Page 42 - Banking Finance October 2022

ARTICLE

report / annexure should be attached showing breakup of the financial health of the enterprise as it is unworthy
how the projected numbers are arrived at? to provide funds to such entities who are already sick
or where chances of survival are few.
CMA Data should represent a viable business performance
- over borrowing is un-favorable and cannot be justified
Conclusion:
through mere projecting some financial ratios.
As mentioned above, a professionally crafted CMA data report
Why is it important to prepare a CMA could really make the loan approval process simple, quick&
hassle-free. Even though a CMA Data is a very detailed analysis
report?
of the Profit and Loss statement and balance sheet of an
A. Significance of CMA Data for Borrowers entity, the key to prepare a good CMA Data is to present a
CMA data gives a financial blueprint of an entity's healthy financial projection to analyze the past & proposed
performance year-on-year basis. The overall financial flow of funds and viability of the project of the borrower.
position, performance and health, loan eligibility, Therefore, someone with vast experience and in-depth
repayment capacity, etc., can be determined with the knowledge of finance should study & prepare CMA report.
use of CMA data report. CMA data clearly marks out
the flow of & application of funds in a concerned From a banker's perspective CMA data is a systematic
business. A properly planned and well drafted CMA Data analysis of working capital management of a borrower and
is sufficient to establish eligibility for loan as it is the the main objective is to ensure the usage of long term and
mirror of creditworthiness for borrower who wants to short term funds for the given purpose. Though, the Banks
enjoy credit facility from banks. have been given liberty by RBI not to follow CMA for deciding
the eligibility and magnitude of working capital finance, yet
B. Significance of CMA Data for Banks many are relying on the CMA data, as the CMA system is so
Bank and financial institutions do employ various scientific and systematic, that it transpires the whole activity
measures to mitigate the chances of risks and further of the firm and shows the errors of the borrower and their
wants to decrease the impacts of the risks if happens ill intention to misuse the Banks' funds.
like default of loan. With the help of CMA data and its
components banks will know the financial position, the Another key area where proper knowledge about CMA data
changes in the balance sheet's components, knowing is imperative is avoiding creative accounting. In the recent
the flow of funds, knowing the performance of the past banks have been in news mostly in wrong sense because
borrowing concern and also understand the earning of the frauds happened mostly financial statement frauds.
cycle for paying the expenses. It also helps them to A deeper analysis of those cases reveals that somewhere
know short term solvency of borrowing concerns. With down the line bankers lack the skills to identify the red-flags
ratio analysis, bank will understand the position and thrown by the CMA. Hence a thorough knowledge and
efficiency of the entity more clearly within few minutes. proper interpretation of the CMA data is needed for effective
Compilation of CMA report helps the banks to find out credit assessment and decision making.

L&T talks with several firms to set up green hydrogen plants

Larsen & Toubro(L&T) is in talks with about a dozen companies including steel, cement and refineries companies, to
help them set up green hydrogen plants. The Indian multinational company, which is engaged in engineering, pro-
curement and construction projects, hi-tech manufacturing and services, also plans to supply green hydrogen to
some of these companies. Green hydrogen is an alternative fuel produced by splitting water into hydrogen and
oxygen using renewable electricity.
The plan to help companies to either set up green hydrogen plants or supply the fuel to them comes even as L&T
commissioned its first green hydrogen plant at its AM Naik Heavy Engineering Complex in Hazira. Built at a cost of
over Rs. 25 crore, the plant will supply 45 kg of green hydrogen daily. This will be used for captive consumption in
the company's Hazira manufacturing complex. The green hydrogen plant will reduce the carbon footprint by 300
tonnes per annum. The work on the plant began in January.

42 | 2022 | OCTOBER | BANKING FINANCE