Superday case: a packaged foods company asks for a revolving credit facility to fund its festive season. Estimate the peak borrowing need, size the facility and propose two covenants.

The need peaks at about Rs 440 crore in November, Rs 220 crore above the trough that long-term money covers, so a Rs 250 crore revolver is about right. Stock builds from August for the festive quarter and receivables peak after it. Rs 250 crore leaves Rs 30 crore, about 14%, of headroom. Protect it with a borrowing base and a yearly clean-down.

Think of a firecracker shop before Diwali. It buys and pays for its stock weeks before the first customer arrives, and some of its bulk buyers pay only after the festival. Cash goes out first, into stock, and comes back last, from receivables, so the borrowing peak sits between the two. For Ambrila, holding the next two months' cost of goods means stock jumps in August and September as the festive months come into view. Receivables of 45 days peak in November and December, when sales are high. Payables of 30 days offset only part of it.

The model says the revolver must carry Rs 220 crore at the November peak. Headroom of 10% to 15% over the modelled peak is sensible, because a late festival, a slow-paying distributor or a jump in input prices moves the peak up. Rs 250 crore is 14% above Rs 220 crore, so the ask is reasonable. Stress it: if festive sales come in 10% higher, receivables and stock rise together and the revolver need at the peak becomes about Rs 264 crore, more than the facility. A good season, not a bad one, is what breaks a seasonal line. That argues for Rs 250 crore committed plus an accordion option to add Rs 25 to 50 crore on request, which is the conversation to have with the client before signing.

First, a borrowing baseA cap on drawings set as a percentage of eligible receivables and stock, so the loan can never exceed the assets that repay it.: drawings limited to 75% of eligible receivables plus 50% of stock. At the November peak that allows about Rs 330 crore, comfortably above Rs 220 crore, but it shrinks automatically if receivables go bad. Second, a yearly clean-down: drawings reduced to zero, or close to it, for 30 consecutive days, which proves the facility is funding a season and not a permanent hole. In this model the need is back to the trough from February to August, so Ambrila can meet it easily. If it cannot, the working capital has become long-term debt in disguise, and the bank should know.