Page 334 - CA Final PARAM Digital Book.

(Conclusion Related)
➢ Suggestions on various aspects to be taken care of before and after the proposed merger /
acquisition.
➢ Finally, an executive summary may be prepared highlighting the significant areas.

New Course – (SM23)
QNO SWOT Analysis
628.500 TITANIUM CNO -- Unique

CA. Y is employed with a leading private sector BDFP Bank posted in NOIDA branch. One of the existing
borrowers has approached branch with a proposal to sanction fresh term loan of ₹ 5 crore with
commensurate increase in working capital credit facilities relating to expansion of its garment
manufacturing unit. While performing due diligence, he notices that company was formed just two years
ago and had availed term loan of ₹ 10 crore and cash credit facilities of ₹ 5 crore respectively. Its sales
have increased from ₹ 25 crores in first year to ₹ 45 crores in year just ended. It is generating cash profits
and is timely servicing its debts.

The borrower was earlier catering to domestic market. However, now it is in process of procuring export
orders and working assiduously in this regard. The expansion plans are in line with development in area

of marketing relating to exports.

However, there are a large number of units catering to domestic and export market of garments in
NOIDA, Delhi and surrounding areas. There is also demand slump in biggest US market.

Besides, the unit is family-based and relies upon marketing skills of its main promoter. There is lack of
well-paid qualified staff with the borrower to deal effectively with its customers both domestic as well as
foreign.

He starts jotting down and elaborating above points. Identify what he is trying to do as part of due
diligence.
Answer SWOT Analysis: As part of due diligence exercise, he is performing SWOT analysis of borrower. He is making
analysis of strengths, weaknesses, opportunities and threats (SWOT) pertaining to borrower.
Strengths: Features such as rise in sales, generation of cash profits and timely service of debts represent
borrower strengths.
Weakness: Lack of well-paid qualified staff to deal effectively with its domestic and foreign customers is an
area of weakness.
Opportunities: Entering into export market presents opportunity for borrower.
Threats: Presence of large number of competitors and demand slump in US market reflect threats.

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