How a Packaged Drinking Water Unit Secured ₹55 Lakh Term Loan After 2 Bank Rejections
| PARTICULARS | DETAILS |
| Industry | Packaged Drinking Water Manufacturing (BIS/FSSAI-certified) |
| Location | Industrial Area, Madhya Pradesh |
| Business Age | 3 Years (GST-registered and operational) |
| Annual Turnover | ₹68 Lakh (FY 2023-24, verified through GST records) |
| Loan Requirement | ₹55 Lakh Term Loan for RO plant upgrade and automated bottling line |
| Bank Applied | Nationalised Bank – Central India Branch |
| Previous Status | Project report rejected twice — distribution assumption unsubstantiated, working capital cycle not explained |
THE PROBLEM
The client’s packaged water unit was supplied to local retailers and a few institutional buyers and needed ₹55 lakh to upgrade its RO plant capacity and add an automated bottling line to enter the larger 20-liter jar segment. Two prior project reports had been rejected:
Problem #1 – Distribution Assumption Unsubstantiated: The first report projected sales tripling in Year 1 by “expanding into new markets,” with no distributor agreements, no institutional buyer pipeline, and no explanation of how the additional volume would actually reach customers. The bank rejected it as speculative.
Problem #2 – Working Capital Cycle Not Explained: The second report fixed the sales projection but didn’t explain the bottle/jar deposit-refund cycle specific to this industry (jars are refundable-deposit assets, not one-time sale items), leading to an incorrect and understated working capital requirement that didn’t match how cash actually flows in this business model.
OUR APPROACH — Step-by-Step Project Report Preparation
Step 1 – Root Cause Analysis
Our senior CA reviewed both rejected reports line-by-line. Key issues identified: no distributor or institutional buyer documentation; the jar deposit-refund cycle was omitted from the working capital calculation entirely; and machinery power cost for the new automated line was missing from operating expenses.
Step 2 – Financial Reconstruction
We collected 3 years of ITRs, audited P&L statements, 12 months of bank statements, GST returns, and machinery quotations. Actual turnover of ₹68 lakh was verified independently through GST data.
Step 3 – Realistic Projection Building
Instead of assuming market expansion with no basis, we built projections grounded in 2 signed institutional supply agreements (a local hospital chain and a corporate office park) plus organic retail growth at the sector’s typical 15% rate. Year 1: ₹92 Lakh | Year 2: ₹1.12 Cr | Year 3: ₹1.34 Cr.
Step 4 – DSCR Engineering
With correct power cost loading and full interest on the phased disbursement, Net Cash Accruals rose to ₹9.8L in Year 1, rising to ₹15.2L by Year 3. DSCR: 1.34 (Y1) → 1.76 (Y2) → 2.18 (Y3) — all comfortably above 1.25.
Step 5 – Working Capital Cycle Correction
Rebuilt the jar deposit-refund cycle into the working capital model—showing the number of jars in circulation, deposit float held, and refund liability—giving the bank an accurate, industry-appropriate working capital requirement instead of an understated figure.
Step 6 – Bank Submission Support
Our CA personally attended the pre-sanction meeting and responded to the credit officer’s 4 queries on institutional buyer credibility and the jar deposit cycle on the same day.
KEY FINANCIAL DATA — Project Report Summary
| METRIC | FY 2023-24 (ACTUAL) | YEAR 1 (PROJECTED) | YEAR 2 (PROJECTED) | YEAR 3 (PROJECTED) |
| Annual Sales Turnover | ₹6,800,000 | ₹9,200,000 | ₹11,200,000 | ₹13,400,000 |
| Gross Profit | ₹1,020,000 (15%) | ₹1,564,000 (17%) | ₹2,016,000 (18%) | ₹2,546,000 (19%) |
| Net Profit (PAT) | ₹408,000 (6%) | ₹644,000 (7%) | ₹896,000 (8%) | ₹1,206,000 (9%) |
| Net Cash Accruals | ₹480,000 | ₹980,000 | ₹1,240,000 | ₹15,20,000 |
| DSCR | – | 1.34 ✓ | 1.76 ✓ | 2.18 ✓ |
| Current Ratio | 1.4 | 1.7 ✓ | 1.9 ✓ | 2.2 ✓ |
| Debt-to-Equity Ratio | 0.8 | 1.6 ✓ | 1.2 ✓ | 0.9 ✓ |
| Term Loan Eligibility | – | ₹5,500,000 | ₹6,000,000 | ₹6,800,000 |
THE RESULT
LOAN SANCTIONED — Rs. 55 LAKH TERM LOAN APPROVED
|
PARAMETER |
DETAILS |
|
Amount Sanctioned |
₹55 Lakh Term Loan – Full applied amount approved |
|
Processing Time |
17 working days from document submission to sanction letter |
|
Interest Rate |
11.10% p.a. (MCLR-linked) due to strong DSCR and institutional buyer documentation |
|
Bank Queries |
4 queries raised, all resolved within 24 hours by our CA team |
|
Previous Rejections |
Two earlier rejections successfully overturned through distribution documentation and working capital correction |
|
Client Impact |
RO plant upgraded, 20-litre jar segment launched, institutional supply contracts worth ₹18 lakh/year secured |
Frequently Asked Questions
- Why was the packaged drinking water unit loan turned down twice?
The previous project reports had exaggerated sales predictions, imprecise financial assumptions, and insufficient technical specifics, rendering the plan unsuitable for bank clearance.
- How did the amended project report support the ₹55 lakh term loan?
The CA-prepared project report had accurate market analysis, realistic production capacity, precise financial predictions, DSCR calculations, and complete project cost estimates, which increased the bank’s confidence.
- What information is included in a packaged drinking water project report submitted for bank loan approval?
A complete study includes information on plant capacity, machinery, manufacturing processes, BIS compliance, project costs, working capital, profitability estimates, cash flow, balance sheet, and repayment analysis.
- Why is DSCR necessary for a packaged drinking water unit loan?
The Debt Service Coverage Ratio (DSCR) indicates if the company can comfortably repay its borrowing. A healthy DSCR increases the likelihood of term loan acceptance.
- Can a young entrepreneur obtain a loan for a packaged drinking water plant?
Yes. Banks will finance new entrepreneurs that provide a properly designed, CA-certified project study accompanied by realistic financial estimates and sufficient paperwork.
- Which documents are necessary for a packaged drinking water project financing application?
Banks typically require KYC documentation, land or lease paperwork, machinery quotations, promoter profiles, project reports, financial statements, bank statements, and other supporting business documents.
- How long does it take to approve a packaged drinking water unit loan?
The time it takes for approval is determined by the bank and the quality of the papers. Many applications are handled in a matter of weeks when accompanied by a full and professional project report.
- Why do banks want extensive project reports for packaged drinking water units?
The study assists banks in assessing market demand, production capacity, profitability, payback capabilities, project viability, and overall financial risk before approving the loan.
- What were the main reasons why the bank authorized the ₹55 lakh term loan?
The bank approved the updated proposal because it featured realistic sales figures, verifiable project costs, excellent financial ratios, accurate cash flow projections, and good responses to all credit inquiries.
- How can Sharda Associates assist with a packaged drinking water project report?
Sharda Associates creates CA-certified project studies that include extensive financial predictions, feasibility analysis, profitability estimates, DSCR, CMA data, and complete documentation to increase bank loan approval prospects for packaged drinking water production facilities.