Assignment
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Solution
We can offer various products to Tata Steel Ltd., keeping the following factors in mind:
It has a global presence.
It is heavily engaged in both exports and imports.
Its balance sheet is debt heavy, considering recent acquisitions.
It’s operating in a capital intensive industry.
Let’s look at various solutions that can be offered:
Treasury Products:
Forward contracts and options for trade receivables and payables: The company is an exporter of goods. Also, the company imports coal, which is a key raw material. The company needs to hedge its currency exposure on these trade transactions.
Cross-currency Interest rate swaps for hedging debt: The company is debt heavy, in view of the recent acquisition made in Europe. The company may require to hedge currency risk on any foreign currency loan.
Working Capital Products:
Overdraft and short-term working capital loans can be offered to meet the cash flow mismatch of the company.
©Finitiatives Learning India Pvt. Ltd. (FLIP), 2013. Proprietary content. Please do not misuse!
www.learnwithflip.com
Cash Management Products:
‘It has a global presence in 50 markets and manufacturing operations in 26 countries.’
International perspective: The company has its presence across continents and may use structured cash pooling products to efficiently utilize its funds and minimize interest expense.
Domestic perspective: Payment and collections set ups can be used by the company in its day to day domestic trade transactions.
Corporate Salaries: A monthly salary credit facility for all their employees across India.
Dividend payout: A quarterly dividend payout facility to the company’s shareholders.
Standby LCs (SBLCs):
The company has overseas entities, which may not have strong independent financials to avail of bank finance in that geography.
An SBLC, issued by earmarking the parent company’s banking limits will allow the weaker entity to
Solution
We can offer various products to Tata Steel Ltd., keeping the following factors in mind:
It has a global presence.
It is heavily engaged in both exports and imports.
Its balance sheet is debt heavy, considering recent acquisitions.
It’s operating in a capital intensive industry.
Let’s look at various solutions that can be offered:
Treasury Products:
Forward contracts and options for trade receivables and payables: The company is an exporter of goods. Also, the company imports coal, which is a key raw material. The company needs to hedge its currency exposure on these trade transactions.
Cross-currency Interest rate swaps for hedging debt: The company is debt heavy, in view of the recent acquisition made in Europe. The company may require to hedge currency risk on any foreign currency loan.
Working Capital Products:
Overdraft and short-term working capital loans can be offered to meet the cash flow mismatch of the company.
©Finitiatives Learning India Pvt. Ltd. (FLIP), 2013. Proprietary content. Please do not misuse!
www.learnwithflip.com
Cash Management Products:
‘It has a global presence in 50 markets and manufacturing operations in 26 countries.’
International perspective: The company has its presence across continents and may use structured cash pooling products to efficiently utilize its funds and minimize interest expense.
Domestic perspective: Payment and collections set ups can be used by the company in its day to day domestic trade transactions.
Corporate Salaries: A monthly salary credit facility for all their employees across India.
Dividend payout: A quarterly dividend payout facility to the company’s shareholders.
Standby LCs (SBLCs):
The company has overseas entities, which may not have strong independent financials to avail of bank finance in that geography.
An SBLC, issued by earmarking the parent company’s banking limits will allow the weaker entity to