International Financial Environment, Euro Money Market, International Capital Markets, International Bond Market, International Equity Market, GDR’s, FCCB’s, External Commercial Borrowings (ECB’s), Working Capital Management in MNC’s, INTERNATIONAL CASH MGMT, Centralized Vs Decentralized CM, Techniques to optimize cash flows, Netting, Transfer Pricing, Sources of short term funds,

2.  Types of Exposures
 Sources of Long Term Funds
 Sources of Short Term Funds and Cash Management
in MNC’s

3. International Monetary System
International BanksMNC’s
International Financial
Institutions
Financial
Intermediaries
International
Capital markets
Foreign Exchange
Market
International Monetary Fund
Euro Money
Market

4.  Euro Currency
 Euro Deposits
 Euro Loans
 Loan syndication
 Euro Banking
 Euro Banking and Central Banks

5. Foreign
Bonds
International Capital Markets
International Bond Market International Equity Market
Euro
Bonds
Euro
Bonds
Foreign
Equity
•Yankee Bonds
•Samurai Bonds
•Bulldog Bonds
•Euro/Dollar
•Euro/Yen
•Euro/Pounds
ADR GDR

6. Foreign Bonds Vs Euro Bonds
International Debt Instruments
 Straight Euro Bonds
 Convertible Euro Bonds
 Bonds with warrants
 Currency cocktail
 Yankee Bonds
 Samurai Bonds
 Floating Rate Notes (FRN)
 Bulldog Bonds

7.  GDR
 ADR
 EDR
Portfolio Investment vs FDI

8. Investors
Company
Lead managers
& Syndicate
Luxemburg
Stock
Exchange
Custodian
Depository
Shares
Mechanism of GDR’s
GDR’sGDR’s
GDR’s

9. Company
Lead managers
& Syndicate
English Legal
Counsel
Indian Legal
Counsel
Investors
Luxemborg Stock
Exchange
Custodian
Luxemborg
listing Agent
Depository
PR consultant
Auditor
Indian Legal
Counsel
English Legal
Counsel
Euro clear
Cedel & DTC
GDR’sShares
Listing
Agreement
Depository
Agreement
Subscription
Agreement
Mechanism of GDR’s

10.  Pre Issue Discuss Strategy, Obtain legal
advice, prepare tentative plan of issue
 Week 0-4 Nominate Lead Manager, co managers,
depository, bankers etc.
 Week 5-7 Meetings between LM, auditors, legal
advisors, preparation of official circular
 Week 8 LM completes & sends preliminary offer
offer document to co-managers &
underwriters.
 Week 9 Road shows and investor meets
 Week 10 Launch & syndication by LM, foreign
listing, trading approval etc.

11.  Advantages
 Easy access to foreign capital markets
 Lower leverage and reduces interest rate burden
 No Cash redemption
 Free of foreign exchange risk
 Stabilisation effect from enhancing trading facility
 Disadvantages
 Immediate EPS dilution
 Dividends not tax deductible
 No downside protection for investors

12. Advantages
 Sell Shares at Premium
 No immediate EPS dilution
 Appeals to defensive investor
 No bond repayment if converted
Disadvantages
 Increase leverage
 Increase interest burden
 Foreign exchange risk

13. Automatic Route
Approval Route

14. INTERNATIONAL CASH MGMT
ACCOUNTS RECEIVABLE MGMT
INVENTORY MANAGEMENT
SHORT-TERM FINANCING

15. Objective of Cash Management in MNC-
 To maximize return by proper allocation of short
term investments
 To minimize cost of borrowing by accessing
different money markets

16. Key Areas:
1. Organization
2. Collection/Fund Disbursement
3. Interaffiliate Payments Netting
4. Excess-Funds Investment
5. Optimal Global Cash Balances
6. Cash Planning/Budgeting
7. Bank Relations

17. Advantages –
 Efficient liquidity levels
 Enhanced profitability
 Quicker headquarter action
 Decision making enhanced
 Better volume currency quotes
 Greater cash management expertise
 Less political risk

18. Disadvantages –
 Complete centralization is practically impossible
 Local problems in dealing with customers
 Conflict of interest among parent and subsidiary

19. Accelerating cash inflows
Managing blocked funds
Leading and Lagging
Netting
Transfer Pricing
Investing excess cash

20. Offset payments of affiliate receivables/ payables so that
net amounts only are transferred
 Bi lateral Netting
 Multilateral Netting

21. China
India
Parent USA
UK
China
India
Parent USA
UK
4 m $
1 m $
6 m $
1.75 m $
5.25m $
1 m $
2 m $
3.5 m $
2 m $

22.  Trade Credit
 Pre Shipment
 Post Shipment
 Bill Discounting
 Export Financing

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