Mr Kamdar needed a ₹35 crore bank guarantee to bid for a ₹350 crore government highway project, but his existing bank limit was only for Cash Credit. We structured a solution and arranged the required Bank Guarantee facility, enabling him to submit the tender successfully and win the project, boosting his business growth.
Bank Guarantee Process
A Bank Guarantee (BG) secures business transactions, but waiting for funds can slow operations. Mr Aryan’s company needed immediate capital for a high-value contract. By opting for BG discounting, he accessed funds upfront, ensuring smooth project execution. Let’s understand the bank guarantee process through the Mr Aryan case study.
A Case Study
Mr Kamdar is the promoter of Megaprojects. The company works on many private company projects and wants to extend its operations into government projects. Projects including road construction, dam construction, 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 a performance bank guarantee. In July, the state government 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 a 10% performance bank guarantee for bidding. Let’s understand the bank guarantee process.
The Execution 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 Cash Credit (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 it. This tender will help his company to achieve better growth in 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 in government contracts for the last couple of decades and has worked on many government projects. He suggested to Mr Kamdar to get help from Terkar Capital. Earlier, when Mr Joseph encountered the same condition, he received good help from Terkar Capital and benefited a lot.
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.
He discussed this situation with his best business friend , Mr Joseph. Mr Joseph has been in government contracts for the last couple of decades and has worked on many government projects. He suggested to Mr Kamdar to get help from Terkar Capital. Earlier, when Mr Joseph encountered the same condition, he received good help from Terkar Capital and benefited a lot.
Bank Guarantee Execution with Terkar Capital
When Mr Kamdar approached the Terkar Capital team. Terkar Capital understood the whole business scenario, and they analysed the financials of the company. They found Mr Kamdar and his company have a 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 a working capital facility of Rs. 45 crores in terms of CC, and Bank Guarantee 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, and all the stakeholders of his business benefited a lot.
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