A PRESENTATON BY:

ACUMEN BUSINESS CONSULTANCY PVT. LTD.

PRESENTOR MR. KAPIL LADHA

MCGM CONTRACTORS

About MCGM:

MCGM is one of the largest local governments in the Asian continent.

The geographical area covered by MCGM is from Churchghate to Dahisar in the Western zone of Mumbai; from CST to Mulund also covering Mankhurd in the central zone.

MCGM works on the Zero Budgeting system. Last year the gross revenue and expenditure of the corporation was Rs. 36,000.00 Crore (Approx.) which was fully

allocated during the that year.

MCGM Different From OTHER Civic Agencies:

Unlike Others, MCGM does not have to be

dependent on Union or State Government funds

and works on its own revenue (Octroi,

Development Fund and Property Tax)

The tender process and requirement of Fund is

different from others.

Working for the Financial Capital of the country,

MCGM has to be on its toes and cannot ignore

the slightest development or infrastructure

requirement of the City. It allocates certain

amount of funds for any emergency or urgent

requirement.

Bidding Process:

Registration with MCGM & Classification

Pre-BID Meeting

Submission of BID

Technical Clearance of

Bidder

Financial Clearance

Online awarding of

Tender

Deposits & Its Working:

S.N.

Deposits Required % Requirement Submission of Deposit

Release of Deposit

1. Earnest Money Deposit (EMD)

1% of the Contract Bid Value (CBV)

At the time of Submission of Bid

After providing ASD/ SD/ RM

2. Additional Security Deposit (ASD)

If CBV < 12% of Tender Value, Equivalent amount for Every Additional %

Submission of Tender After work completed

3. Security Deposit (SD)

5% of CBV If you are the Lowest Bidder

After work completed

4. Retention Money (RM)

If CBV < 15% = 3%;CVB < 20% = 10%;CVB > 20% = 20%

Below Rs. 5.00 Cr = Beginning

After completion of Defect Liability Period (Different for every work)

Above Rs. 5.00 Cr= Will be deducted from the Running Bill

Example:

Tender Value Rs. 10.00 Crore. Say the contractor bid for Rs. 7.00 Crore

Thus, Contract Bid Value (CBV) is 30% below the Tender Value.

The above funds will be blocked till the completion of the project/ contract.

The Defect Liability Period starts from the Completion of the Project. Thus, even after the

contract is completed the RM will not be released until this period is over.

ASD & RM could be given as a Bank Guarantee instead of blocking of the Funds.

Now the amount required to execute the above contract: Amount Blocked in Deposits(Rs. In Crore)

EMD = 1% of CBV at the time of Bidding. 0.07

Since CBV < 12% of Tender Value, ASD = 18% * TV (30-12 = 18) 1.80

SD = 5% of CBV 0.35

RM = 20% of CBV (Since, CBV is 30% below the TD) 1.40

TOTAL FUNDS REQUIRED 3.62

Market Potential & Opportunity for Banks:

There has been no single MCGM Contractor default in any Banks.

In Mumbai there are more than 200 contractors including small & large.

All the contractors fall in the MSME category. There are very few Banks who have ventured into this

segment because of nature of funding. Recently few Private Banks have been working on this

segment aggressively. Apart from building a good quality Loan Book, it also

generates Fee Based income, deposits and CASA. The Business Controlling of the Borrower is with the Bank

due to the escrow mechanism.

Challenges for the Bank:

Multiple Banking

Security Coverage

Timely Sanction & Disbursal of Loan

Retirement of Bank Guarantees

Facilities Required:

Cash Credit Facilities

Bank Guarantees

Solvency Certificate

Conclusion:

Infrastructure in MSME Category is a growing segment.

The working is different from other segments and the Banks need to assess their requirement accordingly.

This is one such segment where the Banks can deepen their reach as the Banks already have existing relationship.

For your Valuable Time