Company: ABC Hospitality Private Limited. (Case referred by MOPWML)
Line of Business: Providing Hospitality Services to retail customers
Company Turnover: 7-8 Cr per annum
Customer’s Requirement: The client had provided a residential property collateral of around 12 Cr along with an equity portfolio of around 3 Cr to an NBFC and was enjoying a funding of 6 Cr against it. The customer had a requirement of another 4-5 Cr for business expansion purposes. He had approached his existing lender for enhancements and had been turned down due to low turnovers in his existing business.
Problem Area: The customer was looking for an enhancement of 4 Cr, which would bring his total funding to 10 Cr against a turnover of 7-8 Cr. His company showed negligible profits and hence, there was no capacity on papers to service a debt of that amount. The customer, apart from approaching his own banker (who had funded him at 13%) had approached several other Banks and NBFCs including DHFL, IndiaBulls, Capital First, etc, and had been turned down for similar reasons.
Solution: Even though the customer did not have the capacity to service a debt of 10 Cr, he had been servicing his existing 6 Cr debt without any payment delays. We convinced Standard Chartered Bank to fund him the highest amount possible without increasing his EMI Burden. As he had nearly serviced the loan for 4 years, the bank was willing to take a risk of funding him without increasing the EMI. Hence, by bringing the Rate of Interest down from 13% to 9%, we were able to fund him a loan amount of 7.2 Cr, thus giving him an additional funding of 1.2 Cr. To fulfil the remaining requirement, we ensured that while Standard Chartered Funded the company against the property, they freed the Equity Portfolio of around 3 Cr which had originally been mortgaged by the customer to his existing banker. The client could liquidate this portfolio and use the receipts to fulfil his business requirements.
Thus, by combining the repayment track of the customer and using the fact that he was over collateralized, we were able to satisfy the customer’s needs of enhancement and saving him around 25 lakhs a year by reducing his cost of borrowing.
