New Delhi Based Chemical Importer - Trade Finance Service

New Delhi Based Chemical Importer - Trade Finance Service

2 Feb 2019   3:27 PM
 

Case:

A New Delhi based industrial chemical importer with an annual turnover of more than INR 170 crores. The company imports chemicals worth more than USD 2 million every month for manufacturing of industrial chemicals. Earlier, the client used to make payments in foreign currency through sight / usance LCs for imports but was unaware of foreign currency Trade credit facilities being provided by Nationalized Indian banks situated overseas.

Myforexeye Value Addition:

As the client was oblivious about the usance LC & supplier’s credit process, Myforexeye team assisted the client through the entire process of supplier’s credit along with the additional clauses of the LC which needs to be incorporated at the time of issuance. Our team assisted the client in discussing with their bank on extending the tenor of the LC required for Supplier’s credit. The client understood the entire process and opened a usance LC under Supplier’s credit route from their bank. We provided guidance to the client on negotiation with their suppliers on agreeing to the process flow of supplier’s credit. Keeping in mind the working capital cycle of the client, the LC needed to be opened for the tenor of 180 days from which 120 days were granted as interest free by the supplier.

Myforexeye team was able to arrange financing from an overseas bank for this transaction at LIBOR+50 bps p.a. After transmission of the LC to the beneficiary bank, the beneficiary disclosed that they always discount the LC on sight with their bank (for 120 days credit period that they extend to our client) and asked the applicant to incorporate the beneficiary’s bank’s name in a clause in Field 41D of the LC. Our negotiating bank also required their name in this clause without which they were not willing to proceed further. Myforexeye team discussed the whole situation with its overseas bank and proposed to client & their supplier to change the clause by replacing the name of the “negotiating bank” with “Any bank” on an exceptional one-time basis. Now the supplier was able to discount the LC with his bank (for 120 days) and applicant can also enjoy the benefits of foreign currency funding (for last 60 days). For future transactions, Myforexeye offered to discount the entire tenor of 180 days as the rates being proposed by us were more competitive than the rate the supplier’s bank was quoting. This offer is being discussed currently between the supplier & our client.

The client was very satisfied with our service and the ability to solve problems even after LC issuance without upsetting their trading partner & yet offer very competitive rates.

 

 

 

 


Date : 2-Feb-2019