mcgm contractors
TRANSCRIPT
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