“Online Vendor Bill Discounting”

Submitted by

T.SAI KUMAR

171319

Submitted To

Prasanth. K

Project submitted in partial fulfilment for the award of

Post Graduate Diploma in Management.

VIGNANA JYOTHI INSTITUTE IN MANAGEMENT

BACHUPALLY, HYDERABAD, Telengana-500090

1
 2018

Title of the SIP project: Online Vendor Bill Discounting

Name of the student: Tadepalli Sai Kumar

Name of the company: Springforth Capital Advisors

Department: Finance Department

Company mentor details:

Name: Ishwar

Designation: Junior Analyst

Contact details: 9878487593

Email Id: analystco@springforthcap.com

Company address: Flat A-3, Ground Floor, Plot No 326, Lakshmi Nilayam,
Teachers Colony St, Teachers Colony, Begumpet, Hyderabad, Telangana
500016

Contact number: 04064615593

Website: www.springforthcap.com

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 DECLARATION

I hereby declare that this Project Report titled Online Vendor Bill Discounting submitted by
me is a bonafide work undertaken by me and it is not submitted to any other Institution or
university for the award of any degree/diploma certificate or published any time before.

Name of the Student: T. Sai Kumar Signature of the Student

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Executive Summary:

This project is all about the process of bill discounting and the current market is running in this
sector. After analysing this project, we can come to know that exact position of the bill
discounting market.

At present the main problem facing by the Indian economy is - Despite the important
role played by MSME’s in India’s overall economic growth, they continue to face constraints
in obtaining adequate finance, particularly in terms of their ability to convert their trade
receivables into liquid funds. So, to overcome out of this problem many companies came into
existence and tried to solve by providing loans to them in the form of discounting and factoring.
At the end of the project it is mentioned about a company which our company helped to get a
working capital loan of 30crs from RXIL a bill discounting company.

Also, this project speaks about MSME sector because the main vendors
are MSME banks and what are the challenges faced by them. After reading this project report
everyone will come to know about the practical structure of bill discounting system in India
and cost structure of different companies involved in this sector. Also, we can come to know
about the advantages and disadvantages from bill discounting.

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 Table of contents

S. No TOPIC Pg.no

1 PMCI Analysis 8-13

2 Introduction to the RXIL 13-14

3 My Project 14-25
-Introduction to the Project
-Work Area Deliverable
-Work area Outcome

4 Introduction to SPINGFORTH CAPITAL 26-33

ADVISORS

3 Deals happened in Springforth Capital Advisors 34-35

4 Financial Strengths 36-47

5 Relevance of this project to the company 48

6 Learnings from the project 49

7 Bibliography 50

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 List of Tables

S. No Indication of the table Table No

1 TReDS Benefit Analysis 1 21

2 Comparison of Onboarding Charges 2 23

between RXIL and M1X

6
 List of Figures
S. Indication of the Figure Figure no. Page No
No

1 Process of Bill Discounting in RXIL 1 11

2 Growth Rate of MSME Sector 2 16

3 Industry Diversification 3 17

4 TReDS process 4 21

5 Types of Agreements 5 22

6 Cost Structure of RXIL 6 24

7 Revenue Comparison between RXIL and M1X 7 25

8 Fund structure of SAFAL 8 30

9 Functions of Investment Banking 9 30

10 Global Market Share of Investment Banking 10 31

Sector

11 Financial Performance of Sri Saravana 11 40

Spinning Mills Pvt Ltd

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PMCI ANALYSIS

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Product: Bill discounting is a discount/fee which a bank takes from a retailer to release
money. This is the money which bank asks before the credit period terminates. The bill is later
offered to seller’s customer and complete amount is composed. It is valid in situations when a
customer purchases goods and makes payment via letter of credit. For discounting of bill, the
credit period may vary from 30days to as high as 120days. Based on the credit value of the
buyer and the risk involved in the bill, the bank carries out the discounts of the amount. Bank
then receives this amount at the completion of credit period.

The bills or invoices that are included under the bill discounting are
formally the ‘Bill of exchange’. A bill of exchange is a tool which is used only by approving
the name. For example, we can consider our currency as a bill of exchange. The currency offers
value printed over it is funded to the bearer. In the instance of discounting on bill, these kinds
of bills can be either owed to the bearer or due to the order. So, after discounting a bill, a bank
can get the bill re-discounted from different banks for cash flow constraint.

Advantages of Bill/Invoice Discounting: Business acquires the cash instantly. It

permits a financier to run the business without funds. This operates in the same way as a bank
overdraft. There is a rough competition prevailing in the market to range such credit.
Henceforth there are many different products to satisfy the requirements of the client.

Invoice Factoring: Factoring is a financial transaction and a type of debtor finance in which
a business sells its accounts receivable (invoices) to a third party (called a factor) at a discount.
A business will sometimes factor its receivable assets to meet its present and immediate cash
needs. It might also factor their invoices to mitigate credit risk. Factoring is commonly referred
to as accounts receivable factoring, invoice factoring and sometimes erroneously accounts
receivable financing.

Reverse Factoring: Reverse Factoring or Supply Chain Financing is when a bank or

finance company commits to pay a company’s invoices to the suppliers at an accelerated rate
in exchange for a discount. It is unlike traditional invoice factoring, where a supplier wants to
finance his receivables. Reverse factoring or supply chain financing is a financing solution
initiated by the ordering party to help his supplier finance their receivables more easily and
typically at a lower interest cost than what would normally be offered

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Difference between Invoice discounting & Invoice factoring: They both are
financial facilities that can release the capitals with the help of unpaid invoices. Factoring is
applied by smaller business, for example, a start-up business or a small firm. Invoice
discounting is considered by larger and more reputable firms.

 Selling of bills at a discount to the bank before its maturity is known as Bill
Discounting. Selling of the debtors to a financial institution at a discount is Factoring.
 The main difference between these two depends on controls the sales ledger and
accountability for getting payment.
 Discounting is treated with Bills of the company, but the factoring can be done with
any of the trade debts
 Another difference between these two is in the range of confidentiality. Through
factoring, the customer resolves their invoice straight with the factoring company. Due
to this, customers are more probable to be conscious of your factoring plan

Factoring Vs Reverse Factoring:

 Difference between factoring and reverse factoring is the type of security used in
advancing funds. In reverse factoring, the factor uses accounts payable, which is the
total money owed by the buyer as security for advancing funds. However, in factoring,
the repayment source is accounts receivable, which is the total amount a supplier is
entitled to for goods or services delivered.
 The initiators of factoring and reverse factoring are not the same. The process of invoice
factoring is initiated by the supplier but in reverse factoring, the process is initiated by
the buyer as a means of assisting their suppliers to easily finance its receivable

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Process of Bill Discounting: For every bill to be get it discounted there is processing to
be followed. The following is the structure of bill discounting process.

Figure 1:Process of Bill discounting in RXIL

 The seller sells the goods on credit basis and raises invoice on the buyer.
 The buyer accepts the invoice. By accepting, the buyer acknowledges paying on the
due date
 Seller approaches the financing company to discount it
 Financing company assures itself of the legitimacy of the bill and credit worthiness of
the buyer
 The financing company avails the fund to the seller after deducting appropriate margin,
discount and fee as per the norms
 Seller gets the funds and uses it for further business.
 On the due date of payment, the financial intermediary or the seller collects the money
form the buyer (depends on the agreement between the seller and the financing
company)

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Market: Generally, there are two types of markets in relating to bill discounting and can
have named them as:

1) Discount Market
2) Acceptance Market

1)Discount Market: Discount market refers to the market where short-term genuine trade
bills are discounted by financial intermediaries like commercial banks. When credit sales are
affected, the seller draws a bill on the buyer who accepts it promising to pay the specified sum
at the specified period. The seller must wait until the maturity of the bill for getting payment.
But, the presence of a bill market enables him to get payment immediately. The seller can
ensure payment immediately by discounting the bill with some financial intermediary by
paying a small amount of money called ‘Discount rate’ on the date of maturity, the intermediary
claims the amount of the bill from the person who has accepted the bill

2)Acceptance Market: The acceptance market refers to the market where short-term
genuine trade bills are accepted by financial intermediaries. All trade bills cannot be discounted
easily because the parties to the bills may not be financially sound. In case such bills are
accepted by financial intermediaries like banks, the bills earn a good name and reputation and
such bills can readily discounted anywhere. In London, there are specialist firms called
acceptance house which accept bills drawn by trades and import greater marketability to such
bills. However, their importance has declined in recent times. In India, there are no acceptance
houses. The commercial banks undertake the acceptance business to some extent

Company: The following are the three companies that RBI has given license to involve in
Vendor Bill Discounting:

1) RXIL- A joint venture between National Stock Exchange and SIDBI

2) TReDS- A joint venture between Axis bank and Mjunction Services
3) M1X

Apart from the above companies there are some more private companies which are involved
in bill discounting

4) Drip capital
5) Kredex
6) Indifi

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 Industry: This Industry has drawn more consumers to draw the bills due to limited access
to credit and higher demand for more flexibility. Industry offering leads to improve working
capital access for clients at a faster rate than traditional bank lending. In addition to that demand
for short-term solutions to manage working capital, such as invoice discounting is expected to
decline over the five years to 2022. According to some research reports Revenue of this
industry is $5BN at the annual growth rate of 0.2%.

Bill discounting can be done globally by a name called Export bill discounting. It means for
example the bank of china buys from the exporter the undue time draft accepted by banks or
the undue debt claim honoured by the banks under the expert L/C or the undue debt claim
guaranteed by banks under the documentary collection. In this case, I the issuing bank fails to
pat the pay at maturity, Bank of China has the right of recourse.

Industry Threats & Opportunities:

 Clients have increasingly turned to external competitors to maintain control over sales
ledger
 Many hidden charges from operators discouraged many small business owners from
using bill discounting
 The growth in accounts receivable financing has come with criticism.

Introduction to RXIL:

Receivables Exchange of India Ltd (RXIL) was set up on February 25, 2016 as a joint venture
of Small Industries Development Bank of
India (SIDBI) and National Stock
Exchange of India Limited (NSE), with
an objective to operate India’s First Trade
Receivables Discounting System
(TReDS) - an online platform for financing of receivables of Micro, Small & Medium
Enterprises. RXIL commenced operations on January 09, 2017.

Introduction to TReDS (Trade Receivables Discounting System):

TReDS is an online digital platform primarily meant for MSMEs to auction their trade
receivables against large Corporates including Govt. Departments and PSUs at competitive

13
rates through online bidding by multiple Financiers (Banks and Factoring Companies). The
main objective is to address the critical needs of MSMEs i.e. promptly finance trade receivables
and financing their trade receivables based on Buyers credit rating. Also, it is without recourse
to MSME Vendor.

• TReDS will enable discounting of invoices/bills of exchange of MSME Sellers against large
Corporates including Govt. Departments and PSUs, through an auction mechanism, to ensure
prompt realization of trade receivables at competitive market rates

A Committee on Financial Sector Reforms (FSR) recommended setting up of Electronic Bill

Factoring Exchanges.

• In this, MSME bills against large companies could be accepted electronically and auctioned,
to ensure prompt realization of trade receivables at competitive rates.

• Consequently, SIDBI in collaboration with NSE, took the initiative to set up an E-discounting
platform to support financing of MSME receivables.

Salient features:

 Common platform for sellers, buyers and financiers

 Eliminate paper
 Easy access to Funds
 Competitive discount rate
 Seamless data flow
 Standardised practises

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MY PROJECT

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Introduction to MSME: MSME’s play a crucial role in Indian Economy. It produces
diverse range of products & Services and contributes to add value across different sectors
MSMEs contributes 30% to the counties GDP from FY12 to FY15 and are the backbone to the
overall economic growth and contributes to employment generation in India. It also acts as a
growth driver for the Indian Economy.

Figure 2:Growth Rate of MSME Sector

On observing the above graph, we can understand that there is an increase in growth rate of
service part in MSMEs i.e. from 23.8% to 24.6% and there is a decrease on Manufacturing
sector i.e. from 6.2 to 6.1

As above said- In India contribution of MSMEs (not registered and registered) tp India’s GDP
is 30% but the share of registered ones is 8%. In comparing, share of MSMEs to the GDP of
major economies in India. Thus, MSMEs have a potential for future growth as the contribution
of registered ones in India is still low as compared across the leading economies of the world.

16
Industry Diversification of NIFTY SME Emerge Portfolio Leads to lesser
Concentration:

Figure 3:Industry Diversification

NIFTY SME EMERGE is a diversified portfolio spread across 14 sectors. Services, Textile,
IT and Consumer Goods sectors are few of the top sectors with a combined weight -55% in
the index as on September 2017.In the same way, top 10 sectors have a combined weight of
91.4% of the index with the bottom 4 sectors weights adding up to 8.6%.
Indian Ecommerce market is extending at a quick race. It is also helping in
MSME growth eventually. The advanced commerce market in the country has developed
persistently from $4.4billion of 2010 to $13.6 billion out of 2014 while the worldwide market
is determined to reach $1.5 trillion out of 2014. Given the capability of MSME segment in
India, a few great moments have seen in the private business portions and the MSME area
has picked up significance among these players.

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Challenges Faced by MSMEs:
 Individual Sectors have the tendency to face their own challenges, as real estate has
seen many downfalls in past few years. Due to disturbance in west Asian countries
and fewer demands in European countries exports industries have seen the reduction
in their business too which have turn unfavourably for small and medium enterprises.
 The companies which are under the problem of growth have a different type of
problems which they need to deal with especially with ‘Financing’. A survey was
conducted with 15000 companies from various sectors. The common point that every
company showed that SMEs exposed to bank credit were immensely falling due to high
interest rates. In-order to overcome these challenges, SMEs tried through different
financial options like- Foreign banks, Debt funding, Equity Funding, Grants, NBFC
loans
 MSMEs require timely and adequate capital infusion through term loans and working
capital loans, particularly during the early and growth stages. So RXIL came into
existence to solve this working capital issue

Problem: Despite the important role played by MSME’s in India’s overall economic growth,
they continue to face constraints in obtaining adequate finance, particularly in terms of their
ability to convert their trade receivables into liquid funds. To solve this issue Receivables
Exchange of India Ltd (RXIL) came into existence

India’s first blockchain- based network went live, when three online bill-discounting exchange
platforms came together and implemented a solution for their operations. RBI has introduced
TReDS to facilitate financing trade receivables of micro, small and medium enterprises from
corporate buyers through multiple financiers. The project has been implemented without any
cryptocurrency being used for settlement.

Impact of RXIL:

TReDS has successfully executed financing of trade receivables of MSMEs and successfully
settled both financing and repayment legs through NPCI NACH Debit and Credit Settlement
System as mandated by RBI.

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As on May 31, 2018, 69 Buyers, 196 MSME Vendors and 28 Financiers were registered on the
TReDS platform & 7387 invoices aggregating INR 338 crore have been factored. 19 PSUs
have also executed the Master Agreement till date.

The TReDS Platform of RXIL is expected to be a catalyst in the growth of MSMEs by bringing
in transparency in the business eco-system and addressing the issue of delayed payments for
MSMEs. Through this many of the people are getting benefitted. The following are the are
some of parties involved and the benefits got by them in this:

Parties:

1) Seller – Enterprises as per MSMED Act,2006

2) Financer – Banks and NBFC factors
3) Buyer- PSUs, Corporates and Govt Depts

Benefits for the Seller (MSME’s):

 Best discount rate due to participation of Multiple Financiers in auction.

 Efficient capital deployment
 Timely receipt of funds
 Cost & paperwork reduction
 Helpful in Business growth due to improved liquidity
 Increased Transparency
 They would the invoice discounted at their cost i.e.@10% (Usually they do not get rates
cheaper than 13-14 if secured, and if unsecured it is 16-18)
 Lower Supply chain cost as financing costs for MSME’s lower and based on buyer’s
credit rating.

Benefits for the Buyer (Corporates):

 Compliance with MSMED Act, 2006.

 Efficient cash flow management
 Efficient payment cycles
 Cost & paperwork reduction
 Increased Transparency

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Benefits to MSME Financier:

 Access to a wider market.

 Assures qualified instruments
 Risk Management
 Reduced operational cost

Operating function of TReDS:

 Onboarding - Entity creation

Verification

Onboarding fees

 Factoring Unit – Prerequisites

Upload of Invoice
Acceptance

 Auction - Bid offerings

Bid acceptance
Obligation
 Settlement - Between Financier and Seller
Between Buyer and Financier
Between Buyer and Sell

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TReDS Process:

Shipment of Goods Seller/Buyer Counterparty

from Vendor to Uploads the Accepts Invoice
Buyer Invoice Online

Cost
In Auction - RXIL Generates
Bearer(Seller/Buye
Financiers Bid Obligations
r) Accepts Bid

Leg2-Buyer Pays Leg3- Buyer Pays

Leg1- Financier Vendor
Financier(Due
Pays Vendor(T+1)
Date) (Unfinaced)

Figure 4:TReDS process

TReDS Benefits and Costs: For buyers

Table 1: TReDS Benefit Analysis

Case-1 Invoice Interest Due After Interest Financing

Amt Rate Days Paid Cost

Normal 10000000 15% 45 365 184932

Bank
RXIL 10000000 9% 45 365 110959

Case-2 Savings 73973

RXIL 10000000 9% 75 365 184932

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  Consider an example of taking working capital loan. If the loan amount 1cr is taken
from bank for a duration of 45 days, interest charged by banks is 15% and the total
financing cost will be 1,84,932
 Taking the same loan from RXIL leads to lesser amount of interest cost due to
competition among financiers and therefore a firm can get a benefit of Rs.73973
 In case if the firm wants to pay the higher interest and takes the loan from banks, then
it can repay the loan amount in 75 days but not in 45 days. So, the company can generate
revenue by investing money for some more time

TReDS Agreement:

Financier

MSME RXIL Buyer

Seller

Sponsor
Bank

Seller’s NPCI Buyer’s

Designated Designated
NACH
WC Bank
Account Bank
Financier’s Designated Bank Account
Account
Figure 5:Types of Agreements

There are many agreements formed between in this TReDS process i.e. in between MSME
Seller and RXIL, RXIL and MSME buyer, between banks and RXIL, Financiers and Bank etc.,
all these are the mandatory agreements formed between different parties to get the TReDs
process done.

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Comparison of Onboarding fee between M1X and RXIL:

Table2: Comparison of Onboarding Charges

COMPARISON OF M1X AND RXiL

on boarding fee in thousand Rs
Client turnover in Crores M1X RXiL
<1000 25000 25000
1000-2000 50000 25000
2000-5000 100000 25000
5000< 150000 25000

RBI Guide Lines for TReDS:

 Eligibility criteria for setting up and operating TReDS is that it will not be allowed to
assume credit risk and minimum paid up capital shall be Rs.100Crs. In addition to that
TReDS should have a net worth of Rs.100 crore at all the times
 The promoter’s minimum initial contribution to the paid-up equity capital of TReDS
shall be at least 40% which shall be locked in for a period of five years from the date
of commencement of business of TReDs

Cost Structure of RXIL: To be registered with these agencies-MSMEs, Clients should

pay certain amount of charges so that their transactions will be flowed easily. The following is
the cost structure followed by RXIL:

The following are the different amounts charged to buyer and vendor separately and the default
assumption is that vendor will bear the transaction cost (May vary based on the agreement
between buyer and seller)

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 Fees/Charges Buyer MSME Vendor
Registration
Fee Rs.25,000 Rs.10,000
(One time)

Annual Fee
(Yearly)
Rs.25,000 Rs.10,000

Transaction NIL
Charges (Considering 0.35% p.a.
(One Factoring Vendor is
Unit) bearing the cost)
Figure 6: Cost Structure of RXIL

Revenue Sharing: Though there is a different cost structure for both the companies they
are giving a great competition in the market and occupying good percentages in terms of
revenue. The following is the revenue sharing comparison between the companies RXiL and
M1X

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 REVENUE SHARING COMPARISON
M1X RXiL

117.3725
117.25
REVENUE ( IN LAKHS )

56.1225
56
7.1225
2.7125
2.625
0.525

3.5
2.5

2.5
7

1.5

1.5
0.5

0.5

10 50 51 100 101 500 501 1000 1001

TRANSACTION VOLUME ( IN CRORES)

Figure 7:Revenue comparison between RXiL &M1X

The revenue of the company is increasing if the volume of transaction increases from
0.5Lakhs.0.525Lakhs to 3.5Lakhs and 118 Lakhs for both M1X and RXIL respectively. If we
observe the graph from initially the revenue is little bit high for RXIL rather than M1X as
because RXIL has many vendors to supply loan for the needy people.

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Introduction to Springforth Capital Advisors: Basically, Springforth offers two
types of diversified financial services:

1. Investment Banking
2. Investment Management

1.Investment Banking: It is a mix of Investment banking and strategic consulting services and
includes:

a. Private Equity Syndication: It is a group of investors who decide on the price of an

equity IPO before it enters into the market. Many factors such as hedge risk and the
financial status of the company are taken into consideration by equity syndication when
determining its price. Our expertise and the detail-oriented process helps us in pre-
empting the issues in capital raising and this build efficiency behind our engagement
and optimise the resources spent. Company place paramount importance to the
symbiotic Client-Investor relationship and play the role to ensure an optimum
framework of engagement.
Sectors of Interest: Healthcare, Pharma, Logistics, Food & Agri, FMCG and
consumption. Our Fund raise is a size of USD 5mn- USD 50mn
b. Venture Capital Fund Syndication: Springforth has successfully raised funds for
venture capital funds in India and these are sourced from banks, financial institutions
and from limited persons.
c. Debts and Structured Finance: Investment banking companies helps in advising their
clients to get project finance, working capital loans. Springforth has helped companies
in these services to the tune of $20mn. Its focus is to help clients getting the best
structure in terms of security and interest rates.
d. Mergers and Acquisitions: Springforth has developed strong relations with the
corporates and buyout funds who are looking at opportunities of inorganic growth and
maintain a periodic dialogue with such entities to share and discuss opportunities
Sectors of Interest in M&A: Pharma & Health care, Logistics and IT/ITES.

26
In part of Strategic consulting services Springforth is offering

a. External CFO Services: Springforth is advising various growing companies on a

retainer basis as external CFO team. The Idea of companies is to get best quality service
in early stage where they can’t afford a professional CFO.
This works as a win-win situation for the client in terms of getting
contemporary professional advice and for springforth as a retainer client with recurring
opportunities of fund raise.
b. Business Advisory: Springforth has a strong analyst team guided by the founders.
We can produce best deliverables from the promoters and investors prospective and in
shorter timeframe.
c. SCM Advisory Services: As a part of SCM advisory, Springforth is offering:
- Warehouse design
- SCM Cost Optimization
- Transport Network planning and implementation
- Business scale up advisory for logistics companies

2. Investment Management: Springforth Investment managers is the investment

management firm from Springforth Capital Advisors, a full-service mid-market
investment bank, in partnership with the industry veterans in the areas of Food,
Agriculture and Logistics.

Investment approach: SIM has been launched keeping faith in India’s ever-growing
consumer markets to accelerate and nurture Food, Agri and logistics Start-ups. The typical
profile is as follows:

 Promoters with more than 2years of corporate/entrepreneurial experience

 Product/Process innovation
 Creation of new categories/Sub-categories and working on solutions for unique
problems
 Pre-Series A stage
 Potential to integrate with synergetic horizontals/verticals

27
Portfolio Companies: Following are the some of the companies which are under the portfolio
of Springforth Investment management-

I. Last Mile- It is a start-up based out of Hyderabad which focuses on last mile fulfilment.
It is creating network at Mandal and village level to cover each pin-code in South-India.

II. Tummy kart: It provides 24x7 A la carte food options and customized lunch meals
with subscription facility from its own fully-equipped kitchen in Hyderabad. with more
than 50 years of combined experience, Tummy Kart has come up with sumptuous
delicacies that are swiftly delivered at customer’s doorsteps

III. Return Trucks: Return Trucks, is an award winning innovative platform connecting
goods and truck owners for an economic, effective and timely engagement. RT is
committed to work in the large road-transportation eco-system and be a technology
enabler to build in efficiency in the transportation business

IV. RenoWala: Home Improvement enthusiast in India will have a new customer
experience of getting their home a makeover and get all those services to improve the
new feel of your property. RenoWala is to provide for all the requirements to be met
from every work aspect of Home Improvement. Services will also cover hotels, schools,
offices, hospitals, restaurants and many more.

28
Sector Allocation: Recently the company had launched a 100cr fund by attracting investors
in various fields and decided to invest in the following way.

The main aim this fund is to collect 100crs from various investors, CEO’s, CFO’s, CIO’s of
various family offices, insurance companies in various cities like Mumbai, Delhi Chennai,
Bengaluru etc..., across the country.

The collected amount will invest in agriculture, Food, Logistics sectors in the
above shown way. The company is trying to complete its first close by the end of the July.

29
The following is the fund Structure that has been launched by the SIM recently.

Figure 8: Fund Structure of SAFAL

Investment Banking Sector: It is a specific division of banking related for the formation
of capital for other companies, governments
and other entities. It underwrites new debt
and equity securities for all types of
corporations and to facilitate mergers and
acquisitions for both institutions and private
investors. It also provides guidance to
issuers regarding the issue and placement of
stock. Major reasons behind investment
banks to invest into India is its low operating
cost model because of availability of cheaper
Figure 9: Functions of Investment Banking
workforce.

30
Market Share of Investment Banking:

The following chart compares the market share of revenue of largest global banks globally as
of December 2017. As it shown the revenue of JP morgan is 8.1% of the global investment
banking revenue

Figure 10: Global Market Share of Investment Banking sector

Main role of this sector is to take care of government, companies and other market participants
in raising capital. These banks take the role of transaction underwriter and making sure that the
evolution of bonds or stocks is executed optimally on buying and selling side. It means the
prices of emitted securities are not too low or not too high and that there are enough investors
to purchase of these securities.

JP Morgan and Goldman Sachs were the top leading companies in the world in
terms of revenue generation with 8.1 and 7.2% respectively Other leading investment banks
were Bank of America Merrill Lynch and Morgan Stanley. The revenues of JP Morgan
amounted approximately 6.63 billion U.S. dollars in 2017, whereas Bank of America Merrill
Lynch generated about 5 billion U.S. dollars.

31
Company:

Springforth Capital Advisors is a mid-market focused sector agnostic boutique advisory firm
founded and run by corporate professionals aggregating 50+ years of work experience across
investment banking, logistics and corporate finance spectrum

Recent Developments

SIM is also set to launch a ₹100-crore fund that will invest in early stage companies in the
agriculture, food and logistics companies. To be named Springforth Agri Food and Logistics
(SAFAL), it will help these firms to reach the Series A funding stage. Richard B Saldanha,
former Vice-Chairman, Blackstone India and former Chairman Unilever, Peru is the Chairman
of SIM.

Financials:

 The total revenue of Springforth Capital Advisors Ltd as on 2014 march was 7.49 INR
million.
 The total assets value is 2.71INR Million and net current assets value is 2.30 INR
Million.
 Cash flow from operations is -4.08, cash flow from investing activities is -0.10, cash
flow from financing is 4.16 INR million.
 Ratio Analysis
Current ratio 1.68

ROCE% 13.65

EBIDTA Margin% 12.22

PAT Margin% 6.01

Trends in Investment Banking: India was the top destination for private equity (PE)
and venture capital (VC) investors in 2015. The country received a record $22.4 billion in
investments 2015, 31.8% more than the previous highest of $17 billion in 2007, according to a
report by Bain & Co. India Pvt. Ltd. The 2015 deal value marked a 47% increase over the $15.2

32
billion India received in 2014. Consumer technology, real estate and banking, financial services
and insurance are the top sectors that attracted investors, accounting for 65% of deal value.
Investments in consumer tech grew 46% to $6.9 billion.

33
 Deals
happened
in
SPRINGFORTH CAPITAL
ADVISORS

34
Deals happened from Springforth Capital Advisors: Springforth had been creating
platform between these agencies and its clients in helping them to get out of financial credit
such as Eastern group and Sri Saravana Spinning Mills Pvt.ltd. Sri Saravana Spinning mills is
trying to get working capital loan of 30crs from RXIL with the help of Springforth Capital
Advisors and it is in the early stage.

RXIL is waiting for the proper vendor to accept this deal

Sri Saravana Spinning Mills Pvt.ltd: It is incorporated in 1983 and it is in Tamil Nadu.
It is engaged in manufacturing of yarn. Its products include single yarn and two-ply yarn.

35
 Financial Strength

Lean Quality Report (LQR):

Sri Saravana Spinning Mills Pvt. Ltd.

Overview

Company Type & Status Private Company – Operating

Company Year Founded/Incorporated 1983

Company Website http://ssm-india.com/

Company Description  It is engaged in manufacturing of yarn.

Its products include single yarn and
two-ply yarn.

Company Total Income (2016) 2,961.8INR Mn

Company EBITDA (2016) 369.48 INR Mn

Company PAT (2016) 175.45 INR Mn

Company Equity Paid Up (2016) 37.07 INR Mn

Company Total Debt (2016) 170.17 INR Mn

Company Contact P.B. No-15, Pithalaipatti, Dindigul, Tamil

Nadu,624002, India

Company Telephone 91-451-2480501

Company Email yarns@ssm-india.com

36
 Directors N. Krishnasamy- Founder

Jaikumar Krishnasamy- Managing Director

Capital Market Relations

Shareholding Structure (As of 2017)

Total Shareholders 2

Directors 100%

Total 100%

Financial Summary (in INR Mn)

Year End Mar – 2017 Mar – 2016 Mar – 2015

Net Sales 2941.09 2545.97 2304.67

Total Income 2961.81 2252.87 2328.47

Total Expenditure 2592.33 2209.21 1961.30

EBITDA 369.48 343.66 367.17

37
EBIT 282.72 260.23 282.82

PBT 234.74 196.74 193.36

PAT 175.45 155.32 180.83

SOURCES OF FUNDS:

Equity Paid up 37.07 37.07 37.07

Reserves and surplus 853.29 677.84 488.40

Net Worth 890.36 714.90 525.47

Total Debt 170.17 97.02 176.32

APPLICATION OF FUNDS:

Gross Block 2220.35 2032.35 1973.36

Investments 0.72 0.83 5.00

Cash and Bank Balance 45.09 28.79 63.09

Net Current Assets 149.24 44.78 (77.47)

Total Current Liabilities 698.12 706.34 765.02

Total Assets 1151.03 879.89 837.29

CASH FLOW:

Cash Flow from Operations 154.24 221.27 465.90

Cash Flow from Investing (252.01) (59.59) (65.17)

38
Cash Flow from Financing 94.84 (191.68) (371.79)

KEY RATIOS:

Debt to Equity 0.19 0.14 0.34

Current Ratio 1.21 1.06 0.90

ROCE (%) 26.66 32.05 40.30

RONW (%) 19.71 21.73 34.41

EBITDA Margin (%) 12.47 13.46 15.77

PAT Margin (%) 5.92 6.08 7.77

CPM (%) 8.85 9.35 11.39

39
 Figure 11: Financial Performance of Sri Saravana Spinning Mills Pvt Ltd

Receivables Exchange of India Ltd.

Overview

Company Type & Status Private Company – Operating

Company Year Founded/Incorporated 2015

Company Website http://www.RXiL.in/

Company Description It is engaged in providing loans to the required

companies in the form of discounting the bills

Company Total Income (2017) 10.45 INR Mn

40
 Company EBITDA (2017) (23.14) INR Mn

Company PAT (2016) (28.36) INR Mn

Company Equity Paid Up (2016) 250.0 INR Mn

Company Total Debt (2016) 221.37 INR Mn

Company Contact

Company Telephone

Company Email

Directors

Capital Market Relations

Shareholding Structure (As of 2017)

Total Shareholders

Directors 100%

Total 100%

41
Year End Mar – 2017

Net Sales 10.45

Total Income 10.45

Total Expenditure 33.58

EBITDA (23.14)

EBIT (26.83)

PBT (26.83)

PAT (28.36)

SOURCES OF FUNDS:

Equity Paid up 250.0

Reserves and surplus (28.63)

Net Worth 221.37

Total Debt -

APPLICATION OF FUNDS:

Gross Block 33.67

Investments 30.96

Cash and Bank Balance 201.01

Net Current Assets 160.99

42
Total Current Liabilities 55.26

Total Assets 222.89

CASH FLOW:

Cash Flow from Operations (2.71)

Cash Flow from Investing (203.64)

Cash Flow from Financing 247.17

KEY RATIOS:

Debt to Equity -

Current Ratio 3.91

ROCE (%) (12.12)

RONW (%) (12.81)

EBITDA Margin (%) (221.41)

PAT Margin (%) (271.39)

CPM (%) (235.98)

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 Springforth Capital Advisors Pvt.ltd

Overview

Company Type & Status Private Company – Operating

Company Year Founded/Incorporated 2008

Company Website http://www.springforthcap.com/

Company Description  It is engaged in investment advisory,

Strategic consulting, Investment
banking Services.

Company Total Income (2014) 7.49INR Mn

Company EBITDA (2014) 0.45 INR Mn

Company PAT (2014) 0.33 INR Mn

Company Equity Paid Up (2014) 37.07 INR Mn

Company Total Debt (2014) -

Company Contact Flat A-3, Ground floor, Plot no-326, Teachers

Colony, Begumpet

Company Telephone 91-40-64615593

Company Email clientrelations@springforthcap.com

Directors Kalyan Vijay Sivalenka- Founder & MD

Maheen Khannu – Operating Partner

44
 Pradeep Dhobale- Operating Partner

Capital Market Relations

Shareholding Structure (As of 2017)

Total Shareholders 2

Directors 100%

Total 100%

Financial Summary (in INR Mn)

Year End Mar – 2014 Mar – 2013 Mar – 2012

Net Sales 7.49 2.05 1.81

Total Income 7.49 2.11 1.81

Total Expenditure 7.04 4.06 2.13

EBITDA 0.45 (1.95) (0.31)

EBIT 0.37 (2.03) (0.36)

PBT 0.38 (2.03) (0.36)

PAT 0.33 (2.02) (0.37)

SOURCES OF FUNDS:

45
Equity Paid up 1.77 0.1 0.1

Reserves and surplus 0.94 (1.89) (0.37)

Net Worth 2.71 (1.79) (0.27)

Total Debt - - -

APPLICATION OF FUNDS:

Gross Block 0.57 0.47 0.41

Investments - 0.05 -

Cash and Bank Balance 0.03 0.05 0.02

Net Current Assets 2.30 (2.18) (0.63)

Total Current Liabilities 3.36 2.82 1.25

Total Assets 2.71 (1.79) (0.26)

CASH FLOW:

Cash Flow from Operations (4.08) - -

Cash Flow from Investing (0.10) - -

Cash Flow from Financing 4.16 - -

KEY RATIOS:

Debt to Equity - - -

Current Ratio 1.68 0.23 0.5

46
ROCE (%) 13.65 113.41 133.33

RONW (%) 12.22 112.85 137.04

EBITDA Margin (%) 6.01 (92.42) (17.13)

PAT Margin (%) 4.41 (95.73) (20.44)

CPM (%) 5.47 (91.94) (17.68)

47
Relevance of this project to the company:

 Springforth is dealing with various type of services and one of those is advising the
clients in relation to investments, working capital
 So, as a part of working capital management springforth creates a platform between the
clients and loan provider companies through bill discounting i.e. RXIL
 As I mentioned currently Springforth is dealing with a client – SRI SARAVANA
SPINNING MILLS PVT LTD, it also trying to get into a deal with “DODLA DAIRY”
 AS a result, with the help of this report I will be able to analyse how exactly the bill
discounting process took place in the practical world

48
Learnings from the Project: After completion of this project,

 Came to know about the process of bill discounting happens in practical world
 Learned about the growth rate, structure of MSME’s in the country
 Came to know about the cost structure of different companies in the bill discounting
sector while the time of taking loan through discounting or factoring
 Learnt about the various services offered by Springforth Capital Advisors and about
the Investment Banking Sector.
 Gained practical knowledge about the deals happened in Springforth with external
clients in relating to bill discounting system
 Came to know about how the amount is charged by different companies to various
clients practically
 Also learnt about the various types of portfolios, funds involved at present and with
what type of funds does springforth is dealing with while the time of my internship

49
Bibliography:

 http://www.springforthcap.com/
 http://www.springforthinv.com/
 http://www.RXiL.in/
 https://www.sidbi.in/RXIL.php/
 https://www.profitbooks.net/invoice-discounting/
 http://www.boc.cn/en/cbservice/cb3/cb35/200806/t20080627_1324120.html
 https://www.mbaknol.com/investment-management/commercial-bills-market-or-
discount-market/
 https://www.apvelocity.com/difference-factoring-reverse-factoring/
 https://www.wip-funding.com/difference-factoring-reverse-factoring/
 https://www.business-standard.com/article/markets/treds-how-the-system-meant-to-
help-msmes-get-capital-works-117041300418_1.html
 http://www.smeventure.com/role-smes-economic-development-india/
 http://www.smeventure.com/dynamic-role-b2b-e-commerce-msme-growth-india/
 http://app.vccedge.com/home
 https://www.ibisworld.com/industry-trends/specialized-market-research-
reports/advisory-financial-services/intermediaries/invoice-discounting.html
 http://smartinvestor.business-standard.com/market/story-520833-storydet-
First_blockchain_network_Online_bill_discounting_exchanges_implement_tech.htm
#.W0bxnNIzbIU
 https://www.educba.com/investment-banking-in-india/
 https://www.statista.com/statistics/271008/global-market-share-of-investment-banks/

50