CitiBusiness Newsletter Q4

CitiBusiness
Rajat Madhok
CitiBusiness Newsletter Q4 - 2013
Dear Client,
Greetings!
It is my pleasure to present to you the first edition of the CitiBusiness quarterly newsletter, a way for us to connect
with you periodically starting with this quarter of 2013.
The newsletter highlights key products, trends across industries, important regulatory updates and also showcases a
few of our successful events conducted in the recent past.
This has been a strong quarter for us and I am happy to announce that Citibank proudly took home a string of major
awards and recognitions at global, regional and national levels.
Citi was felicitated with the grand prize of ‘Best Overall Global Internet Bank’ award at the Global Finance World’s Best
Internet Bank Awards. It was a clean sweep in the Best Corporate/Institutional Internet Bank awards as Citi took home
the winner’s trophy at not only the global but also each of the regional levels i.e. North America, Western Europe, AsiaPacific, Latin America, Central and Eastern Europe and Middle/East Africa geographies.
Citi received the ‘Best Foreign Bank’ and also the ‘Best Foreign Retail Bank’ for the second consecutive year at the Dun
& Bradstreet-Polaris Financial Technology Banking Awards. We also received recognition for ‘Significant Achievement
in HR Excellence’ at CII’s 4th National HR Excellence Awards 2013. Citibank’s personal loan campaign received
accolades for ‘Best Mixed Media Marketing Campaign’ and recognition at the CMO Hall of Fame and Marketing Hall of
Fame 2013 by Paul Writer. This is also the second year Citi has won the ‘Best Foreign Large Banker’ award at The
Sunday Standard Best Bankers' Awards 2013.
These accolades are a tribute to your active support and confidence vested in our teams to deliver the best quality,
service and products to suit your specific needs.
We, at CitiBusiness, look forward to continue our work as your trusted partner and commit to adding more value to your
business. I do hope you will find this inaugural newsletter edition interesting and look forward to your suggestions and
feedback.
Wishing everyone a very happy new year!
Warm regards,
Rajat Madhok
Managing Director,
Head - Commercial Bank, Citibank India
CitiBusiness
Product Showcase – Buyers’ Credit
Buyer’s Credit refers to loans for payment of imports
into India. It is usually arranged by the importer from a
bank or a financial institution outside India for import
of either raw materials or capital goods. Buyer’s
Credit is available up to a tenor of one year for import
of raw material and up to three years for import of
capital goods. The importer can avail of Buyer’s Credit
under Open Account, Collections or Letter of Credit.
Buyer’s Credit transactions are regulated as per the
guidelines laid out by the RBI’s ‘Master Circular on
External Commercial Borrowings and Trade Credits’,
dated 2nd July 2012, and its amendments thereafter.
Citibank’s Global Presence Advantage - Citibank
customers can avail of Buyers’ Credit at competitive
rates from an overseas Citibank branch owing to the
global presence of Citibank.
CitiBusiness
The flow of a typical Buyer’s Credit transaction is depicted below.
Goods import
Seller
6
Import payment made to Seller’s Bank
Payment released
due date
Payment made on
Documentation
3
Execution of Loan
1
Requests for BC
Buyer
7
6
Seller’s Bank
BC Loan repaid on due date
Citibank India
Funding from Overseas Branch to Citi India’s Nostro Account
5
Transmission of Loan booking request
4
Obtain loan document from Citi Overseas Branch
2
Citibank Overseas Branch
Important facts about Buyer’s Credit
?
Authorized Dealer (AD) banks are permitted to approve Buyer’s Credits for imports into India up to
USD 20 million per import transaction, only for imports permissible under the current Foreign Trade
Policy of the Directorate General of Foreign Trade (DGFT) with a maturity period up to one year (from
the date of shipment)
?
For import of capital goods as classified by DGFT, AD banks may approve Buyer’s Credit transactions
up to USD 20 million per import transaction with a maturity period of more than one year and less
than three years (from the date of shipment)
?
No roll-over/extension is permitted beyond the permissible period
Regulatory update regarding all-in-cost ceiling of Trade Credits for imports into India
?
As per RBI review, it has been decided that the all-in-cost ceiling as specified under paragraph 4 of
A.P. (DIR Series) Circular No. 28 dated September 11, 2012 will continue to be applicable till September
30, 2013 and is subject to review thereafter
?
It has also been decided that for availment of trade credit, the period of trade credit should be linked
to the operating cycle and trade transaction. AD banks may ensure that these instructions are strictly
complied with
?
All other aspects of Trade Credit policy remain unchanged
CitiBusiness
Sector Updates
IT/ITES
Software industry shows signs of recovery; Business volumes pick-up
After a period of prolonged slowdown, the
effort on the part of companies to better utilize
software industry is showing signs of recovery as
their bench strength and improve employee
per CMIE reports. Business volumes have
utilisation. As a result, utilisation levels across
improved, order pipe-lines are robust, utilisation
companies have gone up by 200-600 basis
levels have increased and most companies have
points to 74-85 per cent during April-September
been able to rein in attrition levels.
2013 as compared to the previous year.
As per CMIE analysts, although the sales growth
Driven by higher business volumes and the
of the listed software companies during 2011-13
benefits of rupee depreciation, aggregate sales
remained healthy, business volumes were muted.
of the listed software companies grew by 23.4 per
However, with a gradual improvement in the
cent y-o-y during the first half of the year. CMIE
economic environment in client markets,
expects the industry’s sales growth to improve
companies are witnessing an increase in
further in the coming quarters due to the
business volumes. All leading IT powerhouses
addition of new clients and the improving
have reported a healthy rise in business volumes
economic conditions in client markets.
during the first half of the current financial year.
Additionally, many large software outsourcing
CMIE analysts opine that client budgets for the
current year for IT companies are higher than the
previous two years. Even the discretionary
spending by clients is improving. There has been
deals are scheduled to come up for renewal in the
coming quarters and Indian companies are
expected to grab a larger share of these multiyear deals. This would also help the industry.
an improvement in demand across both US and
To cater to the growing business volumes, CMIE
Europe. The rise in business volumes over the
experts predict that software companies are
past six months has also pushed up utilisation
expected to continue hiring new employees.
levels of companies. Although employee
Companies are also planning to step-up on-site
additions have been lower than the previous
recruitment to comply with the proposed new US
years due to lower hiring, there was a conscious
bill and stricter local employment norms.
CitiBusiness
Sector Updates
Automobile Ancillaries
Automobile ancillaries production grows 7.2% during April-September 2013
According to data released by the Central
the second-half of 2013-14. This will lead to an
Statistical Organization (CSO), production of
improvement in demand from the OEM segment.
automobile ancillaries during the first half of
Additionally, the increasing localization efforts of
2013-14 was 7.2 per cent higher than the previous
OEMs are also expected to bode well for the
year. While domestic automobile production
industry.
during this period was flat, a healthy
replacement demand for auto parts and the low
base of the previous year was responsible for the
healthy rise in production during this period.
The replacement demand for automobile
ancillaries will also continue to remain healthy.
For the year ending March 2014, CMIE experts
expect replacement demand to grow by around
CMIE analysts expect the healthy rise in
9-11 per cent. This will be led by the average 13.2
automobile ancillaries production to continue
per cent growth in automobile sales, witnessed
during the second half. For the year ending March
during 2007-11.
2014, CMIE expects automobile component
production to rise by 8.2 per cent. This would be
significantly higher than the 3.7 per cent rise
reported during 2012-13 and would be driven by
an improvement in demand from the original
equipment manufacturer (OEM) segment and a
healthy demand from the replacement segment.
While demand from the domestic markets will
remain buoyant, auto component demand from
the overseas markets is likely to be sluggish in
2013-14 as per CMIE industry experts. Demand
from EU is expected to remain weak due to the
prevailing uncertain economic environment.
However, an expected recovery in demand from
The OEM segment is the key driver of auto
North American markets is expected to support a
component demand, accounting for about 70 per
modest rise in export earnings in 2013-14. Auto
cent of the total market share as per CMIE
component exports are expected to rise by 2.3
reports. Domestic automobile production is
per cent (in USD terms) during the year.
expected to grow by a healthy 6.3 per cent during
CitiBusiness
Sector Updates
Drugs and Pharmaceuticals
Net sales of drugs & pharmaceutical industry up by 7.2% y-o-y in first-half of 2013-14
According to CMIE reports, net sales of the 137
share in total ANDA approved by the USFDA has
listed drugs & pharmaceutical companies that
been on an upswing since past few years.
have announced their results for the first-half of
2013-14 grew by 7.2 per cent on a y-o-y basis. The
growth in industry’s sales was broad-based with
around 67 per cent of the companies reporting
higher sales than the same period a year ago.
While net sales of the large-size companies rose
by a healthy 13-15 per cent, that of mid-sized
companies and small-sized companies either
remained flat or grew by a modest 4-5 per cent.
CMIE analysts believe that exports will continue
to grow in the ensuing months of the year 201314. Pro-generic policies of the developed
countries and new marketing strategies
(venturing into new markets and tapping niche
revenue segments) of the Indian pharmaceutical
companies will continue to back the growth in
exports. Indian pharmaceutical companies are
eyeing growth prospects in some of the fast-
As per CMIE, Indian drug exports, in rupee terms,
growing and emerging markets like Russia,
grew by 11.3 per cent to Rs.433.7 billion during
South Africa, Latin America etc. Besides this, the
April-September 2013. The growth in exports
generic companies are diversifying into different
came in spite of increased regulatory scanning
product categories and are exploring niche areas
by the US Food & Drug Administration (USFDA).
like oral contraceptives, dermatology, injectable
Nineteen import alerts have been slapped on
oncology, paediatrics, primary care and custom
Indian facilities in 2013 so far, the highest in the
research manufacturing services (CRAMS). This
five year period. It is also the highest as
is because they are high growth areas and
compared to any other country. In spite of this,
provide limited competition.
Indian companies managed to grab significant
number of abbreviated new drug application
(ANDA) approvals by USFDA in 2013 so far. Out of
290 ANDAs approved during the year, 110 were
granted to Indian companies. Moreover, India’s
As per CMIE, the industry was unable to translate
the growth in sales into profit growth. Net profit
of the industry fell by 3.4 per cent during the first
six months of the year 2013-14. Net margin
contracted by 100 basis points to 8.9 per cent
during April-September 2013.
CitiBusiness
Client In-Focus
'
'
Sledgehammer Oil Tools Pvt Ltd
We sincerely cherish our relationship with Citi. Citi has always been keen to support our
growth plans and their insightful market coverage and advisory has been instrumental in
'
'
helping us achieve our growth goals effectively. We look forward to continue to benefit
from Citi’s award winning banking products, service delivery platforms and advisory
services, customized to meet needs of our growing enterprise.
- Mr. Pradeep Mohanty, MD, Sledgehammer Oil tools Pvt Ltd.
Brief on the company
Sledgehammer Oil Tools Ltd established in 2006
is a Faridabad, Haryana based company engaged
in the manufacturing of oilfield casing and
cementing accessories. The company is a
Government recognized export house and Asia’s
largest producer for Casing accessories for the
oil fields. The company is export focused and
supplies directly to various geographies globally.
Relationship with Citi
The client’s relationship started with
CitiBusiness in July 2012, while this has been a
liability relationship with the bank since 2006.
Over the past year, CitiBusiness has become the
one-stop solution provider for the entire gamut
of the client’s banking requirements, including
Working Capital funding and foreign exchange
advisory. The business solutions suggested by
Citibank have helped the client to save interest
costs of approximately $140M.
Business Need
About 95% of the client’s top-line comes from
exports to various geographies around the
world, such as USA, Europe, Russia, Malaysia,
Canada, Australia and the middle-east. The
company has been in high-growth mode, and
required affordable external funding to fuel its
growth. At the point the client had access only to
funding at rupee linked interest rates.
CitiBusiness
Client In-Focus
Citi’s Engagement and Benefits to client
Leveraging Citi’s global presence and access to
cheaper dollar funding, CitiBusiness provided
the client with a two-fold solution to further its
growth – a break on interest rates by providing
cheaper dollar rate-linked funding, at the same
time providing an enhancement on quantum of
facilities. Given the client’s exposure to global
currencies and the inherent foreign exchange
risk, CitiBusiness also brought to the table its
expertise on foreign exchange advisory and thus
ensured mitigation of currency risk.
Saurabh Jain, Citibanking Head (North) & Amit
Mamgain, Branch Manager, Faridabad presenting
the Friendship cup trophy to Mr. Pradeep Mohanty,
Managing Director, Sledgehammer Oil tools Pvt Ltd.
Team Citi and Team Sledgehammer have a great
relationship outside the meeting rooms too. The 2
teams have been playing an Annual Cricket series
aptly named the ‘Friendship cup’ for the last 3
years. The picture is at the award distribution
ceremony of the Friendship cup 2013 held on
27.10.13 where Sledgehammer won the series 2-1.
CitiBusiness
Client Events
CitiBusiness Bank Webinar
: 10th September, 2013
Date
Theme : Volatile Foreign Exchange in Current Market Scenario
A webinar was conducted for CitiBusiness clients where users could login to the session from the comfort of their
workplace/home. The webinar speaker for the session was Mr. Gautam Das, Director -Treasury, Citi Commercial Bank
India. The topic of the webinar was Volatile Foreign Exchange in Current Market Scenario. The webinar recorded an
attendance of 267 participants, including 167 unique client industries. This was also very interactive as there was a
stream of questions from clients across the country wanting to know Citi expert opinions on topics related to foreign
exchange varying widely from appointment of a new RBI governor to the potential Syria war and its impact.
CitiBusiness Client Event, Bangalore
Indraneel Saha, Lending Specialist, Citibank India, sharing insights | Participants at the event
Venue : Hotel The Elanza, Richmond Road, Bangalore
: 2nd August, 2013
Date
Theme : Opportunities in IESS 2014 & INDEE Vietnam
The event was conducted in collaboration with EEPC INDIA (Formerly Engineering Export Promotion Council)
specifically for SME exporters/ importers from Bangalore. The event was attended by top importers & exporters
from different industries. Indraneel Saha, Lending Specialist, Citibank India was the speaker and he introduced the
audience to the CitiBusiness commercial banking proposition. He also shared his insights on the Indian economy
and currency movements. It was an evening event that concluded with an interactive session over dinner.
CitiBusiness
Key Regulatory Updates
RBI has released a circular (Ref: RBI/2013-14/364 A.P. (DIR Series) Circular No.70) dated November 8,
2013 with respect to settlement of imports / exports with third parties (Parties other than
importer/exporter). The guidelines are mentioned below:
EXPORT TRANSACTIONS:
AD banks may allow payments for export of goods / software to be received from a third party (a party
other than the buyer) subject to conditions as under:
a)
Firm irrevocable order and a tripartite agreement should be in place
b)
Third party payment should come from a Financial Action Task Force (FATF) compliant country
and through the banking channel only. Website Link - http://www.fatf-zgafi.org/pages/aboutus/
membersandobservers/ can be referred for updated list of FATF countries
c)
The exporter should declare the third party remittance in the Export Declaration Form/SDF/Softex
form. In the event that the export payment is to be received from a third party, the third party details
will need to be in line with the information in the EDF/SDF/Softex form.
d)
It would be responsibility of the Exporter to realize and repatriate the export proceeds from such
third party named in the EDF
e)
Reporting of outstanding, if any, in the XOS would continue to be shown against the name of the
exporter. However, instead of the name of the overseas buyer from where the proceeds have to be
realized, the name of the declared third party will be shown in XOS report to RBI
f)
In case of shipments being made to a country in Group II of Restricted Cover Countries, (e.g. Sudan,
Somalia, etc.), payments for the same may be received from an Open Cover Country. Open cover
country list will be restricted to FATF compliant list as mentioned in point (b) above (i.e. if a country is
mentioned in the “open cover country” list and is not part of FATF compliant country list, “third party
payment” cannot be allowed). Website - http://www.ecgcindia.in/en/Lists/Circulars/
Attachments/28/Country%20Classification%20List.pdf can be referred for Group II of restricted
cover countries, and Open cover countries.
Note: Restricted cover Group II country is country which experiences chronic political and economic
problems as well as balance of payment difficulties.
CitiBusiness
Key Regulatory Updates
IMPORT TRANSACTIONS:
AD banks are allowed to make payments to a third party for import of goods, subject to conditions as under:
a)
Firm irrevocable purchase order (or) tripartite agreement should be in place
b)
Third party payment should be made to a Financial Action Task Force (FATF) compliant country
and through the banking channel only. Website Link - http://www.fatf-gafi.org/pages/aboutus/
membersandobservers/can be referred for updated list of FATF countries
c)
The Invoice should contain a narration that the related payment has to be made to the (named) third party
d)
Bill of Entry should mention the name of the shipper as also the narration that the related payment
has to be made to the (named) third party.
e)
Importer should comply with the related extant instructions relating to imports including those on
advance payment being made for import of goods; and
f)
The amount of an import transaction eligible for third party payment should not exceed USD
100,000. This limit will be revised as and when considered expedient.
The above guidelines come into force with immediate effect for shipments effected post 11th November, 2013.
RBI has released a circular (Ref. no. RBI/2013-14/301/A.P. (DIR Series) Circular No. 56) dated
September 30, 2013 regarding the review of all-in-cost ceiling.
As per the circular, RBI has decided to continue the existing all-in-cost ceilings for trade credits for imports
into India till March 31, 2014.
CitiBusiness
Disclaimer:
Nothing in this News Letter is an offer, invitation to offer, commitment or agreement on the part of Citibank or on the part of any Citibank
entity, including to prepare, negotiate, execute or deliver any product/s, service/s, arrangement/s, lending or subscription and does not
give rise to any liability or obligation on the part of any Citigroup entity. Not all products and services are necessarily applicable to all
prospects / customers or available at all locations or at all times. All products and services are subject to the provisions of the applicable
laws and regulations and Terms and Conditions applicable from time to time. Availability and issuance of products and/or services is also
subject to, among other factors, where relevant, such due diligence as may be required by Citibank, an offer being made by Citibank and
an acceptance of that offer, internal approvals and external approvals (if any) and the customer meeting regulatory as well as Citibank's
internal policy requirements. This News Letter is merely descriptive of various products that are currently available.
Terms and Conditions, without limitation, the nature of products and services, rates operational particulars etc., may be modified or
supplemented by Citibank for its products / services in its sole discretion at any time and from time to time including during the course
of a due diligence and/or credit approval process or as a result of changes in market or economic or other relevant conditions or criteria
otherwise (including the absence of any material adverse change in the financial markets or in the financial condition, operations or
prospects of relevant persons).
The source of the information in the 'Sector Updates' section of this News Letter has been taken from the CMIE databases and therefore,
it does not represent Citibank’s view on any sector.
For more information on the awards, please visit www.dnb.co.in, www.cii.in, www.paulwriter.com, www.thesundaystandard.com and
Global Finance (www.gfmag.com).
Prior to availing of any products or services or entering into any transaction including a borrowing, subscription or Investment
("Transaction/s"), you should determine, without reliance upon Citibank or its affiliates, the economic risks and merits (and
independently determine that you are able to assume these risks), as well as the legal, tax and accounting characterizations and
consequences of any such transaction. Please note that neither Citibank nor any other Citigroup entity is in the business of providing
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All products and services are at the sole discretion of Citibank and subject to RBI / FEMA / SEBI / Other regulatory guidelines issued
from time-to-time.
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