BFSM

CASE STUDY

AUGUST 30, 2018

JEAN PAUL
B2131
According to this case study

When we look at exhibit 7: sales for fertilizer of Gujarat state Fertilizer corporation.

YEAR METRIC TONNES

1967-68 92,167
1968-69 2,32,539
1969-70 3,16,734
1970-71 3,59,079

This table clearly shows us that every year the sales of fertilizer is keep on increasing. When
we compare sale of fertilizer in the year 1967-68 with 1970 -71, we can see the sales has
increased almost 4 times of the sales for the year 1967-68. This shows that the demand for
fertilizers in Gujarat keep on increasing year after year.

COMPANY- X

 Company -X is a partnership firm. It has 3 partners A, B, C and have limited liability

of Rs. 200000, Rs. 100000 and Rs. 70000 respectively.
 It is a new venture
 It requires a loan of RS. 2,20,000. Out of these 2 lakhs against pledge of stock. They
are willing to give 25% of margin. And Rs 20,000 against the hypothecation of the
stock.
 Business in the districts Kaira and Baroda.
 Confident to sell fertilizers worth 8 Lakh.

As the manager of the bank I would sanction the loan to this firm

Reasons are as follows:

 When we look at the exhibit 1: scheme for distribution of inputs like fertilizers,
Insecticides, seeds etc. Company X is eligible for the loan, as it satisfies terms of
advances i.e. a) securities b) rate of interest c) margin d) repayment schedule.
  There is a huge demand for fertilizers in Gujarat and the districts they are functioning
i.e. Kaira and Baroda. Exhibit 7 shows the demand for fertilizers in Gujarat and
Exhibit 3 and 4 helps you to see how much areas in these districts and the demand for
the fertilizers in these areas. They have a huge acre in these districts and demand is
also very high.
 When we look at the exhibit 6 we can see the demand for fertilizer for these districts
for each year. It is increasing year after year. So, it is possible for the firm to achieve
sale of 8 lakh.
 The firm has a good market and chances of getting profit is very high.
 If firm can make huge profits, then 25% of margin belong to our bank and the interest
amount will be received without any default.
 For a bank it gets money when it gives loans. So, this is best opportunity for the bank
to make money.

COMPANY- Y

 Company -Y is a partnership company with 4 partners.

 It was established in the year 1957.
 They are working in Mehsana and Banaskantha districts of Gujarat.
 They have an annual sale of Rs. 10.86 lakh.
 There net profits where Rs. 66,500 last year.
 Government fixed price is Rs 945 per tonne. But they are selling at lesser price than
the price offered by the government. i.e. Rs. 870 per tonne for wholesale, Rs. 890 per
tonne for semi-wholesale and Rs. 900 for retailers.

As the Manager of this bank I would sanction the credit for company-Y

Reasons are as follows:

 It is an established firm having greater expertise in the field of fertilizers and

pesticide distribution in the districts of Mehsana and Banaskantha.
 The firm is making a profit even selling fertilizers at a lesser rate offered by the
government. This ensures the credit worthiness off the firm. We can ensure there
 will be no default in the fees because they are financially sound. They can also
make huge profits by increasing the price if they want to.
 They have a bank balance with our bank of Rs. 2900. In case of default money can
be deducted from their account. It is also our banks duty to give credit services to
our clients.
 The bank can earn income in the way of commission
 The demand for fertilizer is increasing in stable rate. This is shown in exhibit 6.
This ensure that the firm would keep on making profits for next few years.