0 lacs durin$ current
4nancial years! The Company has already
initiated the process of 4lin$ the form +ith *;C
+ith re$ards to conversion of share application
money3unsecured loan to eBuity!
The company has unsecured loans
from 635 @alin$a ?atcheries %vt Ltd!
L*s! 1!1" CrM and one 6r 9 * %atnaik
L*s! 1!2 CrM! The lon$(term
availability of these funds shall be
critical for the cash Do+ stability of the
company!
The Company has submitted that the unsecured
loan contributed by 63s @alin$a ?atcheries %vt
Ltd +ill be converted to share capital durin$ the
year! ?o+ever, the funds contributed by 6r
%atnaik +ill continue as lonm$ term unsecured
loan durin$ the year! ;nce the land deal is
formaliAed 86r %atnaik is buyin$ land from the
promoters:, the money can be capitaliAed in the
books of the Company!

Thou$h, the company is stated to be
into +orkin$ in the premium se$ment,
the %,T mar$ins have been modest
only for 0I 200" L,uditedM as also for
0I 2009 LestimatedM!
The company is no+ plannin$ to cater
the $eneral se$ment in vie+ of some
$overnment re$ulation, but there is a
sharp <ump in the %,T mar$ins by
almost 200', +hich needs to be
properly analysed and <usti4ed!
The 4nancial year 200C(0" +as the 4rst full year
of operation! The Company earned %B9-T mar$in
of more than 10' durin$ the year, +hich is in
line +ith industry standard! The %,T mar$in +as
mar$inally lo+er 1!""' mainly on account of
depreciation 1 4nancial char$es! The Company
has conservatively estimated %B9-T 1 %,T
mar$in of 11!02' and 1!02' for 0I 200"(09,
+hich is considered as acceptable!
5ince the cape) pro$ram +ill result in more of
boiled rice production 8hi$her demand in local
market:, the Company +ould be able to increase
Jovt! 5upplies under %95 scheme +herein the
mar$in is normally hi$her! 0urther, +ith
commercial operation of 2
nd
unit, the Company
+ould be able to enter custom millin$ business,
+herein the pro4tability mar$in is normally
4

hi$her! 0urther, +ith increase in capacity, the
economy of scale +ill ensure reduction in
operational3 overhead cost, thus resultin$ in a
hi$her pro4tability! Therefore, the estimates
made by the Company for 0I 2009(10 8%B9-T of
1': is considered as acceptable!
Corporation Bank in its sanction of
enhanced CC limit has linked the
release of the same to the completion
of the e)pansion pro<ect! The pro<ect is
not yet completed but it is proposed to
release entire limit includin$ a further
enhancement by *s! F2 lacs! The CC
limit presently should be pe$$ed at
the current operative levels allo+ed by
Corporation bank and the enhanced
limits should be released only after
completion of the pro<ect!
The Cash Credit limit allo+ed by Corporation
Bank for even the e)istin$ " tph plant is
considered inadeBuate! /e have veri4ed the
reBuirements +ith the other (2 e)istin$ rice
mills in our portfolio and observe that the
reBuest made by the Company is $enuine 1
need based!
The holdin$ pattern estimated by the Company
in line +ith past3industry trend 1 the /C limit
+orks out to *s 220 lacs and *s &00 lacs
respectively for 0I 200"(09 and 2009(10!
,ccordin$ly, +e propose to disburse the /C limit
sub<ect to availability of dra+in$ po+er!
The outstandin$ in the CC limit +ith
Corporation Bank +as *s! 12C lacs as
on 6arch &1, 200", +hich +as in
e)cess of the sanctioned operative
limit of *s! 12"!20 lacs! The same
needs to be e)amined!
Corporation Bank had sanctioned total limit of *s
2&2 lacs 8enhancement from *s 12" lacs: and
had allo+ed dra+l to the e)tent of *s 12& lacs
pendin$ completion of second phase of pro<ect!
The overdra+in$ of *s 2 lacs as on 6arch &1,
200" may be due to interest application as on
the year( end date!
The company in its pro<ect report has
stated that the e)pansion pro<ect shall
allo+ it to use some common facilities!
?o+ever, items like Boiler and 7T%
have been considered under both the
"T%9 as also F T%9 plant! There
separate reBuirement be e)amined as
per the technical necessities!
5ince the t+o plants 8" tph and F tph: are
separate, the Company is reBuired to have
separate Boiler, 7T% and millin$ eBuipments, for
both the units! ?o+ever, the common assets
include entry3e)it $ates, boundary, /ei$hbrid$e,
Jo(do+n, 5tora$e 5pace, Nehicles, etc!
The pro<ect cost and operatin$ ratios
may be compared +ith similar pro<ects
done by our bank!
/e have compared the pro<ect cost of *,-.%L
+ith units of our e)istin$ portfolio such as
Jayala)mi ,$ro 1 6an$alam *ice 6ill, brief
details of +hich is furnished hereunderO
8*s in lacs:
%articular
s
6an$alam Jayala)mi
,$ro
*ames+a
r ,$ro
Capacity 9 tph 9 tph 1 tph
%ro< Cost ""&!00 "F0!00 10!00
T!L "0!00 22!00 FFF!00
5ales 2F21!00 2200!00 2&&!00
%B9-T
8':
12!02' 1&!1' 1!1C'
%,T 8': &!2&' !&' 2!99'
T;L3T./ 2!F& 2!9C 2!2
The cost envisa$ed by *,-.%L is considered in
line +ith the estimates of these units! 0urther,
5

the revenue 1 pro4tability ratios considered by
the promoters are also in line +ith industry
trend.
The core promoterKs mar$in for the
second e)pansion pro<ect LTL ---M at a
cost of *s! 22F!C0 lacs has been
indicated as *s! 22!C0 lacs only +hich
is only 10' of the pro<ect cost! This is
lo+ and ideally the promoters should
be brin$in$ resources pendin$ the
disbursement of the subsidy!
%endin$ disbursement of Corporation Bank loan,
the promoters have already infused si$ni4cant
amount of fund into the business! The overall
promoters mar$in vis(P(vis our Term Loan +orks
out to 2' e)cludin$ cost of land, +hich is
considered as satisfactory by industry standard!
The 0,C* in the pro<ect also +ork out to 1!F& as
on 6arch &1, 2009 +hich is above the stipulated
level! -f the market value of land is included, the
0,C* +ill improve to more than 2!20 and is
considered as acceptable!
Bs!ness Parameters
The company, other+ise, is operatin$
at about 22(F0' capacity utiliAation
on t+o 5hift basis! The necessity for
e)pandin$ capacity may be seen in
this li$ht also! -t may also be seen
+hether the $overnment re$ulation for
custom millin$ shall be applicable to
only part of the companyKs facilities as
$enerally these stipulations are on
$ross capacities! The pro4tability
aspect may be put to such sensitivity
test!
The year 200C(0" +as the 4rst full year of
operation durin$ +hich the Company achieved
capacity utiliAation of 22(F0'! The Company
started the year +ith a *a+ *ice %lant 8demand
for boiled rice is normally hi$her in ;rissa:. -n
addition to e)pandin$ the capacity of e)istin$
unit to include boiled rice plant, the second unit
has been planned to cater the need of all three
se$ments such as %remium 5e$ment, *ural 1
6iddle Class as +ell as Jovt! 5upply 8custom
millin$:! /ith these combined facility, the
Company +ill be in a position to come up as a
full(Ded$ed inte$rated unit! The capacity
addition is e)pected to increase the top line as
+ell as conseBuent bottom line of the Company!
Management Parameters
The reasons behind ne$ative net(
+orth of the $roup associate 635
@alin$a ?atcheries be looked into form
mana$ement practices an$le!
63s @alin$a ?atchery %vt! Ltd is operatin$ a
%oultry Qnit for last t+o decades! The poultry
business continues on a lo+ scale even till date!
/ith <oinin$ of youn$er members into the
business, the family decided to enter food
processin$ 1 +arehousin$ business durin$ 0I
2002(0F! 0urther, on account of business non(
viability, the promoters have decided to
$radually e)it from %oultry Business and
concentrate fully on food processin$ business!
The Company has been adversely aEected
durin$ last fe+ years due to bird(Du and entry of
other or$aniAed3unor$aniAed players into the
business! The accumulated loss resulted in a
ne$ative net+orth as on 6arch &1, 200"!
?o+ever, t.e #romoters .ave !n)sed $ong
term nsecred $oan o) Rs /01 $acs !nto t.e
Com#an*2 I) t.e same !s cons!dered as
3as! e3!t*4 t.en t.e Com#an* wo$d
.ave a 5et wort. o) Rs /67 $acs as on
Marc. 684 9::7 w!t. ;ero term $!a'!$!t*2
@?%L has diversi4ed into meat processin$ and
6

+arehousin$ business in the recent past! The
Company does not en<oy any credit facility from
any bank e)cept a pled$e 4nance limit from
5tate Bank -ndia! /e have discretely enBuired
+ith local 5B- ;>cials and they have $iven
positive opinion on the promoters! -nfact, 5B- has
also started pursuin$ +ith the promoters for the
*ice 6ill pro<ect!
The corporation Bank sanction letter
dtd 1F!09!200F indicates e)posure of
QT- Bank in @alin$a ?atechries %vt Ltd!
The same may be looked into and
commented upon!
-n the referred sanction, Corporation Bank has
called for credit opinion from QT- Bank due to
featurin$ of our Bank in the Balance 5heet of the
Company. /e have veri4ed our record and
observe that no credit facility +as ever $ranted
to the Company in the past! The featurin$ of
name may be due to some liability relationship
at that point of time!
Sectora$ (t$oo%
%olicies of Central 3 5tate Jovt! in
respect of procurements, pricin$ etc!
shall have a direct bearin$ on the
sector!
/e have not e)perienced any ma<or policy
chan$e in ;rissa +ith respect to *ice 6ill
se$ment and all the e)istin$ units in our
portfolio are doin$ +ell! The promoters are into
the business of food processin$ business for a
lon$ time and are 4nancially stron$ to +ithstand
any re$ulatory chan$es by the central3state
$overnment!
Secr!t* Strctre
The land securities both primary and
collateral are primarily leasehold land
from --9C;! The valuations as such be
done conservatively more so in vie+ of
the stated fact about closure of
operations of @alin$a ?atcheries +hich
could also result in erosion of
valuation!
-ncidentally, the value of F!F ,cre land
transferred to *amesh+ar ,$ro
-ndustries %vt Ltd! in the second half
of 0I 200F(0C is *s! 2F!F1 lacs only!
The basis of valuation of the ad<acent
land admeasurin$ 2!2 ,cre for *s! !"2
Crores may be looked into detail!
/e have recently inspected the unit as +ell as
collaterals! The Company is oEerin$ around 2
acres of prime land 8& k!ms from @handa$iri
5Buare on .!?(2:! The value estimated by the
Company is around *s !"2 Crs, +hich in our
vie+ is considered as acceptable! 0urther the
property is considered as fairly marketable in its
present form and likely to attract premium due
to its pro)imity to ?i$h+ay!
9ue to intra($roup transfer, the consideration
value may be lo+er! ?o+ever, +e shall obtain a
detailed valuation from our empanelled la+yer
before disbursement of credit facility!

The land details be properly reconciled
as there has been transfer of land
from kalin$a ?atcheries to *amesh+ar
,$ro and it may be con4rmed that the
proper --9C; consent is available!
The Copy of -9C; .;C for transfer of F!FF acres
of land from kalin$a ?atcheries to *amesh+ar
,$ro has been obtained 1 held in our record!
/e have speci4ed submission of speci4c .;C
from -9C; for creation of mort$a$e on the land
in favour of our Bank +ithin &0 days from the
date of disbursement!
7

(t.ers
This +ould be an G/atch accountK and
revie+ freBuency of si) months be
maintined,
.oted for compliance!
S.as.! B Prasad B R 5anda
Manager (Cred!t) Asst V!ce Pres!dent
(Cred!t)
8