Finance Your Project

India has a highly advanced and widespread network of financial institutions to meet the short-term and long-term requirements of funds. A dynamic and vibrant equity culture has evolved. A chain of Stock Exchanges, Mutual Funds, Merchant Bankers. Bankers and Brokers provide the institutional mechanism to tap into the enormous Indian money market.
 
Major international banking groups like Citibank, Bank of America, Grindlays Bank, Standard Chartered, Bank of Tokyo, Banque Nationale De Paris, Swiss Bank, Deutche Bank etc... have rapidly expanding operations in India. A large range of domestic banks also offer a wide portfolio of products and services to the corporate sector. Part of the equity capital and the total loan capital requirements of a project are subscribed to by State-level institutions like Kerala State Industrial Development Corporation (KSIDC) and National financing institutions like IDBI, IFCI and ICICI.
 
Projects are financed by a combination of long-term loans and equity with a debt : equity ratio averaging 1.5 : 1. The loan will be repayable in a period of 8 to 10 years depending on the debt servicing capacity with an initial moratorium of 2 years. Minimum promoters' contribution required for a project is 25 % of the project cost. Part of the promoters' contributions can be obtained from State-level institutions like KSIDC.
 
Maximum term loan eligibility is limited to 75% of the costs of fixed assets. Promoters also can raise equity from the primary market. For a public issue a minimum of 25% of the issued share capital should be offered to the public. Promoters should hold a minimum 25% of the issued share capital.
 
For 100% Export Oriented Projects (EOU)
Duty-free import of capital goods, components/spares, offices equipment, raw materials, consumables etc...
Supplies made to a 100% EOU from Domestic Tariff Area (DTA) are treated as deemed and exempted from taxes and duties.
Sales are allowed to DTA subject to sectorial caps.
Liberal conditions for foreign equity participation.
Exemption for corporate income tax upto the year 2010.
Extremely streamlined procedures for all clearances.
Even more liberalised packages for export-oriented Electronics Hardware Technology Parks.
 
INCOME TAX HOLIDAY - a unique facility to industrial units in Idukki & Wayanad districts : Industrial Units that will be set up in Idukki & Wayanad districts in Kerala on or before 31st March 1999 will be eligible for 5 year income tax holiday. Further, units will also benefit from income tax exemption for 30% of the profits for another 5 years that follow the tax holiday. The scheme has retrospective effect from 1st of October 1994. For further details contact Business Development Group, KSIDC, Trivandrum.
 
OTHER EXPORT PROMOTION SCHEMES - Under zero duty scheme, capital goods can be imported without duty against the commitments of exports of 6 times CIF value of imported capital goods to be met over 8 years. Under Export Promotion Capital Goods Scheme, Capital goods can be imported at a concessional rate of customs duty of 15% CIF value against the export commitment of 4 times CIF value over 5 years.
 
For NRIs And Overseas Corporate Bodies (OCBs)
1.Direct invesment in industry, trade, infrastructure etc.
2.Upto 100% equity with full repatriation facility for capital and dividends in the following sectors:
  34 High Priority Industry Groups
 Export Trading Companies
  Hotels and Tourism-related Projects
  Hospitals, Diagnostic Centres
 Shipping
 Deep Sea Fishing
  Oil Exploration
 Power
 Housing and Real Estate Development
  Highways, Bridges and Ports
 Sick Industrial Units
  Industries Requiring Compulsory Licensing
 Industries Reserved for Small Scale Sector
3.Upto 40% Equity with full repatriation: New Issues of Existing Companies raising Capital through Public Issue upto 40% of the new Capital Issue.
4.On non-repatriation basis: Upto 100% Equity in any Proprietary or Partnership engaged in Industrial, Commercial or Trading Activity.
5.Portfolio Investment on repatriation basis: Upto 1% of the Paid up Value of the equity Capital or Convertible Debentures of the Company by each NRI. Investment in Government Securities, Units of UTI, National Plan/Saving Certificates.
6.On Non-Repatriation Basis: Acquisition of shares of an Indian Company, through a General Body Resolution, upto 24% of the Paid Up Value of the Company.
7.Other Facilities: Income Tax is at a Flat Rate of 20% on Income arising from Shares or Debentures of an Indian Company. HOW TO REPATRIATE YOUR PROFITS The process of repatriation of capital invested and income earned on it is simple. Companies with direct foreign investment, established on the basis of repatriation, are allowed to repatriate dividends, net of taxes. The equity invested can also be repatriated, should the investor decide to do so.
KSIDC offers financial assistance and support to medium and large scale industries in the State including service sectors like tourism, star category hotels, resorts, hospitals, infrastructure projects, etc and where the constitution of assisted unit is in the nature of Private/ Public Ltd Company. Normally financial assistance is available for projects with an investment of Rs. 200 Lakh and above. KSIDC's term loan assistance is limited upto a maximum of Rs. 3500 Lakh in a project and it can go up further for single project prior permission from State Government. The definition of the medium and large scale manufacturing industries, defined by the Central Government is applicable to KSIDC also.
The standard norms for financial assistance of the projects:
 
Debt EquityRatio
    

  a. 1:1 up to 1.5:1 for new companies with minimum/no track record.

  b. 1.5:1 up to 2:1 for expansion of good assisted units & other good non-assisted units.

 
Term Loans
 Up to Rs. 35 Crore can be sanctioned. No cap for term loan under direct financing. However loan exceeding Rs. 35 Crore is subject to approval by State Govt. The minimum amount considered for assistance is Rs.1 Crore except in case of expansion proposals of assisted units, where the minimum limit would be Rs. 50 lakhs.
 
Short Term Loan
 May be considered for assisted units on a selective basis.
 
Repayment
 Repayment period is 6-8 years with a moratorium of 2-3 years, on a selective basis.
 
Interest Rate
 Based on a sliding scale with interest band ranging from 11.00 - 13.00%. Further, a further reduction of maximum up to 1% will be granted at the end of every financial year by reversal of the interest charged, provided there are no arrears of interest as on 31st March of the relevant particular year. The reduction in interest as above shall be calculated on the outstanding principal alone and there shall be no reversal of penal interest portion.
 
Working capital term loan

 May be considered for units with good performance track record. For the purposes of determining good performance track record, the following parameters are considered.

1. The company has made cash profits during the preceding five years

2. The company has made net profits during the preceding three years

3. There are no overdues to financial institutions/ banks and

4. There has been turnover growth during the previous three years.