FTP (Forex Transaction Processing)
We had come across a German entity, are one of the largest vendors for manufacturing of AC Vents for cars. Having a presence in India since 2011. Till date has a top-line of Rs. 250.00 Crores out of which FX exposure is Rs. 80.00 Crore with transacting currency is Euro.
This client has banking facilities with one of the leading private banks. The Client had approached us through a reference and asked to get the audit done on basis of historical details. We did a quick analysis and found sizable difference. Though they had an understanding with the bank for 15 paisa as a margin, bank was not passing appropriate margins and was keeping a gap of 70 paisa over and above the IBR.
Also, we had observed that company’s bottom line was getting a pressured because of PCFC facilities and was getting overcharged on by interest and was not able to enjoy the exchange gains. We advised them to convert the PCFC in Rupee loan and saved a substantial cost on it.
| Exchange Rate Analysis - DIPPL | ||||||||
| CCY | Inward Amount | Exchange Rate | Spot High | Spot Low | Bank Margin | Expected Rate | Gap | Loss in INR |
| EUR | 95,000.00 | 67.30 | 68.76 | 68.15 | 0.15 | 68.00 | -0.70 | -66,500.00 |
| EUR | 172,000.00 | 68.28 | 69.32 | 69.13 | 0.15 | 68.98 | -0.70 | -120,400.00 |
| EUR | 220,243.00 | 69.03 | 70.12 | 69.88 | 0.15 | 69.73 | -0.70 | -154,170.10 |
| EUR | 142,000.00 | 68.90 | 70.21 | 69.75 | 0.15 | 69.60 | -0.70 | -99,400.00 |
| EUR | 74,000.00 | 71.2940 | 72.675 | 72.144 | 0.15 | 71.99 | -0.70 | -51,800.00 |
| EUR | 177,000.00 | 71.51 | 72.685 | 72.36 | 0.15 | 72.21 | -0.70 | -123,900.00 |
| Potential Loss | -616,170.10 | |||||||
Observations
- Observed that bank is not charging appropriate FX margins and gap of 70 paisa that too from day’s spot low.
- The gap is ranging from that too from FX margin.
- In these 6 transactions client had lost Rs. 477,270.10 that too from the lowest possible rate.
Basis this outcome, client had decided to subscribe our services.
Scenario after our entry
| Currency | Amount | Spot | Bank Margin | Net Rate | Initial Difference | Potential Savings (Paisa) | Potential Savings (Rs.) |
| EUR | 195826.42 | 75.2900 | 0.15 | 75.1400 | 0.70 | 0.55 | 107,704.531 |
| EUR | 74446.08 | 75.4500 | 0.15 | 75.3000 | 0.70 | 0.55 | 40,945.344 |
| EUR | 274025.05 | 75.9200 | 0.15 | 75.7700 | 0.70 | 0.55 | 150,713.7775 |
| EUR | 172,939.50 | 76.4007 | 0.15 | 0.15 76.2507 | 0.70 | 0.55 | 95,116.725 |
| EUR | 97,209.77 | 76.1300 | 0.15 | 75.9800 | 0.70 | 0.55 | 53,465.3735 |
| EUR | 180,354.43 | 76.4776 | 0.15 | 76.3276 | 0.70 | 0.55 | 99,194.9365 |
| EUR | 21,268.00 | 76.0600 | 0.15 | 75.9100 | 0.70 | 0.55 | 11,697.4 |
| EUR | 195,777.00 | 79.7300 | 0.15 | 79.5800 | 0.70 | 0.55 | 107,677.35 |
| EUR | 100,235.00 | 78.7066 | 0.15 | 78.5566 | 0.70 | 0.55 | 55,129.25 |
| EUR | 195,873.00 | 79.6300 | 0.15 | 79.4800 | 0.70 | 0.55 | 107,730.15 |
| EUR | 95,308.00 | 80.4610 | 0.15 | 80.3110 | 0.70 | 0.55 | 52,419.4 |
| EUR | 93,448.20 | 78.0300 | 0.15 | 77.8800 | 0.70 | 0.55 | 51,396.51 |
| 933,190.7475 |
It has been clearly seen that the gap has been narrowed down substantially and cost-effectiveness is visible. And the FX loss has been recovered in few transactions only.
For its overall FX exposure we have brought the savings of Rs. 9.33 Lakhs.
Advantages through FTP are:
- Client is getting 100% transparency of their transactions.
- Cost of transaction has brought down by 78.5%
- Getting deals executed through us by providing details through an easily accessible web portal.
- Able to access all information on just one click and log-in.
- Can focus on core business activities.
- Enjoying savings of almost by adopting FTP services.
- Client has recently opted for our Risk Management Advisory services.
