- Why Manufacturing CMA is More Complex
- Installed Capacity & Utilisation
- Revenue Projection for Manufacturing
- Cost Structure — Industry-Wise
- Working Capital Cycle (RM → WIP → FG)
- Fixed Assets & Depreciation
- Term Loan for Plant & Machinery
- DSCR for Manufacturing Units
- Industry-Specific Profiles
- Prepare Manufacturing CMA Online
Why Manufacturing CMA is More Complex
A manufacturing CMA has more moving parts than any other sector. Unlike a trading or service business, manufacturing involves:
- A full working capital cycle: Raw Materials → Work-in-Progress → Finished Goods → Debtors
- Significant fixed assets with depreciation schedules
- Revenue directly constrained by installed capacity
- Complex cost structure: material, power, labour, packaging, and overhead
- Parallel need for both working capital (CC limit) and term loan (for plant/machinery)
Banks apply the strictest scrutiny to manufacturing CMA — but they also have the most detailed industry benchmarks to compare against.
Installed Capacity & Utilisation
The starting point for any manufacturing CMA is the installed production capacity. All revenue projections must flow from capacity:
Revenue = Capacity (units) × Utilisation (%) × Selling Price per unit
| Year | Typical Utilisation (New Plant) | Typical Utilisation (Expansion) |
|---|---|---|
| Year 1 | 50–65% | 70–80% |
| Year 2 | 65–75% | 75–85% |
| Year 3 | 75–85% | 80–90% |
| Year 4+ | 80–90% | 85–90% |
Revenue Projection for Manufacturing
For capacity-based revenue, the CMA must document:
- Product mix — if multiple products, show each separately with capacity, utilisation, and price
- Selling price assumptions — based on current market prices, escalated at 3–5% per year for inflation
- Seasonal factors — if the business is seasonal (e.g., agri-processing, consumer goods), explain how annual revenue is distributed
- Domestic vs export split — export revenue has different debtor days and sometimes different GST treatment
Cost Structure — Industry-Wise Benchmarks
The P&L (Form II) must show costs broken down into the categories banks expect. Typical cost structure for manufacturing industries:
| Industry | Raw Material % of Revenue | Power & Fuel % | Labour % | Other Mfg % | Gross Margin % |
|---|---|---|---|---|---|
| Jewellery | 80–85% | 1% | 3% | 2% | 10–14% |
| Textile | 50–60% | 5–8% | 10–12% | 5% | 20–30% |
| Food Processing | 55–65% | 3–5% | 5–8% | 4% | 22–32% |
| Pharma | 35–45% | 5% | 8–10% | 8% | 35–45% |
| Engineering | 50–60% | 4–6% | 8–12% | 5% | 22–30% |
| Steel Processing | 65–75% | 5–8% | 4–6% | 3% | 12–22% |
| Paper & Packaging | 45–55% | 8–12% | 6–8% | 5% | 20–30% |
| Chemicals | 40–55% | 8–12% | 6–8% | 6% | 25–40% |
Working Capital Cycle (RM → WIP → FG)
The full manufacturing working capital cycle involves all 5 components:
Raw Material Stock
Days of RM held before entering production. Driven by lead time from suppliers, minimum order quantities, and import transit time. Typically 20–90 days depending on industry.
Work-in-Progress (WIP)
Time the product spends being manufactured — from RM entry into production to finished product emergence. Complex multi-stage processes have high WIP (15–45 days). Simple assembly: 1–7 days.
Finished Goods Stock
Products ready for sale but awaiting dispatch. Higher for seasonal industries (stocks built up pre-season). Typically 15–45 days for most manufacturing sectors.
Debtors
Credit extended to customers after dispatch. The dominant working capital item for most manufacturers. 30–90 days depending on customer type (retail vs. wholesale vs. government).
Less: Creditors
Credit received from raw material suppliers. This reduces the bank finance requirement. Typically 15–45 days. Well-established manufacturers often get 60+ day credit from large suppliers.
Fixed Assets & Depreciation
Manufacturing businesses have significant fixed assets — land, building, plant & machinery, electrical installations, and vehicles. The CMA must show:
- Opening Gross Block — cost of all fixed assets at the start of each year
- Additions — new capital expenditure during the year (funded by term loan)
- Depreciation — computed on the Written Down Value (WDV) method as per the Companies Act or Income Tax Act
- Net Block — Gross Block minus Accumulated Depreciation
| Asset Class | Companies Act Rate (WDV) | Income Tax Rate (WDV) |
|---|---|---|
| Building (Factory) | 10% | 10% |
| Plant & Machinery (General) | 13.91% | 15% |
| Computers & IT Equipment | 40% | 40% |
| Motor Vehicles | 25.89% | 15–30% |
| Office Equipment | 13.91% | 15% |
| Furniture & Fixtures | 10% | 10% |
Term Loan for Plant & Machinery
When manufacturing businesses apply for a term loan to purchase plant and machinery, the CMA must specifically address:
- Justification for the capex — capacity expansion, replacement, modernisation
- Cost breakup — machinery cost, civil work, electrical, freight & erection, pre-operative expenses
- Means of finance — term loan amount, promoter margin, subsidy if any
- Additional revenue from new capacity — incremental revenue that justifies the loan
- DSCR from incremental and existing operations combined
Banks want to see that the new machine / plant will generate sufficient additional revenue to pay its EMI — with a comfortable DSCR of 1.50+.
DSCR for Manufacturing Units
DSCR for manufacturing is computed as:
DSCR = (Net Profit After Tax + Depreciation + Interest on TL) ÷ (Principal Repayment + Interest on TL)
For manufacturing units with both working capital and term loan, the interest in the numerator includes only term loan interest — not CC/OD interest. Banks require:
- Minimum DSCR of 1.25 in any individual year
- Average DSCR of 1.50 over the loan repayment tenure
- DSCR above 2.0 indicates low credit risk — likely to get better pricing
Industry-Specific Profiles in JS & Co CMA Tool
The JS & Co CMA tool covers these manufacturing sectors with pre-set benchmarks:
| Industry Profile | Pre-Set RM % | Working Capital Days |
|---|---|---|
| Jewellery | 82% | RM:30 | WIP:5 | FG:15 | Debtor:30 | Creditor:15 |
| Textile | 55% | RM:45 | WIP:7 | FG:30 | Debtor:60 | Creditor:30 |
| Food Processing | 58% | RM:20 | WIP:5 | FG:15 | Debtor:30 | Creditor:15 |
| Pharma | 40% | RM:60 | WIP:30 | FG:45 | Debtor:60 | Creditor:45 |
| Chemicals | 48% | RM:45 | WIP:20 | FG:30 | Debtor:45 | Creditor:30 |
| Engineering | 55% | RM:45 | WIP:30 | FG:30 | Debtor:60 | Creditor:30 |
| Steel | 70% | RM:30 | WIP:7 | FG:20 | Debtor:45 | Creditor:30 |
| Paper | 50% | RM:30 | WIP:10 | FG:20 | Debtor:45 | Creditor:30 |
| Electronics | 55% | RM:30 | WIP:15 | FG:20 | Debtor:45 | Creditor:30 |
Generate a Manufacturing CMA Report Online
JS & Co's CMA tool handles manufacturing sector CMA — with fixed asset schedules, depreciation computation, full working capital cycle, DSCR, and term loan EMI schedule. Try free.
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