Vinu: Manu, why can’t banks use the same appraisal approach for all industries?

Manu: Because each industry has a different risk structure—cash cycle, margins, customer concentration, and volatility vary widely.

Vinu: From the start, what is the first industry-specific check?

Manu: The business model and operating cycle. A trader may collect in 30 days, while a contractor may wait 120 days for the same ₹50 lakh billing.

Manu: In manufacturing, 12% gross margin may be normal. In trading, even 4% could be healthy. Comparing margins across industries misleads credit decisions.

Manu: A garment unit earning ₹20 lakh profit on ₹2 crore turnover may be stable. But a real-estate-linked contractor earning the same ₹20 lakh depends on a single project—risk is far higher.

Vinu: What about customer concentration?

Manu: Critical in industry analysis. If 70% sales come from one buyer, even a strong balance sheet becomes fragile.

Vinu: How does regulation affect industry risk?

Manu: Some industries face frequent policy or compliance changes. That directly impacts costs, timelines and cash flows.

Vinu: Do bankers often ignore this?

Manu: Yes. Many appraisals focus only on financials and miss industry-specific shocks.

Vinu: How should a banker practically use industry risk in appraisal?

Manu: Adjust assumptions—longer receivable days, lower margins, and higher contingency buffers for risky industries.

Vinu: Final takeaway?

Manu: Credit risk is not just borrower-specific—it is industry-driven.

Vinu: So one template cannot fit all.

Manu: Exactly. Good lending begins with understanding the industry first.

We invite you to join our Diamond Membership
Check - https://courses.carajaclasses.com/courses/Diamond-Membership-6305fad1e4b0cccc82d610be
For Special Discount on Diamond Membership 
Connect with us  - https://wa.me/919025100249?text=DLM