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JAIPUR Submitted in partial fulfillment of the requirement for the Award of Post Graduate Diploma in Business Management Submitted By: Ajay Kumar Motwani PGDM-BM BM/July/11/24/2327
Submitted To: CORPORATE GUIDE: Mr. Abhishek Tiwari Head-Operations Au Finance-Jaipur FACULTY GUIDE: Prof. POONAM MISHRA Faculty, FMS-IRM Jaipur
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CERTIFICATE
Certified that this project report entitled ANALYSIS OF VEHICLE LOAN OF AU FINANCE AND MEASURING THE CUSTOMER SATISFACTION LEVEL is a record of project work done independently by Mr. Ajay Kumar Motwani under my guidance and supervision and that it has not previously formed the basis for the award of any degree, fellowship or associate ship to him.
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DECLARATION
I AJAY KUMAR MOTWANI hereby declare that this project report entitled ANALYSIS OF VEHICLE LOAN OF AU FINANCE AND MEASURING THE CUSTOMER SATISFACTION LEVEL is a bonafide record of work done by me during the course of summer project work and that it has not previously formed the basis for the award to me, for any degree/diploma, associateship, fellowship or other similar title of any other institute/society.
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ACKNOWLEDGEMENT
I express my sincere thanks to Brig.S.K.Gaur Director, FMS- Institute of Rural Management Jaipur giving me an opportunity to get training at AU FINANCIERS (INDIA) PVT. LTD. This study is one of the valuable, continuous and systematic guidance of Prof. Poonam Mishra, faculty, FMS- Institute of Rural Management his support and constant help has made this study possible. I am grateful for his invaluable support. I would also extend my sincere thanks to Mr. Mr. Abhishek Tiwari, Head-Operations at AUFIPL for providing me an opportunity to do a project work in their esteemed organization. I also express my gratitude to Mr. Ravindra Pratap Gautam and Mr. Arun Agarwal for the help, guidance, cooperation and assistance extended to me in different departments of RFC. The assistance was offer to me in various forms like dissemination of information rendering brochures, periodicals etc which proved helpful in completing the project on time
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Executive Summary
The summer training of a management student plays an important role to develop him into a well groomed professional. It gives theoretical concepts a practical shape in the field of applications. The project at AUFIPL dealt with credit appraisal and henceforth analysis of consumers who have taken loan. The forthcoming project report is divided in phases: Phase 1: Understanding the policies of AUFIPL regarding its products. Studying and practically doing the process and procedures Phase 2: Financial Position of the company Phase 3: Analysis on loans taken up by consumer conferring the suggestions and recommendations. The research methodology was Exploratory and descriptive in nature. Both the secondary and the primary data collection methods were taken into consideration and the conclusions of the report were derived fundamentally on the basis of the primary data collected and thus analyzed accordingly.
Questionnaires were circulated amongst the consumers who came to the branch. A few importance scaling were used to draw inferences based on the survey.
After doing the thorough analysis it can be concluded that a vibrant and a well-developed market which has been shown to facilitate consumption & investment, by providing loans to different segments has a lot of potential in the coming years. The lenders as well as borrowers in the country are growing at a very fast pace.
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Introduction
At Au Finance I was working with the Credit department, which caters specifically to providing loans to individuals meeting the necessary requirements. As a part of my project I had to study policies and credit analysis process of Vehicle loan. The report is divided into 3 parts. A brief abstract of the entire work done is stated below.
DETAILING ABOUT THE PRODUCTS OFFERED BY AU FINANCE. DESCRIPTION OF THE CREDIT ANALYSIS OF THE VEHICLE LOAN.
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Statement of problem:
In the current scenario where it is seen that big financial institutions have been bankrupted just because of credit default so Credit Appraisal has become an important aspect in the financial institutions and is gaining prime importance. It is the incident of credit defaults that has given rise to the financial crisis of 2008-09. But in India the credit default is comparatively less that other countries such as US. One of the reasons leading to this may be good appraisal techniques used by financial institutions in India. Eventually the importance of this project is mainly to understand the credit appraisal techniques used by the financial institutions with special reference to AU FINANCIERS INDIA PVT. LTD
Project objective:
To study the process of credit appraisal and documents required for Vehicle loan To know the satisfaction level and loyalty of customers (who have taken loan for vehicle) of AUFIPL To find out financial position of the company (AUFIPL)
Research Methodology
Research type: The research conducted for Phase I and II is an exploratory research. It includes: Analysis of historical records. Analysis of documents. The research conducted for Phase III was descriptive research.
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Sampling: Sampling Size: 50 Sampling Method: convenient sampling (Non Probability sampling) Sampling unit: Businessman-woman, professionals, salaried class and farmers who had taken loan from Au Finance Research location: Jaipur Research tools: Pie charts Line diagrams Tables Percentages
Source of data: Primary Research. Through questionnaires, online surveys and telephonic interviews. Secondary data: through annual report, internet and websites. Internal policies and guidelines of company.
This study also helped me as I have not done any study at this level before, so by this study I came to know about different Financial Institutions other than banks, I came to know about the credit appraisal procedure of AUFIPL, various loan schemes of AUFIPL etc. by meeting the different
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high level officials of AUFIPL & different customers of AUFIPL I think I have also improved my confidence, communication skills etc.
1. Time constraint 2. No direct access to company data 3. Lack of interest shown by some officials of AUFIPL 4. Questionnaire is filled according to the response given by the customers, it may contain some biased information 5. Sample size is not quite enough to reach to any precise conclusion.
Review of Literature
A study done by Kenny Sikand Student of FMS-IRM in the year 2011 with Axis Bank, Jaipur is to be reviewed and the research process and methodology will be understood to apply the same with AUFIPL.
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PROFILE OF COMPANY
Industry Type:
AU FINANCIERS is a NBFC (Non-Banking Financial Company). A non-banking financial company (NBFC) is a company registered under the companies Act,1956 and is engaged in the business of loans and advances, acquisitions of shares/stock/bonds/debentures/securities issued by the government or local authority or other securities of like marketable nature, leasing, hire purchase, insurance business, chit business, but does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/construction of immovable property.
The types of NBFCs registered with the RBI are: Equipment leasing company: - is any financial institution whose principal business is
that of leasing equipments or financing of such an activity.
Loan company: - means any financial institution whose principal business is that of
providing finance, whether by making loans or advances or otherwise for any activity other than its own (excluding any equipment leasing or hire-purchase finance activity).
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NBFCs cannot accept demand deposits (Demand deposits are funds deposited in an institution, that are payable immediately on demand e.g.: Savings account, Current account etc)
A NBFC cannot issue cheques, to their customers and is not a part of the payment and settlement system Deposit insurance facility of Deposit Insurance Credit Guarantee Corporation (DICGC) is not available for NBFC depositors They cannot offer interest rates higher than the ceiling rate prescribed by RBI from time to time.
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They cannot offer gifts/incentives or any other additional benefit to the depositors. They should have minimum investment grade credit rating, from the credit rating agencies
Maharashtra and Gujarat has brought the benefit of growth to people outside the usual scope of organized finance and allowed us to propagate the motto of inclusive growth. Its biggest area of operation is commercial vehicle financing where we serve the requirements of various categories of the market right from three wheelers to multi-axle trucks. From first time buyers of new vehicles to refinancing of running vehicles, our extensive product portfolio allows us to cater to a broad cross section of the market. It also engaged in small secured business loan products for personal and business needs. Our excellent track record of high quality lead generation, high collection ratio and low delinquencies has attracted the attention of high quality stakeholders and today, besides the promoters, our principal investor is Motilal Oswal Private Equity Advisors Private Limited. The support of our investors and our enhanced management bandwidth has given us the impetus to forge ahead in new geographies and expand our product portfolio.
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Milestones: In just first few years from inception, we disbursed, 150 crores in vehicle loans, SME loans,
etc.
Exhibiting fabulous unlimited potential and quick growth prospects, we entered into the
channel business with a strategic relationship with HDFC bank.
This was an immensely crucial year for the company as Motilal Oswal Private Equity
Advisors Pvt. Ltd. Infused Rs. 20 Crores worth of equity and strategic acumen on board with a strong product support and constant process development, we expanded our base to Gujarat
Established a relationship with IDBI, Central Bank of India and State Bank of Patiala. Recorded an all time high PAT of Rs. 5.2 crores and AUM of Rs 244.17 crores. The
international Finance corporation, (a member of the world Bank Group) Motilal Oswal Private Equity Advisors Pvt. Ltd. and other promoters infused a whopping Rs. 60 Crores of shares Capital into the company.
Recorded a PAT of Rs. 11.85 crores and AUM of Rs. 485.58 crores. RBI classified the company as the only Systematically Important Asset Finance Company
in Rajasthan
Our exceptional long term facilities was were rated A-by CARE. Based on high performance and consistent growth, CRISIL has upgraded its rating to BBB+/
Positive
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BOARD OF DIRECTORS:
Mr. Sanjay Agarwal, Promoter & Managing Director Mr. Uttam Tibrewal, Executive Director Mr. Krishan Kant Rathi (Director) Mr. Vishal Kumar Gupta (Investor Director)
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NUMBER OF PEOPLE The number of employers is increasing year by year at fastest speed, like in 2006-07 the no. of employees was 155 but in 2012 it is 2000.
No. of employees
2000 1500 1000 500 0 2006-07 2007-08 2008-09 2009-10 2010-11 2011May 2012
No. of employees
Year 2004-05 2005-06 2006-07 20007-08 2008-09 2009-10 2010-11 2011-12(May) (Source: www.aufin.in)
Total No. of Customers 2376 6182 12335 20239 26723 41995 77358 110000 (Table no. 01)
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Target Customers
DEPARTMENTS
Marketing Department. Accounts Department. Collection Department. Credit Departments. Human Resources Departments. IT Department. Insurance Department.
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BRAND
AU means gold which is precious and worthy across all cultures and times. It symbolizes in service, wealth and happiness. Financiers mean those who finance. As the name of the company suggests, we are the company who finance thorough imperil service to create happiness in the lives our precious and worthy customers. We have launched the new logo of our company which is having manifolds. Firstly, it is symbolic to Swastik, the most prominent auspicious symbol of the present era. Swastik symbolizes auspiciousness, well being and let good prevail. Secondly, it is made up with 4 Fs which means- Fast, Fair, Flexible & Friend. Thirdly, the color associated with it has deep meaning. Blue color is considered to be a corporate color which symbolizes calmness, peace, confidence, intelligence, stability, unity, trust, loyalty, wisdom, faith, tranquility and sincerity. Red color which a very emotionally intense color is associated with energy, strength, courage, power, determination as well as passion, desire, and love.
STRENGTHS
Relationship based origination model: We meet every borrower in person before disbursing a loan. The company works on the concept of touch and feel which helps to understand background, profile & needs of the customers which are overlooked by the organized sector. Company provides easy finance with hassle (difficulty) free documentation, speedy and transparent process.
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has been able to establish strong relationships in the marketplace, as well as with various authorities/establishments.
Investor Relation
IFC is a dynamic organization, constantly focusing in creating opportunity to the people to escape poverty and to improve their lives. To achieve this Purpose, IFC offers development-impact solutions though firm-level interventions direct investments, advisory services, and the IFC Asset Management Company; standard-setting; and business enabling environment work. IFC is the financially and legally independent private sector arm of the World Bank Group. It also coordinates with the other institutions of the World Bank Group for its activities. IFCs operations are carried out by its departments, most of which are organized by world region or global industry/sector. IFC has over 3,400 staff, of which 51% work in field offices and 49% at headquarters in Washington, D.C. IFC continues to develop new financial tools that enable companies to manage risk and broaden their access to foreign and domestic capital markets. IFC has launched a broad and targeted set of initiatives to help private enterprises cope with the global financial and economic crisis. IFC investment in AU financiers will expand borrowing to low-income and underserved customers. Alliance of IFC with AU financiers will enables us to mutually attain the purpose by strengthening the business model of AU Financiers.
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SOCIAL RESPONSIBILITY
The company continues to contribute to the economic well being of the communities it interacts with and enhances their social well being. The company during the year continued to involve itself in social welfare activities by contributing to recognized charitable institution, which specifically benefits the economically disadvantaged and socially weaker sections of the society. The Company has regularly contributed to the Akshay Patra Foundation. Akshay Patra Foundation runs Nutritious food for children in schools a well known mid-day meal program targeted towards school going children from the under privileged sections of society. In the current year the company donated a Mahindra Vehicle to Akshay Patra foundation Company is frontrunner in state of Rajasthan in phasing down old Diesel and Petrol 3 wheelers with new upgraded LPG/CNG based 3 wheelers. Thereby, Company is supporting Govt. of India vision of save energy and environment friendly vehicles on road for better future of our next generation. Companys 99% of lending is concentrated to vehicle financing and Companys is focused on financing of vehicles with greater fuel efficiency, lower emission of pollutants and new technology including CNG/LPG. Companys is looking forward to do concentrated financing of vehicles which shall lead to:
1.
Saving
of
fuel
with
better
fuel
efficiency
with
new
technology
vehicles. of EURO
3. Funding of vehicles run on LPG / CNG with little or no atmospheric pollution. Company has been financing following vehicles which leads to lower emission of pollutants and Higher fuel efficiency and with sophisticated technology. Company also promoting education by reimbursing the cost of education of children of our employees who belong to economically weaker section of the society.
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Chapter 3 Analysis
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Vehicle Financing:Commercial vehicle loans will continue to remain the mainstay for the Company. Company primarily offer our services for financing various types of heavy commercial vehicle, light commercial vehicle, multi-utility offer our services for financing various types of heavy commercial vehicle, light commercial vehicle, multi-utility vehicle, cars, three wheeler loading, three wheeler passenger, tractor etc. of different reputed brands like Mahindra & Mahindra, Tata Motors, Piaggio vehicles, Force Motors, Maruti, Chevrolet, Toyota, etc.
Features:
Touch & Feel Policy Takeover/ Top-up Loans Simple documentation Quick credit decision Speedy approval & Disbursement Loan approval on NIP also i.e. Non Income Proof Wide repayment options such as Cash/FPDC/RPDC/ECS Variable guarantor facility i.e. guarantor can be Existing Customer/Family, Member/Govt. Employee/Any transporter etc.
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Credit Assessment
Storage
Audit Compliance
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Case Sourcing:
All sales team are responsible for this job. Company believes that it will help us in transparency with customer and will enable better understanding of customers requirement. It is responsibility of Credit team to verify the source of case during the field visit or tele verification
CIBIL Check
Once the concerned sales executive satisfy with the customer and feels that overall requirement is within company norms and customer profile is matching with required product, will collect the required document i.e. address Proof/ID proof and will check the Credit History from Credit bureau ,as per below given policy.
1. Three Wheeler: No CIBIL Check is required either for applicant or co applicant/ guarantor. 2. All Other Products: a. Applicant: CIBIL report is mandatory and will be checked at branch level, at the time of recommendation. b. Co-Applicant / Guarantor: CIBIL report will be pulled by Credit team only as per below given parameter (i)If Co applicant / Guarantor is husband / Father / Son or beneficiary of the vehicle, CIBIL report will be checked OR (ii.) If funding is based on Co-Applicant / Guarantor then CIBIL report will be checked. Other then above two conditions, CIBIL is not required for Co-Applicant / Guarantor
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Good Match: If the CIBIL reports fetch credit History with good track record i.e. NO Delay (0 DPD), case will be considered for next Level / Process
Bad Match: If the CIBIL reports fetch credit history with delay payment/written off/settled / overdue it needs to be approved by appropriate authority as per matrix. Any bad history need to be approved by RCM based on facts and finding of credit and sales team. All such deviation must be justified at the time of approval.
Field Investigation
Once the application qualified above parameter, concerned sale executive will login the file for FI through telephonically or by email to concerned FI Coordinator/FI executive whichever is applicable. The FI executive will conduct the investigation as per policy and submit his report to Credit Manager / BM, in approved format and will also communicate the status of FI to concerned sales executive to enable them to forward the case recommendation for approval.
Different Status of FI and their interpretation: i. Positive: Customer is worth for recommendation for loan and does not have any drawback as per
initial verification. During the investigation no wrong /negative activity observed.
ii. Negative: Customer has some negative feedback from market or nature of business activity/profile does not match with company policy &profile. Any customer will not classify as Negative due to lack of experience only. Any customer who is involved in business activity which is excluded (Annexure III) in company policy will be classified as Negative.
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iii. Refer :If the CPV/FI executive is not able to take decision, due to any reason, it report may be
classified as Refer All cases which has been classified as Refer , the concerned credit officer/manager needs to clear the concern after discussion with concerned CPV/FI executive and if required may be visit the case before final recommendation.
Credit decision will be taken; hence it become important that executive should not hide any fact in fear of losing the case. It is always advisable that they should capture all the negative points/concern and give their recommendation with mitigate that why they want to do this case. It will help in assessing the proper risk involved in the deal. Please note that CAM must be signed by the sale executive and will be considered that all information provided in the CAM is correct and verified by the concern sales executive. After completing the recommendation the concern executive/branch will forward the same with CIBIL (if applicable) to respective Credit Manager for approval.
Credit Assessment
Once the proposal received by respective Credit Manger he will assess the proposal as per below parameters
CAM review: The Credit Manger will review the credit assessment memo and will understand the customer profile and requirement, scheme offered by executive.
CIBIL Verification: He/She will verify and assess the CIBIL report (if applicable).
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Discussion with Field Investigation: Credit Manger will call the verification executive and will take a view regarding profile of applicants any negative points observed during the verification. This is required because some time the concerned executive will not be able to communicate properly in writing. Tele verification: Concerned Credit executive will call all the applicants and understand the requirement of customer, product required, experience and existing income source. After verifying all the above fact he/she will underwrite the case as per underwriting norms depending on the vehicle segment.
Product & Profile Match: This is the most crucial part of the assessment. During assessment everybody should check whether the required product matches customer requirement /living standard. For example if a customer residing in slum or lower middle class area and asking for high end vehicle, it shows that there is some third party involvement. All such mismatch should be checked properly at every stage of approval.
Area Coverage: Branches should operate in the territory as allocated to them and shall not source business from areas pertaining to other branches.
Approval Validity: All approval will be valid for 30 Days, in case of and delay beyond this period, need fresh approval from concerned authority.
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Files Received by Sales Co-ordination team at HO. Verification of Payment detail & Marking Document details on file forwarding memo File Checking by NDC maker as per Operation Policy
File Hand over to sales Co-ordination team for pendency updation in Web Jaguar. Follow up with branch for pendency completion
Disbursed File sent to feeding Team for syster Entry, PDC, PDD & Scanning
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UNDERWRITING NORMS FOR COMMERCIAL VEHICLE Standard Policy Condition Risk & Mitigate Minimum 18 years at the I. If Age of Applicant is Risk: Applicants whose beginning of contract to less than 18 age is less than 18 year, maximum Year cannot sign agreement as 65 years at the end of the loan per law. Agreement will Tenure be invalid. Mitigate : We should not fund II. If applicants age is between 18 to 21 year and profile is FTU/FTB Risk: Customer of this age group will have less maturity, Liability towards family will be lesser and chances of diversion from current business in any ups & down will be high. Mitigate: Father or any senior family member should be taken as coapplicant. It will also establish that parents also agreed for this Loan, and they will support applicant in any unfavorable circumstances. If above condition is not possible, case can be done subject to satisfaction of credit team based on other parameter III. If applicants age is above 21 year for all profile (FTU/FTB/ Transporter) No Risk related to Age
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2.
Residence
Owned Residence In the name of I. If House Owner is self or any family member Applicant and proof is (Father/Mother/Wife/Son/Parental) available. Stability on Same Address :No minimum Limit II. If House Owner is Applicants family member, ownership proof and relationship proof is available Stability on Same Address :No minimum Limit III. If house owner is Applicants family member, ownership proof is available but no relationship proof is available. Stability on Same Address should be Minimum 6 month.
Risk: It is possible that house owner is not family member of Applicant, wrong information has been provided. Mitigate: We can consider as owned house if CPV / TVR supports that hose is owned by applicants family member. Applicant should have KYC of the same address. Risk: It is possible that customer is residing in rented/temporary house and trying to do fraud.
IV. If House owner is Applicant or family member, but no document is available for ownership proof or relationship proof
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Stability on Same Address should be minimum 1 year and 3 year in same City.
Facts: This condition may be possible where customer is residing in slum area / migrated from other city but living since so many years. Or it can be possible in old ancestral property
3.
Experience
Mitigate :Document like Old Ration Card / DL / Voter ID card / OLD LIC policy / Old Gas Connection Pass book of the same address ,should be collected and CPV should verifies that customer is living in owned House. If above condition is not possible, Customer will be considered as rented Profile, and will be funded accordingly Risk : Chances of fake Rented Profile : Customers permanent Permanent address proof address proof address proof / information is must be collected and FI not available / FI not possible high has to be conducted Stability: 1 year on same Mitigate : Existing Customer should be taken as Coborrower/ Guarantor address and 3 year in same city. (To be verified by coapplicant / Guarantor should have owned document or CPV report) house FTU NIL Applicant is having experience Risk : Information provided FTB 12 Month as in driving but valid DL is not by applicant is wrong to Driver , DL to be available. avail higher LTV collected Mitigate: Experience should Transporter Minimum 12 month Customer is having ownership be verified from CPV and ownership in same of of less than 12 month TVR. Number of person higher segment of whose vehicle was taken on vehicle rent should be documented Mitigate: Such applicant can be considered as transporter subject to satisfaction of Credit Manager based on other parameter.
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4 5
6.
Identity Proof
Number must be verified during TVR Track available but repayment is not good (IF repayment can be verified through CIBIL, Track is not required) Special Condition : 1. If average delay is more than 60 days and Peak delay is more than 90 Days, RCM approval is required. 2. IF average delay is more than 90 Days, Credit Head Approval is required Customer does not have any ID proof as per KYC policy.
Risk : Customer intention may not be good or customer may be overleveraged Mitigate: Credit Team Should assess the reason for default and should mention in recommendation on what strength we are doing this case.
Customer does not have proper address proof as per KYC policy
Risk: Chances of fraud will be high, identity will not be established. Mitigate: All such case has to be specifically approved by Credit / Ops head with reason. Risk: Chances of fraud will be high, identity will not be established. Mitigate: All such case has to be specifically approved by Credit / Ops head with reason.
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8.
RC Copies
Customer is having vehicle but not in his own name, taken on agreement
Risk: Vehicle detail given by customer wrong, customer has given this information to avail higher LTV.
9.
CoBorrower / Guarantor
Mitigate: RC, purchase agreement and latest insurance copy to be collected. If no document is available, customer will be considered as FTB. Coborrower / Guarantor Risk: Coborrower / do not have vehicle or guarantor may not be able experience in to support customer in transportation line. vehicle operation. Mitigate :Guarantor with other business activity can be considered if he is financial sound, subject to credit approval (Table no. 02)
Borrower Profile:
The Credit Policy for commercial vehicle caters the following segment of customers.
First Time User (FTU) : Customer who do not have any commercial vehicle or do not having any experience in the same segment directly of indirectly will be classified as FTU
First Time Buyer (FTB): Customer who have experience in managing the vehicle as driver or who had vehicle in past but do not have any documentary evidence as vehicle ownership will be classified as FTB. This profile will be a typically a driver who intends to by a vehicle for his own. DL of same segment will be the mandatory document for this profile.
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Transporter: These are the customers who have at least one commercial vehicle in same or higher segment and minimum ownership period of 12 month.
Captive Users: These customers are not engaged in transportation business, they require
commercial vehicles to support their business. They may or may not own a commercial vehicle. They differ from FTU in the sense, that while FTU will earn from the direct usage of vehicle, the Captive user is not earning primarily from the vehicle.
2. Borrower Profile a. Non Income Proof Customer: These are the segment, where customer do not have any banking habit or do not have any proof to established his her business or in other terms their income cannot be verified through any document. It can be assessed only based on personal discussion and by verifying his business or living standard. It can be again reclassified in following two category:
I. Agri Base Funding: These are typically farmers, who depend on agricultural income and living in joint family/independently. In case of joint family (Father/Mother/ Real brother), income of other family can be clubbed /considered.
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Document Required: Agri Land document in own name, in case parental property relationship proof will be required.
II. Self Employed (Business): These are typically small business men, who do not have any income proof. For example Shopkeeper / small trader / agents / property dealer / Private teacher /employee getting salary in cash etc.
Document Required: Any proof which established the existence of business like RST/SCT copy / Copy of purchase Bill/ Utility Bill in the name of Shop / Salary Certificate on letter head / Photograph of Business premises supported by CPV report or any other relevant document as per operation policy (All such proof will help us in classifying the asset in PSL/Agri)
b. Income Proof Customer: These are the profile where income can be accessed through various documents like banking / ITR / Salary Slip / Form 16 /Balance sheet etc.
Documented Required: Latest 3 Month Salary Slip / 6 Month banking / Last 2 year ITR or Balance Sheet. Documented gross income should be at least equivalent to yearly repayment amount. For example: Salaried Customer whos proposed EMI is 10000/- per month, in such case gross salary should be minimum of 10000/- per month. In case customer is providing banking, in such case average monthly bank balance should be at least equivalent to the monthly EMI. However the assessed income (assessed by AU employee) should be at least 2 times of the EMI amount. All such assessment will not require any supporting document, it has to be justified during recommendation / credit underwriting and supported by CPV report. Credit team has to see whether customer is capable to pay EMI after considering his all fixed expenses.
c. Repayment Based: Any customer who have the repayment history of personal car / MUV or any four wheelers for more than 12 month will be considered as Income Based customer. Track record or repayment proof of EMI for at least 12 month will be mandatory document; no additional income document will be required.
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PHASE II: Financial Position of the company Comparative Analysis & Interpretation Comparative Analysis:
(See Appendix)
Particulars Total Current Assets Total Current Liabilities Total Assets Cash and other bank balances Loans & Advances Total Capital Employed 31st March 2010 10,415.43 824.12 10835.00 3,7745.05 4,000.03 10,010.88 31st March 2011 23,448.29 2165.65 24443.08 2845.12 15,144.80 22,277.43 Increase/Decrease/Rs. Increase/Decrease Percentage 13,032.86 125.13 1341.53 13,608.08 (899.93) 11,144.76 12,266.55 162.78 125.59 (24.03) 278.62 122.53
Secured Loans
Particulars Term Loan Cash Credit Total 31 March 2010 4740.06 1267.03 6007.09
st
st
Particulars Operating Exp. Total Provision/ write offs Total Expenditure Total Income PAT Net Profit
Total Expenditure = Operating Expenses + Total Provision/Write offs 1234.03 2542.38 1308.35 106.02 2,284.46 565.53 596.07 5426.99 129.12 1338.93 3,142.53 727.59 742.86 137.6 128.66 124.63
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Interpretation:
The comparative analysis reveals that during 2011 there has been an increase in current asset of Rs. 13,032.86 Lacks i.e. 125.13% and in the current liabilities have increased by Rs. 1,341.53 Lacks i.e. 162.78% so the current financial position has increased. The liquid Asset that is cash in hand, cash in bank shows a decrease in 2011 over 2010 this will not improve the liquidity position of the concern. The other assets loans & advances have increase by Rs. 11,144.76 Lacks its show that company business improved, and long term liabilities increase in form of secured loan then it show that company have good relationship with the banks in India. The overall financial position of the company is satisfactory. The comparative analysis reveals that there has been increase in Operating Expenses 103.23% and total expenditure increased by Rs. 106.02% The total income of the bank has increased by 137.6% and the company earns the profit of Rs. 1338.93/- Lacks which is 124.63% more than the previous year.
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Following are the important overall profitability ratios, which relevant to the business concerns are: Return on Assets Return on Capital Employed Return on Equity Capital
1. Return on Assets:
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30000 25000 20000 15000 10000 5000 0 1 2 3 Total Asset Net Profit
(Figure no.03)
Interpretation
The Return on asset of AU Financiers (India) Pvt. Ltd is not satisfactory. The Assets are not utilized properly.
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20000
5000
0 1 2 3
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3000 2500 2000 1500 1000 500 0 1 2 3 Equity Capital Net Profit
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Liquidity Ratio:
1. Current Ratio
Current Ratio for 2010: 10,415.43/824.12 = 12.64 Current Ratio for 2011: 23,448.29/2165.65 = 10.83
Interpretation:
The company has sufficient and excess funds available with it to repay its debt (in case) in both the financial years 2010 and 2011. This implies that company has excess of cash in the form of advances and cash and bank balances.
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CHARACTERISTICS OF POPULATION
Every population either small or large has some unique characteristics of its own and there are various factors that affect the population and make it behave in a certain manner. There might be variations within the group however; their behavior if compared to that of any other population group will vary substantially or at least to certain extent. The sample size of the population selected for the market survey is of 50. The questionnaire used for the market survey is included in the appendices of the project report (Appendix). The following is the list of charts prepared to analyze the sample population.
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Respondent 14 21 15 0 50
Respondent
25 20 Axis Title 15 10 5 0 Respondent 18-28 14 28-38 21 38-50 15 >50 0
Interpretation:
The sample population was divided into four different age groups to better understand their behavior. The survey results show that majority of the auto loans were taken by the age group of 28 38.
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Income < 1 Lakh 1-2 Lakh 2-5 Lakh > 5 Lakh Total
Respondent 2 30 14 4 50
Respondent
< 1 Lakh 1-2 Lakh 2-5 Lakh 4% 8% 28% 60% > 5 Lakh
Interpretation:
Second classification of respondent is based on the basis of their annual income. This classification is done to know that mostly which income level people have more demand for loan. In Auto Loan on an average the annual earnings of 60%% 1 - 2 lakh and the smallest percentage is 4% is less than 1 lakh.
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Respondent 21 1 27 1 50
Farmer 2%
Respondent
Government Emp 2%
Interpretation:
The third important consideration which helps to identify Occupation of the respondent the occupation comprises of Government Employee, private employee, businessman and farmers.
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Source to knew about Au Newspaper Advertisement Friends & Relatives Others Total
Respondent 0 0 33 13 50
40 35 30 25 20 15 10 5 0
Respondent
Interpretation:
This question is asked in order to know the effectiveness of the advertisement strategy adopted by Au finance. The result found by the survey shows that most of the customer knew about the various loan schemes through their friends & relatives who had taken loan from Au Finance.
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Respondent 38 12 50
Yes No Total
Respondent
Interpretation:
As the graph depicts that 76% of people would recommend the company to their friends and relatives. This shows the satisfaction level of the customers with AU financiers. And the 24% people will not recommend because of the high interest rates and penalty charges not because of the services.
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Respondent 35 15 50
Respondent
Interpretation:
As the graph depicts that 70% of people would prefer the company once again. This shows the loyalty level of the customers with AU financiers. And the 30% people will not prefer because of the high interest rates and penalty charges not because of the services.
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Respondent 38 12 50
Respondent
Interpretation:
The findings suggest that 76% customers are satisfied with the rate of interest charging by AUFIPL and only 24% are unsatisfied. But the company should review its interest rates from time to time in order to be competitive in the market and to improve customer satisfaction continually.
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SATISFACTION LEVEL
Respondent 8 30 9 3 50
Respondent
6% 18%
Interpretation:
As per the survey, a majority of the people were satisfied of the facilities provided by AUFIPL. However, a certain segment of the population was not at all satisfied with the services provided by AUFIPL. Dissatisfaction depends largely on other factors for example, bad customer relationship, and many such factors which are discussed in detail in the latter part of the report under the heading suggestions which have been originally the complaints of dissatisfied customers.
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FINDINGS
1. The company has taken funds in the form of loans and advances irrespective of issuing equity capital and hence, the cash has been paid in the form of interest which has increased manifold times from the last year.
2. It is found during survey that company is not investing money in advertising and promotion activities. All the customers got to know about Au through their friends and relatives
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SUGGESTIONS
FACTOR FIRST:
Some extra benefits can be introduced for the existing customers.
Advantages:
It will reduce switching of customers It will attract new customers.
Suggestion: Since Au Financiers doesnt provide two wheeler loans; it is recommended that company should provide it so that it can capture more market.
FACTOR SECOND:
More emphasis should be laid on advertising of the products.
Advantages:
It will increase the awareness among the customers. Suggestion: Au Financiers needs aggressive marketing and business strategy to compete with other NBFC. It is suggested that company should formulate competitive policies and apply push strategy.
FACTOR THIRD:
Focus on reducing the interest rates.
Advantages:
If the customers are getting more benefits on comparatively lesser rate of interest, they would surely prefer the company.
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CONCLUSION
AU Financiers (India) Pvt. Ltd. is growing company with roots in Rajasthan, Maharashtra & Gujarat. The financial profile of the company is good because company has good relationship with banks like HDFC, IDBI, SBI, DCB, AXIS, BOI ANDHRA, PNB CBI, INDIAN, SIDBI, INDUSIND, & SBOP. The number of people and customers is increasing very fast and the number of the branches across the state is increasing very fast. Also the net worth of the company showing that company is on good track. Company is totally depended upon fund because companys business is providing loans to customers. Fund is the oxygen for the company because if company dont have fund then it cant disburse loans to its customers. The biggest USP of the company I found was it provide loan or it sanction loan at very less documentation. Good coordination between organization and customers, which reveals the importance of fair and clear business.
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Chapter V Bibliography
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BIBLIOGRAPHY
BOOKS 1. C.R. KOTHARI-Research Methodology (Second Revised Edition) Websites: 1. www.aufin.com 2. www.wikipedia.com
OTHER SOURCES:
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Chapter VI Appendix
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LIST OF APPENDICES
QUESTIONNAIRE
6. Age of the Respondent? (i) (ii) (iii) (iv) 18-28 28-38 38-50 More than 50
7. Annual Income of the Respondent? (i) (ii) (iii) (iv) Below 1 Lakh 1-2 Lakh 2-5 Lakh 5 Lakh and above
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8. Occupation of Respondent (i) (ii) (iii) (iv) Government Employees Private Employees Businessman Farmer
9. How do you come to know about Au? (i) (ii) (iii) (iv) Newspaper Advertisement Friends or relatives Other (Specify _______________________________)
10.
Have you borrowed loan from any other sources also? (i) (ii) Yes (What are the things you like in Au?) No (Why you preferred Au as compare to any other NBFC?)
_____________________________________________________________________ _____________________________________________________________________
11.
For the Past how many times you have taken loan from this company? (i) (ii) (iii) (iv) 1 2 3 More than 3
12.
Do you feel that the procedure to apply loan with the Au was difficult? (i) Yes
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(ii)
13.
Would you recommend this company to your friends, relatives and associates? (i) (ii) Yes No
14. Do you think that company takes unnecessary charges? (i) (ii) Yes No
15. Are the interest rates justifiable according to todays inflationary scenario? (i) (ii) Yes No
16. Will you prefer Au once again in future? (i) (ii) Yes No
17.
For the past how much time you have taken loan from this company?
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18.
How much time the Au took to sanction your loan? (From the time of application)
19.
How satisfied are you with the services provided by the Au? (i) (ii) (iii) (iv) Very satisfied Satisfied Somewhat satisfied Dissatisfied
20.
What are your suggestions for the betterment of the services provided by Au? ________________________________________________ _________________________________________________
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Assets. Current Assets. Debtors Less than 6 Months Debtors More than 6 Months Loans & Advances Accrued Interest on Loans Trade Advances Term Deposits Cash and other bank balances Advances recoverable in cash/kind Other current assets Current Assets Total
Increase/Decrease / Rs.
Increase/Decrease Percentage
51.86
102.08
50.22
96.83
10,415.43
23,448.29
13,032.86
125.13
191.32 89.44
764.46 112.04
573.14 22.60
299.57 25.27
Net Block
540.38
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317.69 419.57
342.37 994.79
24.68 575.22
7.77 548.15
Total Assets
Total Assets = Total Current Assets. + Total Fixed Assets 10,835.00 24,443.08 13,608.08
125.59
Current Liabilities Sundry Creditors Other current liabilities/provisions EMI Payable Against Securitisation / Assignments Provisions Provisions for NPA Provision for Estimated Loss for Securitisation / Assignments Other Provisions Current Liabilities Total
114.37 375.82
211.56 612.75
97.19 236.93
84.98 63.04
182.77
1,001.67
818.90
448.05
151.16 44.92
339.67 41.02
188.51 (3.91)
124.71 (8.70)
52.50
183.34
130.84
249.23
53.74 824.12
115.31 2,165.65
61.57 1,341.53
114.58 162.78
Net Current Assets. = Current Assets Current Liabilities Net Current Assets. 9,591.31 21,282.64 11,691.33
121.89
Total Capital Employed = Net Block + Investments + Net Current Assets Total Capital 10,010.88 22,277.43 12,266.55 122.53 Employed
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Represented By Equity Share Capital Share Application Money Compulsory Convertible Preference Shares Reserves and Surplus Less : intangibles DTA Tangible Net worth
1,393.29 7,549.99
891.50
2,612.23
1,720.73
193.02
37.86 3,999.66
84.29 11,471.22
46.43 7,471.56
4.13 4.13
(4.13) (4.13)
10,835.00
24,443.08
13,608.08
125.59
Channel Business
15,417.00
13,630.00
(1,787.00)
(11.59)
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5,348.00 20,765.0
19,839.87 33,469.9
14,491.87 12,704.87
270.98 61.18
24,765.03
48,614.67
23,849.63
96.30
31th March 2010 Expenditure Salaries and staff expenses Admn. and Misc. expenses (incl. raw material) Operating Expenses 451.38 681.18
31th March Increase/Decrease Increase/Decrease 2011 Rs. Percentage 803.18 1,498.53 351.80 817.34 77.94 119.99
1,132.56
2,301.71
1,169.15
103.23
Provision for NPAs Provision for Credit Loss on Securitization Provision for Overdue Debtors Loan Written Off Debtors Off
1.37
(3.91)
(5.28)
(385.53)
52.50
130.84
78.34
149.23
8.21 39.40 -
Total Provision / 101.47 240.67 139.20 137.18 Write offs Total Expenditure = Operating Expenses + Total Provision/Write offs Total Expenditure 1234.03 2542.38 1308.35 106.02
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Income Interest on own books Income under Channel Business Income from securitization Interest on FDR Income from Operations Other Income Total Income
546.82
1,556.14
1,009.32
184.6
912.67
972.86
60.19
6.595
537.84
2,082.89
1,545.05
287.3
105.59 2,102.92
191.84 4,803.73
86.25 2,700.81
81.68 128.4
181.54 2,284.46
623.26 5,426.99
441.72 3,142.53
243.3 137.6
PBIDT Less:Depreciation and Impairment of Fixed Assets PBIT Less:- Interest Less:- Prior Period Adjustments Less:- Misc. expn. written off PBT Less:- Tax PAT
PBIDT = Total Income Total Expenditure 1,050.43 2,884.61 1,834.18 30.53 45.81 15.28
174.61 50.04
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Total Expenses = Total Income Profit After Tax (PAT) Total Exp. Add : Depreciation 1,718.93 30.53 4,133.87 45.81 2,414.94 15.28 140.49 50.04
Gross cash accruals = Profit After Tax + Depreciation Gross cash accruals Less : Dividends Pref. (Rs.) Equity (Rs.) Net cash accruals Net cash accruals/Total Income (%) 608.82 26.65 1,338.93 24.67 730.12 (1.98) 119.92 (7.42) 608.82 1,338.93 730.12 119.92
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