Arunika Herath

View ACF 12/8/21, 6:58 PM View ACF Customer Information 1 Customer Information 01 Client Details Name Kalana Importers and General Merchant (Pvt) Ltd CIF No Date Next Renewal Sector TRADING 31-Dec2022 Application Reference CoBorrower Facility Request New Constitution/Legal Form Application 05-NovDate 2021 Private Limited Liability Company Watchlisted NO Sub WHOLESALE RICE SUGAR WHEAT Sector WHEAT FLOUR & 02.1 Ownership/Shareholding details/Comments Owners/Shareholders Relation Type Age Share Holding Net Worth Name Director & Shareholder S.R.W.M Santha Bandara Waidyasekara 49 Director & Shareholder R.M. Kusumalatha Rathnayake 48 50% 50% Kalana Imports and General Merchants Pvt Ltd ( KIGMPL) is a family based limited liability company between husband and wife. The company started its humble beginning in 2018. Company is engaged in importing/wholesale and retail dealer of all kind of essential items such as rice, dhal, onion, flour etc. The company can be identified as a top commodity dealer in Dambulla area. Mr. Waidyasekara and Mrs. Kusumlatha(spouse) are the directors of KIGMPL. Mr. Waidyasekara is managing the business with the help of his wife Mrs. Kusumlatha. Prior to commencing the current business Mr. Waidyasekara was involved in a same type of business in Dambulla under the name of MBES Company Ltd since 2000 . However he has been removed from the directorship by other directors of MBES Group due to an internal issue. Thus, Mr. Waidyasekara has taken legal action for compensation or reinstates his directorship. He has filed a law suit seeking compensation for his removal from the business and the case is under hearing . There after client has started another business under the name of Kandula Transport and International. The business was involve in supplying building materials for the contractors. It is said that Mr. Waidyasdekara held the reputation and the business contacts of MBES. Therefore, having established his own business in 2019 as Kalana Importers and General Merchants Pvt Ltd. He managed to achieve the magical two billion sales figure within just three years of operations; which is significant. Client has recorded a turnover passing Rs.2Bn in last two consecutive years . Mr. Waidyasekara owns following assets Residential Property - Rs.50Mn Commercial Property - Rs.50Mn Vehicles - Rs.60Mn Total Assets Rs.160Mn 02.2 Client Segmentagtion (MMEA, MMEB, MMEC, MMED, SME - Cat A, SME - Cat B, SME - Cat C, SME - Cat D or Commodity Traders) - Pls attach the segmentation detail sheet Category SMEC Locally Listed No Publicly Owned No Diversification of Industries & Products No Independent Management No Owner Managed Yes Succession Externally audited by- ENY/ KPMG/ PWC/ DELOITTE Yes-Acceptable N/A 1/19 View ACF 12/8/21, 6:58 PM Externally Maximum Clean exposure Nil 03 Major Business Activities & Products, Brands & Services details Kalana imports (Pvt)ltd was incorporated in 2018 , with Mr. Waidyasekara as the managing director, the other director is his wife Ms.Kusumalatha Rathnayake. The Managing Director ,Mr. Waidyasekara aged 49 years had originally started the business in 2000 and rose up to the present level this his hard work and dedication. Initially he has worked as an employee of the MBES Traders in Dambulla and Kandy. He worked there nearly 10 years and finally has been appointed to the director board. However with his removal from the director board he has ventured his own business in Dambula. Mr. Waidyasekara has recruited the majority of the staff members to his company and managed to canvas the customer base of the BMES to the business. Their mainline of the business consist of trading (whole sale and Retail) essential commodities such as rice, dhal, onion,flour etc. They are mainly involved in wholesale trading of above items . Out of their total turnover , around 90% is on wholesale basis and out of same 10% is through the retails sales . Their main outlet is located within the Dambulla, Eeconmic Centre. Sales are carried out on cash basis (27%) as well as the credit basis(73%) . The average credit period remain at 60 days. The main customers of the business are as follows PH and Sons traders – Naula MBS Kandy Aruna Traders – Jayanthipura S & J Kantale Kandalama Hotel Sigiriya hotel The purchases are done on credit basis with a credit period of 30 days. The main suppliers of the business includes following. Lal & Sons – Pettah Ranjitha traders – Pettah Sahana Traders – Colombo Palligoda Traders – OMS Global trading – Pettah Wilson trading – Pettah Majority of the transactions are carried out in cash basis. Almost all purchases from Pettah market are done through party cheques. Thus, the transactions routed via the bank accounts are very minimal . However BM , SME RM and Zonal head have visited the client and witnessed the magnitude of the business. (photos are attached) There are nearly 50 staff members and 3 managers employed in the business. Facility Application https://kalypto.unionb.com/Kalypto.credit.live/app.axd/acf.ViewAll?request_id=124834&revision=11 2/19 View ACF 12/8/21, 6:58 PM 1 Facility Details 1.1 Basic details S.No Facility Type Facility Description Purpose 01 Term Loan Term Loan of Rs.12.5Mn To consolidate the existing borrowings at 'Sinhala Trade Association', Kandy. 02 Term Loan Term Loan facility of Rs.70Mn To part finance the purchasing cost of a commercial property 1.2 Facility Specifications S.No Facility Limit Parent Existing Limit Type Nature Limit Additional Proposed Pricing/Interest Limit (+ or Outstanding Limit Rate -) Linked Security Repayment Terms Sector LKR 01 Term Loan Regular 12,800,000 12,800,000 Residential AWPLR + 3% p.a.(Quarterly Property review) with a floor rate of 11% p.a. Capital to be TRADING repaid within 59 equal monthly installments of Rs.213,300/and the final installment of Rs.215,300/along with interest 02 Term Loan Regular 70,000,000 70,000,000 AWPLR + 3% Residential p.a.(Quarterly Property review) with a Commercial floor rate of 11% Property p.a. Capital to be INDUSTRY repaid within 95 equal monthly installment of Rs.729.160/and the final installment of Rs.729,800/along with interest. 82,800,000 Grand Total (LKR) 82,800,000 Exposure Details (LKR) Description Total Funded Facilities Existing 0 Proposed 82,800,000 Total Facilities of the Group 0 82,800,000 Group exposure Net of Cash 0 82,800,000 Total Non Funded Facilities Other Group Facilities 1.3 Comments on new request/Purpose The current request is to grant the following facilities. Propositions Term Loan of Rs.12.8Mn to consolidate the existing borrowings at ' Sinhala Trade Association' Term Loan of Rs.70 Mn to part finance the purchasing cost of commercial property at Padeniya, Dambulla Term Loan facility for LKR 12.8Mn 3/19 View ACF 12/8/21, 6:58 PM Mr. Waidyasekara has obtained a facility of Rs.20Mn from Sinhala Trade Association , Kandy to finance the working capital of the business. However due to the high finance cost client wanted to settle the facilities. Accordingly, the BU had been able to convince him to shift its credit facilities to UBC. A summary of the facilities which will be settled by UB are as follows. Facility Term Loan Granted Amount ( Rs.000) 20,000 Outstanding Capital Balance ( Rs.000) 12,800 Interest 17% Security Commercial Property Tenor (months) 60 Balance Tenor (months) Purpose 30 Working Capital Financing The proposed facility of Rs.12.8Mn will be utilized to settle the above capital balances together with the pre mature settlement fees and accrued interest for the above facilities on the settlement date.(any value above the said amount would be settled by the client's own funds) The proposed loan will be repaid within 60 equal monthly installments. Term Loan facility for LKR 70Mn Mr. Shantha Waidyasekara wishes to expand his business due to the potential demand in the area . therefore he intends to purchase a new commercial property which is located in Dambulla after identifying the potential of the property. The property is located in the Padeniya village in Wagapanaha within the municipal limits of Dambulla , about 1 and half km away from Dambulla city. The current owner Mr. Jayasinghe is operating a grocery store under the name of 'Jayasinghe Stores' in the building. This is 0A:1R : 17P property which comprise of a 3 story commercial building with an area of total 9829 Sq. Ft. The ground floor and the 2nd floor will be used to maintain the stores and 1st floor will be used to maintain the office. At present client maintain the stores at his business premises , this space is not sufficient to store the inventory. Therefore he is planning to move the stores to the new location. The proposed building is located very closer to his business premises. Therefore the new building is ideal to maintain the stores. The proposed acquisition of the building will helps the client to increase the inventory level and ultimately effect to the turnover growth. Due to development of a third and fourth wave of covid 19 ,the sales and purchases agreement has not been signed yet .Client has not paid any advance payment yet until the proposal facility is approved. As confirmed by the BM the purchase price of the property is Rs.85Mn.As per the valuation report on 17/07/2021 made by the panel valuer the FSV of the property is Rs.98.35Mn.As confirmed by the BU the current property owner has been bankrupted due to the higher borrowings hence he wants to sell the property and settle the debts. This property is currently mortgaged to LOLC. The outstanding balance is nearly Rs.70Mn (the exact amount yet to be confirmed). Therefore Mr.Waidysekara was able to bargain the selling price to a value which is lower than the market price. The proposed facility will be repaid within 96 months. Project Cost Investment Proposed Property Debt to Equity Debt Equity Total 70,000,000 15,000,000 85,000,000 0.8 0.2 The debt to equity of the proposed investment is 80:20 https://kalypto.unionb.com/Kalypto.credit.live/app.axd/acf.ViewAll?request_id=124834&revision=11 4/19 View ACF 12/8/21, 6:58 PM As per the balance sheet as at 31/03/2021 the business has done following investments. Investments Amount Debt Equity 9,724,136 0 9,724,136 Proposed Property 85,000,000 70,000,000 15,000,000 Total 94,724,136 70,000,000 24,724,136 0.74 0.26 Existing Assets D/E Ratio Hence the total D /E ratio of the business is 74:26 which is satisfactory. This relates to the above summary of means of financing. The overall acquisition cost will be LKR 85 Mn and the client will be investing LKR 15 Mn as equity. He has sought the assistance of UBC to finance the balance LKR 70 Mn and therefore, the debt to equity of the transaction stands at 80.20.The equity portion for the transaction will be sourced by the Savings held by Mr. Waidyasekara and he will invest the same to meet the payable at the signing of the transfer deed . Justification The loan will be serviced from the Company's cash flows. The projected P&L statement prepared reflected an ISCR of 3.79X and a DSCR of 1.18X indicating the repayment capacity of the proposed term loan facilities. The proposed facility 01 will be repaid within 60 months and facility 02 will be repaid within 96 months. As per the projected cash flows in section 7 it is clear that 5 year and 8 year tenor is the most suitable tenor for the client to repay the financial commitments with out any cash flow constraints .DSCR shows as 1.18 in the normal condition and it will be reduced to 1.0 in the worst case scenario. Granting a longer tenor will reduce the monthly commitment which smoothen the business cash-flows. Due to the additional borrowing of Rs.70Mn his monthly financial commitments will be increased at a considerable level. The payments of monthly commitments will be easy if there is a longer tenor for the existing borrowings even though the balance tenor is 30 months. Providing a longer tennor would be easy for the client since the pay back period of the initial capital expenditure will be long term . Also providing the longer tennor is giving us the opportunity to shift the existing facility package of the client to UBC. At the same time it supports the client for the future expansion plans of the business . Considering the above granting a 5 year and 8 year tenor is justifiable. The borrower has offered two properties to secure the propose facilities and one property has been already mortgaged to Sinhala Trade association. This property is located inYatihelagala, Haloluwa. The fresh property which will be obtained will be the property located at Dambulla . The properties will only be accepted subjected to the clear title and related matters and will be subsequently valued by a panel valuer of the bank. The exposure to the borrower will be restricted to 70% of the combined property value as per the official valuations. Since one property which will be held as collateral is the residential property of Mr. Waidyasekara he holds a genuine interest over the same and therefore, the chances of the repayment been defaulted have been minimized. It should also be noted that since the proposed facility is a term borrowing the LTV will further improve over a period of time with the gradual repayment of time. Even though the purchase price is Rs.85Mn the actual market value of the property to be purchased is Rs.109Mn, that will strengthen the security position. Mr. Waidyasekara hails from a business background and he has more than 20 years of experience in the industry. He has the capability to manage the business successfully with knowledge and experience of managing his existing business. Mr. Waidyasekara is a potential client to UB - Dambulla branch which is a new to bank relationship. The BU will be able to earn a large income and improve the CASA level from this relationship. BM, SME RM and Zonal head have visited the client and witnessed the operations of the business. They are strongly recommend the client. Given the viability of the business , long standing business profile of the borrower, reputation and strength of the borrower and the facts and figures mentioned in the above the proposed facility could be justified. 2 Security Details S. Type of Currency No Security Description https://kalypto.unionb.com/Kalypto.credit.live/app.axd/acf.ViewAll?request_id=124834&revision=11 Value Linked Facility 5/19 View ACF 12/8/21, 6:58 PM Type of S. Currency No Security 01 LKR Description Linked Facility Value Property Primary Floating Mortgage Bond For Rs.22,500,000/- over the property depicted as Lot No. 22,500,000 Lot 7 in Plan No.3944 dated 31/10/2000 made by C.Palamkumubura licenced Surveyor and leveler a subdivision of a divided portion of the land called 'Ranaliyadda' situated at Yatihelagala - warathenna in Kulugammanasiyapattu of Harispattuwa within the Kandy District in Central Province containing an extent of 0A:0R:15.81P owned by Sri Rama Waidyasekara Mudiyanselage Santha Bandara Waidyasekara (NIC No -) 01, 02 LTV - 70% The property is already mortgaged to Sinhala Trade Association.Mr.Waidyasekara is currently residing in this property. 02 LKR Property Primary Floating Mortgage Bond for Rs.59,500,000/- over the property depicted as Lot No. X 59,500,000 on Plan No.193A dated 11/08/1998 made by A.M. Anurarathne Licensed Surveyor ( certified by EMSB Ekanayake,Town Planner on 2013/08/13) 3 allotments of land marked 1 to 3 called KATUPATHYAYA situated at Padeniya village in Wagapanaha Pallesiya Pattuwa within the Matale District in Central Province containing an extent of 0A 1R 17.0P . 02 The property will be owned by Mr.Shirama Waidyasekara Mudiyanselage Santha Bandara Waidyasekara (NIC No-V) The property has been valued by KMU Dissanayake on- MV - Rs.109,250,000 FSV -Rs.98,350,000 IV - Rs.64,000,000 LTV - 61% Total LTV should be limited to 70% *The property consist of a 3 story commercial building which has a total built up area of 9829 Sq. Ft *The property is currently mortgaged to LOLC. 82,000,000 Grand Total (LKR) 82,000,000 Security Documents required Security Documents required facility 01 & 02 ----------------*PMB of Rs.22.5Mn *Loan agreement of Rs.12.8Mn *Original deed and the plan *Approved building plan and the COC Facility 02 ----------* PMB of Rs.59.5Mn * Original Deed and the plan * Loan agreement of Rs.70Mn * Approved building plan and the COC 2.1 Insurance Details 3 Covenants & Conditions Sr.No 1. Covenant The disbursement of proposed facility 01 will be made only upon receipt of the undertaking from Sinhala Welanda Peramuna and disbursement of the Proposed Facility 2 will be made only upon receiving the undertaking from LOLC confirming the final O/S liabilities due to them by the client and confirmation/undertaking to release all the original documents pertaining to the property directly to UBC https://kalypto.unionb.com/Kalypto.credit.live/app.axd/acf.ViewAll?request_id=124834&revision=11 Nature of Covenant New 6/19 View ACF 12/8/21, 6:58 PM Sr.No Covenant Nature of Covenant 2. Loan proceeds of the Facility No.02 should be directly paid to the LOLC together with the client contribution by a bank pay order or RTGS. In case client paid an advance payment a proof documents should be collected prior to disbursing the New facility. 3. Out of the loan proceeds of the facility 2 the amount which is equivalent to the outstanding balance of the existing borrowings at LOLC to be directly paid to LOLC by a pay order of Union Bank PLC to take over the security. If there is any New residual balance after settling the LOLC liability , the same should be directly paid to the vendor by a bank pay order or RTGS. 4. If there is any residual balance remaining at Sinhala Welanda Peramuna after the settlement the same should be born by the client on his own funds New 5. The disbursement of the facilities are subject to a satisfactory title report from the panel lawyers or legal officers of the bank for both properties. New 6. Facility offer is subject to obtaining the approved building plan and COC. If that is not available only the land value will be considered and total LTV will be limited to 70% of the Forced Sale Value. New 7. Monthly cash build up of Rs. 400,000/- to a savings account to be commenced. The balance of the said account will be held under lien. New 8. New 9. All security documents/ property documents (including the approved re-survey plan/ transfer deed) to be perfected and lodged with UBC without any lapses prior to the disbursement of the proposed term loan facility 10. The transfer deed to of the property to be executed at a value equivalent to LKR 85Mn or to the value determined by PRD New whichever is higher at the time of execution. 11. The survey plans of the both properties should be certified by the survey and the boundaries and extent should be confirmed as it is older than 10 years. New New 4.1 Account Conduct 4.2 Account Conduct with other banks - last 6 months (Credit & Debit turnovers and highest & lowest balances Client operate current accounts in Peoples Bank- Dambulla Branch.A summary of the turnovers are as follows. S R W M S BANDARA WAIDYASEKARA -) Year 2021 CR DR January 5,593,423 5,535,200 February 10,502,103 9,975,495 March 13,337,164 13,947,675 April/May 18,995,960 18,956,211 May 711,700 7,020,000 June 3,826,000 3,405,000 July 6,156,000 6,595,000 Aug 14,287,000 8,191,000 Sep 6,135,000 9,639,000 Oct 7,369,000 8,767,000 Average 8,691,335 9,203,158 86,913,350 92,031,581 Total KALANA IMPORTERS & GRNARAL MERCHANTS (PVT)LTD -) Year 2021 January Febuary March CR DR 3,983,179 3,713,124 5,565,184 4,838,245 10,302,833 11,014,678 April 2,835,533 2,744,991 May 6,806,939 6,620,517 June 7,454,000 6,492,000 July 4,837,000 5,418,000 Aug 7,212,000 4,602,000 7/19 No Crib report for the business S.W.M.S.B. Waidyasekara (Director) Exposure Direct # of Facilities 8 In-direct 3 Total Total Limit O/s Rs'000 Rs'000 17,493 12,941 9,330 9,318 There are some irregularities in the CRIB report as follows. Facility No.6 :As per the client he has requested moratorium facility from DFCC bank. However it has not been granted since it is a luxury vehicle. Client has not done payment during that period assuming that moratorium facility has been granted. However once he got to know the arrears position he has negotiated with the bank and the bank has restructured the facility in Nov 2020. The repayment of the restructured facility is regular. Facility No. 4:The above facility has been obtained from the Central Finance. As per the confirmation received from BU this is an error due to a system issue. Facility No. 9,10:As per the client he has obtained lease facility in 2015 to purchase 2 lorries. At that time he was involved in supplying building materials under the name of ‘Kandula Transport’ . In 2019 he has sold these vehicles to another party subject to the existing lease agreement since he discontinued that operation and started the current business. However that person has failed to pay the lease rental regularly during Sep 2019- Jan 2020.However once he get to know the arrears position he has settled the arrears balance .As confirmed by BM Agreements are not available for this transfer . However there are some irregularities in the repayment of facility 9,10,11 and 12 . These are the facilities which have been transferred to another party. These facilities are in the moratorium and DPD in October due to the delay in processing time in CF for the moratorium obtained upto 31/12/2021. View ACF 12/8/21, 6:58 PM As per the CRIB Client has a settlement history of Rs.54Mn worth of facilities during the last 5 years .At present client is servicing the facility in a satisfactory level without any Delays. He has totally recovered from the NPL position. Repayment of the other facilities is regular. Kusumaltha Rathnayake (Director) Exposure Direct Total # of Facilities 3 In-direct 5 Total Limit O/s Rs'000 Rs'000 5,730 4,643 17,493 17,585 There is a NPL facility in Aug 2020 which has been obtained from DFCC . As per the BU Client has obtained the Moratorium facility for this lease facility. The facility has been crossed to NPL during the moratorium processing time. Subsequently it has been regularized. Despite of some ad- hoc delays the repayment is satisfactory in other facilities. Note - BM – Dambulla has obtained the verification from Central Finance and DFCC branch managers. They have confirmed that client is very good client with a high credibility. The NPL position during the last year is due to the above reasons and these references further justify the facts given in the customer letters. A mail has been raised to get the approval for the CRIB deviation. 5.2 Risk Rating Comments/Justifications (Must justify if any qualitative parameters have been assigned/selected with the best answer from the given selection of answers under rating model) Succession Plan - ' Well laid down succession plan' is in placed. This is a family based business. Client's spouse also actively involve in the operations of the business. She is over looking accounting function and the HR functions. All the strategic decisions are taken by Mr.Waidyasekara with the support of his spouse. Apart from that there are 3 managers employed in the business. One manager is managing the purchasing function and the other manager is managing the sales function of the business. The other manager is overlooking the entire business in the absence of Mr. Waidyasekara. Mr. Waidyasekara's planning to groom his son to involve in the management of the business after he completed the school education. In addition to that there nearly 50 staff members are employing in the business. Market Reputation - 'Highly Respected '. Customer is a reputed businessman in the area. Location Advantage - ' Very Good' - The business is located within the Dambulla Economic Center. 6 Financial Highlights (000) 6.1 Financial Analysis 6.2 Comments on Financials Client does not prepare the audited financial statements for the business. However he provided the management accounts for 3 years s. The summary of the financial statements given below. LKR - - - Turnover 339,705,045 2,038,230,279 2,105,141,790 Cost of Sales : 319,589,970 1,917,943,652 1,978,334,188 Gross Profit: 20,115,075 120,286,627 126,807,602 Administration Expenses 8,669,272 62,883,689 64,558,792 Sales and Distribution Expenses 1,827,860 10,448,173 10,970,240 Other Expenses Operating Profit Finance Expenses - 455,425 387,105 9,617,943 46,499,340 50,891,465 3,750 1,049,255 3,197,642 https://kalypto.unionb.com/Kalypto.credit.live/app.axd/acf.ViewAll?request_id=124834&revision=11 9/19 View ACF 12/8/21, 6:58 PM Net Profit 9,614,193 45,450,085 47,693,823 - - - GP Margin 6% 6% 6% OP Margin 3% 2% 2% NP Margin 3% 2% 2% LKR - - 4,424,136 4,424,136 Fixed Assets Property Plant and Equipment 5,300,000 Motor Vehicle 4,424,136 9,724,136 Inventories 42,358,219 44,476,130 Trade and Other Receivebles 51,268,187 92,431,596 - 2,136,868 Total Fixed Asests Current Assets Lease Suspense A/C Bank 579,050 334,611 Cash in Hand 251,310 1,982,078 Total Current Assets 94,456,766 141,361,283 98,880,902 151,085,419 0 0 Trade Creditors 31,352,620 32,920,250 Bank Loan 17,092,140 13,705,468 Total Assets Long Term Liabilities Long Term Borrowings Current Liabilities Leasing A/C Accrued Expenses Total Current Liabilities Total Liabilities Capital Total Liabilities and Equity 6,325,200 80,230 84,765 48,524,990 53,035,683 48,524,990 53,035,683 50,355,912 98,049,736 98,880,902 151,085,419 Note - The balance sheet is available only for 2019/2020 and 2020/2021 Turnover/Profitability As per the above financial statements the business has recorded a revenue of Rs.340Mn in 2018/2019 .This includes only 9 month sales since the company has established in June 2018.During the first year the company has shown a slow growth .The revenue has been increased to Rs.2.04Bn in 2019/2020 and further increased to Rs. 2.1Bn in 2020/2021. This was a increase of Rs.67Mn or 3.3% against the 2020.Despite of the Covid- 19 outbreak the business shows a satisfactory growth during the last year. This is mainly due to the fact that customer is involve in trading essential commodities. Client has provided the actual sales details for the last 4 months Month Sales(LKR) Apr-21 150,676,351 May-21 164,357,787 Jun-21 135,720,127 Jul-21 127,384,642 Aug-21 142,307,003 Total 720,445,910 Average 144,089,182 These sales has been verified by the BM and SME RM through system generated reports of the client's accounting system. (Sales reports from March - Sep 2021 are attached) Through its Peoples Bank C/As, it had routed credits to the value exceeding Rs.15.3Mn per month on average during the last 9 months. This is accounting to almost 11% of the business turnovers are routed through the current account. During the period of Jan 2021 to Aug 2021 the business has generated a total revenue of Rs.1.16Bn.Out of that nearly 27% on cash sales,35% on bill to bill sales and 38% on PDC. It was noted that PDC sales includes the sales proceeds 10/19 View ACF 12/8/21, 6:58 PM received from ‘party cheques’ sales and turnover routed through bank accounts. Since nearly 27% sales are on cash basis and 35 % from 'bill to bill' basis client has not obtained any working capital facilities. The facility which has been obtained from Sinhala Trade association (Rs.20Mn) has been used to finance the working capital requirement of the business. Apart from the client always keep Rs.30Mn worth of cash at any point of time to finance the working capital of the business. Also BM has got the references from his suppliers in Pettah and verified the bill books and internal record and confirmed the authenticity of the management accounts As per the above financial statements GP has been Rs.120.8Mn in 2019/2020 and Rs.126.8Mn in 2020/2021. The GP has been increased by 5% in 2020/2021 with relative to the increase of turnover. The GPM remain at 6%p.a. through out the period. The bottom line of the business has been Rs.45.45Mn in 2019/2020 and Rs.47.7Mn in 2020/2021. The change of the NP through out the period is relatively to the change in the revenue. NPM has been 2%-3% through out the period. Administration expenses has been increased from Rs.62.8Mn to Rs.64.6Mn in 2020/2021.Administration expenses mainly comprise of salaries and wages (58%) and shop overhead expenses (23%). Sales and Distribution expenses has been increased from Rs.10.4Mn to Rs.10.9Mn in 2020/2021. Financing expenses has been increased from Rs.1.Mn to Rs.3.2Mn in 2020/2021.This is due to the higher finance cost of the existing loan at Sinhala Welanda Peramuna. Liquidity and Working Capital Management As per the above financial statement the working capital position has been positive . As per the balance sheet submitted as at 31/03/ 2021 current and quick ratios are 2.7 and 1.83, which are satisfactory. The business recorded a current assets position of Rs.141.36Mn as of- . Current assets as at 31/03/2021 mainly comprise of receivables Rs.92.4Mn (65%) ,inventories - Rs.44.4Mn (31%) , cash and bank balance -Rs.2.3Mn(2%) The business recorded a current liabilities position of Rs.53Mn as at-. Current liabilities mainly comprise of trade creditors Rs.33Mn (62%) , loans Rs.13.7Mn (26%) and leases Rs.6.3Mn(12%). Debt and Equity Management As at 31/03/2021 net worth of the operation is recorded as Rs 151 Mn and fixed assets of the business is held as Rs 9.7Mn. From the fixed assets,Rs.4.4Mn PPE and Rs.5.3Mn motor vehicles. There is no long term borrowings of the company. Therefore gearing level of the business is at a higher level. Therefore we could identify that Company has generated fairly good level of retained profits which has been invested in acquiring assets. 6.3 Ageing Analysis of Inventory ------------ Current Year Inventory (FG,RM,WIP) Amount % -------- Year Less than 1 Month 1 Month to 3 Months 3 Months to 6 Months 6 Months to 1 Year More than 1 Year 0 Total 0 6.4 Ageing Analysis of Debtors ------------ Current Year Description Amount Year % -------- Less than 1 Month https://kalypto.unionb.com/Kalypto.credit.live/app.axd/acf.ViewAll?request_id=124834&revision=11 11/19 12/19 View ACF 12/8/21, 6:58 PM Assumptions : *Annual sales for Year I was predicted based on the last 5month actual sales with a 5% growth rate. *Annual sales growth of 5% is forecasted based on the details submitted by the firm and the same is anticipated to remain constant for the next four years. * The average monthly sales assumed as Rs.151.3Mn *Cost of Sale is predicted at 94% based on the Management accounts *Operating expenses are predicted at 4% of the sales based on the management accounts The same is expected to remain constant for the next five years. *The existing other bank leases are assumed to be repaid in full within the next five years. The projected P&L account prepared based on the aforementioned assumptions reflected an ISCR of 3.79 and a DSCR of 1.18 indicating the repayment capability of the client Sensitivity Analysis The projected P&L has been sensitized based on the following scenarios. 1.If the revenue will drop by 5% 2.if the operating cost increase by 5% 3.If the revenue drop by 3% and Operating cost increase by 3% (Worst Case) Scenario 01 Year 2 Year 3 Year 4 Year 5 1,724,820 1,621,331 103,489 72,624 30,865 9,108 21,757 29,322 Year 1 1,811,061 1,702,397 108,664 76,255 32,408 7,864 24,545 30,788 1,901,614 1,787,517 114,097 80,068 34,029 6,620 27,409 32,327 1,996,695 1,876,893 119,802 84,071 35,730 4,887 30,843 33,944 2,096,529 1,970,738 125,792 88,275 37,517 5,376 32,141 35,641 ISCR 3.2 3.9 4.9 6.9 6.6 DSCR 1.0 1.1 1.3 1.6 1.6 Year 3 Year 4 Total Turnover Cost Of Sales Gross Profit Operating expenses Operating Profit Interest Expenses Net Profit Income available for debt service Scenario 02 LKR Total Turnover Cost Of Sales Gross Profit Operating expenses Operating Profit Interest Expenses & finance charges Net Profit Income available for debt service Year 1 Year 2 Year 5 1,815,600 1,906,380 2,001,699 2,101,784 2,206,873 1,706,664 1,791,997 1,881,597 1,975,677 2,074,461 108,936 120,102 126,107 132,412 114,383 76,255 80,068 84,071 88,275 92,689 32,681 9,108 34,315 7,864 36,031 6,620 37,832 4,887 39,724 5,376 23,573 31,047 26,451 32,599 29,411 34,229 32,945 35,941 34,348 37,738 ISCR 3.4 4.1 5.2 7.4 7.0 DSCR 1.1 1.2 1.4 1.7 1.7 https://kalypto.unionb.com/Kalypto.credit.live/app.axd/acf.ViewAll?request_id=124834&revision=11 13/19 View ACF 12/8/21, 6:58 PM Scenario 03 Year 1 Total Turnover Cost Of Sales Gross Profit Operating expenses Operating Profit Interest Expenses & finance charges Net Profit Income available for debt service Year 2 Year 3 Year 4 Year 5 1,779,288 1,868,252 1,961,665 2,059,748 2,162,736 1,672,531 1,756,157 1,843,965 1,936,163 2,032,972 112,095 117,700 106,757 123,585 129,764 74,803 78,543 82,470 86,593 90,923 31,955 9,108 33,552 7,864 35,230 6,620 36,991 4,887 38,841 5,376 22,847 30,357 25,688 31,875 28,610 33,468 32,104 35,142 33,465 36,899 ISCR 3.3 4.1 5.1 7.2 6.9 DSCR 1.0 1.1 1.4 1.7 1.7 In the worst scenario the company generates a ISCR of 3.3 and DSCR of 1.0 , which is satisfactory. Special Scenario A special scenario has been considered based on the turnover mentioned in the Management Accounts 2020/2021 (Monthly turnover is Rs.175.5Mn) LKR Total Turnover Cost Of Sales Gross Profit Operating expenses Operating Profit Interest Expenses & finance charges Net Profit Income available for debt service Year 1 Year 2 2,105,142 1,978,833 126,309 84,206 42,103 9,108 2,315,656 2,176,717 138,939 92,626 46,313 7,864 Year 3 Year 4 Year 5 32,995 39,998 38,449 43,997 44,325 48,397 51,152 53,237 56,267 58,561 ISCR 4.4 5.6 7.3 10.9 10.9 DSCR 1.4 1.6 2.0 2.5 2.7 2,547,222 2,801,944 3,082,138 2,394,388 2,633,827 2,897,210 168,117 152,833 184,928 112,078 101,889 123,286 50,944 56,039 61,643 6,620 4,887 5,376 8 Auditor's details/Auditor's Qualifications (if any) 9 FINANCIAL COMMENTS (For SME clients with out audited financials statements) FINANCIAL COMMENTS (For SME clients with out financials) - Should contain information about last 12 months total credits to all CASA accounts (all banks) discounted @ 10%, Actual revenue from top 5 customers (with names & values) during last 12 months, last 12 months total debits to all CASA accounts (all banks) discounted @ 10%, estimated Sales & cost of sales for next 12 months. 10 Risks & Risk Mitigation Analysis (Comment on Security Risk, Succession Risk, Market Risk, etc.) Security Risk The proposed exposure of the borrower will be secured against mortgage over 2 first class residential properties. One property is an existing property of the client which is located in Yatihelagala.Other property which is to be purchased is located in Padeniya, Dambulla . The collateral offered is a high value security and the marketability of the property is considered high in case of an eventuality.The estimated MV of the existing property is Rs.30Mn . As per the valuation report on- by KMU Dissanayake the MV of the property is Rs.109.25Mn and the FSV of the property is Rs.98.35Mn.The aggregated LTV is https://kalypto.unionb.com/Kalypto.credit.live/app.axd/acf.ViewAll?request_id=124834&revision=11 14/19 12/8/21, 6:58 PM View ACF restricted to 70%. The existing property is a residential property of the client the property to be purchased will be used for commercial purpose. The property is currently mortgaged to the Sinhala Welanda Peramuna. The proposed facility No.01 will be used to settle the outstanding balance of the facility and get the security documents to bank custody. BU has confirmed that COC and the approved building plan is available for the property to be purchased. COC of the existing property will be obtained before the disbursement. Furthermore, our comfort is on the satisfactory performance of the business which has sustained in the market during difficult times and stability of the promoter which positively adds comfort to our collateral position. Lending in the above manner is justifiable owing to the fact that Mr.Waidyasekara is one of the most sought after clients in the respective industry, where our competitors are constantly after him and ready to take such exposure against property without any hesitation. The subject properties are located at developed areas where the land prices are upwardly fluctuating. Hence, our security risk is at an acceptable level. Financial Risk The client had posted satisfactory financial performance over the years. He is very keen on managing acceptable profit margins on each consignment and plans his stock level efficiently. Due to the strength of the client's sound financial standing, growth potential in the industry and the solid business relationships established with its suppliers and clientele, it is highly unlikely that he would face any adverse financial crisis in the near future. Key man/ Succession Risk The key person of the entity, Mr. Waidyasekara is hailing from a business family background having more than 15 yeras of experience and know how in different fields of business having captured most of the client base whilst securing supplier relationships in the Dambulla. Mr. Waidyasekara has the primary decision making authority in all business activities , however he get the support of his spouse. Mr. Waidyasekara has been the driving force behind the success of the business. the promoter has been understudying the business operations/ dealings/ market synopsis since the inception. Client's spouse also actively involve in the operations of the business. She is over looking accounting function and the HR functions. Apart from that there are 3 managers employed in the business. One manager is managing the purchasing function and the other manager is managing the sales function of the business. The other manager is overlooking the entire business in the absence of Mr. Waidyasekara. Mr. Waidyasekara's planning to groom his son to involve in the management of the business after he completed the school education. In addition to that there nearly 50 staff members are employing in the business. He serves as a Director of the present family concerned limited liability companies formed with the assistance of his wife . Despite being in his late 40 's , he has developed considerable amount of experience over the years whilst maintaining strong tie ups with suppliers and has enabled a position to develop the business to a near future. The business has been well organized based on the operations carried out and additional personals are manned to support the day to day operations. The overall business is gradually moving out of the conventional operating structure with much of change being steered by different individuals to have control over varied operations. Given the facts, we don't foresee any major risks associated with the succession of the group. Market Risk In the present context, prices of consumer edibles are widely fluctuating. However, since the commodities are consumer edibles, the stocks are fast moving and hence the actual liquidity level of the business is quite high. Although the prices of commodities are widely fluctuating, the Managing Director, Mr.Waidyasekara has been able to steer the Company clear of risk, guided by his extensive experience in the respective trade. Furthermore, the reserves thus far accumulated and the actual profitability of the operations provide a cushioning effect against such temporary market fluctuations. He could foresee and plan out their purchases / imports according to the market conditions without overtrading situations and facing losses on consignments. Although the commodity prices in the world market are on the increase in general and the local consumption is bound to reduce, the firm would be able to sustain its operational levels without major reduction due to its capacity to capture the market that has been shared by small-time traders The goods that are imported by them are non-perishable in nature (move faster) therefore, the inherent risks associated in this trade are mitigated to some extent. The major competitors of the KIGMPL includes MBS, MBES, CTC family super, Multi Traders etc. However client was able to achieve a competitive edge over the other players in the market due to his loyal large customer base. In addition to that client has developed the business to the new markets such as Polonnaruwa, Bakamuna etc. Hence the market risk could be considered as minimum. https://kalypto.unionb.com/Kalypto.credit.live/app.axd/acf.ViewAll?request_id=124834&revision=11 15/19 12/8/21, 6:58 PM View ACF Impact of Covid - 19 to the business During the pandemic situation the demand has been increased as customers trying to purchase bulk stocks. This has been continued during the 1st lock down period in April - May 2020 ,2nd lock down period in May 2021 and 3rd lock down period in Aug - Sep 2021.Client uses his own vehicles for the distribution and purchases. He maintain a buffer stock these days to meet the customer's demand. Also client was able to obtained government orders to supply the essential food items to supply for the needy people during the lockdown period. Therefore Covid-19 has not significantly effected to the business since this is an essential commodity. Operation Risk Amidst a foreign exchange crisis in April, the government imposed import restrictions on 156 categories of products including essential food items such as rice, grains, pasta, bakery products and liquor until July 2020. Items such as milk powder, palm oil, red lentils, sugar and sunflower oil were allowed to be imported on a three months credit basis. These could be indirectly impact on our client since his suppliers are direct importers in Pettah market. According to market sources, presently priority is given to import the medical supplies and secondly to import the essential items Hence, these items would receive priority over other types of imports. Therefore major importers such as R G Brothers, Palligoda Group,AJS Traders are currently operate on 180 day Usance LCs basis. Sight LCs are not accommodated due to the present situation, since these major importers have a good rapport with their foreign suppliers and since they dealing with them for a longer period they are able to negotiate better credit terms. Hence settlement of LCs are also done after a longer credit period. They are allowed to import the commodities on open account basis also. All the government banks and some large private banks are releasing USD to above large importers to import the essential commodities since the commodity imports get the 2nd priority. However, rules have been relaxed by the port authorities to release the goods based on copy documents due to the perishable nature of products. KIGMPL is a top 20 client of above importers. Therefore our client receive a guaranteed quota of items despite the restrictions. The other impact of the restrictions would be the price increase. This is forecasted to continue further in the market, however margins of intermediaries involved in trading of essential items are expected to be maintained and the price increase to be passed on to the final consumers. Therefore the operation risk under the current atmosphere could be mitigated. 11 Compliance with Policy/Product Parameters (comment on deviations/Exceptions) Approval for the CRIB irregularity has been attached 12 Pricing Waivers/Concessions 13 Recommendations Despite the risks hi-lighted above the facility as per the limit summary is proposed by the BU & recommended by the Zonal office, subject to conditions & covenants, in view of the following *The key person of the business has been in the industry nearly 2 decades. *High financial strength & integrity of the client *Availability of valuable tangible collateral with an adequate security margin. *Experience, exposure and expertise of the borrower who is engaged in various business sectors *The satisfactory DCSR to service the proposed facility. *Strong recommendation given by the BM ,SME RM and Zonal head after visiting the client and verifying the magnitude of the business *Well established business model with potential future growth ================================================================================ 16/19 . User Comments On Line Recommendation/Approval Branch Designation User Name Action Taken Comments Date Date Started Finished 0 https://kalypto.unionb.com/Kalypto.credit.live/app.axd/acf.ViewAll?request_id=124834&revision=11 17/19 View ACF 12/8/21, 6:58 PM Branch Designation User Name Action Taken Date Date Started Finished Comments . Head Office Assistant Manager arunikah2617 08-Dec2021 11:14:09 14 Balance Sheet (000) Currency LKR CURRENT ASSETS CURRENT LIABILITIES FIXED TERM ASSETS NON CURRENT ASSETS NET ASSETS FINANCED BY: LONG TERM LIABILITIES 15 Profit & Loss 16 Ratios Profitability Ratios https://kalypto.unionb.com/Kalypto.credit.live/app.axd/acf.ViewAll?request_id=124834&revision=11 18/19 View ACF 12/8/21, 6:58 PM Liquidity Ratios Asset Management Ratios Gearing/Leverage Ratios Performance Ratios ATTACHMENTS File Name Actual Sales summary 2021.pdf CEO Approval for CRIB deviation.pdf COC Property 2.pdf CRIB Kandula Transport.pdf Financial Analysis -Kalana Imports Pvt Ltd .xls New CRIB Bandara Waidyasekara.pdf New CRIB Kalana imports Pvt Ltd.pdf New CRIB Kusumalatha.pdf Photos of the business.docx Photos of the commecial property to be purchased.docx Photos of the existing resedential property Haloluwa kandy.docx ROE - Kalana Imports new.xls System records of daily sales Apr2021.pdf System records of daily sales Aug 2021 new.pdf System records of daily sales July 2021.pdf System records of daily sales Jun 2021.pdf System records of daily sales Mar 2021.pdf System records of daily sales May 2021.pdf System records of daily sales- Sep 2021.pdf Valuation report property 2.pdf