Fixing the leakage on IBR
Case: One of our clients now, based in Tirupur has exports in one of the entity and imports in other group entity. Have transactions for both exports and imports in the same bank. While converting every dollar on the exports receivable, they faced an interbank rate difference of 6 paisa and on imports payments they paid 7 paisa more than the interbank rate. Therefore, a difference in single dollar was 13 paisa and with the turnover of nearly 120 crores, the client lost nearly 20 lakhs per annum which he was not aware of.
Solution: CR Forex identified the leakage in the rates and gave the client an access to CR Forex live screen. With the help of CR Forex live ticker, the client could better negotiate with the bank and fix the interbank difference to zero to one paisa for both exports and imports. Hence, on a conversion of single dollar, the client saved nearly 12 paisa i.e. nearly 19 lakhs annually.
The client was very happy with the cost saving that our live screen could do for him and upgraded himself by taking our other services too.
Structured hedging technique for exporters
Case: A thin margin spices exporter based in Indore having monthly exposure of nearly 4 lakh USD used to book range forwards and lost nearly 25 paisa per dollar or 12 lakhs on their annual exposure. Secondly, they used to only hedge 40-50% of his exposure being in a thin margin business and rest convert on spot to take advantage of a depreciating rupee. However at times when the trend of the rupee is on an appreciation side, they used to lose heavily against the un-hedged exposure.
They approached CR Forex to fix and optimize their Forex practices.
Solution: Firstly CR Forex suggested them to shift from range booking forward contact to fixed date booking forward contract. This helped them to earn premium for an additional entire month which is nearly 25 paisa rather than just earning up till beginning of the month which earned them less premium.
For e.g.: For an order taken on 1st Jan and expected payment receivable on 31st March.
In range booking i.e. forward booked from 1st March to 31st March, Forward Premium earned is – 50 paisa.
Whereas, In fixed date booking i.e. forward booked for 31st March, Forward Premium earned is – 75 paisa.
Secondly, we suggested them not to get carried away by market move and follow a risk management policy by hedge 80%-100% of their exposure. This helped them earn sustainable and significant gains irrespective of whatever direction the USDINR pair moves.
Since then, they have become one of our oldest loyal clients and following our designed policy have warranted themselves against the market.
Risk Management for Importers
Case: A Delhi based importer having an import turnover of nearly 7 lakhs per month were reluctant to pay premiums in order to hedge. In March 2020, when rupee depreciated significantly, the client had incurred heavy Forex loss due to un-hedged exposure. Also on the banking front, their bank didn’t pass them the cash spot benefit of 2 to 3 paisa due to lack of their awareness, thereby losing nearly 1.68 lakhs annually merely on cash spot.
Solution: CR Forex identified the drawbacks in the existing Forex practices, explained significance of systematic hedging and designed a risk management policy that included safeguard the exposures using various tools like in the combination of forwards and option. By adapting to the mix of both, client’s exposure was prevented against the irrational market move by having opportunity to participate even while rupee appreciates and freeze the risk while rupee depreciates.
Secondly, CR Forex team helped client to identify the omission of cash spot on the banking front and saved/earned them cash spot benefit in case of any cash conversions.
After testing and trying CR Forex services, the client gave our reference to two other companies who have also started taking our services.