Nov 20 2018

Mumbai based steel importer – Trade Finance Service

Case:

A Mumbai based steel importer, which was set up in 1980s, and is now amongst the reputed players in Stainless Steel utensils industry. Client is a leading player engaged in the manufacturing and exporting of kitchen utensils. With increasing demand, client wanted to expand production and was looking to import machinery for setting up an additional line. Given it was a capex import, the client desired longer tenor funding at competitive rates.

Myforexeye value addition:

The client was in discussion with their bank for term funding and also approached Myforexeye for advice with funding options available to them. During discussions, we assessed that the payment terms with supplier was a combination of advance payment & a large portion was at sight. The ‘at-sight’ portion was eligible for funding options and we explored buyers credit backed by SBLC, but faced lack of appetite from overseas lenders under this product. Given supplier was insisting on a sight LC, we proposed UPAS (Usance LC Payable at Sight) instead, to accommodate funding. Given the tenor, appetite was a challenge for most overseas lenders, however, Myforexeye was able to secure commitments from a couple of lenders at attractive pricing. We went with the best offer with an objective to assist the client in overall cost reduction as well. However, the supplier was resistant in accepting a UPAS LC when their payment terms was ‘at-sight’. Myforexeye team provided support to the client in their discussions with supplier and suggested that supplier should take opinion from their relationship bank to verify that their commercial interest was protected under this structure. This worked, and the supplier was supportive post receiving such an opinion from their bank on the LC.

The deal was closed with L+80 bps p.a. for 1080 days with annual LIBOR reset. Compared to INR term funding rates, Myforexeye was to help the client in saving hugely on the interest cost. Since then, the client has also partnered with us for forex advisory needs.