Vibgyor Limited is a medium sized enterprise, specialising in manufacturing of resins both epoxy and polyester. The company began its journey from Kanjikode a small village in the outskirt of Palakkad town in Malabar area of Kerala in 2012. It was co-founded by two friends Mr. Narayan Nambiar and Mr.Suresh Nair. They started making on a small-scale, resins for industrial uses which were sold in the South India to liquid paints and powder coating manufactures. They were fairly successful as the resins were priced competitively and soon became popular amongst the users. Buoyed up by their success, the owners decided to expand operations. Being the son of the soil Mr. Suresh Nair was sceptical of this idea. He feared that highly literate and well- informed labour force will be difficult to manage. Future turn of events proved him right. However, they ventured into powder coating manufacturing. Their unit was one of the eight units manufacturing powder coatings in India. Due to the strict control by environment protection agencies, the manufacturing and usage of liquid paints were drastically falling. This gave tremendous impetus to the growth of their unit. From a 5-worker organisation, working in a garage, they went on to become a 50-member strong company -registered as Vibgyor Coating limited Ltd(VCL) having 22% market share in resin market and 15 % powder coating segments .To meet the additional fund requirements to buy modern machinery, train employees , advertise to crate brand awareness and license advanced technology from foreign collaborators, the management of VCL. took additional loan of Rs 20 crores from the State Bank of India, have already repaid. By 2014-end, the Vibgyor Ltd. had become brand name in South India and was manufacturing epoxy, pure polyester, hybrid and acrylic kinds of powder coatings in different finishing meant for surface coating and industrial requirements. Things were looking bright and rosy for Vibgyor Ltd. and it was at the threshold of a massive expansion. In December 19, 2018 a small mishap in the resin plant culminated into a full blown labour unrest and the militant workers stalled the working of the unit. Due to the intransigent workers the plant was eventually shut down in June 2019. .

Mr. Nambiar, the CEO and the board decided to wind up the resin business and shift their operation retrenching the existing workers. The compensation agreed by the workers amounted to Rs24.80 crores. . Madukarai the neighbouring village in Tamilnadu which is 15 Kms from the existing plant is chosen as the new site. Madukarai is known for good industrial relation and the company will be entitled to a tax- free investment subsidy of 20% of the investment in Plant & machinery and the end of 2 year of operation. The facility at Kanjikode is let out from July 2020 at a monthly rent of Rs 5lacs.( fixed for the next 5 years). State Bank of India agreed to finance the 80% of the cost of the new set up including retrenchment cost. 20% to be brought in as equity by the promoters. They have also agreed to finance 80% of the net working capital required as calculated on the basis of the operation of the first year. Interest rate is 10 p.a on term loan and 10.5 % for working capital. Principal amount of Term loan has to be paid in 8 equal instalments at the end of each year with a mortarium of one year from the date of initial disbursement of loan. Interest is paid on the year as it is accrued VCL started the shifting process on 14 th April 2020 and availed a nominal loan Rs One lac. The balance of term loan is availed evenly during 2020-21. ( Hint charge int for total loan amount for 6 months) The plant and building will be ready for ready for operation from 1 st April 2021. Assume that the full amount of permissible working capital finance is availed at the beginning of the year of operation

VCL does not foresee any difficulty in setting up the at plant at Madukkarai. They expect to achieve 38% market share. Due to environmental and regulatory concerns the demand for powder coating is expected to show a robust growth. installed capacity of plant in Kerala was 8400 T.P.A. It envisages a huge demand for epoxy and polyester powder in the coming years. Therefore, VCL intends to launch new products - high weather and corrosion resistant and insulating coating powder for various industrial applications in texture and structure finish. VCLs new facility at Madukarai will have an installed capacity of 15,000 TPA. VCL intends to import required plant, Extruder, Air Classifier Mill, mixer and testing equipment from BUSS.AG. Switzerland at a landed cost of Rs 270 crores( salvage value after 10 years being 5 crores) Other initial investments are Land Rs 30.7 crores, Preconstruction and land development Rs 7 crores, Factory building Rs.17 crores Pre-operative expenses Rs 10.5 crores( can be written of equally in first 5 years) Machinery and equipment are subject to a depreciation of 20% on WDV basis. Building land development cost to be written off fully over 10 year period. These are approved rates which can be claimed only when the asset is put into use. Applicable tax rate is 30%.. Labour compensation paid in 2020 is tax deductible.

VCLs expected percentage of capacity utilization is 50, 60, 65, 70, 75 for the first five years respectively and year 6 to year 7, 80% and year 8 to 10 , 85 %. There is no process loss or stock of finished at any point of time. Cash Cost data is follow per kg(all variable) Resin (indigenous) 30 Hardeners and flow control agents (imported) 10 Titanium di oxide (imported ) 20 Fillers/pigments (indigenous) 15 Direct labour cost 8 Packing material (indigenous) 4 Other production overhead 3 Details of other expenses are Administrative expense 2020-21 10 lakh per year 2020-22 on wards 5 lkah per month with 10% increase every year Selling Expense fixed 3 lakhs per month and Rs 10 per kg sold Selling price per kg 150/ 60% of the sales are on credit.

Working capital requirement Resin (indigenous) 1 month Hardeners and flow control agents (imported) 3 months Titanium di oxide (imported ) 3 momths Fillers/pigments (indigenous) 1.5 months Receivable (consider Selling Price) 2 months Packing material 1 month Indigenous suppliers extend 1.5months credit and imports are on net credit of 2 months No credit is available on packing material. 80% of the net working capital requirement is available from the bank. It is availed at the start of the year of operation. No subsequent enhancement of working capital will be available, The AGM of the State Bank of India, Sultanpet, Palakkad Branch, Mr. Kuber Chand, visited the premises of VCL. and undertook a detailed appraisal to ascertain its credit worthiness. He wants the following for the purpose loan appraisal by the Regional office of SBI Cashflow statement from 2020-21 to 2022-23 . Working capital requirement projection from 2021-22 to 2023-24

REQUIRED 1.Prepare a cash flow statement as required ( balance of each year may be carried over to the next year) 2.Projection of working capital requirement from 2021-22 to 2023-24 and the available bank finance of working capital in the first year of operation. Assume available bank finance is constant for two more years to follow.