Page 244 - A Banker Down the Rabbit Hole

X Three more big players have entered in the market even before the
commissioning of this plant. The market share this company could
command under these competitive scenario was quite uncertain.

The Chief was an expert in analyzing the various sectors and told that
there was a problem in this sector due to excess capacity creation. So
far, no player has been able to make profits.

Chief opined that looking at the poor and uncertain prospects for profits
in this sector, the banks might not be willing to finance the project and
that was the reason the Chairman of BAL had invested huge amount of
Rs. 12 crores from his own sources and now he was at a point when he
could not invest any more from his dried up sources. He wanted the next
funding from banks. The Chief categorically stated that our bank should
not get into this project.

I asked my Chief, "If other banks also did not support this project
underway, what will happen to his huge investment which was sure to
get jeopardized? The Chairman would not let it happen like this. What
could be the alternatives for the company to raise funds if most of the
banks think the way we perceived about prospects of this project?"

He thought for a while and exclaimed that this was a brilliant question
from me. He predicted that the company would siphon off funds from
the existing profitable company to this non-viable project. They might
divert the funds raised for BAL to Silicon project along with all the surplus
profits from BAL. But silicon project may not come off to be viable and
company might deprive the BAL of needed funds putting funds of lending
banks to BAL also in jeopardy. He proposed that we must be on guard
and watchful on developments about their tying up for funds for Silicon
project with other Financial Institutions. In case, they do not get funds
from bankers, then we should take some protective steps to stop the BAL
from diverting funds to the silicon project. If we did not do that, our funds
given to BAL would become possibly irrecoverable.

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