September 2014

Treasury and Trade Solutions

India Day Series: Session 2 Treasury Strategy in a Resurgent India

10.00-10.05

Munir Nanji, Head, Asia Pacific, Treasury & Trade Solutions Sales, Citi:

Opening Remarks

Slide 2

10.05-10.25

MJ Akbar, National Spokesperson, Bharatiya Janata Party:

The 3 Ps of Economic Growth: Policies, Politics & Processes

Slide 3

10.25-10.40

Gourang Shah, Head, Asia Pacific, Treasury Advisory Group, Citi:

Treasury Best Practices in Emerging Markets

Slide 4-12

10.40-10.45

Ruchita Aggarwal, Head, North & East India, Treasury & Trade Solutions Sales, Citi:

Closing Remarks

Slide 13

Webinar Schedule:

1

Note: New York Time Zone

Opening Remarks

Speaker

10.00-10.05 A.M.

Munir S. Nanji is Managing Director and Regional Sales Head for Citi Treasury and Trade Solutions in Asia

Pacific covering large and multinational corporations, financial institutions, and public sector organizations. Prior

to his current role, Munir was Regional Head for Bank Services Group and Public Sector. Munir brings over 20

years of international banking experience. He started his career at Citi in 1992, spending over a decade in

Emerging Markets covering Corporate Banking, products, relationship and risk management. His extensive

industry experience includes establishing and leading Citi’s transaction services business in Africa and Central

Europe, running a large corporate and middle market business, as well as helping to drive the bank’s business

development efforts in EMEA based in London. Munir holds a 1st Class Honors degree in Electrical Engineering,

Wharton alumni, MBA from INSEAD and currently doing a doctorate at Cranfield School of Management.

2

Munir Nanji, Head, Asia Pacific, Treasury & Trade Solutions Sales, Citi

The 3 Ps of Economic Growth:

Policies, Politics & Processes

Speaker

Mr. Akbar has a long history working in politics. He was elected Member of Parliament in 1989, served in Lok

Sabha till 1991 with Congress support, was also the party’s spokesperson in 1989. He joined BJP in March 2014.

Over the course of his career, Mr. Akbar made significant contributions to the Indian Media as a journalist and

editor. He launched The Telegraph in 1982, widely recognized as India's first modern newspaper, The Asian Age

in 1994, India's first international newspaper, and The Sunday Guardian in 2010. Simultaneous with fulltime

journalism, he had a parallel career as an author of major internationally acclaimed books on the history of South

Asia, the volatile interplay of faith and nationalism on the Indian subcontinent, and conflicts between the Muslim

world and the Christian realms.

10.05-10.25 A.M.

3

MJ Akbar, National Spokesperson, Bharatiya Janata Party:

Treasury Best Practices in Emerging

Markets

Speaker

Gourang Shah, Head, Asia Pacific, Treasury Advisory Group, Citi

10.25-10.40 A.M.

As Head of Treasury Advisory, Gourang leads a team that provides advisory service to clients in setting up best

in class efficiency structures such as Treasury Center, Shared Service Center, Principal Structures, and In-house

Bank. Gourang has over 20 years of experience in Corporate Treasury, Mergers and Acquisition, Financial

Planning & Analysis, and Product Engineering. Prior to joining Citi, he was based in the United States as Vice

President and Assistant Treasurer of Tyco Electronics. Gourang holds a Master’s Degree of Business

Administration from the University of Michigan in Ann Arbor, United States and a Bachelor’s Degree from the

Indian Institute of Technology in Bombay.

4

-28 -38 -46 -78 -88 -32 -39 -48

-2.3%

-2.8% -2.7%

-4.2%

-4.7%

-1.7% -1.9%

-2.0%

-6%

-5%

-4%

-3%

-2%

-1%

0%

-100

-80

-60

-40

-20

0

2009 2010 2011 2012 2013 2014E 2015E 2016E

Current accountbalance (US$bn)Current account deficit(% GDP)

6.7%

8.6% 8.9%

6.7%

4.5% 4.7%

5.6%

6.5%

2009 2010 2011 2012 2013 2014E 2015E 2016E

Macroeconomic Environment Economic growth is picking up, CPI inflation has eased to 30-month low, while current account deficit appears

under control. Against this backdrop, investment into India has revived.

GDP Growth (% yoy) CPI (% yoy)

8.0%

14.9%

8.8% 9.0% 10.4%

8.3% 8.0%

6.5%

2009 2010 2011 2012 2013 2014E 2015E 2016E

Current Account Balance FDI

22 18 9 22 20 22 18 23

42

33

26

33

27

31 33

38

19 15 17

11 7

9

15 15

0

5

10

15

20

25

30

35

40

0

5

10

15

20

25

30

35

40

45

2009 2010 2011 2012 2013 2014E 2015E 2016E

FDI, Net into India (US$bn)

FDI - To India (US$bn)

FDI - Abroad (US$bn)

Source: Citi Research, July 2014 5

Efficient Treasury Operations (1)

Various initiatives and relaxation of regulations have lowered the barriers to international trade

Bilateral Trade Netting Goods trade allowed without RBI approval

Merchanting Trade Simplification

Avail export / import financing

Export Challenges Solution

Delay in BRC issuance Same-day e-BRC issuance (separate request letter not required)

Need for partial BRC Partial e-BRC in line with realization is available

No auto confirmation of BRC Email alerts sent to client post issuance

Import Challenges Solution

Manual filing and signing of documents Online generation / authorization of A1 Form, debit authority

Warehousing and managing open account import bills Document warehousing

3rd Party Payments for Import / Export now allowed

E-Bill Factoring Exchange E-acceptance and bill payments to MSMEs

Factoring Regulation Act Allows A/R as financing tool

Working Capital

Relief

Ease of

Doing

Business

Quicker

Turnaround

Reduced

Paperwork

6

Paper to Electronic ~30%* yoy growth in e-payment since 2003 (chart 1)

NEFT Continuous Settlement 12 hourly settlement per weekday

India MoneyLine: 24x7 system for 1-to-1 transfers to replace NEFT

Automated Clearing House (NACH) Integrated ECS for Debit & Credit

Covers 82,000+ bank branches across India

Standardization Structured Financial Messaging System (SFMS)

– Centralized, secured platform for NEFT, RTGS, NG-RTGS

– Allows quicker domestic LC transmission

ISO 20022 to be adopted for NG-RTGS

Bharat Bill Payment System (BBPS) Draft guidelines issued by RBI Aug 2014

Interoperability between multiple bill payment platforms

GIRO-based payment of essential services, insurance premia, utilities,

taxes, school fees

Efficient Treasury Operations (2) RBI’s vision for Payment and Settlement Systems (2012-2015) move India towards a “less-cash” society with

wider use of electronic payments

*By transaction value with exception of 2008-2009, although cheque volumes were still high (52% of total payments turnover) in 2012

DSO Turnaround Standardization

Charts source: RBI annual report

7

India: Domestic Interbank Pooling

Features

• Single currency

• Pre-specified targeted balances in source

accounts

• Mobilization based on pre-standing

parameters or instructions of periodicity,

timing, amount, direction

• Monitor flows of company accounts across

banks

(20) +30 (5) +10

0

Before Pooling

Bank A Bank B Bank C Bank D

After Pooling

0 0 0 0

15

Bank A Bank B Bank C Bank D

Benefits

• STP results from automation across

interbank pooling mechanism

• Eliminates O/D charges

• Pools idle, dispersed funds for gainful

application

Cash pooling is nascent in India

8

TIDE Fixed Deposits MIBOR-Linked

Deposit

Mutual Funds

(Debt)

Commercial

Paper

Issuer / Counterparty Banks Banks Banks MF Houses – CD,

CP, Govt Bonds

Govt, Public Co,

Private Co

Indicative Rates

(30d – 2yrs p.a.) 3% 7% – 8%

7.22%

(Mibor* – 100bps) 7.5% – 9% 8.6% – 9.8%

Tradable - - - - Yes

Principal Protection Yes Yes Yes - -

Payout Fixed rate paid daily Fixed rate paid at

maturity

Floating rate paid

daily

Daily / weekly /

monthly available Issued at discount

Terms 7d – 5yrs 7d – 5yrs 7d – 5yrs O/N – 1096d 7d – 1yr

Breakage Costs - 1% - Nil to 1% MTM

Manual / Auto Auto Manual Manual Manual Manual

Investment Options

* Overnight Mibor as of 13th Aug, 2014 was 8.22% 9

Subsidiary Funding Indian subsidiaries cannot participate in global cash pools. Instead, working capital of Indian subsidiaries can be

funded by the Finance Company via commercial papers and INR bonds.

CP INR Bonds INR Loans

(Bank Lending)

ECB*

(Interco Lending)

Tenor /

Limits • < 1 yr • < 5 yrs

• < 5 yrs

• RBI regulates max borrowing

limit per bank

• Max $750MM / yr via auto route

• <$20MM: 3 yrs**

• >$20MM: 5 yrs**

• 7 yrs now available for working capital

Lenders

• Typically

mutual funds,

banks, FPI

• Insurance

companies, FPI,

banks, pension funds

• Indian banks (incl. branches),

NBFI, NBFC

• Non residents (int’l banks, offshore

branches of Indian banks, parent co)

End uses • No restrictions • No restrictions

• Infrastructure & manufacturing

projects (syndicated loans)

• General corporate purposes

(bilateral loans)

• NOT for acquiring Indian

companies

• CAPEX, ODI in JV / subs

• NOT for on-lending, real estate sector,

Indian co acquisition, INR loan

repayment

Remarks

• Credit rating

required

• Prepayment

not allowed

• Credit rating required

• Prepayment not

allowed

• Credit rating required

• Prepayment allowed

• Covenants apply

• Floating rate interest only,

linked to bank Base Rate

• Credit rating not required

• Prepayment < $500MM possible

without RBI approval (min avg

maturity applies)

• Only for select industries

• Can keep proceeds abroad or remit

funds to India, pending utilization for

permissible end-uses

• LIBOR-based

• Monthly RBI reporting

*External Commercial Borrowing, which refers to bank loans, buyers’/suppliers’ credit, securitized instruments availed of from non-resident lenders with 3yr min avg maturity

**Amount per financial year, with stated min. avg maturity 10

Analytics Solutions

Risk Mitigation

Recent efforts from government and banks to develop solutions for risk mitigation in India

Aadhaar Bridge Payment Systems

Direct credit of gov’t benefit payments to beneficiary a/c

Aadhaar number – common authentication tool across payment instruments

Government

Banking

Partner

Payments Risk Manager Prevents misuse of financial authority

Identifies unusual transactions by

stopping payments during payment

initiation in CitiDirect

Interactive dashboard allows data

analysis by region, legal entity, a/c, etc

View volume and value trends

Credit Card 2nd factor authentication improves

security for card-not-present transactions

Mobile Collect Distributors / customers dial payments

24x7 using (IFSC and a/c #) or (MMID +

Amount + MPIN)

Pull transactions with customer’s mobile

number, MMID and distributors’ OTP

Eliminates risk of cash handling

Payment Analytics

Online portal to analyze A/P

data

Charts and reports

available

Facilitates easy cash flow

forecasting by identifying

payment trends

Receivables Vision

Aggregate A/R data across

channels

Dashboard view of key A/R

indicators

Drill-down, detailed reports

Allows user customization

Audit

Tracking

Surveillance

11

“Intelligent Centralization”

Regional Treasury Centers:

Funds business units

Forecasts cash flows

Identifies risk exposures

Executes investment and FX trades

Coordinates bank relationships

Provides close response to business

Central Treasury:

Sets policy

Manages aggregate risk

Forecasts / manages aggregate

liquidity

Plans / raises capital

Sets global bank relationship strategy

Central Treasury

Regional Treasury Center

Shared Service Center

Shared Service Centers:

Processes vendor payments, payroll, & customer

receivables

Provides cash forecasting support

Supports accounting processes

Centralization Delivers Benefits…

Operate at 5% lower Cash/ Market Value

Increase ROA by 1.44%

INSEAD case study, in collaboration with Citi,

demonstrates value of centralization: companies with

sophisticated centrally managed Treasury (relative to

those who leave Treasury decentralized) are able to:

Multiple Tobin’s Q* by a factor of 1.1

Source: Blue Ocean Finance: The Evolution of Corporate Treasury Operations in the 21st Century, INSEAD, 2013

*Tobin’s Q is calculated as the market value of a company divided by the replacement value of the firm’s assets. Low Tobin’s Q implies undervaluation of firm’s stock.

Balance centralization to attain the benefits of global efficiency and control, with proper distribution of resources

to capitalize on opportunities and mitigate risks occurring in key growth markets

…need to balance with optimal distribution of resources

12

Closing Remarks

Speaker

Ruchita Aggarwal, Head, North & East India, Treasury & Trade Solutions Sales, Citi

10.40-10.45 A.M.

13

As head of the North & East India Sales Management team, covering Global Banking & Global Subsidiary client

relationships, Ruchita has led her team to win new corporate and marquee public sector businesses, and

incremental mandates from existing clients. Prior to her current role, she was a Treasury & Trade Sales Manager

based out of New Delhi. She was responsible for managing over thirty multinational and large local corporate

clients across a variety of industries. Ruchita joined Citi in 2002 as a Management Associate and has held

various roles including Relationship & Sales Manager with the Commercial Banking Business of Citi, India. In

2008, Ruchita was a Senior Sales Consultant and championed the ‘Telecom sector’ for India. Ruchita has been

nominated twice to the “Global Chairman’s Club” in 2007 and 2008 and is recognized as a “Top Gun 2008” which

represents the top ten percent of the Chairman’s Club winners.

Please forward all questions or remarks to

saurabh.r.gupta@citi.com to continue the

discussion!

Have further questions for any of

today’s speakers?

14

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