A PROJECT REPORT ON

"MARKET RESEARCH TO MEASURE THE VIABILITY OF HSBC ASSET UNDER SME SEGMENT IN PUNE MARKET w.r.t TRADERS

CONDUCTED AT:

HSBC PUNE

IN PARTIAL FULFILLMENT OF THE POST GRADUATE DIPLOMA IN MANAGEMENT THROUGH INDIRA INSTITUTE OF MANAGEMENT, PUNE

PREPARED BY : SONAL JADWANI MARKETING (Batch: 2010-2012)

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ACKNOWLEDGEMENT

I would like to express my profound gratitude to my project guide Mr. SAURABH SINGH (Cluster Manager, PUNE) who gave me this opportunity to explore my technical as well as my professional skills in the field of Marketing Management during my Summer Internship Program at HSBC,PUNE. He always had the answers to my queries, by it regarding the departmental matters or regarding any concept or terminology of the working process. I got to learn from him all the skills that are required to be an excellent Personnel Manager. My special thanks to Mr. SOURABH JAIN (Associate Vice President, PUNE)& MRS MRINAL KELKAR(Associate Vice President, PUNE) who were there with me throughout the project. Their support, practical guidance and easy explanations have added to the success of this project. Without both of them this project would not have been so interesting. I would also like to thank all my friends and my team members at HSBC for their support and co-operation during my project I would also like to take an opportunity to thank my Faculty Guide, Mrs. GUNJAN RAJAN whose utmost guidance and endurance made me face every difficult situation with ease and helped me to relate my theoretical knowledge with the real time business situations. Last but not the least I would like to express my gratitude to our honorable Director , PANDIT MALI who gave me an awesome opportunity where I could expose myself to the live business situations and find practical solutions for problems associated with them.

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Table of contents

Serial No.

Contents of the Page Brief Introduction of the subject ( Banking in India)

Page No. 5

1.

2.

Banking in HSBC 7 About HSBC 9 Various departments Working capital finance & its 11-16 products International trade products 17-25 RBI regulations w.r.t MPBF 26

Survey 3. Data interpretation Calls visited

28 31 38

4. 5.

Observation & findings Conclusion Annexure

39 40

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EXECUTIVE SUMMARY
MEASURING VIABILITY OF HSBC ASSET

HSBC is a pioneer in business banking and commercial banking in the country and has its own share of market and goodwill amongst the customers. The viability of HSBC asset amongst traders was measured by carrying out market research technique. This technique used the scheduled method. However the sampling followed was simple random sampling. The sample size chosen was 50 and it was channelized under different types of traders viz traders in commodity, building material, pharmaceutical, cables and wires & machine tools. These traders were subjected as to how their business propagandas are w.r.t current banking facilities, turn over, and existence. The objective of the research was to find out the prospective clients of HSBC. The different ways HSBC can benefit these traders and create a win win situation. Also it was to find out as to how can traders get a benefit in SME segment of the bank .

The results obtained were as follows :

In Terms of their turn over

: Machine tools 86% 14% Nil Nil Cables & wires 40% 60% Nil Nil

Turnover

Commodity Pharmacy Building material <2.5 cr 22% Nil 14% 2.5 - 10cr 45% Nil 86% 10 25cr 11% 40% Nil 25- 50 cr 22% 60% Nil
In terms of their existence:

Existence Commodity Pharmacy Building material >3years 100% 100% 14% <3 years Nil Nil 86%
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Machine tools 71% 29%

Cables & wires 100% Nil

A BRIEF INTRODUCTION TO BANKING IN INDIA BANKING IN INDIA (HISTORY)

Banking dates back to 1786, the first bank established in India, then the nationalization of banks in 1969 and recently the liberalization of the same since 1991.

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BANKS IN INDIA:

In India the banks are being segregated in different groups. Each group has their own benefits and limitations in operating in India. Each has their own dedicated target market. Few of them only work in rural sector while others in both rural as well as urban. Many even are only catering in cities. Some are of Indian origin and some are foreign players.

BANKING SERVICES:

Bouquet of services is at customers demand in todays banking system. Different types of accounts and loans, facilitating with plastic money and money transfer across the globe.

FINANCIAL & BANKING SECTOR REFORMS:

The last decade experienced a complete reform in the financial and banking sector. The capital and financial market, banking & non-banking organisation and financial instruments was redressed towards development.

R.B.I:

RBI is the central bank of the country since 1934. It regulates, controls credit, issue licenses and functions as banker of all banks and the government.

EASY BANKING IN INDIA: With the advancement of technology, banking sector has become more easy, fast, accurate and also time saving. ATMs, Mobile Banking, SMS Banking and Net Banking are only the tip of an ice-berg. BANKING SERVICES FOR NRIs IN INDIA:

This section discusses upon the services provided to the NRIs in India through different dedicated account. FAQs make the section more comprehensive.

PROXY BANKING IN INDIA:

Only 42% of rural households have bank accounts. Proxy Banking, a bank through Kiosk and ATM challenges to penetrate the untouched population in interior India.

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1. About HSBC
HSBC HISTORY (A local bank to serve local needs)
The HSBC Group - is named after its founding member, The Hong Kong and Shanghai Banking Corporation Limited, which was set up in 1865 to finance the growing trade between China and Europe The HSBC Group has a remarkable history in banking and financial services. That history has left its mark and helped to make us what we are today one of the leading organizations of the modern financial world.

A BRIEF OVERVIEW:
Headquartered in London. HSBC is one of the largest banking and financial services organizations in the world. It recruits over 300,000 employees spanning an international network of around 7,500 offices in 87 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. This network is linked by advanced technology and provides a huge range of financial services to customers across the globe. HSBC has weathered change in all forms revolutions, economic crises, new technologies and has adapted to survive.

HSBC IN INDIA
The Hong Kong and Shanghai Banking Corporation Limited in India offers a full range of banking and financial services to over 1.7 million customers through its 50 branches and 152 ATMs across 29 cities. HSBC is one of India's leading financial services groups, with over 35,000 employees in its banking, investment banking and capital markets, asset management, insurance broking, insurance, software development and global resourcing operations in the country. It is a leading custodian in India.

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More than 5% of India's exports and imports pass through HSBC India's banking channels. The Bank is at the forefront in arranging deals for Indian companies investing overseas and foreign investments into the country. It has a fully enabled and established insurance advisory of international standards. It is one of the leading players in domestic and export factoring, and one of the leading banks for an increasing number of SMEs. With its extensive reach across Asia, the Americas and Europe, HSBC has the capacity to offer complete banking and financial solutions to India's burgeoning economy

GROUP STRUCTURE
The HSBC Group operates in five regions: Europe; Hong Kong; Asia Pacific; the Americas, the Middle East and Africa. Our headquarters is in London and we are a public limited company - HSBC Holdings - incorporated in England and Wales We provide a large range of financial services to personal, private and commercial clients as well as corporations and institutions. HSBC was established as a uniform, international brand name in 1999 to unify the Group and promote it as a whole, backed up in 2002 by the launch of a unique advertising campaign This campaign successfully set us apart from our competitors with the strapline The worlds local bank, a phrase that has since become universally recognized.

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1. Various departments in HSBC

2. Business Banking at HSBC

The Business Banking segment is divided into various portfolios depending on the channel through which they are serviced.

Channels: Large customers are relationship managed while smaller relationships are portfolio managed through branches and alternate banking channels. Services: HSBC offers the complete range of transaction banking services, working capital funding, TRY solutions and loans for and against property to the larger SME customers, while the portfolio managed business is liability led with a focus on transaction banking. SME Lending: CMB has in 2Q10 launched asset backed lending for the Business Banking segment, with products such as mortgage/share backed lending.

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1.

Working capital finance and related products:

Meaning of Working Capital:

Working Capital is the amount of Capital that a Business has available to meet the day-to-day cash requirements of its operations. Working Capital is the difference between resources in cash or readily convertible into cash (Current Assets) and organizational commitments for which cash will soon be required (Current Liabilities) It refers to the amount of Current Assets that exceeds Current Liabilities (i.e. CA CL) Working Capital refers to that part of the firms Capital, which is required for Financing Short-Term or Current Assets such as Cash, Marketable Securities, Debtors and Inventories. Working Capital is also known as Revolving or Circulating Capital or Short-Term Capital

1. Meaning and Types of Finance: Finance

- Finance is the Art of passing currency from hand to hand until it finally disappears

Types & Sources of Finance

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Long Term Sources of Finance

Finance required to meet Capital Expenditure Also, known as Fixed Capital Finance

Short Term Sources of Finance

Finance required to meet day-today Business requirements Also, known as Working Capital Finance

2. Working Capital Management: Working Capital (WC)

Meaning of Method Conventionalof On the BasisWCConcept Working Cycle Concept OperatingCapital Method (i) Gross Working Capital Factors Affecting Cash Cost MethodWC (ii) Net Working Capital Meaning of WCNegative Balance Sheet Method Working Capital) (Positive & Management Importance of WC Management On the Basis of Periodicity (i) Fixed / Permanent Working Capital (Regular & Reserve Margin/ Cushion WC) (ii) Variable Working Capital (Seasonal & Special Working Capital)

Basics regarding WC Classification/Type of WC Methods of estimating WC

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A. OVERDRAFT
HSBC understands that expanding and growing business to the heights of success is a dream of every entrepreneur . At times, to fuel this growth, an enterprise would require urgent finance. At such times, an overdraft against investments would be just the right option. One need not liquidate its precious, farsighted investments and at the same time, meet the financial needs of the present.

B. CASH CREDIT
Cash credit is a short-term cash loan to a company. A bank provides this type of funding, but only after the required security is given to secure the loan. Once a security for repayment has been given, the business that receives the loan can continuously draw from the bank up to a certain specified amount. This type of financing is similar to a line of credit. A party can withdraw money anytime when they need, and the interest is charged only on the utilized money. Cash Credit is an important product with respect to small medium enterprises which requires finance for their day to day production.

C. FACTORING
At HSBC, we understand that an adequate cash flow for working capital is one of the essentials for smooth running of your business Our constant endeavor is to provide you with innovative services designed to meet your business needs. HSBC introduces Factoring Solutions for Small and Medium Businesses. It is a structured working capital finance solution thats includes finance against your domestic or export receivables, collection of receivables on due date, credit protection # 12 | P a g e

and credit advisory services. It is an internationally accepted financing solution that allows you to convert your accounts receivables to cash thereby releasing the cash generation potential of your business.

Features & Benefits

I. Raise Cash instantly:
Factoring enables you to raise instant cash against your invoices. HSBC can pay up to 90% of the value of eligible invoices within a day of submission of invoice and the delivery documents.

II. No Collateral Security required:

No Collateral Security needed to avail finance. You pay interest only on the actual funds utilization in your account.

III.Concentrate on your core business:

The more your sales book grows, the more well help you to turn your invoices into cash. This will enable you to respond more quickly to market opportunities. Collection of receivables is also managed by HSBC enabling you to concentrate on your core business activities.

IV.Optimize your Cash flows:

Avoid the hidden costs associated with providing extended credit for your customers. Improved cash flows can help you to negotiate competitive purchase terms with your suppliers. You can also choose additional services from our offering including our Credit Protection# service to protect yourself from bad debts that may arise.

D.

BANK GAURANTEE

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It helps to have a third partys vetting for your business. When running a business, customer might come across a situation that their client may ask customer to provide a financial guarantee from a third party. In such circumstances, customer approach bank and ask it to stand as a guarantor on customer behalf. This concept is known as bank guarantee (BG). This is usually seen when a small company is dealing with much larger entity or even a government across border. Let us take an example of a company XYZ bags a project from, say, the Government of Ethiopia to build 200 power transmission towers. In this case, companies all over the world would have applied. The selection would be made on the basis of lowest cost and track record as submitted in the proposal form. However, the government has limited ability to assess all companies for financial stability and credit worthiness. To ensure the project is done satisfactorily and on time, the government puts a condition that company XYZ will have to furnish a guarantee given by one or more banks. In banking nomenclature, company XYZ is an applicant, its bank is the issuing bank and the Government of Ethiopia is the beneficiary. Usually, the BG is for a specified amount, which is a percentage of the total money required for the contract. Obviously, the bank will not just issue such guarantee with its own due diligence. The bank does its own thorough analysis of the financial wellbeing of company XYZ to assess the amount of guarantee it can issue. After all, the bank is at a risk too, in case the client defaults. This amount is called a limit. Here too there is a catch. The bank will issue guarantee provided the company has not exceeded its overall limit for BGs. And if the Government of Ethiopia is not satisfied with the performance of the contract at a later date, it can invoke the BG. In this situation, the bank will have to immediately release the amount of the BG to the government. BGs can be broadly classified into Performance and Financial BGs. As the name suggests, Performance BGs are the ones by which the issuing bank, also known as the Guarantor, guarantees the ability of the applicant to perform a contract, to the satisfaction of the beneficiary.

E. BILL DISCOUNTING
Bill discounting is a major activity with some of the smaller Banks. Under this type of lending, Bank takes the bill drawn by borrower on his (borrower's) customer and pay him immediately deducting some amount as discount/commission. The Bank then presents the Bill to the borrower's customer on the due date of the Bill and collects the total amount. If the bill is delayed, the borrower or his customer pays the Bank a pre-determined interest depending upon the terms of transaction.

F. SHORT-TERM LOAN

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HSBC provide a Revolving Credit Limit usually structured as a short-term facility. This way, one can repay each drawing within a fixed period of time (1, 3 or 6 months). One has the flexibility to re-borrow sums as needed, up to the total amount of the limit. This form of facility is usually used for financing permanent working capital needs.

G. DOCUMENTARY CREDIT
Documentary credit is primarily a means of payment for international trade, and exporters are accustomed to using it when selling to potentially risky markets. However, a confirmed export documentary credit will also serve the exporter as a financing instrument. An exporter may include a payment term granted to the purchaser in the documentary credit and agree with the bank that the receivable shall be discounted at the shipping stage.The exporter is able to improve its competitive position and balance sheet through documentary credit financing. The exporter can include the costs of discounting in the price of its product.

International trade products

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A. Products for Exporters

Exporters can face significant risks when they undertake international trade, not least the fear of delay or non-payment. Whether someone is a new or long-established exporter, HSBC Trade Services can help to reduce risks, allowing focusing on growing export business. To benefit from HSBC's export services, one need not to have special facilities. Simply request your buyers to advise documentary credits through us and benefit immediately from our international network. Whats more, if one is the beneficiary of a documentary credit issued by an HSBC Group office, you are entitled to the same level of service excellence as any of our regular customers.

I. Export Collections:
HSBC can collect commercial / shipping documents through their banking network. For exporters, it is a more secure option than trading on open account terms because the shipping document will be delivered to the importer only against payment or an acceptance to pay on due date. HSBC also offers instant email functionality, providing details on the export collection transactions, to a designated person in office through our EDCA offering.

I. Export Financing:
HSBC can address funding gaps in your trade cycle and support your business, by providing you export financing options in foreign currency (at LIBOR linked rates) or in Indian Rupees, both at the pre-shipment and post-shipment stage. HSBC can discount your export receivables by negotiating bills drawn under a DC or discounting bills under collection, with the latter available both for D/P (Documents against Payment) and D/A (Documents against Acceptance). HSBC can reduce country and bank risk, exposure to interest and exchange rate fluctuations and turn your receivables into cash. We also provide instant email advice.

I. Advance Remittances:
Any payments into the country by overseas parties are processed expeditiously and credited to your account promptly.

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I. DC Advising:
A Documentary Credit ("DC") opened by the overseas importer's bank, will be checked for authenticity and couriered across to your doorstep. With a presence in over 83 countries and over 10,000 group offices, and global correspondent banking relationships with over 2,500 banks, we have Swift key arrangements with most of the major banks, to facilitate straight through processing of DC advising. We also offer a real time electronic DC advising functionality wherein the DC is sent through an automated email to a designated person in your office.

I. DC Confirmation:
Reduce bank and country risk effectively by enjoying the security of payment commitments from both the issuing bank and the confirming bank. HSBC is one of the largest institutional banks with global correspondent banking relationships with over 2,500 banks. If HSBC confirms the DC, and your documents are presented in compliance with the DC terms, payment from HSBC will be final. Ideal for buyers working with sourcing agents who require credit cover. If you are a sourcing agent or the first beneficiary, we can provide guidance on the terms and conditions of your DC and assist in either fully or partially transferring your DC to the ultimate supplier.

I. DC Transfer:

I. Trade Solutions:
HSBC has designed a special programme for exporters, supplying to certain large reputed buyers in the US and Europe. As an established supplier to such large reputed overseas buyers, you are entitled to enjoy a range of extra benefits when you present documents to HSBC for negotiation under Documentary Credits (DCs) issued by other HSBC group offices. These extra benefits include: Lower overseas bank charges viz. handling charge, courier, cable charges, discrepancy fee, reimbursement fee; which are to the account of beneficiaries: Faster communication and quicker turnaround times. As both the import and export legs of the transactions are handled by one bank you should receive funds 6 days earlier on average, saving you interest charges Peace of mind that documents are only checked once and held by the local HSBC office until acceptance; and Opportunities for Pre and Post shipment finance.

I. Forfeiting:
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HSBC can arrange for an offshore financing on your export receivables to countries especially high / medium risk with medium to long credit periods. The schematic below describes the forfaiting transaction flow: Advisory services on any export transaction - Our local experts understand trade thoroughly, and they can provide value to your business by performing advisory on a host of trade issues, including structuring DCs for your export business. The schematic below describes the Forfaiting transaction flow

A. Products for Importers

HSBC offers a wide range of import services, delivered by our experienced trade team, who will ensure that your business is handled efficiently and without delay. Whats more, with the support of our global network behind you, you can rest assured that we have HSBC representatives available to assist you, wherever in the world you do business.

I. Issuance of documentary credits (DCs) and standby letter of credits (SBLCs) :

When issuing DCs or SBLCs through HSBC, you enjoy the following benefits: Detailed advice on structuring the instruments to meet your import requirements Comprehensive guidance on the DC terms and conditions

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Access to HSBC's vast global expertise and resources Ability to turnaround transaction processing expeditiously

I. Import Collections services:

This is a cost-effective solution for trading internationally. Under this arrangement, the importer gets the shipping documents, after making payment or providing an acceptance to pay at a future date. HSBC has established strict service standards, which ensure that you are promptly informed of any documentary collections drawn on you.

I. Import Financing:
HSBC can address funding gaps in your trade cycle and support your business, by providing you import financing options in foreign currency (at LIBOR linked rates) or in Indian Rupees. We can arrange import buyers' credit financing through HSBC branches / group entities overseas, at internationally competitive LIBOR linked rates.

I. Advance Remittances / Direct Remittances:

For your import payments to be made to overseas beneficiaries, HSBC provides a quick turnaround for payments by way of Telegraphic Transfer / Demand Drafts etc.

I. Issuance of shipping guarantees/delivery order or any other guarantee:

In case the goods you import arrive before the transport documents, we could issue you a shipping guarantee / delivery order to facilitate taking delivery of the goods. You then have immediate access to your goods and avoid expensive storage fees and demurrage charges

I. Advisory services on any Import transactions:

Whatever your sourcing requirements, HSBC is well positioned to provide you expert advice for structuring your import transactions. Leveraging on our global presence, HSBC can offer solutions where HSBC group entities can handle the transaction on both sides thereby ensuring a smoother, safer and a more cost-effective execution of transactions.

I.

Documentary Credits (DC):

DCs, more commonly known as letters of credit are a widely used method to effect payments in domestic and international trade. A written undertaking is issued by a bank (usually referred to as the issuing bank) on the instructions of the buyer of goods to the seller.

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The payment is made under conditions stated in the undertaking. Payments are always upto a stated limit and against stipulated documents. The use of a DC provides enough safeguards for the parties involved.

The seller is ensured payment, provided he complies with terms he agreed to while the buyer can include all terms and conditions within the DC that satisfy him on the quality and quantity of the goods without having to sight / inspect the goods themselves. Since banks act as trustworthy third parties/ intermediaries, the issues relating to trust between the buyer and the seller are taken care of. DCs can be either sight or usance depending on whether credit period is extended to the buyer by the seller.

Important aspects to check for when you receive a DC are: Payment terms Availability of the DC Acceptability of issuing bank Terms of shipment Feasibility of complying with terms of the DC Workability of the DC Bank charges to whose account

Confirmation to a DC enhances security under the DC and mitigates any existing issuing bank and/ or country risk since the same are taken over by the confirming bank. The schematic below elucidates Documentary Credit transaction flow :

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I.

Collections:
Trade between counterparties on collection basis is carried out where there is an inherent comfort level between the buyer and the seller but each party desires to safeguard itself to some extent. However, the buyer is at relatively lower risk than the seller. He can inspect the documents before paying for them. The collection cycle starts when the seller, having shipped the goods and obtained the necessary documents, presents the documents together with his instructions to his bank (remitting bank).

The Bank will send these to its branch/ correspondent bank (collecting bank) in the buyer's country for payment. Collection can be on D/P (Documents against Payment) or D/A (Documents against Acceptance) basis. Under D/P, the buyer gets the title to the goods only after he pays for them. In a D/A scenario, the buyer gets title to the goods against accepting to pay on a future date (i.e. due date) by accepting a Bill of Exchange drawn by the seller on the buyer; hence a credit period is extended by the seller to the buyer. The risk to the exporter is much greater because he does not have a bank's undertaking as in the case of a documentary credit; but he may retain control over the goods through the collecting bank.

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This system is usually used when dealing with parties that have an established track record or where the exporter is sure that the importer will not refuse the goods. The schematic below elucidates Collections transaction flow :

I.

Open Account:

In an open account trading scenario, the buyer has a much greater leverage than the seller. Under open account trade, the entire risk in the transaction is borne by the seller since the payment is made by the buyer only after the latter has taken possession of the goods. Seller's risk is therefore of non-payment or delayed payment. Risk mitigants for the seller will be an established track record with the buyer, mutual dependence between the buyer and the seller or alternative structures built into the transaction such as avalisation, export factoring, etc. The schematic below elucidates Open Account transaction flow :

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II.Advance Payment:
This trade payment method is prevalent for transactions where the seller has a much higher bargaining power than the buyer . Such payment method may also be employed where the buyer may not have the ability to open letters of credit (formally called Documentary Credits) through their bank/s. It is also possible that the buyer is a cash rich company and therefore wants to avail a cash discount from the seller. Obviously, the inherent risk in the transaction is borne by the buyer which involves performance risk on the exporter as well as country risk where cross-border trade in involved. Risk mitigants for the buyer could be an established relationship with the seller, or any mutual dependence between the buyer & the seller. Bank Guarantee from the seller covering the performance risk could also provide comfort to the buyer.

The schematic below elucidates Advance Payment transaction flow

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1.

RBI REGULATIONS w.r.t. MPBF:

a) Computation of Maximum Permissible Bank Finance (MPBF):

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The Tandon Study group had suggested the following alternatives for working out the maximum permissible bank finance:a. Bank can work out the working capital gap. i. e. total current assets less current liabilities other than bank borrowings and finance a maximum of 75 per cent of the gap; the balance to come out of long-term funds, i.e. owned funds and term borrowings b. Borrower should provide for a minimum of 25 per cent of total current assets out of long-term funds, i.e. owned funds and long term borrowings. A certain level of credit for purchases and other current liabilities inclusive of bank borrowings will not exceed 75 per cent of current assets. c. It may be observed from the above that borrowers contribution from long term funds would be 25 per cent of the working capital gap under the first method of lending and 25 per cent of total current assets under the second method of lending. The above minimum contribution of long-term funds is called minimum stipulated Net Working Capital (NWC) which comes from owned funds and term borrowings. b) Classification of Assets & Liabilities: In order to calculate net working capital & maximum permissible bank finance, it is necessary to have proper classification of various items of current assets & current liabilities. All illustrative lists of current assets & current liabilities for the purpose of assessment of working capital are furnished below: Assets: a. Cash and bank balances b. Receivables arising out of sales other than deferred receivables (including bills purchased & discounted by bankers) c. Installments by deferred receivables due within one year d. Raw materials & components used in the process of manufactured including those in transit e. Stock in process including semi finished goods f. Finished goods including goods in transit g. Other consumable spares h. Advance payment for tax i. Prepaid expenses j. Advances for purchases of raw materials, components & consumable stores k. Payment to be received from contracted sale of fixed assets during the next 12 months Liabilities: 25 | P a g e

1. Short-term borrowings (including bills purchased & discounted) from Banks and Others 2. Public deposits maturing within one year 3. Sundry creditors (trade) for raw material & consumer stores & spares 4. Interest & other charges accrued but no due for payments 5. Advances/progress payments from customers 6. Deposits from dealers selling agents, etc. 7. Statutory liabilities Provident fund dues Provision for taxation Sales-tax, excise, etc. Obligation towards workers considered as statutory 1. Miscellaneous current liabilities Dividends Liabilities for expenses Gratuity payable within one year Any other payments due within one year

a) Information/Data required for assessment of working capital:

In order to assess the requirements of working capital on the basis of production needs,it is necessary to get the data from the borrowers regarding their past/projected production, sales, cost of production, cost of sales, operating profit, etc. In order to ascertain the financial position of the borrowers & the amount of working capital needs to be financed by banks, it is necessary to call for the data from the borrowers regarding their net worth, long term liabilities, current liabilities, fixed assets, current assets, etc.

a) Check list for verification of the information/data:

Bank should verify not only the arithmetical accuracy of the data furnished by the borrowers but also the logic behind various assumptions based on which the projections have been made. For this purpose, bank officials should hold discussions with the borrowers on projected sales, level of operations, level of inventory, receivables, etc. if necessary, a visit to the factory may also be made to have a clear idea of products and processes

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SURVEY TO MEASURE THE VIABILITY OF HSBC ASSET UNDER SMES WITH RESPECT TO TRADERSS IN PUNE

Research Objectives

The primary objectives of my study are to measure the viability of HSBC asset in small and medium enterprises with respect to traders. In the same research i have attempted to analyze and distinguish potential levels among five types of traders viz. 1. 2. 3. 4. 5. Commodity traders Pharmaceutical Building Material Machine tools Cables & wires

Methodology
The basic methodology that i followed was the questionnaire method. To serve our purpose, i designed a questionnaire as to gain the maximum relevant information from the respondent taking minimum of their time. The questionnaire that was designed is presented below NAME OF THE COMPANY_____________________________________ NAME OF CONTACT PERSON__________________________________ INDUSTRIAL AREA___________________________________________ CONTACT NO./ EMAIL ID______________________________________ 1. Type of traders: CABLES & WIRES. COMMODITIES BUILDUING MATERIAL (CEMENT/STEEL) ELECTRICAL INSTRUMENT (BATTERIES) LOGISTICS BUILDUING MATERIAL PHARMACEUTICALS OTHERS 2. Years in existence: < 3 Years >3 Years 3. Turn Over Range: <2.5cr 2.5cr-10cr 10cr-25cr 25cr-50cr >50cr 4. Profitability in year 2011: Yes No 4. Company is in: Import 27 | P a g e

Export

Domestic

5. Currently banking with other bank? YES NO 6. If yes than which bank?

7. What facilities you are availing? PRODUCT Cash Credit/Overdraft Term Loan WCDL Letter of Credit Buyers Credit Bank Guarantee Pre shipment Post shipment Factoring EPC PCFC AMOUNT

8. Type of collateral : Residential Commercial Industrial

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Sample Composition
Sample Size:

Our sample comprised of one categories of respondents that is the traders.

Our sample size of survey comprised 50 people, the break up being as under 1. Commodity traders-10 2. Pharmaceutical- 10 3. Building Material-10 4. Machine tools-10 5. Cables & wires -10

Sample Technique: In my survey i have used STRATIFIED RANDOM SAMPLING

under which the population is sub-divided into homogeneous groups or strata, and from each stratum, random sample is drawn.

Experiences and Difficulties Faced in the Field

The market research that i conducted provided us an excellent opportunity to implement all that we had learnt in our class room sessions in the practical outfield. After having designed the questionnaire and having made a few minor changes, we were ready to go out into the field to carry out the survey. As mentioned earlier, I covered the various areas during my research. i found that the respondents were very forthcoming and cooperated with me for the most part. Nonetheless, i did face a few minor problems while conducting the survey. These are as under Sample: while conducting the survey among consumers, i found that the locality that I am visiting was mainly inhabited by all type companies. The region was good for sampling for all of them except for machine parts Limitation: in the opinion of mine, the sample taken for study is too small and not representative enough to draw very relevant conclusions that may hold well in the larger scheme of things. This, i, feels is a major limitation of the stud

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1. DATA ANALYSIS & INTERPRETATION

IN TERMS OF THEIR T.O

COMMODITY TRADERS Fig 6.1

PHARMACEUTICAL TRADERS fig 6.2

Interpretation (fig 6.1)

45% of commodity traders were in the range of 2.5 to 10 crores, followed by 22% each in the range of 25-50 crores & less than 2.5 crores. However 11 % of these traders were in the range of 10-25 crores.

Interpretation (fig 6.2)

In pharmaceutical traders 60% were in the range of the 25-50 crores, accompanying 40% in the range of 10-25 crores.

BUILDUING MATERIAL Fig 6.3

MACHINE TOOLS fig 6.4

Interpretation (fig 6.3)

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Interpreting building material type of traders, 86% were in the range of 2.5-10 crores and only 14% were falling below 2.5 crores

Interpretation (fig 6.4)

In case of machine tools type of traders, the order followed was exactly the opposite of building material that is, 86% were below 2.5 crores & 14% in the range of 2.5 10 crores.

CABLES & WIRES Fig 6.5

Interpretation (fig 6.5)

Cables & wires type of traders, enjoyed 60% and 40% turnovers in the range of 2.5-10 crores & less than 2.5 crores

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 IN TERMS OF THEIR EXISTENCE

_
COMMODITY TRADERS Fig 6.6 PHARMACEUTICAL TRADERS fig 6.7

Interpretation ( fig 6.6) & Interpretation (fig 6.7)

The existence of both commodity traders & pharmaceutical traders was above 3 years. Neither of them were enjoying a good turnover in less than 3 years of existence. Thus they could be seen as prospective customers for banking with HSBC

BUILDUING MATERIAL TRADERS Fig 6.8

MACHINE TOOLS TRADERS fig 6.9

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Interpretation (fig 6.8)

While in building material type of traders, 86% were in the range of more than 3 years & only 14% existed from less than 3 years. .

Interpretation (fig 6.9)

In machine tools. The trend observed was 71% above 3 years and 29% below 3 years.

_ CABLES & WIRES Fig 6.10

Interpretation (fig 6.10)

Traders trading in cables & wires were also observed to be above 3 years. That is 100 % result was obtained here as well 33 | P a g e

 OVERALL CONTRIBUTION

Interpretation
The above pie chart represents 5 type of traders, i.e commodity, pharmaceutical, building material, machine tools, & cables n wires. Sample size taken was 38 & individual contribution has been depicted Of the total, commodity traders contributed 24%, pharmaceutical being 26%, building material 19% , followed by 18% in machine tools & 13 % in cables & wires.

1. Summary of calls visited Company name:

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Star (India) Pvt limited

Polychroic Petrochemicals Pvt Ltd

Persons met:

Mr. Vinod Mr. Shashank Parvate

HSBC Staff:

Preeti Kaul Arpit Shah

Minutes of the meeting:

The calls that I had visited were factoring calls Polychroic was the positive call & Star India is expected in future. The clients were quite optimistic about the unsecured facility due to its benefits & features and therefore the rate of conversion is positive for these calls.

Actionable:
Polychroic is in progress Star (India) Pvt Ltd is being handled by Preeti Maam

8. OBSERVATION & FINDINGS

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 In terms of their turnover:

45% of commodity traders were in the range of 2.5 to 10 crores, followed by 22% each in the range of 25-50 crores & less than 2.5 crores. However 11 % of these traders were in the range of 10-25 crores. In pharmaceutical traders 60% were in the range of the 25-50 crores, accompanying 40% in the range of 10-25 crores. Interpreting building material type of traders, 86% were in the range of 2.510 crores and only 14% were falling below 2.5 crores. In case of machine tools type of traders, the order followed was exactly the opposite of building material that is, 86% were below 2.5 crores & 14% in the range of 2.5 10 crores. Cables & wires type of traders, enjoyed 60% and 40% turnovers in the range of 2.5-10 crores & less than 2.5 crores

In terms of their existence: Existence of commodity traders observed was 100% in more than 3 years of range. The same result was obtained in case of pharmaceutical type of traders and cables & wires type of traders

While in building material type of traders, 86% were in the range of more than 3 years & only 14% existed from less than 3 years. In machine tools. The trend observed was 71% above 3 years and 29% below 3 years.

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CONCLUSION
From the above observations we can conclude that 45% of commodity traders could be beneficial to HSBC in terms of their SME WORKING CAPITAL FINANCE product, followed by 86% in building material type of traders and 60% in cables & wires type of traders. However in case of pharmaceutical type of traders 60% were in the range of 25-50 crores. Thus for SME segment, considering working capital finance/ lending traders could benefit them as a larger amount falls in the required criteria of HSBC turnover. When the venture or existence of these traders in the market was calculated, 100% results were observed above 3 years in case of commodity, pharmaceutical and cables & wires type of traders, followed by 71% in case of machine tools and 86% in case of building material types. Thus these traders again fulfill the HSBC criteria and can contribute to the LENDING product of SME segment

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ANNEXURE
Questionnaire ( mentioned above pg number 28) ASSIGNMENT Balance sheet of XYZ Company for both the financial years that is 2008 to 2009 & 2009 to 2010 was given. For the same we had to calculate:
Variation in Sales.

1. Profit Margins 1. PBDIT 1. Interest Coverage 1. DSCR 1. Grearing/ Leverage 1. Current Ration 1. Working Capital Gap 1. Working Capital (Operating) Cycle 1. Creditor Days 1. Debtor Days 1. Stock Days 1. MPBF

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