A SYNOPSIS ON

“CREDIT RISK MANAGEMENT”

AT

“ZUARI CEMENT LTD”

BY

B SWETHA

(HALL TICKET NO: 2129-18-672-005)

Synopsis for project to be submitted for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

OSMANIA UNIVERSITY

2018-2020

AURORA’PG COLLEGE, MUSARAMBAGH

 CHAPTER PLAN

CHAPTER-1
INTRODUCTION
SCOPE OF THE STUDY
OBJECTIVES OF THE STUDY
METHODOLOGY OF THE STUDY
LIMITATIONS OF THE STUDY
CHAPTER-2
REVIEW OF LITERATURE
CHAPTER-3
INDUSTRY PROFILE
COMPANY PROFILE
CHAPTER-4
DATA ANALYSIS AND INTERPRETATION
CHAPTER-5
SUGGESTION
FINDINGS & CONCLUSION
BIBLIOGRAPHY
 INTRODUCTION:

Credit risk refers to the probability of loss due to a borrower’s failure to make payments on
any type of debt. Credit risk management is the practice of mitigating losses by
understanding the adequacy of a bank’s capital and loan loss reserves at any given time – a
process that has long been a challenge for financial institutions.

The global financial crisis – and the credit crunch that followed – put credit risk management
into the regulatory spotlight. As a result, regulators began to demand more transparency.
They wanted to know that a bank has thorough knowledge of customers and their associated
credit risk. And new Basel III regulations will create an even bigger regulatory burden for
banks.

To comply with the more stringent regulatory requirements and absorb the higher capital
costs for credit risk, many banks are overhauling their approaches to credit risk. But banks
who view this as strictly a compliance exercise are being short-sighted. Better credit risk
management also presents an opportunity to greatly improve overall performance and secure
a competitive advantage.

Credit risk refers to the probability of loss due to a borrower’s failure to make payments on
any type of debt. Credit risk management, meanwhile, is the practice of mitigating those
losses by understanding the adequacy of both a bank’s capital and loan loss reserves at any
given time – a process that has long been a challenge for financial institutions.
The global financial crisis – and the credit crunch that followed – put credit risk management
into the regulatory spotlight. As a result, regulators began to demand more transparency.
They wanted to know that a bank has thorough knowledge of customers and their associated
credit risk. And new Basel III regulations will create an even bigger regulatory burden for
banks.
To comply with the more stringent regulatory requirements and absorb the higher capital
costs for credit risk, many banks are overhauling their approaches to credit risk. But banks
who view this as strictly a compliance exercise are being short-sighted. Better credit risk
management also presents an opportunity to greatly improve overall performance and secure
a competitive advantage.
Credit Risk

Credit risk – the risk of financial loss due to an unexpected deterioration of counterparty
credit quality – has doubtless been brought into sharp focus over recent years, but it has also
played a significant role in the majority of financial crises prior to this time. This ongoing
need to have accurate measurement and efficient management of credit exposure is a
foundation stone for firms; therefore it is essential that they are equipped with a complete
gamut of tools and techniques to achieve this.

Our comprehensive credit risk solution covers provides single name and portfolio credit risk
analysis by means of three components: current and potential exposure, expected credit loss
and credit value-at-risk.

The solution’s counterparty structure allows users to drill down to the individual subsidiaries
of an organization. The full legal structure can be implemented with distinction between
branches and legally independent subsidiaries. Subsidiaries can be consolidated based on the
percentage ownership. Additionally, flexible analysis by country is available.

Risk mitigation techniques

 Close out netting

 Collateral and guarantees for one specific exposure or all exposures of a given
counterparty
 Freedom to model any contract structure, whether from the corporate, trading or retail
business

Credit line analysis

 Modeling of the expected usage of the undrawn part of a credit line

Financial product / Instrument coverage

 All credit exposure calculations applied consistently for any type of financial
product/instrument from deposits to exotic options
 Specific instruments for credit risk include collateral, guarantees, credit lines, credit
line opening, credit default swaps, total return swaps and credit spread options
Trade credit arises when a firm sells in products or services on Credit and does not receive
cash immediately. It is an essential marketing tool, acting for the moment of goods through
production and distribution stages to customer. Affirm grants trade credit. To protect is sales
form the competitors and to attract the potential customers to by its products at favorable
terms. Trade creates “Accounts receivable or trade debtors” that the firm is expected to in the
near futures. The customers from whom receivable or book debits have to be collected in the
future is called trade debtors or simply as debtors and represent the firms clime or asset.
A credit sale has characteristics:

i) It involves an element of risk that should be carefully analyzed. Cash sales are totally risk
less, but not the credit sales as the cash sales as the cash payment are yet too received.

ii) It is based on economic value to the buyer, the economic value goods services passes
immediately at the time of sales while the seller expects on the equivalent value to be
received later on.

iii) It implies futurity the buyer will make the cash payment for goods services received by
him in future period. debtors constituted a substantial portion of customer assets several
firms. For e.g.:- In India, traders Debtors after inventories are the major components of
current assets. They from 1/3rd of current assets in India. Granting credit and creating Dr’s
amount to the blocking of the firms founds.

Thus trade debtors represent investment as substantial amount are tide-up in trade debtors
it needs careful analysis and proper management.
NEED AND IMPORTANCE OF THE STUDY

Credit risk management is one of the key areas of financial decision-making. It is significant
because, the management must see that an excessive investment in current assets should
protect the company from the problems of stock-out. Current assets will also determine the
liquidity position of the firm.

The goal of Credit risk management is to manage the firm current assets and current
liabilities in such a way that a satisfactory level of working capital is maintained. If the firm
cannot maintain a satisfactory level of working capital, it is likely to become insolvent and
may be even forced into bankruptcy.

SCOPE OF THE STUDY

The scope of the study is limited to collecting financial data published in the annual reports of
the company every year. The analysis is done to suggest the possible solutions. The study is
carried out for 5 years (2015-19).
Credit risk is the risk arising from the uncertainty of an obligor’s ability to perform its
contractual obligations. Credit risk could stem from both on- and off-balance sheet
transactions. An institution is also exposed to credit risk from diverse financial instruments
such as trade finance products and acceptances, foreign exchange, financial futures, swaps,
bonds, options, commitments and guarantees.

OBJECTIVES OF THE STUDY:

1. To analysis the credit policies of ZUARI CEMENT LIMITED

2. To find out debtor turnover ratio and average collection period.

3. To find out whether it is profitable to extend credit period or reduce credit Period.

4. To suggest measures to increase profits.

5. How all areas of business are influenced by Credit Risk Management?

6. How to manage information to create a volume driven business.

RESEARCH METHODOLOGY

The data used for analysis and interpretation from annual reports of the company.

that is secondary forms of data. DDR, ACP and Increase in credit period analysis are the

Techniques used for calculation purpose.

The project is presented by using tables, graphs and with their interpretations.

Primary data:

Primary data is collected from the Execute of the organization

Secondary data:

Secondary data obtained from the annual reports, books, magazines and websites.
LIMITATIONS

 The study is based on only secondary data.

 The period of study was 2015-2019 financial years only.
 Another limitation is that of standard ratio with which the actual ratios may be
compared generally there is no such ratio, which may be treated as standard for the
purpose of comparison because conditions of one concern differ significantly from
those of another concern.
 The accuracy and correctness of ratios are totally dependent upon the reliability of the
data contained in financial statements on the basis of which ratios are calculated.
 BIBLIOGRAPHY
BOOKS:

 Roy, S. (2013, Feburary 7). Basel-Ill implementation : A new Challenge for Indian
Banks. Basel-Ill implementation : A new Challenge for Indian Banks. Business standard.
 Banerjee, S. (2012). Basel I and Basel II Complaince : Issues for Banks in India.
Working Paper 68/2012. www.mse.ac.in
 Awdeh, A. (2011). The Effect of Capital Requirements on Banking Risk. International
Research Journal of Finance and Economics(66).
http://www.eurojournals.com/finance.htm
NEWS PAPERS
Economic Times

BANKS INTERNAL RECOREDS:

1. Annual Reports of zuari cement (2014-2018)
2. State bank Of India Manuals
3. Circulars sent to all Branches, Regional Offices and all the Departments of
Corporate Offices.

WEB SITES
1. www.zuaricement .com
2. www.rbi.org
3. www.indiainfoline.com
4. www.financeindia.com