Our Term Lending Portfolio
The Corporation has provided financial assistance to about 229 companies to set-up industrial units in the State since inception. The units financed are in various fields viz. hotel/tourism industry, cement, steel, pharmaceuticals, chemicals, general engineering, food/agro processing, electronics/electrical, textiles etc. A total term loan component of about Rs.158.00 Crores as on March’2014 has been advanced by the Corporation to such Companies. The Corporation has assisted 49 companies by way of equity contribution and an amount of Rs.8.75 Cores had been sanctioned to these companies as equity against which major amount stands recovered with good returns.
The Corporation has been following a diligent and judicious pre and post appraisal system. The officers of the Project Cell are well qualified and experienced and have over the years developed an expertise in the conduct of project appraisals. There is continuous interaction with the officers of the All India Financial Institutions, in particular the IDBI and the SIDBI and newer and modern techniques of project appraisal are being adopted and assimilated . There is greater emphasis on computerisation and the Project Wing is well equipped in this regard. Computerised appraisal programmes have been developed and introduced which have led to an over all improvement in the techno-economic appraisal of projects. Techniques like SWOT analysis have also been introduced to ensure greater diligence at the pre-appraisal stage.
Before considering the loan applications, all aspects with regard to viability, marketability etc. of ventures are carefully considered and studied. Market analysis, being an integral part of any venture is also carried out before formulating the appraisal. The appraisals are evaluating at various levels viz. Internal Screening Committee, Advisory Committee headed by the Secretary Industries and thereafter by the Board of Directors.
Projects are now being taken up for financing on a very selective basis and clustering/mushroom growth of particular projects is being studiously avoided in order to prevent inter-se competition. In order to additionally secure the term loans, w.e.f. 1997, the Corporation has started the practice to take collateral security to an extent of 35% of the term loan amount disbursed in respect of new units. The collateral security is in the form/shape of landed assets and/or FDRs. This collateral security is in addition to the primary mortgage of the financed assets and the personal guarantees of the promoters.
Norms of Providing Term Loans
Long Term Loans
- 1. The Corporation provides long-term loans to the extent of Rs.500 lakhs to an industrial project (including tourism related ventures) for the acquisition of fixed assets like land, building, plant and machinery and to meet expenditure on technical know-how, pre-operatives etc.
- 2. Long term loans are provided to public/private limited companies, partnership firms, Hindu joint family concerns, sole proprietary concerns and cooperative societies. Projects can also be considered for consortium financing by HPSIDC alongwith either the Himachal Pradesh Financial Corporation (HPFC) or any other financial institution/bank.
- 3. The loans are sanctioned for setting up new industrial units as well as for the expansion, diversification and modernization of an existing unit. The debt equity ratio normally does not exceed 1.5:1.
- 4. The Corporation also requires collateral security usually in the form of real estate to the extent of 35% of the term loan sanctioned.
The term loans extended by the Corporation are repayable within a period of 7-10 years with a moratorium of 1-2 years depending upon the servicing capacity of the project. The interest rates charged are those prevailing from time to time.
HPSIDC also extends bridge loans against term loans sanctioned by it. The financial assistance under this scheme is generally to the extent of 75% of the sanctioned term loan, which can be extended upto 90% in special circumstances, against the security of hypothecation of assets, personal guarantee of directors/promoters and/or bank guarantee besides collateral security as per norms under the term loan portfolio. This facility is available in case the promoters are unable to fulfill, on a timely basis, the stipulations laid down during the sanction of term loans due to unforeseen circumstances. Such facility is granted for a period of six months which can be extended for a maximum period upto 12 months.
The loans so advanced are subsequently adjusted through disbursement of regular term loan, after the stipulations are complied with fully.
Under this scheme, quick financial assistance is available to existing small and medium industrial units which are otherwise eligible for financial assistance from HPSIDC and have good record of past performance and enjoy sound financial position. Specifically, the concerns should:
- have been in operation for at least four years;
- have earned profit and/or declared dividend on equity shares during the preceding two financial years; and
- not be in default with any institution/bank in the payment of their dues.
Finance under this scheme is also limited to Rs.500 lakhs and is available for purchase of identifiable items of plant & machinery and other equipment including energy saving systems for modernization/expansion/balancing/replacement or for any other purpose except for a new project. Imported items of machinery and equipment are also eligible for financing. Second-hand items are however not considered for financing under this scheme. The debt equity ratio under this scheme is normally kept at 1.5:1.
Financial assistance under this scheme attracts the prevailing interest rates. Security aspects shall however be normative as covered under the term loan portfolio. Repayment of the loan is required to be made within a period of 2-5 years inclusive of moratorium of 6-12 months depending upon the repayment capacity of the borrower.
Interest Rate Structure/Norms
The prevailing Interest Rate Structure and Norms under the term loan portfolio are as under:
|Debt Equity Ratio (DER)||Collateral Security||Interest to be charged|
|1.5||35%||12% with rebate of 0.50% for timely payment|
- *The effective rate of interest shall be 11.50%.
The Corporation has formulated its interest rate structure on term loans for industrial ventures at competitive rates. The interest rate/norms as indicated are subject to modification/change from time to time as may be deemed fit & necessary by HPSIDC. The interest on the loans advanced by the Corporation is generally payable on quarterly basis.
APPLICATION FORM for term loan may be obtained on payment of Rs.100.00 only, or can also be downloaded from the Corporation’s website-http://hpsidc.nic.in
Note: Check list of information/documents required to be submitted for filling loan application is given in the loan application form.
Appraisal Fee Norms
Term loan processing fee shall be Rs. 500/- per lac of term loan considered for sanction and shall be levied as per following terms/conditions.
- The Corporation shall charge a non-refundable upfront sum of Rs.1000/- (plus service tax if applicable) on account of part of processing fee from the applicants. The same shall not be refunded at any stage even if the proposal is rejected at pre-appraisal stage by the Managing Director or the applicant refuses to avail the loan.
- In case it is decided at the level of the Managing Director to take up the proposal for appraisal, 25 % of the processing fee (inclusive of upfront amount of Rs.1000/-) plus service tax if applicable plus imprest of Rs.10,000/- to be deposited by the applicant before the appraisal of the case is taken up.
- In case of the appraisal being entrusted to outside agencies, the entire amount of appraisal fees to be paid to the appraising agency (inclusive of upfront amount of Rs.1000/-) plus service tax if applicable plus imprest of Rs.10,000/- be got deposited upfront by the applicant before appraisal is entrusted to the appraising agency.
- In the event of the Corporation conducting the appraisal of the project and placing the case before the concerned competent authorities for sanction of the term loan in question and the competent authority rejecting the proposal or where the applicant refuses to avail the loan after sanction but before executing the loan documents , then and under such circumstances/conditions, 25% of processing fees less the upfront fees of Rs.1000/- subject to a maximum of Rs.25,000/- be deducted and the balance be refunded to the borrower. The imprest amount of Rs.5000/- shall however not be refunded. No refund of the appraisal fee or imprest amount as deposited under (iii) above shall be applicable in case the appraisal is conducted through outside agencies.
- In case of sanction of the term loan, the balance 75% of the appraisal fees plus service tax if applicable shall be deposited by the applicant before executing the loan documents without which the loan documents shall not be executed.
- Where the applicant, after sanction of loan executes the legal documents and thereafter does not avail the loan for any reason whatsoever, then and in that case, the entire processing fees inclusive of imprest amount be forfeited and no refund be made to the applicant.