Bank Guarantee Case Study

Understanding Bank Guarantee!

Mr. Kamdar is the promoter of Mega projects. The company works on many private company projects and wanted to extend the operations into the government project. Projects including road construction, dam constructions, etc. So, whenever there are any such projects with the government, the government issues the tender. Thus, when the government issues the tender , it always has the condition of performance bank guarantee. In the month of July, the state government has issued the tender to complete the state road highway project of 100 Km with a budget of Rs. 350 crore, where the contractor has to submit the 10% performance bank guarantee for bidding. So, let’s understand what is a bank guarantee and how Terkar Capital assists in getting bank guarantee funding.

The Process

Mr. Kamdar wishes to bid for this tender. So, he has to submit the bank guarantee of Rs. 35 crores. Mega-projects have a working capital facility of Rs. 50 crores with the State Bank of India, but this limit given by the bank was limited to CC only. And Mr. Kamdar has given all the available mortgages to SBI for the same. He was confused. He needs the bank guarantee but does not have BG and this tender will help his company to achieve better growth for the future. So this deadlock condition for Mr. Kamdar and his company.

He discussed this situation with his best business friend — Mr. Joseph. Mr. Joseph has been into government contracts for the last couple of decades and worked on many government projects. He suggested to Mr. Kamdar to take help from Terkar Capital. Earlier when Mr. Joseph encountered the same condition, he took good help from Terkar Capital and benefited a lot.

Learn more about bank guarantee.

Mega Projects financial snapshots

Company Turnover Rs. 350 Crores Company Industry Infrastructure Projects Mortgage Available Rs. 50 Crores Amount Required Rs. 35 Crores Facility Required Bank Guarantee

Terkar Capital Execution

When Mr. Kamdar approached the Terkar Capital team. Terkar Capital understood the whole business scenario, they analysed the financials of the company. They found Mr. Kamdar and his company has the collateral value of Rs.35 crores and he has already taken the CC exposure of Rs. 50 crore. They also analysed that Mr. Kamdar also has a good repayment track record. Thus, Terkar Capital suggested and executed the working capital option where Mr. Kamdar has the working capital facility of Rs. 45 crores in terms of CC and for BG arranged the exposure of Rs. 35 crores with the available mortgage.

This is the best solution Mr. Kamdar had received to come out of the deadlock condition. He submitted the government tender with the applicable performance BG and he won the tender as well. Because of this tender Mr. Kamdar has increased his turnover to a larger extent, all the stakeholders of his business benefited a lot.

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