INDUSTRIAL DEVELOPMENT BANK OF INDIA

 

 

Constitution and Milestones

 

Industrial Development Bank of India (IDBI) was established in 1964 by the Government of India under Industrial Development Bank of India Act, 1964. The functions and working of IDBI are governed by the Act. Initially, IDBI was set up as a wholly-owned subsidiary of Reserve Bank of India to provide credit and other facilities for the development of industry. In 1976, the ownership of IDBI was transferred to the Government and it was entrusted with the additional responsibility of acting as principal financial institution for coordinating the activities of institutions engaged in the financing, promotion or development of industry.

 

In 1982, IDBI transferred its International Finance Division, which was providing export finance to industry, to Export-Import Bank of India, which was established as a wholly owned corporation of the Government of India under Export-Import Bank of India Act, 1982.

 

In 1990, IDBI's portfolio relating to the small scale industrial sector was transferred to the Small Industries Development Bank of India (SIDBI) which was established as a wholly-owned subsidiary of IDBI under the Small Industries Development Bank of India Act, 1989. However with the amendment of SIDBI Act, 1989, SIDBI has since been delinked from IDBI w.e.f 27th March, 2000.

 

In 1993, IDBI established a wholly-owned subsidiary by the name IDBI Capital Market Services Ltd. (IDBI Capital). The company's business activities include bond trading, equity broking, client asset management and depository services. In 1994, IDBI Bank Ltd. was set up jointly by IDR1 and SIDRI to offer full range of commercial banking products to corporate and retail customers. Another wholly-owned subsidiary i.e. IDBI Intech Ltd. (PMCH) was promoted by IDBI in March, 2000 to take advantage of the business opportunities in the IT Sector. INTECH is registered with Software Technology Parks of India (STPI).

 

In March 2001, IDBI set up IDBI Trusteeship Services Ltd. to provide technology-driven information and professional services to subscribers and issuers of debentures. IDBI is also associated with select bank/institutions in setting up Asset Reconstruction Company (India) Ltd. (ARCIL), which will be involved with the strategic management of non-performing and stressed assets of Financial Institutions and Banks.

 

The Industrial Development Bank (Transfer of Undertaking and Repeal) Bill, 2003 has been passed by the Parliament. The Bill envisages to repeal the WBI Act, 1964 and to bring IDBI under the Companies Act for investing it with the requisite operational flexibility to undertake banking business. With that, IDBI shall be converted into a commercial bank.

 

Functions

 

Over the years, IDBI's role as a catalyst to industrial development has encompassed a broad spectrum of activities. IDBI can finance all types of industrial concerns covered under the provisions of the IDBI. Act, irrespective of the size form of organisation. There are also no restriction on the nature and quantum of assistance that IDBI can provide. IDBI primarily provides finance to large and medium industrial enterprises and is authorised to finance all types of industrial concerns engaged or to be engaged in the manufacture, processing or preservation of goods, mining, shipping, transport, hotel industry, information technology, medical and health services, leasing, generation or distribution of power, maintenance, repair, testing or servicing of vehicles, vessels and other types of machinery and the setting up and development of industrial estates. IDBI may also assist Industrial concerns engaged In the research and development of any process or product or in the provision of special technical knowledge or other services for the promotion of industrial growth. In addition, floriculture, road construction and the establishment and development of tourism related facilities including amusement parks, cultural centres restaurants, travel and transport facilities and other tourist service has been recognised as industrial activities eligible for finance from IDBI. Consequent upon Government of India conferring industry status to the ‘Entertainment Industry including films' and approving the same as an eligible activity for film financing u/s 2(c) (xvii) of IDW Act, IDBI has launched scheme for financing of film industry for production of films. IDBI has also started operations in the secondary market.

 

IDBI has been assigned special role for co-ordinating the activities of institutions engaged in financing, promoting or developing industries as also provision of technical, legal and marketing assistance to industry and undertaking market surveys, investment research as well as techno-economic studies in connection with the development of industry.

 

Organisation and Management

 

IDBI is a Board-managed organisation headed by the Chairman and Managing Director. Eminent industrialists, professionals, management experts and representatives, of the Central Government are included in Board of Directors to frame various policies. Besides Chairman and Managing Director, duly assisted by Executive Directors, and other executives who supervise day-to-day operations, IDBI has a pool of competent and experienced professionals drawn from various disciplines to carry out its policy matters of providing different services to the industry. The bank has an Asset Liability Management (ALM) Committee which meets regularly to manage market risks (viz. liquidity, interest rate and foreign exchange risk) in a co-ordinated manner. The Audit Committee of the Board (ACB) acts as an interface between the Management, the Statutory Auditors and Internal Audit Department.

 

For evolving overall risk management policy and review, and also to give directions to the Risk (sub) Committees, IDBI has constituted a high-level Risk Management Committee. The bank has also set up an independent credit Risk Management Group to evaluate credit both at the transaction level as also in the context of total asset portfolio. The group is required to put in place a comprehensive credit risk management system, which would cover, inter-alia, credit risk assessment, setting of risk-based exposure limits, loan pricing, portfolio risk measurement and MIS for credit risk management.

 

The bank has also set up New Products and Services Committee to co-ordinate the development, marketing and delivery of products and to keep a track of competitive trends and products positioning.

 

Offices

 

IDBI with its Head Office at Mumbai, has an all India presence. It operates Mumbai and New Delhi. Besides, IDBI has 35 branch offices located in State capitals and major commercial centres in India. A list of offices of IDBI is giver at Appendix 5.I.

 

Regulation and Supervision

 

Section 45L of the Reserve Bank of India Act, 1934 empowers RBI, inter-alia, to call for certain information relating to the business of IDBI and give directions relating to the conduct of its business. RBI had set up a Board for Financial Supervision (BFS) in 1995 to undertake off-site and on-site supervision over banks and financial, and has been issuing detailed guidelines on Asset Classification, Income Recognition and Provisioning, etc.

 

Products and Services

 

IDBI provides finance for the establishment of new industrial projects as well as for expansion, diversification and modernisation of existing industrial enterprises. IDBI undertakes/supports wide ranging promotional activities including entrepreneurship development programmes for new entrepreneurs, provision of consultancy services for small and medium enterprises, upgradation of technology and programmes for economic upliftment of the underprivileged. Will offers to its borrowers the option of both fixed and variable interest rates which are based on IDBI's risk perception and creditworthiness of the borrowers. IDBI has made efforts to respond to the financial needs of the industry by constantly expanding its range of products and services.

 

Wide range of products and services, offered by IDBI include project loans, rupee as well as Foreign Currency loans, equity financing, corporate finance (including short-term/working capital loans and structured financing products) venture capital, equipment leasing, bills finance, refinancing of industrial loans as well as various fee-based services.

 

IDBI currently offers the following major products and services to industrial concerns.

 

Direct Finance

 

The expression "direct finance" refers to the provision of finance directly to an industrial unit without the involvement of an intermediary financial institution.

 

(a)    Project Finance

Project Finance involves providing long term credit and other facilities to medium and large scale units for the establishment of new projects as well as for expansion, diversification or modernisation of existing industrial units. Project finance is granted directly to units established as limited liability companies in private, joint and public sectors, and to co-operatives.

 

As part of Project Finance, IDBI provides term loans in rupees and in foreign currency repayable over 5-10 years depending upon the debt servicing capacity of tile borrowing unit, and secured by a charge over the immovable/ movable assets. It also provides financial guarantees, usually in foreign currency, to cover deferred payments and to enable corporates to raise loan born overseas. IDBI's guarantees are of near sovereign nature and have been an important segment of operations in the recent years. Details are given later in this Chapter.

 

(b) Equipment Finance and Asset Credit

Under Equipment Finance, rupee and foreign currency loans are given to industrial units conforming to certain minimum financial criteria for the purpose of Financing acquisition of specific items of machinery and equipment. Such loans are secured by charge on specific assets and have a maturity of upto 6 years including moratorium. Asset Credit Facility extends a line of credit to industrial units for financing of their normal capital expenditure over a specified period. Such credit is normally extended for a period of upto 6 years and is secured by a charge on the assets so acquired. Details are given later in this Chapter.

 

(c) Direct Discounting of Bills

IDBI provides facilities for direct discounting of bills of exchange and promissory notes which arise from the sale of machinery on a deferred payment basis by a seller to a domestic purchaser. Details are given later in this Chapter.

 

(d) Venture Capital

Venture Capital finance is extended by IDBI for projects involving the development and use of indigenous technology and for adaptation and development of imported technology, as well as high-risk, high-return ventures. Details are given later in this Chapter.

 

(e) Working Capital

IDBI provides loans to corporates for meeting working capital requirements. The loans are granted in either rupee or foreign currency for meeting the loan component of the working capital requirements of the company assessed for a year. Details are given later in this Chapter.

 

(f) Film Finance Scheme

 

(g) Corporate Loan Scheme

 

(h) Technology Upgradation Fund Scheme

 

Indirect Finance

 

The expression “indirect finance" refers to the provision of finance to industrial concerns through State Financial Corporations (SFCs), State Industrial Development Corporations (SIDCs) and banks. In indirect finance, the responsibility for repayment to IDBI rests with the relevant intermediary

 

(a) Refinancing of Industrial Loan

IDBI grants refinance facilities to SFCs, SIDCs and banks against the loans to medium-sized industrial concerns throughout India. Details are given later in this Chapter.

 

(b) Bills Rediscounting

Bills of exchange discounted by banks arising from the sale of indigenous machinery on deferred payment terms are rediscounted by IDBI. Details are given later in this Chapter.

 

Financial Services

 

(a) Merchant Banking

IDBI's Capital Market Division provides professional advice and services to industry for capital market issues, private placement of bonds/equity, credit syndications, project advice/appraisal, valuation, corporate restructuring and disinvestments. Details are given later in this Chapter.

 

(b) Forex Services

IDBI offers various foreign exchange related services, namely, spot and purchases of currencies for letters of credit and debt servicing, swaps, forward exchange rate agreements and other derivative products through its dealing room. Details are given later in this Chapter.

 

(c) Debenture Trusteeship

IDBI has not accepted trusteeship assignments since August, 2000. However, the bank has promoted IDBI Trusteeship Services Ltd. (ITSL) in March, 2001 to provide safety, up-to-date information and excellent professional services to the subscribers and issuers of debentures. The new company would be technology-driven and shall have an international strategic partner.

 

Mergers and Acquisitions

 

Considering the increasing restructuring needs of the corporate sector in the wake of economic reforms, a Mergers and Acquisitions (M&A) Department has set up in the Bank in December, 1999. In terms of the emphasis laid on identifying potential buyers for sick units, a data base for sick units in the portfolio of the Bank has been created by the Department.

 

Lending Policies for Direct Assistance

 

Financing Criteria

Credit Evaluation constitutes the basis for sanction of assistance. Each project is evaluated with regard to promoters' background, managerial competence, technical feasibility, financial soundness, commercial prospects, international competitiveness and economic justification. The promoter's background, track record, resourcefulness and expertise in implementation of similar projects are assessed. The past performance of the company is analysed based on its financial statements viz., profit and loss account and balance sheet. Interim comparisons are made. The risk relating to future financial projection is evaluated by considering, inter-alia, the financial and profitability indicators for the project and the level of competitiveness in both domestic and international market. Market Research Department (MRD) carries out industry research and provides inputs to Project Appraisal Department in their appraisal and follow up work. MRD maintains a large updated data base built up during the past 10 years.

 

Generally, IDBI expects a minimum promoters' stake of 25% to 30% of project cost and Debt Equity ratio of about 1.5 though it has a flexible approach in this regard. The other parameters used for evaluation of projects are the internal rate of return, economic rate of return and effective rate of protection. In financing industries of polluting nature, it is ensured that facilities necessary for treatment and disposal of effluents are incorporated to safeguard the environment. Special emphasis is laid on energy conservation and co-generation in energy intensive projects. The repayment schedules are generally fixed considering the cash flow projections of the project. Project loans are normally repayable within a period of five to ten years including a moratorium period of two to three years. The loans are secured by a mortgage over the immovable property of the borrowing unit and a floating charge over its other assets, subject to a charge in favour of banks on specified movables for working capital borrowings.

 

The criteria for working capital and other non-project related finance are generally similar to that for project finance. However, as certain project specific criteria discussed above are often not applicable to this type of finance, more emphasis is placed on the debt-equity and debt service coverage ratios, the security cover and the general creditworthiness of the borrower.

 

Approval Process

In the context of emerging environment, the Credit Delivery mechanism has been. revamped based on the recommendation of Booz-Alen & Hamilton, the consultants appointed by IDBI. The customer base has been segmented into corporate and mid-corporate divisions; industry wise/group wise focused Corporate Finance Departments have been carved out. A dedicated group has been constituted to deal with infrastructure related projects. The sanctioning authority has been shifted largely to Committees. There are five Zonal Committees functioning at Mumbai, Delhi, Kolkata, Chennai and Guwahati. The Credit Committee is empowered to sanction assistance upto specified limits with respect to Head Office and also in respect of cases emerging from branches where the assistance recommended for sanction exceeds the power of the Zonal Committees. The proposals beyond the threshold of Credit Committee are referred to the Executive Committee which meets at least once a month. Further, in order to deal with the cases of restructuring, OTS and negotiated settlements, the Bank has set up two committees viz. High Powered Committee and Empowered Committee.

 

Lending Rates

IDBI fixes the minimum term lending rate (MTLR) from time to time. Interest on specific loans are fixed within a band over the MTLR depending upon the risk perception of the project, the track record of the borrower and the industry outlook. Short and Medium Term loans are sanctioned at rates relates to the maturity. IDBI has also introduced a Minimum Short-Term Lending Rate (MSTLR) which is applicable to short-term/working capital loan.

 

IDBI has also announced a new floating interest rate scheme which is based on the six-month average of secondary market yield of five-year government paper, to be updated on a quarterly basis.

 

Follow-up and Monitoring

A project monitoring system has been built-up by IDBI over the years. Project monitoring is done both during implementation and operating periods through periodical progress reports/annual reports furnished by the borrowing units, follow-up visits and periodic interaction with the Chief Executive/Senior Executives of the companies. The system enables IDBI to monitor the progress of the project, diagnose difficulty if any and work out remedial measures when needed. Where considered necessary on grounds of higher exposure, IDBI also considers nomination of IDBI officers/outside professionals on the Boards of borrowing companies.

 

Lending Policies for Indirect Assistance

 

IDBI ascertains the business plans and resource forecasts of State Financial Corporations (SFCs) and State Industrial Development Corporations (SIDCs) to evaluate their fund requirements. Limits for refinancing and lines of credit are fixed taking into consideration other resources available.

 

Under Bills Rediscounting, IDBI extends annual limits to Commercial banks, Electricity Boards, State Road Transport Organisations and Corporations. The limits are reviewed periodically.

 

Since the credit risk in indirect finance is borne by the primary lender, IDBI fixes uniform interest rates in tune with the movement in prime lending rates for such finance.

 

PROJECT FINANCE SCHEME

 

Objective

 

To provide long term finance for new projects, expansion, diversification and modernisation of existing projects.

 

Types of Assistance

 

Term loan, underwriting, direct subscription to equity capital and deferred payment guarantee.

 

Eligibility

 

Any industrial concern conforming to the definition in Section 2(c) of IDBI Act.

 

Nature of Assistance

 

Rupee and foreign currency loan.

 

Promoters' Contribution

 

25% of the project cost- minimum-normally expected.

 

Debit Equity Ratio

 

1.5 : 1.

 

Interest Rate

 

On Rupee Loans:-

Based on Minimum Lending Rate fixed from time to time. Actual rate within the prevailing rate band depends upon creditworthiness of borrower and risk perception. Interest is payable quarterly.

 

On Foreign Currency Loan:-

Floating rate based on LIBOR depending upon the source of the currency plus a fixed spread according to the risk perception and maturity of the loan.

 

Up-front fee

 

1 % of loan amount.

 

Commitment Charges

 

0.25% on the undrawan portion of loan payable from the date of signing of the loan agreement.

 

Underwriting Commission

 

2.5% of the underwritten amount.

 

Conversion Option

 

(i) Where overrun in project cost, 20% of additional assistance subject to certain criteria.

(ii) In case of default.

 

Security

 

First charge on movable and immovable fixed assets.

 

Repayment

 

In quarterly instalments to be fixed on case to case basis depending upon projected cash-flow of the borrower.

 

Documentation

 

1)                  Loan agreement

2)                  Deed of hypothecation

3)                  Personal guarantee from main promoters, wherever required

4)                  Undertakings from promoters for:

(a)    Meeting overrun/shortfall in the project cost/means of financing

(b)    Non-disposal of share holdings by promoters

5)                  Undertaking from MD for non-receipt of commission, if company is in default to IDBI.

6)                  No Objection Certificate from IT Dept. under Section 281 (i)(ii) of IT Act

7)                  Resolution under Section 293 (1)(a) and 293(1)(d) of Companies Act.

 

CORPORATE LOAN SCHEME

 

Objective

 

To provide finance for capital expenditure and long-term working capital.

 

Eligibility criteria

 

Financially sound companies with net worth of not less than Rs. 25 crores having been in commercial operation for 5 years and making profit consistently for last 3 years, besides satisfying certain criteria.

 

Nature of Assistance

 

Rupee Loan, Foreign Currency Loan.

 

Extent of Assistance

 

Minimum - Rs.5 Crore

Maximum - Not more than 70% of the cost of capital goods or raw materials, components etc. to be purchased or imported.

 

Promoters' Contribution

 

30% of the cost of capital goods/raw materials, components to be purchased.

 

Current Ratio

 

Not less than 1:2:1

 

Total Debt Equity Ratio (DER)

 

Not more than 2:5:1

 

Debt-Equity Ratio

 

Preferably 1: 1 but not more than 1:3:1 (including proposed loan).

 

Interest Rate

 

On Rupee Loan

Based on Minimum Term Lending Rate fixed from time to time. Actual rate within the prevailing rate band depends upon creditworthiness of borrower and risk perception and maturity of loan. Interest is payable quarterly.

 

On Foreign Currency Loan

Floating rate based on LIBOR depending upon the source of the currency plus a fixed spread according to the risk perception and maturity of the loan.

 

Up-front Fee

 

1 % of the loan amount.

 

Repayment

 

5-51/2 years (Payable quarterly).

 

Security

 

q                   Demand promissory note; and

q                   First charge on movable and immovable properties, by way of extension or exclusive charge, with a margin of 30%, or

q                   Hypothecation of raw material/components to be acquired out of loan, or

q                   Pledge of marketable shares with 50% margin based on average of high and low of market quotations during the       preceding six months (Pledge of shares will not be accepted as exclusive security for loans over one year maturity).

q                   Personal guarantees of promoters/ directors, wherever considered necessary.

 

Documentation

 

q                   Loan agreement

q                   Deed of hypothecation

q                   Pledge agreement

q                   Personal guarantee from promoters/corporate guarantee.

 

                                                            ASSET CREDIT SCHEME

Objective

 

For acquiring new machinery/equipment.

 

Eligibility

 

Financially sound companies

Should have been in operation for a minimum period of 5 years, consistently profit making for last 3 years.

 

Nature of Assistance

 

Line of credit which is valid for one year-rupee loan.

 

Extent of Assistance

 

85% of cost of equipment including taxes/duties, transportation and installation charges. Minimum - Rs. 3 crore, Maximum - Rs. 25 crore.

 

Promoters' Contribution

 

15%

 

Net Worth

 

Above Rs. 5 crore

 

Debt Equity Ratio

 

1.5 : 1

 

Current Ratio

 

1.33 : 1

 

Interest Coverage

 

2: 1

 

Interest Rate

 

Based on Minimum Term Lending Rate fixed from time to time. Actual rate within the prevailing rate band depends upon creditworthiness of borrower and risk perception. Interest is payable quarterly.

 

Management Fee

 

1% of loan amount. Payable at the time of execution of Loan Agreement.

 

Repayment

.

Maximum upto 6 years

 

Security

 

Extension of first charge, or hypothecation of assets financed.

Personal guarantee/corporate guarantee, wherever required on case to case basis.

 

Documentation

 

*  Loan agreement

*  Deed on hypothecation

*  Demand promissory note.

 

WORKING CAPITAL LOAN

 

Objective

 

To provide loan component of working capital finance to companies already assisted by IDBI.

 

Eligibility Criteria

 

Financially sound-companies

 

Net Worth

 

Not less than Rs. 15 crore.

 

Debt-Equity Ratio

 

Not more than 3:1

 

Current Ratio

 

Not less than 1.25:1

 

Interest Coverage

 

Not less than 2:1

 

Nature of Assistance

 

Rupee/Foreign currency loan

 

Extent of Assistance

 

Upto 80% of working capital gap. Minimum of Rs. 2 crore or US $ 0.50 min.

 

Interest

 

Rupee Loan:-

Minimum Term Lending Rate to be announced from time to time plus Risk spread. Risk spread to be based on the perception of credit risk involved and credit rating of borrower.

 

Foreign currency loan:-

Source of foreign currency fund allocated to a particular borrower and interest rate is normally linked to LIBOR.

 

Repayment

 

12-18 months with roll-over facility at the discretion of IDBI.

 

Security

 

*  Extension of first charge on the company’s fixed assets, present and future; and

                any one or more of the following:

            *  First charge of the company's movable properties

            *  Personal guarantee of the promoter-directors and/or Corporate Guarantee wherever considered necessary.

 

Documentation

 

*  Working Capital Facility Agreement

*  Demand Promissory Note

*  Deed of Hypothecation

*  Deed of Guarantee (personal/corporate), wherever stipulated

*  Such other statements as may be required.

 

                                                            EQUIPMENT FINANCE SCHEME

Objective

 

For acquiring new machinery/equipment/specific machinery.

 

Eligibility

 

*  Financially sound companies

*  Should have been in operation for a minimum period of 5 years, consistently profit making for last 3 years - Good track   record and dividend paying capacity for not less than 2 years.

 

Exclusion

 

Assistance under the scheme will not be available for:

q       acquisition of second hand equipment/machinery;

q       in-house fabrication of equipment/machinery;

q       reimbursement of the cost of the equipment/machinery purchased more than 90 days prior to the date of application; and

q       grass-root projects or major expansion/diversification, which would call for detailed appraisal.

 

Nature of Assistance

 

Rupee and Foreign Currency Loan.

 

Extent of Assistance

 

70% of cost of equipment plus taxes/duties, transportation and installation charges. Minimum - Rs. 3 crore, Maximum - Rs. 25 crore

 

Promoters' Contribution

 

30%

 

Net Worth

 

Above Rs. 5 crore

 

Debt Equity Ratio

 

1.5: 1

 

Current Ratio

 

1.33: 1

 

Interest Coverage

 

2: 1

 

Interest Rate

 

On Rupee Loan:-

Based on Minimum Lending Rate fixed from time to time. Actual rate within the rate band depends upon creditworthiness of borrower and risk perception. Interest is payable quarterly.

 

On Foreign Currency Loan:-

Floating rate based on LIBOR depending upon the source of the currency plus a fixed spread according to the risk perception and maturity of the loan.

 

Management Fee

 

1 % on loan amount. Payable at the time of execution of Loan Agreement.

 

Repayment

 

6 years including moratorium.

 

Security

 

Extension of first charge or hypothecation of assets financed.

Personal guarantee/corporate guarantee, pledge of shares wherever required on case to case basis.

 

Documentation

 

*  Loan agreement

*  Deed of hypothecation

*  Demand promissory note.

 

                                                FINANCING OF FEATURE FILMS SCHEME

 

objective

 

Financing of film industry for production of films.

 

Scope of the Scheme

 

Financing of production of feature films as defined under the Cinematograph (Certification ) Rules, 1983. Advertisement films, short films, documentaries etc. are not eligible for financing.

 

Constitution

 

To he eligible for assistance, the borrower should be a corporate entity. The corporate entity should be promoted by reputed producers, backed by established directors and other technicians and possess satisfactory track record. In case, the entity is recently corporatised, track record of the main promoters may be considered.

 

Quantum of Assistance

 

q       Normally not less than Rs. 200 lakh.

q       Normally not exceeding 50% of the estimated cost of the film.

q       Debt-equity ratio not to exceed 1: 1.

 

Promoter's Contribution

 

q       Normally not less than 30% of the estimated cost of the film.

q       A part of the equity contribution (not exceeding 20% of the estimated cost of the film) may be raised in the form of advances from distributors against sale of territories, music/video rights etc.

 

Debt Equity Ratio

 

Not to exceed 1: 1.

 

Period of Loan

 

Within a period, normally not exceeding two years. The schedule of repayment would be decided on case-to-case basis depending upon the timing and quantum of sale proceeds from distribution agreements/music rights etc. and expected streams of cash inflows.

 

Interest Rate

 

Cap rate in the prevailing interest rate band (subject to, availability of tax shield under Section 36(1)(viii) of the IT Act). IDBI to have the discretion to charge higher rate in case the tax shield is no available.

 

Up-front Fee

 

1% of the quantum of assistance.

 

Profit Sharing

 

q       IDBI shall reserve the right of sharing the upside of a film in a manner to be decided on case to case basis.

q       IDBI may take equity exposure selectively.

 

Security

 

q       Letter from, film processing laboratory conveying rights on the negatives of the film in favour of IDBI.

q       Assignment of all agreements and Intellectual Property Rights (IPRs) in favour of MBI. IDBI to have right in negotiation of valuation of all IPRs.

q       A Trust & Retention Account (TRA) will be maintained for all capital as well as revenue inflows and outflows. The receivables on sale of all IPRs shall be credited to TRA. The modalities of TRA will be worked out to the satisfaction of IDBI. A No Objection Certificate (NOC) from all concerned parties for the TRA arrangement will be required. IDBI shall have first charge on the TRA.

q       First hypothecation charge on all the tangible movable assets under the project.

q       Personal guarantees of the producers.

q       Assignment of existing rights like music, video, internet, CD, DVD, rights, library of old hit films etc.

 

Comprehensive Insurance Cover

 

q       The film would require to be comprehensively insured

 

Completion Bond Guarantee

 

The Borrower would be required to obtain completion bond guarantee from prescribed agencies. Till such time the guarantee is made available, the risk in this regard would need to be mitigated suitably, to the satisfaction of IDBI.

 

Procedure for Sanction of Assistance

 

q       On receipt of the complete application, IDBI will submit the proposal to an Advisory Committee for screening of the proposals for financing. Wherever necessary, IDBI may refer the proposal to a group of experts for guidance and expert advice.

q       IDBI will convey sanction of assistance to the borrower after the assistance is sanctioned by the competent authority. The assisted concern will enter into an agreement with IDBI, after it has conveyed its acceptance, of the terms and conditions of sanction.

 

Disbursement

 

q       Expenses during the pre-shooting stage shall be met from the promoters' contribution. The assistance from MBI will be disbursed during shooting and post-shooting stages.

q       Amount of disbursement will depend on the total budget of the film, progress and shooting/processing of the film, drawal schedule, timing of the equity contribution, compliance of various terms and conditions of the letter of sanction.

 

Monitoring

q       Progress reports, cash flow statements, audit reports and other reports in specified formats will be required to be submitted by the borrowers to IDBI at periodic intervals.                                                                              

q       IDBI shall have the right for appointment of specialised agencies for monitoring the timely shooting/processing of the film, assessing the reasonableness of the expenditure incurred etc.

 

TECHNOLOGY UPGRADATION FUND SCHEME (TUFS) FOR TEXTILE SECTOR

 

IDBI is the Nodal Agency for the Technology Upgradation Fund Scheme (TUFS) for the textile industry (excluding SSI sector) and co-ordinates implementation of the Scheme with other institutions/banks as also with the Government agencies. The scheme shall remain in operation for five years with effect from 1st April, 1999 to March 2004. While the thrust of the Scheme is on post-spinning segments (weaving, processing and garmenting), spinning segment is also granted assistance provided eligible value addition activities set up by the spinning mills. Under the Scheme, the beneficiary units are eligible for reimbursement of five percentage points on the interest charged by the lending agencies in respect of a project involving technology upgradation.

 

Definition of Technology Upgradation

 

Technology Upgradation would ordinarily mean induction of state-of-theart or near state-of-the-art technology. But in the widely varying mosaic of technology obtaining in the Indian textile industry, at least a significant step up from the present technology level to a substantially higher one for such trailing segments would be essential. Accordingly, technology levels are bench-marked in terms of specified machinery for each sector of the textile industry. Machinery with technology levels lower than that specified will not be permitted for funding under the TUF Scheme.

 

Scope of TUFS

 

IDBI sponsored Technology Upgradation Fund Scheme covers the following:

(a)        Cotton ginning and pressing

(b)        Silk reeling and twisting

(c)        Wool scouring and combing

(d)        Synthetic filament yarn texturising, crimping and twisting

(c)        Spinning.

(f)        Viscose Filament Yarn (VFY).

(g)        Viscose Staple Fibres

(h)        Independent Weavings preparatory.

(i)         Weaving, knitting including non-wovens, fabric embroidery and technical textiles.

(j)         Garment/made-up manufacturing.

(k)        Processing of fibres, yarns, fabrics, garments and made-ups.

 

General Eligibility Conditions

 

Type of Units

 

(1)        Existing unit with or without expansion and new units.

(2)        Existing units can modernise and 1 or expand with the state-of-the-art technology.

(3)        New units must set up their entire facilities only with the appropriate eligible technology.

(4)        A unit can undertake one or more activities listed under 'scope of TUFs'. However, multiple activities ran be     undertaken only in an integral manner, i.e., by way of forward or backward integration. It is, however, clarified that weaving/knitting and garment manufacturing or weaving/knitting and processing or garment manufacturing and processing will be considered as integral activities.

 

Type of Eligible Textile Machinery

 

(1)        Under the TUF Scheme, generally only new machinery will be permitted.

(2)        However, the following imported second hand machinery are also eligible under TUFS:

(a)        Auto-coners, airjet looms and waterjet shuttleless looms of upto 5 years' vintage and with a residual life of minimum 10 years;

(b)        Projectile and Rapier shuttle-less looms with or without high speed direct beam warper with creel and/or sectional warping machine with auto stop and tension control of upto 10 years' vintage and with a residual life of minimum 10 years;

(c)        Following worsted sector machinery of upto 10 years’ vintage with a residual life of minimum 10 years:

 

(i)         Worsted card.

(ii)        High speed inter-setting/Gill box/Chain gills/Rotary gills/ Vertical gill box.

(iii)       Drawing set/Roving frame/Rubbing frame for worsted system.

(iv)              Ring frames for worsted system.

(v)        Rectilinear combers for worsted system.

(vi)       Ring frames with siro, spinning attachment with or without auto doffers for worsted system.         

(d)        Machinery for jute industry (i.e. jute softening and carding, drawing, spinning and weaving) with a minimum residual life of 10 years subject to a maximum expired life of 10 years.

 

(3)        A certificate certifying the vintage and residual life of the imported second hand machinery must be furnished to the lending agency at the appropriate time as determined by the tending agency. Any of the agencies specified in Appendix-28 of the Handbook of Procedures (Volume 1) of EXIM Policy 2002-07 (as amended from time to time) can give such a certificate. Such a certificate is compulsory for any import of eligible second hand machinery under this scheme irrespective of the value of such import. A certificate from the Textile Commissioner will also be necessary to the effect that the equipment is not indigenously available

(4)        Balancing equipment or equipment required for de-bottlenecking the production process will also be eligible for funding under TUFS.

(5)        Waste reduction equipment or devices will be eligible for funding under the TUFS.

(6)        Eligibility of any other textile machinery equal to or higher than the benchmarked technology not listed in the annexures or developed in the course of the operation of TUFS will be, suo motu or on reference, specifically determined by the Technical Advisory Committee to be constituted by the Government.

(7)        The size of the technologically upgraded facilities of an existing unit or size of the new unit must be of a minimum economic size (MES). Except cotton ring spinning segment, the MES for other eligible segments of the industry should be any unit which is financially viable as per viability analysis of the financial institutions or banks. As regards cotton ring spinning system, ordinarily, 25000 spindles will be the MES. However, for the units having 12,000 or more spindles and with consistently good management and financial performance track record, nodal agencies/PLIs may sanction at their discretion, a technology upgradation project even without topping the spindleage to 25,000, provided post-modernisation, the unit is economically viable. Units with less than 12000 spindles must top it upto a minimum of 12,000 spindles or more, subject to a good management and financial track record land fulfillment of the condition of investment in. downstream permissible value addition activities. However, a new unit will be allowed only at a minimum of 25,000 spindles subject to fulfillment of other conditions of TUFS.

 

Other Eligible Investments

 

(1)        The following investments will also be eligible to the extent necessary for the plant and equipment to be installed for Technology Upgradation and the total of such investments will not normally exceed 25% of the total investment in such plant and machinery:

 

(a)        Land and factory building including renovation of factory building and electrical installations;

(b)        Preliminary and pre-operative expenses;

(c)        Margin money required for working capital,, specifically required for the technology upgradation;

(d)        Captive power generation;

 

Provided that if the investment in captive power generation matching with the energy requirement of the technologically upgraded manufacturing capacity, together with the other admissible investments included in this subpara, exceeds the stipulated 25% of the total investment in textile plant and machinery, such excess, investment in captive power generation shall also be admissible for concessional funding.

 

Further, if a unit has undertaken phase wise technology upgradation and the entire, investment in CPP is made in one phase, it will be eligible under TUFS provided the power requirement of technologically upgraded facility effected in all the phases put together is matching with the capacity of CPP and the benefit will be commensurate with the date(s) of technology upgradation.

 

(2)        Investments in the installation of the following facilities including necessary equipment:

 

(a)        Energy saving devices;                                                                                                             

(b)                Effluent Treatment Plant (ETP);

(c)                Water treatment plant for captive industrial use;                                                                         

(d)        In-house R & D including design studio;

(e)        Information technology including Enterprise Resource Planning (ERP);    

(f)        Total Quality Management (TQM) including adoption of appropriate ISO/BIS standards.

 

(3)        Investment in the acquisition of technical know how including expenses on training and payment of fees to the foreign technicians.

 

Investment in common infrastructure or facilities by an industry association, trust or co-operative society in an industrial cluster or estate

 

Investment in common infrastructure facilities owned by the association, trust or co-operative society of the units participating in the TUF scheme, to the extent necessary for this purpose, including the following:

(1)        Common utilities, viz., water supply, power substation etc.

(2)        Common captive power generation

(3)        Common effluent treatment plant.

 

Any additional investments would attract the normal lending rates.

 

Voluntary Retirement Scheme (VRS)

 

Voluntary Retirement Scheme (VRS) for restructuring of man power of an existing unit as a part of the technology upgradation project will be eligible for funding as a part of the project. However, interest reimbursement will not be admissible on that part of the investment.

 

Cut-off date under TUFS

 

The loans which have been sanctioned prior to 1.4.99 but not disbursed will be re-considered under TUFS as fresh cases, if otherwise they meet the parameters of TUFS. In case of part-disbursed loans, the existing loan cases will have to be terminated and the remainder of the investment conforming to TUFS norms may be considered as a fresh project by the lending agencies. However, the Nodal Agencies and the co-opted PLIs may consider at their discretion the remainder of the project under TUFS without formal termination if the remainder project otherwise conforms to TUFS technology norms.

 

Loans under TUFS

 

Under the Technology Upgradation Fund Scheme, loans will be provided subject to terms and conditions given below:

 

Duration of Scheme

 

The scheme will be in operation for the period of five years from 01-04-1999 to 31-03-2004. Loans sanctioned by the lending agency till the last date of the duration of the scheme period will be eligible under the scheme and the reimbursement would continue to be available till the same is repaid as per the normal lending period of the nodal agency.

 

Amount of loan

 

The assistance will be need-based. There will be no minimum or maximum limit for individual loans.

 

Promoter's contribution

 

Minimum 20% of the cast of the Scheme.

 

Debt Equity Ratio

 

1.5: 1, relaxable in deserving cases.

 

Rate of Interest

 

(i)         Rupee Loan : Normal applicable rates prevailing at the time of sanction/execution of loan documents. Ministry of Textiles (MoT), Government of India has indicated that interest reimbursement of 5 % p.a. would be made available to borrowers availing assistance under TUFS.

(ii)        Foreign Currency Loan: As applicable for normal FC loan. However, MoT, GOI would provide a cover for actual adverse exchange fluctuations not exceeding 5% from the base rate, the base rate being the weighted average rate covering all disbursements of the loan.

 

Period of Loan

 

To be linked to repaying capacity, normally not exceeding 10 years (inclusive of moratorium).

 

Security

 

First charge on fixed assets. Additional security, such as personal/other guarantees and/or pledge of promoters' shareholdings might be stipulated by the lender, if considered necessary.

 

Documentation

 

(i)         Rupee/Foreign Currency Term loan agreement

(ii)        TUFS agreement.

(iii)       Deed of Hypothecation.

 

Nodal Agencies (NA)

 

1.         The nodal agencies under the scheme for different segments are as follows:

Segments

Nodal Agencies

Textile Industry (excluding SSI Sector)

IDBI

SSI Textile Sectors

SIDBI

Jute Industry

IFU

 

2.         The nodal agencies may co-opt other All India Financial Institutions (AIFIs)/State Financial Corporations (SFCs)/State Industrial Development Corporations (SIDCs) and commercial/cooperative banks in the scheme for sanction and disbursement of loan so as to have a better reach. However, there will be no erosion in the rate of the interest reimbursement available to the borrower on account of such linkages.

3.         Applications for assistance under the Fund Scheme may be submitted in the prescribed form available from the    concerned nodal agencies or co-opted AIFIs/SKs/SIDW commercial/co-operative banks, as the case may be.

 

 

FINANCING 0F RECEIVABLES

 

Objective

 

To allow the borrower to raise funds required for executing an order faster and at a cheaper rate than through the traditional means of financing.

 

Eligibility Criteria

 

·         Existing assisted companies with a satisfactory track record of more than three years.

·         The product is targetted specifically at engineering companies and companies executing large orders for Government/Semi Government bodies.

·         It should have executed contracts aggregating at least Rs. 100 crore in the past one year.

·         The contract activity/contractor should be eligible for assistance under IDBI Act.

 

Form of Assistance

 

Line of credit.

 

Extent of Assistance

 

70% of the contract value

 

            Net Worth

 

Minimum Rs. 50 crore

 

Debt Equity Ratio

 

Not higher than 1.5:1

 

Current Ratio

 

Not less than 1.25 : 1.

 

Credit Rating

 

Minimum A+

 

Quantum of Assistance

 

·   Minimum Rs. 20 crore.

·   Depending on credit risk, tenure and other factors, to be decided on case-to-case basis.

 

Front-end Fee

 

Nominal front-end fee of 0.25% to he charged where the tenure of, assistance is less than one year.

The normal front-end fee of 0.1 % to be charged for assistance beyond one year.

 

Repayment

 

Flexible on case-to-case basis. Maximum tenure to he 24 months from the date of first disbursement.

 

Security

 

The assistance is for meeting the working capital requirement for execution of specific orders. Hence multi-layered  security mechanism has been stipulated             

·         First charge on specific current assets (raw materials, work-in-progress and finished goods) availed from the assistance.

·         First charge on receivables from the purchase against the order.

 

Depending upon various other factors, two or more numbers of collateral security may be stipulated.

 

Documentation

 

·         All documents necessary for normal lending.

·         NOC from the bankers of the company for charge on current assets and receivables.

·         Tripartite agreement with the borrower, bank (as Escrow Agent) and IDBI, to be executed to give effect to the escrow arrangement.

·         A confirmation from the purchaser agreeing to make all payments only to the specific account (Escrow Account).

 

VENTURE CAPITAL FUND SCHEME

 

Objective

 

To encourage commercial applications of indigenous technologies Or adaptation of imported technologies, development of innovative products and services, holding substantial potential for growth and bankable ventures involving higher risk including those in tile Information Technology (IT) Sector.

 

Eligibility

 

All industrial concern defined in Section 2(c) of IDBI Act. 1964

·         ventures, which may not be first in the technology but would be one of the first few offering potential for substantial  return.

·         venture should normally have innovation content.

·         ventures, which deliver traditional products/services in emerging sectors and have sustainable competitive advantage.

·         overriding criteria for eligibility will be potential for substantial long-term capital gains.

 

Target Sectors

 

IDBI shall target investment in high growth and profitable industry sectors and will exclude mature industries, commodity- type products and highly competitive sectors. The main criteria will he high growth prospects. potential for capital  appreciation and clear-cut exit route within a time frame of' 3-5 years.

 

Nature of Assistance

 

·         Equity

·         Term Loan

·         Convertible debt

 

Finance for capital expenditure, start-up working capital and selectively for core current assets during commercial operation.

 

Extent of Assistance

 

Finance for capital expenditure, start-up working capital and selectively for core current assets during commercial operation. Maximum upto 80% of the project cost. IDBI's exposure to be restricted to Rs.20 crore in each venture.

 

Project Cost

 

No upper limit on the cost of the venture.

 

Promoters' Contribution

 

Minimum 20% of the cost of the venture, with core promoters' contribution being not less than 10%.

 

Interest Rate

 

Cap rate (MTLR + 3.5%) stipulated under the interest band applicable to project loans. A concessional rate of interest may be charged during the implementation period and, if required, during the first year of commercial operation of the venture. The rate of interest shall be stepped up thereafter to ensure that minimum IRR equal to the cap rate at the time of appraisal is achieved.

 

Repayment Period

 

Upto 5 years after initial moratorium of 1- 1 ½ years to be decided on case to case basis.

 

Royalty on Sales

 

Negotiable.

 

Up-front Fee

 

1 % of term loan.

 

Front-end Fee

 

2.6% on direct subscription to equity.

 

Security

 

First mortgage/charge on fixed assets/personal guarantees from promoters/ pledge of shares by promoters

 

SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA (SIDBI)

 

SIDBI is a statutory corporation which was set up in April 1990 as a wholly owned subsidiary of IDBI, under a special enactment of the Parliament, viz., Small Industries Development Bank of India Act, 1989. With the amendment of SIDBI Act, 1989, SIDBI has since been delinked from IDB1 w.e.f 27th March, 2000. According to the amendment Act, 51 per cent stake of SIDBI shall be held by IDBI/LIC/GIC, public sector banks and other institutions owned or controlled by the Government and the rest by public. The objectives of SIDBI are to serve as the principal financial institution for promotion, financing and development of industry in the small scale sector and to co. ordinate the functions of the institutions engaged in promoting, financing or developing industry in the small scale sector.

 

 

INDIRECT ASSISTANCE FROM IDBI

 

The indirect assistance from IDBI is available in two forms, namely:

*    Refinance facilities for medium scale industries.

*    Bills rediscounting scheme.

 

The refinance is available to state level financial institutions and commercial banks mainly to augment their resources for granting term loans for small scale and other medium-scale industrial units. The borrower in such cases has to deal directly with the financing institution. The appraisal, sanction and disbursement is also completed by the lending institution and borrower is not called upon to come in contact with IDBI for any matter. The refinance available under two schemes is as under

*    Normal Refinance Scheme.

*    Automatic Refinance Scheme.

 

Case to case approval of IDBI is necessary under normal refinance scheme whereas under automatic scheme, the lending institution becomes entitled for refinance after making advance as per the terms and conditions stipulated under the scheme.

 

                                                REFINANCE FOR MEDIUM SCALE INDUSTRIES

 

Objective

 

·         To finance medium scale industries

·         Refinance to banks only in states of Orissa, Bihar, Jammu & Kashmir,

·         Himachal Pradesh and states in the North East.

·         Line of Credit (LoC) to all SFCs/SIDCs.

 

Eligibility

 

·         Industrial concern as defined in section 2(c) of SFCs Act/IDBI Act.

·         Cost of project should not exceed Rs. 1200 lakh, under LOC scheme.

·         Proposals to meet the norms and parameters of the Refinance Scheme.

·         Should not be SSI.

 

Nature of Assistance

 

Rupee Loan

 

Extent of Refinanceable Loan Limits

                                                                                                Rs. (Lakh)

(i) SFCs (Cos/Others)                                                                240/120                                                           

(ii) Twin Function IDCs (TFIDCs)                                                 250  

(iii) SIDCs                                                                                    400  

 

Promoters' Contribution

 

25% of project cost

 

Debt Equity Ratio

 

Not more than 2:1

 

Interest Rate

 

Rate of refinance/LOC to Primary lenders will be announced from time to time based on Minimum Term Lending Rate of IDBI.

 

Up-front Fee

 

1 % on each disbursement under LOC

 

Repayment Period

Refinance:-

Maximum - 10 years

Normal repayment period 3- 10 years

LOC:-

Maximum - 8 years                                                                                                                                          

 

Security

 

Credit risk to be borne by the primary lenders. However primary lenders hold the securities mentioned in the primary lenders' application (including the properties mentioned in the security documents) on behalf of MBI as security for the LOC/Refinance.

 

Documentation

 

*   General agreement with the eligible institutions/banks for line of credit/refinance.

*  Borrower has to enter into an agreement with primary lender and execute deed hypothecation (as per primary          lenders requirement).

 

IDBI BILLS REDISCOUNTING SCHEME

 

Origin/Salient Features of the, Scheme

 

The Bills Rediscounting Scheme was introduced in April, 1965, ill terms of the powers vested ill the Industrial Development Bank of India under section 9(1)(b) of its statute, which authorises it to accept, discount or rediscount bills of exchange and promissory notes of industrial concerns subject to such conditions as may be prescribed. The objective of the Scheme is two-fold. The manufacturers of indigenous machinery/capital equipment can push up the sales of their products by offering deferred payment facilities to the prospective purchaser- user. The purchaser-user of the machinery, on the other hand, is enabled to utilise the machinery acquired and repay its cost over a number of years. The manufacturer, of course, gets the value of the machinery within a few days of the delivery of the machinery by discounting with his banker the bills of exchange/promissory notes arising out of sale of the machinery. The scheme thus, helps the indigenous machinery manufacturing industry to increase their turnover which, in turn helps expansion/modernisation of existing industrial units, thereby contributing to the industrial progress of the country.

 

The facilities under the scheme are available to the following

(i)         manufacturing industries:

(ii)        autonomous purchaser-users in the public sector such as electricity undertakings, transport corporation, municipal,  transport undertakings which maintain separate account for transport division and Government Companies;

(iii)       Sale/purchase of equipments for use of renewal energy sources and for disposal/treatment, of effluents by distillery units;

(iv)       Commercial establishments, institutions (except Government Departments) or professionals (i.e. non-industrial purchaser-user) provided the Item is purchased directly from the manufacturer;                                       

(v)        Imported machinery/equipment, provided the same is purchased from a, local authorised agent of the foreign supplier    and the purchaser is an industrial concern as defined under section 2(c) of the IDBI Act, 1964; and

(vi)       The sale of machinery/capital equipment assembled in India.

 

The Scheme is near-automatic in operation. A simple procedure has been prescribed for availing of credit under the Scheme. It does not envisage any detailed appraisal by the IDBI of the project for which the machinery is required. The assistance for purchase of machinery is available for any purpose except for setting up a new unit. However, machinery/equipment purchased for trading/ leasing/domestic consumption will be outside the purview of the scheme. Documentation procedure is simple. The terms of the Scheme have been deliberately kept flexible and these have been liberalised from time to time to meet the varying needs of the industry.

 

Normally the facilities under the scheme are available only in respect of complete supply of machinery/capital equipment which might include a reasonable amount of accessories/spare parts thereof. If the delivery of the machinery is to be made in several consignments spread over a larger period as in the case of turnkey projects and the manufacturer/seller requires finance in the interim period, he may raise temporary accommodation from his bank which could be adjusted once the supply is completed and relative bills are discounted. However, if the manufacturer/seller intends to obtain finance under the scheme in respect of partial despatches of the machinery, prior clearance of IDBI should be obtained. In such cases, IDBI's financing would be for identifiable parts of machinery/equipment.

 

IDBI rediscounts Bills of Exchange/Promissory Notes discounted by the Institutions approved by it for this purpose. These bills or promissory notes to be eligible for rediscounting by IDBI must be drawn, made, accepted or endorsed by any industrial concern as defined in Sec. 2(c) of the IDBI Act, 1964.

 

According to this section 1ndustrial concern" means any concern engaged or to be engaged in :

 

*    The manufacture, preservation or processing of goods;

*    Shipping;

*    Mining including development of mines; Hotel industry;

*    Transport of passengers or goods by road or by water or by air or by ropeway or by lift;

*    Generation, storage or distribution of electricity or any other form of energy;

*    Maintenance, repair testing or servicing of machinery or equipment of any description or vehicles or vessels or motor boats or trailers or tractors;

*    Assembling, repairing or packing any article with the aid of machinery or power;                                            

*    Setting up of or development of an industrial area or an industrial estate;

*    Fishing or providing shore facilities for fishing or maintenance thereof; Providing special or technical knowledge or other services for the promotion of industrial growth;

*    Providing engineering, technical, financial, management, marketing or other services or facilities for industry;

*    Service industry such as altering, ornamenting, polishing, finishing, oiling, washing, cleaning or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal; Providing medical, health or other allied services;

*    Providing services relating to information technology, telecommunication or electronics;

*    Leasing, sub-leasing or giving on hire or hire-purchase of industrial plants, equipments, machinery or other assets including vehicles, ships and aircrafts.

*    Setting up or development of tourism related facilities including amusement parks, cultural centres; convention centres, restaurants, travel and transport (including those at airports) tourist service agencies and guidance and consulting services to tourists;

*    Development, maintenance and construction of roads;

*    Floriculture activity which includes the cultivation, treatment and processing of flowers or any other process connected with flowers which results in a value added activity.

*    The research and development of any concept, technology, design, process or product whether in relation to any of the matters aforesaid, including any activities specified under the above clause or any other matter; or

*    Such other activity as the Central Government may, having regard to the objects of this Act, by notification in the Official Gazette, specify in this behalf.

 

Mechanism of the Scheme

                       

The intending purchaser-user of indigenous/imported machinery who is not in a position to offer immediately full cash payment for the required machinery approaches the machinery manufacturer/local agent of foreign supplier seeking deferred payment facility. The latter, in order to promote his sales, agrees to supply the machinery and receives the payment. A separate bill/ promissory note is drawn/made for each, instalment together with interest payable on the deferred instalments. These bills are drawn by the manufacturer-seller, accepted by the purchaser-user and co-accepted/guaranteed by the purchaser-user's banker. Alternatively, they are drawn by the purchaser-user and accepted by his banker. Promissory notes are, however, drawn by the purchaser-user and guaranteed by his banker. These bills/promissory notes are then delivered to the manufacturer-seller who gets them discounted with his banker, thus realising the cost of the machinery; the discount payable by him to his banker is included in the amounts of the bills by way of interest for the period of deferred payment. The discounting bank, then, submits an application together with the statement showing particulars of bills discounted.

                                                                                               

The discounting bank rediscounts bills from IDBI and obtains the amount paid to the manufacturer-seller. The discounting bank takes back the bills from IDBI against payment, three working days in advance of the due dates and obtains payment thereof from the acceptor/guarantor of the bills/promissory notes on due dates.

 

Since the seller's bank is primarily responsible for payment to the IDBI with a view to safeguarding its own position, it normally requires that the bills/ promissory notes be accepted/guaranteed on behalf of the purchaser by its banker or a State Financial Corporation or the Industrial Finance Corporation of India or Industrial Credit and Investment Corporation of India Ltd., or an insurance company. It is, however, the discretion of the seller's bank to ask for such acceptance or guarantee or to waive it altogether and rely on the acceptance of the purchaser himself.

 

Sellers of Machinery

 

A manufacturer seller can sell his products on deferred payment basis under the scheme if he is:

(i)         a manufacturer of indigenous capital equipment/machinery of any type including agricultural equipment and machinery; or

(ii)        an authorised selling agent/distributor of a manufacturer provided he has paid in full to the manufacturer for the machinery before the execution of the relative set of bills or promissory notes; or

(ii)        a design engineering concern getting the machinery manufactured according to its own specifications and designs under its supervision and selling it under its own name and with its own guarantee provided the name of its concern has been approved by the IDBI in advance.

 

Buyers of Machinery

 

A buyer can purchase capital equipment/machinery on deferred payment basis under the scheme if he is:

(i)         the purchaser-user of the equipment/machinery in the private sector such as any manufacturing unit, commercial establishment, professional etc.;

(ii)        an autonomous (i.e. not departmental) enterprise under the auspices of a State or Central Government or local bodies e.g., electricity board, road transport corporation, municipal transport undertaking which maintains separate accounts for transport division or a manufacturing unit;                                                              

(iii)       a selling agent/distributor/dealer of agricultural machinery, and equipment provided he offers similar deferred payment facilities to the farmers in respect of his sales of agricultural machinery and equipment to them and does not charge them unduly high prices;

(iv)       a farming enterprise not doing farming itself but providing mechanised services to small farmers; and

(v)        an agriculturist buying agricultural machinery/equipment.

 

The facilities under tile Scheme are also available to finance purchase of indigenous machinery meant for export against allotment of equity in foreign companies to Indian entrepreneurs.

 

Period of deferred payment

 

The period of deferred payment for the sales of machinery to be covered under the Scheme under a set of bills/promissory notes counted from the date of despatch of machinery or from the date of execution of bills/promissory notes, whichever is earlier, should not he less than 2 years and not more than 5 ½ years. Bills are generally drawn at quarterly rests. The manufacturer-seller should normally discount bills/promissory notes with his bank within a period of 2 months from the date of despatch of the relative machinery. In case the bills or promissory notes are lodged by the manufacturer-seller after 2 months, the concerned bank will have to obtain prior clearance of IDBI for discounting the bills or promissory notes.

 

Nature of Assistances

 

Rupee Loan.

 

Quantum of assistance

 

The minimum amount of transaction covering a set of' bills or promissory notes eligible for rediscounting, has been fixed at Rs. 10,000/-. Assistance of 100 % of' value of invoice is allowed.

 

Promoters Contribution

 

IDBI has no stipulation in this regard.

 

Rediscount Fee

 

·         Upto 3 years                                                                       As prevailing from time to time.

·         Above 3 upto 5 ½ , years

 

Security

.

Bills of exchange/promissory notes.

 

Documentation

 

Lodging of bills/promissory notes/hundis/relevant certifications.

 

REHABILITATION FINANCE

 

IDBI has in its portfolio certain potentially viable, weak and sick companies, which can he revived by way of merger/takeover.

 

Rehabilitation Finance Department (RFD), a specialised department, created to achieve the said objective, is oil the lookout for resourceful parties interested in takeover/merger or joining in as co-promoter.                         

 

In addition, IDBI has in its portfolio, other companies which call be revived by undertaking various measures such as strengthening of management, upgradation of technology, infusion of fresh funds, etc.

 

IDBI would like to interact with potential investors/clients who may be interested in takeover, merger or joining as co-promoters etc. in order to achieve the said objectives.

 

Potential investors may contact IDBI, Rehabilitation Finance Department for further details in their area of -interest after furnishing details regarding their credential at e-mail: pm.nair@idbi.co.in

 

DIRECT DISCOUNTIN OF BILLS SCHEME (DDS)

 

Objective

 

To accelerate capital formation and to support sale of indigenous machinery/equipment by ensuring immediate realisation to the manufacturer and deferred credit to the purchaser.

 

Scope

 

Scheme covers sale of indigenous machinery and equipment

 

Purpose

 

Sale of capital goods to existing companies for their modernisation, expansion and diversification projects.

 

Eligibility Criteria

 

(a)        The seller company should have been in operation for at least 3 years.

(b)        Good performance record and sound financial position.

(c)        No defaults to financial institutions.

(d)        Only AAA rated companies against corporate guarantee are eligible.

 

Nature of Assitance

 

Annual limit for discounting of bills (Rupee).

 

Extent of Assistance

 

100% of the total value (including insurance, freight and taxes.).

 

Repayment

 

2 to 7 years.

 

Debt Equity Ratio

 

1.5: 1 for seller company.

 

Interest Rates

           

2-3 years                                                          :           According to temporal profile

Over 3 years and                                               :           As prevalent at the time of discounting of

upto 5 ½ , years                                                            bills.

Over 5 8/2 years and                                         :           Depending on monthly/quarterly/half

upto 7 years                                                                  yearly yearly payments                         

 

Security

 

(1)        Bank Guarantee­

(2)        Co-acceptance

 

Documentation

 

(1)        Purchaser's Certificate

(2)        Bill/Promissory Note

(3)        Bank Guarantee

(4)        Authority Letter from Bank for Signature                                                                                                           

 

SERVICES RENDERED BY IDBI MERCHANT BANKING

 

IDBI set up its Merchant Banking Department (MBD) in 1992. The following is the range of services offered by MBD:

 

Corporate Finance

 

·         Project Advisory Services which include review of feasibility, key contracts/structures

*          advice on key project contracts

*          identifying foreign partners/investors and assistance in. evaluation and negotiations

*          structuring financing plan and advice on financing options

*          financial modelling and sensitivity analysis

*          risk analysis and risk allocation

*          preparation of project information memorandum

*          documentation agency services structuring of credit enhancement mechanism

·         Policy formulation and evaluation of infrastructure projects

·         Project appraisal

·         Placement of equity with banks, FIIs, high net worth investors, mutual funds, institutional investors and private equity funds. Placement of preference shares and debentures with domestic investors.

·         Structuring and syndication of bought-out-deals

·         Co-ordinating the financial participation or multilateral agencies and international banks.

·         Arranging buyers' line of credit/suppliers' line of credit/guarantee assistance.

·         Loan syndication - Rupee & foreign curren1y from Indian Financial Institution, banks, multilateral agencies, foreign commercial banks, export credit agencies.

·         Syndication of' structured debt instruments, ECBs and Commercial Papers.

·         Advice on resolution of inter-creditor issues of offshore lenders (including ECA lenders) and domestic lenders.

·         Advice on commercial issues of loan/Guarantee documentation, Sponsor documentation, Security documentation.

 

Issue Management

 

·         Management of public/rights, issue of equity, preference shares, convertible/ partly convertible/non-convertible debentures including

-           Structuring of instruments.

-           Preparation of offer documents

-           Obtaining statutory and other clearances required in connection with the issue.                                               

-           Tying up underwriting and placement through book building process.                                                        

-           Assistance in selection of bankers, brokers, registrars, printers, advertisement agency and other intermediaries.

-           Marketing of the issue.

-           Post-issue activities including finalisation of basis of allotment/ refund and listing.

-           Advice on buy back of securities and management of tender offer.

-           Open offer management under SEBI Takeover code.

-           Advising the management of Euro issues.

 

Corporate Advisory Services

 

·         Equity and Business Valuation.

·         Advice on Mergers, Acquisition and Divestitures.

·         Advice on Business and Financial Restructuring.

·         Privatisation advice.

·         Restructuring/rehabiliation advice for weak units.

·         Advice on Asset Sale and hive-offs.

 

FOREX SERVICES

 

Objective

 

To advise clients regarding the necessity of booking forward covet to protect their interest in foreign currency  (FC)exposure.

To provide various services relating to foreign currency transactions to clients assisted by IDBI.

 

Eligibility

 

Companies.

q       who wish to acquire machinery/equipments raw materials/services either by way of imports or domestically.

q       who have FC loan/interest exposures.

 

Services Offered

 

q       Opening of Letter of Credit on behalf of clients against foreign currency/rupee loans sanctioned to them.

q       Opening of Letter of Credit on commercial basis against margins/ pledge of' marketable securities.

q       Booking of Forward Covers for protecting clients from adverse exchange rate fluctuation for payments against LIG; opened by IDBI and for repayment of loans/interest to IDBI.

q       Provide Forex advisory services to client for covering foreign change risk.

 

Fees­

 

As per FEDAI rules/competitive rates.  

 

APPENDIX 5.1

 

Addresses of Offices of Industrial Development Bank of India

 

HEAD OFFICE

 

IDBI Tower,

WTC Complex, Cuffe Parade.

Post Bag No. 10020/6080.

Mumbai-400 005.

Tel : 22189111, 22189117

Fax : 022-22181294. 022-22188137;

022-22185179; 022-22180411

E-mail: pro@idbi.co.in

Website: www.idbi.com.

 

BRANCH OFFICES

 

Agartala Branch

Chapala Vailla.

Near Circuit House,Airport Road,

P.O. Kunjaban,

Agartala-799 006.

Tel. : 0381-324986

Fax.: 0381-324986

 

 

ZONAL OFFICE

 

Western Zonal Office

IDBI  Tower,

5th Floor, WTC Complex

Cuffe Parade.

Munibai-400 005.

Tel. 022-22160696/97/98

Fax 022-22161914

 

 

Ahmedabad Branch

IDBI Complex,

Near Lal Bangalows

Off. C.G. Road,

Ahmedabad-380 006.

Tel. : 079-6563911/4994/4149, 6565301/

822/849/896/813

Fax: 079-6400814

 

 

Eastern Zonal Office

44. Shakespeare Sarani.

Post Bag No. 16102

Kolkata-700 017.

Tel: 033-2476818/19/20,2472003/4

           2475446/2409365

Fax : 033-2473593

 

 

Aizawal Branch

IDBI Vaivenga Buildings, Tuikhuahtlang.

Aizawal-796 001

Tel. :0399-325791

Fax: 0389-325791

 

 

 

North Eastern Zonal Offlce

G.S. Road,

Guwahati-781 005.

Tel: 0361-2529520/1/2/2529723

Fax : 0361-2452136. 2529853

 

 

Bangalore Branch

IDBI House. 58,

Mission Road,

Bangalore-560 027.

Tel. : 080-2105047/8,2275412,2225442,

2272869,2274840,2105335

Fax : 080-2215194/2213166.

 

 

Southern Zonal Office

115. Anna Salai, Saidapet

Post Bag No. 1306,

Chennai-600 015.

Tel. 044-22355201-16

Fax 044-22355226/22353346

 

Bhopal Branch

6, Malaviya Nagar,

Near Raj Bhavan, Adj. to LIC,

Bhopal-462 003.

Tel. 0755-2555008/2558415/2762399

Fax 0755-2554921/5220563

 

 

Northern Zonal Office

Indian Red Cross Society Building.

1. Red Cross Road. Post Box No. 231.

New Delhi- 110 001.

Tel.: 011- 3716181-84, 3711733.

               3725480/81

Fax 011-3718074,3711664

                                              

 

Bhubaneswar Branch

IDBl House,

Janpath, P.B.No.190.

Bhubaneshwar-751 022

Tel.: 0674-542196 ,542572,

          5432143,543693/7

Fax :0674-543442       

                                                          

Kolkata Branch

44, Shakespeare Sarani,

Post Bag No. 16102,

Kolkata-700 017.

Tel.: 033-247018/19/20

Fax : 033-2478834/5094

 

Itanagar Branch

TC Road, Bank Tinali,

Itanagar,

Arunachal Pradesh-791 111.

Tel.: 0360-2211436

Fax: 0360-2233436

 

 

Chandigarh Branch                                  

S.C.O. 72-73, Sector 17-B,

P. Bag No. 27,

Chandigarh- 160 017.

Tel.: 0172-709689, 702781/976/385

Fax: 0172-703409

 

 

 

Jaipur Branch                                                 

Anand Bhawan, 1st Floor,

Sansar Chandra Road,

Post Bag No. 22,

Jaipur-302 001.

Tel. 0141-2360581/82/83

Fax 0141-2372830

 

 

Chennai Branch

115,Anna Salai, Saidapet

Post Bag No. 1306,

Chennai-600 015.

Tel. 044-22355201-16

Fax 044-22355226/22353346

 

 

 

Jammu Branch

Office Block No. QB-26,

Grid Bhavan,

1 st Floor, Rail Head Complex,

Jammu- 180012

Tel. : 0191-474337

Fax.: 0191-474338

 

 

Coimbatore Branch

Stock Exchange Bldg.,

683-686, Trichy Road,

Coimbatore-641 005.

Tel.: 0422-2310262/67,2315109/2315216

Fax : 0422-2310257

 

 

 

Kanpur Branch

Virendra Smriti Complex

2nd Floor,

15/54B, Civil Lines.

Kanpur-208 001.

Tel. : 0512-2304232, 2304380,

          2306886,2306915

Fax.. 0512-2334286

 

 

Dimapur Branch

'LEIRAU KI", l st Floor,

Khermahal Junction, Post Box No. 173,

Dimapur-797 112.

Tel.: 03862- 25715

Fax: 3862-25715

 

 

Kochi Branch

Pananpilly Nagar,

Post Bag No. 4253,

Koehi-682 036.

Tel. : 0484-2322157/158, 2318889,

          2312964/68/69

Fax: 0484-2319042

 

 

 

Hyderabad Branch

D.No. 5-9-89/1 and 2,

Chapel Road, Post Box No. 370,

Hyderabad-500 001.

Tel. : 040-23236846/23235466/

23236145/23234610/23240841

Fax: 040-23230613

 

Ludhiana Branch

B- 19-110/4,IInd Floor,

203, Carnival Shopping Centre,

The Mall.

Ludhiana- 141 001.

Tel.: 0161-406541, 407436

Fax.: 0161-406541

 

 

Indore Branch

2nd Floor,

Chaturvedi Mansion,

26/4, Old Palasia,

Agra-Mumbai Road,

Indore-452 001.

Tel.: 0731-563496, 561898

Fax.:0731-563496

 

 

Mangalore Branch

Siddhartha Building, 3rd Floor,

Balmatta Road,

Mangalore-575 001.

Tel.: 0824-444952

Fax: 0824-447029

 

Meerut Branch

222-225, Citi Centre.

IInd Floor,

Begum Bridge Road,

Meerut-250001

Tel.:0121-528970,523461

Fax.: 0121-528970

 

 

 

Rajkol Branch

201,235,236,

Star Chambers, 2nd Floor,

Dr.Rajendra Prasad Road,

Ranchi-360 001.

Tel.: 02181-234904

Fax.:0281-233453

 

 

Mumbai Branch

IDBI Towers, 5th Floor,

WTC, Complex,

Cuffe Parade,

Mumbai-400 005

Tel.: 022-22160696/97/98

Fax.: 022-22160785

 

 

 

Ranchi Branch

“Arjan Place”, 1 st Floor,

5, Main Road, (Near Overbridge),

Ranchi, Jharkhand- 834 001.

Tel.: 0651-300357/208655

Fax: 0651-300357

 

 

Nagpur Branch

F- 1, 1 st Floor, Vasant Vihar Complex,

6, Shankar Nagar,

West High Court Road,

Nagpur-400 010.

Tel.: 0712-536505

Fax.:0712-547668

 

 

Shillong Branch

Sapphire House, Don Bosco Road,

Laitum Kharah, Post Box No.31,

Shillong-793 003.

Tel. : 0364-224632

Fax.: 0364-224632

 

 

 

New Delhi Branch

Indian Red Cross Society Building,

1. Red Cross Road, Post Box No. 231,

New Delhi- 110 001.

Tel.: 0 11-3716181-84, 3711733,

           3725480/81

Fax.:011-23718074/23711664/6774                  

 

 

Shimla Branch

Jeevan Jyoti, Lala Lajpat Rai Chowk,

The Mall, Post Bag No. 52,

Shimla-171 001.

Tel.: 0177-252948/258999

Fax.: 0177-254169

 

 

Panaji Branch

EDC House, 6th Floor,

Dr. Atmaram Borkar Road.

Panaji-403 001.

Tel.: 0832-223112/229584

Fax.: 0832-223401

 

Surat Branch

302, Meridian Tower, 3rd Floor,

Near Rajkumar Theatre,

Udhana Darwaja, Ring Road,

Surat-395 002.

Tel.: 0261-2342890,2348040

Fax.: 0261-2342890

 

 

Patna Branch

Maurya Centre, 1, Fraser Road,

Post Box No. 183,

Patna-800 001.

Tel.: 0612-2223797, 2225676, 2225535

Fax.: 0612-2220758

 

 

Varanasi Branch

1 st Floor, D-64/132K,

Anant Complex, Sigra

Varanasi-221 010.

Tel.: 0542-224023/224083

Fax.: 0541-224023

 

 

Pune Branch

IDBI House F.C. Road,

Dyaneshwar Paduka Chowk,

Shivaji Nagar,

Pune-411 004.

Tel.: 020-5677481-5

Fax.:020-5676132

 

Vijayawada Branch

3A, Alankar Complex,

3rd Floor, Gandhi Nagar,

Vijayawada-520 003.

Tel.: 0866-571025

Fax.: 0866-571025

 

 

Visakhapatnam Branch

13-26-2, 1 st Floor, Apuroopa Areade,

Jagdamba Centre,

Visakhapantanam-530 002.

Tel.:0891-565067

Fax.:0891-565267