Vardhman

Summer internship project report on
“Export financing and

foreign bank charges”
Carried out at
Submitted towards the fulfillment of

SUMMER TRANING
(2008-2009)
SUBMITTED BY : VISHESH GARG

Information Sheet
Name of the company :- VARDHMAN TEXTILES LIMITED
Address of the company :- CHANDIGARH ROAD

LUDHIANA-141001
Phone No. of the company :- 0161-2228943/44/45/46/47/48
Date of internship Commencement :- May 15th 2008
Date of internship Completion :- July 7,2008
Signatures & Name of the industry Guide :- Mrs. Seema Saggar
Designation of the industry Guide :-
Student’s Name :- Vishesh Garg
Student’s Roll Number :- 27078
Student’s E-mail ID :- visheshgarg1986@gmail.com
Student’s Mobile/ residence numbers:- 09999091440

ACKNOWLEDGEMENT
I thank NIILM-CMS for giving me an opportunity to undertake my project work and for
giving me knowledge in field of finance during my two months Summer Internship Any
person can never do work of this nature alone.
I express my sincere and humble gratitude to Mrs. Seema Saggar for being my project
and Industry guide and educating me to make this project a Great Success
I would like to thank Mrs meenakshi for her valuable guidance and support in completion
of my project .I would express my sincere thanks to all the staff members of
VARDHMAN TEXTILES LIMITED (Mr. Rajeev , Mr. Pankaj, Mr. Rohit and many
more ………..without their support this project would not have been a success
Last but not least I would like those person This formal piece of acknowledgement may
not be sufficient to express the feeling of gratitude & respect for those who were
associated with the project & whose encouragement and ideas enriched my project
PREFACE
When everybody is providing what is expected from him, the person delivering the
unexpected to its customers succeeds in the long run. In today’s marketplace, it is no
longer enough to satisfy the customers, the manufacturer needs to delight them as well.
To conquer the modern business world one needs to be one- step ahead of its competitors.
All this might not be of any relevance if not managed properly and that is what a
management graduate is expected to deliver to the industry. However, studying the
theoretical cannot serve the purpose of young & learning managers & that’s why they are
placed in the corporate world to have its imminent view.
Summer training helps the students to view the real business world closely, which in turn
widely influences their conceptions & perceptions. I was fortunate to pursue my training
in a reputed, well established, fast growing & a professionally managed organisation.
This project report is the result of eight weeks training at Vardhmān Group, Ludhiana. It
gave me great deal of exposure & I found practical work very different from theoretical
one.
ABSTRACT
Vardhman is one of the largest textile producer in India having footprints in specialized
yarns, fabrics, sewing threads, acrylic fiber and steel
Every year Out of the total turnover of the Vardhman Group,
approximately 19.94% consists of exports amounting to Rs.489.23 crores. Majority of the
exports is L/C based with a usance period of 90 days to 120 days.
These charges are normally on account of Telex, re-imbursement and/or Discrepancies. In
the FY2007-08, Vardhman paid an amount of 154.83 lacs on account of foreign bank
charges
The Company prepares a Bank Charges Analysis Report every year to analyze the trend
in the amount of charges paid, here our main objective is to analyise these can further be
reduced .
This report contains the Bank Charges Analysis Report FY 2007-08.
METHODOLO
GY
BASIC METHODOLOGY:
EXPLORATORY RESEARCH USING SECONDARY DATA

TEXTLE INDUSTRY
Textile industry is primarily concerned with the design and/or manufacture of clothing as
well as the distribution & use of textiles.
During the late medieval period cotton become known as an imported fibre in Northern
Europe.
By the end of 16TH century, cotton was cultivated throughout America. In roman times
wool linen & leather clothes, was a curiosity that only naturalise had herd of & silk
imported along the silk road from china was an extravagant luxury. The use of flax fibre
& the manufacturing of clothes in northern Europe dates back to Neolithic times.
The process of making clothes depends slightly on the fibre being used, but there are
three main steps-
Preparation of fibres for-
Spinning
Weaving
& knitting.
The preparation of fibres differ the most depending on the fibre used. Flax requires
retting & dressing while wood requires carding & washing. The spinning & weaving
processes are very similar between fibres though.
Spinning wheels & spindles or part was invested in India between 500 & 1000 AD.
DURING THE INDUSTRIAL REVOLUTION:-
The textile industry grew out of the industry revolution in the 18 TH century as mass
production of clothing became a main stream industry.
POST INDUSTRIAL REVOLUTION:-

Power looms were shuttle operated but in early part of the 20TH century, the faster & the
more efficient shuttle less looms came into an existence. Today advances in technology
have produced a variety of looms designed to maximised production for specific types of
material. The most common of these are –
Air jet looms & water jet looms. Industrial looms can weave at speeds of six rows per
second & faster.
INDIAN TEXTILE INDUSTRY & ITS GLOBAL POSITION
The Indian textile industry witnessed growing investments during the last three years. It
is estimated that the textile industry received fresh investment of Rs. 50,000 crores during
2004 and 2006.the fresh investment will enable the industry to expand capacities and
achieve economies of scale. Our economy is largely dependent on textile manufacturing
and trade in addition to other major industries. About 27% of the foreign exchange
earnings are on account of export of textiles & clothing alone.
The textile & clothing sector contribute about 14% of the industrial production & about
3% to the gross domestic product of the country. Around 8% of the total excise revenue
collection is the contributed by the textile industry.
The textile industry in India has a strong multi-fibre raw material production base. A
technology SAVVY industry to meet the challenges ahead.
“India is presently exporting 6 billion U.S. dollars worth of garments, where as with the
WTO regime in place, we can increase the production and export of garment from 18 to
20 billion U.S. dollars within next 5 years.”
First time a separate policy statement was made in 1985 in regard to development of
textile sector.
With new investment flow, India’s cotton production increased by 57% over the last 5
years & 3 million additional spindles & 30000 shuttles less looms was installed.
 The Indian Textile Industry is the second largest in the world.
 It has the largest cotton acreage (9 million hectares).
 It is the third largest cotton producer.
 It ranks 4TH in terms of staple fibre production & 6TH in filament yarn production.
 India accounts for (circa) 25% of the Global trade in cotton yarn.
 It is the largest producer of Jute, the second largest producer of silk and the 5 th largest
producer of synthetic fibre / yarn.
THE INDIAN TEXTILE INDUSTRY WITHIN THE INDIAN

ECONOMY
 The Indian Textile and Apparel industry :

o contributes to circa 3.6% of India’s gross domestic product
o Accounts for 25% of India’s exports.(Ref 7).
 The Textile Industry accounts for about 20% of industrial production.
 The Textile Industry employs over 15 million people.
 Textiles and Garment exports account for 39% of India’s total exports.
 Globalisation has brought opportunities for Indian Textiles.
 But Globalisation also brings threats which have to be addressed (particularly
from cheap imported fabrics).
 If the WTO means better distribution of world trade, it will not be free for all and
only the fittest will survive.
 WTO benefits for Indian Textiles will also apply to other developing countries.
 The Indian Textile Industry has great potential, but great challenges ahead.
 It must maximise its strengths and minimise its weaknesses.
INDIA’S COMPETITORS
India’s exports fall into the low risk category because of its well developed domestic
textile industry.
Despite this, India’s exports do face serious competition from the following countries
• China
• Bangladesh
• Pakistan
• Sri Lanka
Main markets of Indian textiles are:-
• Australia
• Mauritius
• Bangladesh
• New Zealand
• Belgium
• Russia
• Canada
• Saudi Arabia
• China
• Singapore
• Columbia
• Spain
• Egypt
• Sri Lanka
• Germany
• Switzerland
• Greece
• Syria
• Hong Kong
• Thailand
• Indonesia
• Ukraine
• Israel
• U.K
• Italy
• USA
• Japan
• Uruguay
• Korea
• Venezuela
• Lebanon
• Vietnam
• Malaysia.
MULTI-FIBRE ARRANGEMENT (1974)

After the textile quota regime of quantitative import restrictions under the Multi- fibre
Arrangement (MFA) came to an end on Ist Jan 2005 under WTO agreement on textiles &
clothing.
MFA was designed to be a short term measure primarily to give industrialise countries
time to adjust to competition from imports from developing countries.
Aim of MFA was to allocate export quotas to low cost developing countries & limiting
the amount of imports to countries whose domestic industry’s faced serious challenges
from rapidly increasing imports. The expiration of MFA didn’t however mean the end of
quotas on textile & clothing exports from developing countries. The MFA is regime
served to protect newly industrialised countries like Korea, Taiwan & Hong Kong that
have now become non-competitive due to substantial increase in domestic wages.
It checks the decline of textile sector in the industrialised countries but failed to help it
revive
SWOT ANALYSIS
STRENGTHS:
 Indian Textile Industry is an Independent & Self-Reliant industry.

 Abundant Raw Material availability that helps industry to control costs and
reduces the lead-time across the operation.
 Availability of Low Cost and Skilled Manpower provides competitive advantage
to industry.
 Availability of large varieties of cotton fibre & has a fast growing synthetic fibre
industry.
 India has great advantage in Spinning Sector and has a presence in all process of
operation & value chain.
 India is one of the largest exporters of Yarn in international market & contributes
around 25% share of the global trade in Cotton Yarn.
 The Apparel Industry is one of largest foreign revenue contributor & holds 12%
of the country’s total export.
 Industry has large and diversified segments that provide wide variety of products.
 Growing Economy and Potential Domestic & International Market.
 Industry has Manufacturing Flexibility that helps to increase the productivity
WEAKNESSES:
 Indian Textile Industry is highly Fragmented Industry.

 Industry is highly dependent on Cotton.
 Lower Productivity in various segments.
 There is Declining in Mill Segment.
 Lack of Technological Development that affect the productivity & other activities in
whole value chain.
 Infrastructural Bottlenecks and Efficiency such as, Transaction Time at Ports and
transportation Time.
 Unfavourable labour Laws.
 Lack of Trade Membership, which restrict to tap other potential market.
 Lacking to generate Economies of Scale.
 Higher Indirect Taxes, Power and Interest Rates.
OPPORTUNITIES:
 Growth rate of Domestic Textile Industry is 6-8% per annum.

 Large, Potential Domestic & International Market.
 Product development and Diversification to cater global needs.
 Elimination of Quota Restriction leads to greater Market Development.
 Market is gradually shifting towards Branded Readymade Garment.
 Increased Disposable Income & Purchasing Power of Indian Customer opens New
Market Development.
 Emerging Retail Industry and Malls provide huge opportunities for the Apparel,
Handicraft & other segments of the industry.
 Greater Investment & FDI opportunities are available.
THREATS:
 Competition from other developing countries, especially China.

 Continuous Quality Improvement is need of the hour as there are different demand
patterns all over the world.
 Elimination of Quota system will lead to fluctuations in Export Demand.
 Threat for Traditional Market for Power loom & Handloom Products & forcing them
for product diversification.
 Geographical Disadvantages.
 International labour & Environmental Laws.
 To balance the demand & supply.
To make balance between price & quality
COMPETITOR STRENGTHS AND WEAKNESSES

Country Strengths Weaknesses
World’s largest Textile Economy. Large obsolete production
capacities in the cotton
sector.
The largest exporter of textiles &

Low value addition.
clothing (worth US $ 62 billion
in 2002).
This accounts for 17% of world

trade (Textiles = 13%; Clothing
= 20%).
World’s largest producer of

Cotton.
China
World’s largest producer of

Synthetic fibres.
Textile sector generates 10% of

its GDP; and 20% of its
merchandise output.
Relatively low labour costs.

One of the world’s largest Raw material base; no
exporters of readymade garments indigenous cotton
(exports of US $ 5 billion pa). production; & relies heavily
on imported yarns and fibres.
Significant presence in US
markets, due to a large quota. Inadequate infrastructure.
Also enjoys quota free, & duty Leads to congestion &

free access to Australia; Canada delays at ports.
& Norway.
Inadequate communications
Its status as a least developed network.
country (LDC) will give it
favourable market access in the Uncompetitive and
Bangladesh
post quota era (01/01/2005); withunreliable power supply
preferred facility for EU leads to production delays &
markets. elevated costs.
Has mastered the garment trade

& has low cost / high
productivity in that sector.
Textile & Apparel Industry has Small domestic fabric base.

crucial part of country’s
Relies heavily on yarn &
economy.
fabric imports.
It is the country’s biggest

Industry is seeing decline in
employer in manufacturing; &
competitiveness due to its
number 1 export earner.
Sri Lanka heavy reliance on quota
categories, concentration on
In 2001 it accounted for 69% of
the country’s industrial exports
a few markets, inability to
and 53% of its total exports.
develop new markets or
major purchasers because of
Relatively secure markets in with
direct marketing contacts.
USA; EU & Canada through
bilateral agreements.
Relatively small domestic
market, little cash generation
to support investment in
developing export markets.
Fourth largest Cotton producer inLimited manufacturing base
the world. in clothing & processing.
Highly developed garment Limited research &

confection industry, & also development restricting
dyeing & finishing industry. diversity in product &
innovation.
Pakistan Abundant labour force, which
relatively cheaper than China &
India.
CHALLENGES FACED BY TEXTILE INDUSTRY
 Rising rupee brought the inherent structural weaknesses that have plagued the
industry for decades.
 The textile industry suffers from low competitive position too with regard to the
availability of good quality cotton, low level of technology, poor automation, lack
of integrated supply chain, low brand image in overseas markets etc.
 Infrastructural bottlenecks like the transaction time at ports, inland transportation

time, lack of initiatives by textile manufacturers to going for technological up
gradation, fragmentation of Indian textile industry etc.
 Indian industry will have to become competitive by raising its level of efficiency
to meet the challenges both in international & domestic markets.
 The speedy development of the technology in the world textile industry.
 The substantial issues related to fibre resources i.e. energy, water, environment
etc.
 And the increasing cost of HR and other.

 A growing over supply pressure in the world market for apparel.
CHALLENGES:-
1. PRODUCT Products are inadequate to suit the demands of both

the international & domestic markets. The bulk of
products are medium & low quality between
Chinese made & those made in the developed
countries.
2. INEFFICIENT Inefficient operation in the textile enterprises due to
OPPERATION
historical reasons, which led to high cost
production, an excessive work force & poor
management skills, slow reaction on the customer’s
requests & old business operation made.
3. PROCESSING The low level processing technology- there is
TECHNOLOGY
excessive of production capacities for lower end
products & lack of creativity in product design.
4. AWARENESS Improve the awareness of the fashion in the textile
industry & keep up with the pace of the world.
5. RESPONSE Sharpen quick response awareness.
COMPANY’S PROFILE
Vardhman is one of the largest textile conglomerates in India having footprints in

specialized yarns, fabrics, sewing threads, acrylic fiber and steel.
HISTORY OF THE GROUP
The industrial city of Ludhiana, also known as the Manchester of India nestles the
corporate headquarters of Vardhman group. Vardhman, a household name in Northern
India, has carved out a niche for itself in textile industry. The Vardhman group was setup
in 1962 by late Lala Rattan Chand Oswal, father of present Chairman cum Managing
Director, Sh. S.P. Oswal.
At time of installation, the group had a modest capacity of 14,000 spindles which after
more than three decades of operations has increased manifolds. The group presently has
Group Companies
GROWTH OF THE COMPANY
Company also has a strong presence in various countries like Japan, Hong Kong and EU
in addition to domestic market. Yet another forward integration project on readymade
garments is in the offing and is to be realized soon. Vardhman group is earning laurels by
exporting yarn and fabrics to international quality to several countries in west, Africa and
Far East earning valuable foreign currency for country. Vardhman group is first company
among textile industry to receive the 9002/ISO 14002 quality awards in India
PORTFOLIO
The Group portfolio includes manu11facturing and marketing of Yarns, Fabrics, Sewing
Threads, Fiber and Alloy Steel.
Various unit locations of Vardhman Group are as follows:
ST Steel
Y Yarn
C Cotton Yarn
F Fabric
MISSION
Vardhman aims to be world class textile organization producing diverse range of products
for the global textile market. Vardhman seeks to achieve customer delight through
excellence in manufacturing and customer service based on creative combination of state-
of-the-art technology and human resources. Vardhman is committed to be responsible
corporate citizen.
COMPANY’S PHILOSOPHY
 Faith in bright future of Indian textiles and hence continued expansion in areas
“which we know the best”
 Total customer focus in all operational areas.
 Product to be of best available quality for premium market segments through

TQM and zero defect implementation
 Global orientation targeting – at least 20% production for exports.
 Integrated diversification / product range expansion.
 World class manufacturing facilities with most modern R&D and process
technology.
 Faith in individual potential and respect for human values.
 Encouraging innovation for constant improvements to achieve excellence in all

functional areas.
 Accepting change as a way of life.

 Appreciating our role as a responsible corporate citizen.
MARKET PERFORMANCE
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o Largest Spinning capacity in India - over half a million spindles.
o Largest producer of Cotton, Synthetics and Blended yarns in the country
o Largest Dyeing Capacity of Fibre and Yarn
o Largest Exporter of Cotton Yarn
o Market Leader in Hand Knitting Yarns in India
o Largest range of Textile products
o Second largest producer of Sewing Thread in the country
o Collaborations with specialist worldwide

o ERP enabled solutions for online order tracking
FINANCING OF EXPORT
The areas where finance would be essentially needed, after one gets an export order will
be:-
(1) Procuring raw material and components for manufacturing the product.
(2) Refinance facilities so as to get the proceeds of export bills at the time of negotiations
of export documents, soon after shipping the goods.
(3) Availability of funds until the export benefits are realized.
(4) Refinance facilities for long term credit are offered for the export of the product.
FINANCING OF SHORT TERM REQUIREMENTS:-
(A) PRE- SHIPMENT FINANCE:-
Pre- shipment finance is also known as “Packing credit”. It is the advance granted to the
exporter to procure, process, manufacture, pack and prepare the goods, before and till
the goods are shipped. Pre- shipment credit enables him to meet his working capital
requirement for the purchase of raw- materials and components, processing, packing,
transportation and warehousing. Packing credit is short term finance. In India pre-
shipment credit is provided by Indian and foreign commercial banks which are members
of the Foreign Exchange Dealers Association of India (FEDAI).
TYPES OF PRE- SHIPMENT FINANCE:-

The types of credit depend upon the nature of production and procurement system
concerning the commodity to be exported, which are as follows:-
(1) EXTENDED PACKING CREDIT LOAN:-
It is granted to the clients for making advance payment to the supplier for procuring
goods to be exported. Thus it is clean in nature and usually extended to the parties, who
are rated as first class, for a very short duration.
(2) PACKING CREDIT HYPOTHECATION:-

It is extended where raw materials, work in progress and finished goods meant for export
are available as security. The processing/manufacturing may be under taken by the
exporter himself or through sub contractors’ captive units.
(3) PACKING CREDIT LOAN:-

The PCI can be granted as loan in the form of pledge in cases where exporters are
required to collect/obtain the raw materials in odd o bunched lots or the raw material is
seasonal in nature and the actual & delivery schedules agreed upon by the overseas buyer.
(4) SECURED SHIPPING LOAN:-

Once the goods are ready for shipment and exporter/supplier has handed over the goods
to the transport operator clearing & forwarding agent for dispatch and effecting the
Shipment, the advance can be granted as secured shipping loan. This is normally
sanctioned for a short period considering the time taken for dispatch of goods to port
towns and competition of shipping custom formalities. Secured shipping loan can also be
released on receipt/rail receipt from the supplier and after forwarding the same o the C&F
agent with shipping instructions from the party.
(5) COMBINATION OF CLEAN AND SECURED ADVANCE:-

Packing credit can also be given a combination of clean and secured advances
(6) INLAND/IMPORT LETTER OF CREDIT:-
Where the exporter procures goods from the sub- supplier or requires imported raw
materials, back to back letter of credit facility can be extended to him and goods/raw
materials so acquired can be taken under pledge/hypothecation by releasing pre-
shipment credit in due course.
(7) RUNNING ACCOUNT FACILITY:-

Banks may grant pre- shipment finance for exports of any commodity on the following
conditions:-
(a) The need for running account facility has been established by the exporter to the
satisfaction of the bank.
(b) The exporter track record continues to be good.
(c) The letter of credit or firm order should be produced within 30 days.
(d) The packing credit amount should be maintained separately and not mixed with
normal current account or cash credit account of the customer.
(8) LETTER OF CREDIT OR FIRM ORDER:-

Pre- shipment credit facility can be given on the products of sufficient evidence of export
order like cable, telex, irrevocable and confirmed letter of credit. It can also be given
under the ‘red clause letter of credit’ which means at the instance and responsibility of the
foreign bank establishing the letter of credit.
(9) ADVANCE AGAINST DUTY DRAWBACK:-

Duty drawback refers to the import duty paid on raw materials or components for export
or the excise duty paid on the items which are produced for export are repaid to the
exporter. The exporter’s funds are locked up during verification process by various
agencies. Normally, the exporter can claim the duty drawback amount (incentive) only
after the exports of goods by producing necessary documents. But bank may finance
against incentives permissible to the exporter at the pre- shipment stage or at the post-
shipment stage.
(10)PRE SHIPMENT CREDIT IN FOREIGN CURRENCY (PCFC) SCHEME:-

For providing pre- shipment credit to Indian exporters at internationally competitive rates
of interest from authorized dealers in foreign exchange, pre shipment credit in foreign
currency (PCFC) is provided in domestic currency or foreign currency. It is available on
the basis of Confirmed letter of credit or firm export order for a maximum period of 180
days.
POST- SHIPMENT FINANCE:-
Finance and credit are available to keep not only export production but also to export on
credit under various schemes for post shipment credit and for deferred payment. Post-
shipment finance means any loan or any other credit provided by any institution to an
exporter of goods from India from the date of extending the credit after shipment of
goods to the date of realization of export proceeds and includes any loan or advance
granted to an exporter, on consideration of or on the security of any drawback or any cash
receivable by way of incentives from the government forms. Post shipment finance is
provided against shipping documents. It is provided against duty drawback claims.
TYPE OF POST SHIPMENT FINANCE:
(1) PURCHASE OF EXPORT DOCUMENTS:

Purchase or discount facilities in respect of export bills drawn under confirmed export
order are generally granted to the customer who are enjoying bill purchase or discounting
bills from bank on the basis of security offered under letter of credit or depending upon
the credit worthiness of exporters as well as importers or generally on the basis of ECGC
(Export Credit Guarantee Corporation) guarantee fixes the limits for individual
customers. At the time of purchasing the bill bank has to ascertain that this drawee is not
exceeded so as to make ineligible for claim in case non payment.
(2) ADVANCE AGAINST EXPORT BILLS SENT ON COLLECTION:

This facility is another form of post shipment advance and is sanctioned by the bank on
the same terms and conditions as applicable to the facility of negotiation/ purchase/
discount of export bills. A margin of 10% to 25% is stipulated in such cases. In such
cases the export bills are sent by bank on collection basis. The bank may accommodate
him by allowing an overdraft or granting a loan up to a certain percentage of the value of
the bill under collection. The types of facility is however, not very popular. Post shipment
advance can be granted against bill of collection basis in the following situation:
(a)When the accommodation available under the foreign bills purchase limit is
exhausted.
(b) When same export bills drawn under L/C have discrepancies.
(c) Where it is customary practice in the particular line of trade and in case of export to
countries where there are problems of externalization.
(d) The currency in which the bill is denominated is ruling low, but expects it to gain
value soon.
(3) ADVANCE AGAINST GOODS SENT ON CONSIGNMENT BASIS:

When the goods are exported on consignment basis means where payment is receivable
subject to sale of goods. The goods are exported at the risk of the exporter for sale and
eventual remittances of sale proceeds to the exporter by the agent/ consignee, bank may
finance against which transaction subject to the customer enjoying specific limit to that
effect. The overseas branch/correspondent of the bank is instructed to deliver the
documents against “thrust receipt”.
(4) ADVANCE AGAINST UNDRAWN BALANCE:

In some trade, exporters do not draw bills for the full invoice value of goods and leave
some part undrawn for payment adjustment due to the difference in rates, weight, quality
which is ascertained after approval and inspection of goods. Banks keeping some margin
do finance against undrawn at 13% rate of interest up to 90 days that is maximum time
limit which the proceeds must be realized.
(5) ADVANCE AGAINST RETENTION MONEY:

Banks also grant advances against retention money, which payable within one year from
the date of shipment, at a concessional rate of interest which is 13% up to 90 days. If such
advances extend beyond one year, they are treated as deferred payment advances which
are eligible for concessional rate of interest.
(6) ADVANCE AGAINST CLAIMS OF DUTY DRAWBACK:

Custom houses at Delhi, Mumbai, Calcutta, Hyderabad have evolved a simplified
procedure under which claims of duty drawback are settled immediately against
shipment and no funds of exporters are blocked. However, where settlement is not
possible under the simplified procedure exporters may obtain advances claims of
duty drawback as provisionally certified at the rate of 13% p.a. for period of 90
days
HOW DOES VARDHMAN FINANCE ITS EXPORT???????
1) Packing Credit: It is the option available to the company in order to facilitate the
exports of the company . This consists of pre-shipment and post-shipment credit.
The bank offers different limits for both these loans . While the pre-shipment
credit is for filling the gap between the shipment and actually receiving the
payment from the customer . This may be in Indian rupees or foreign currency .
As soon as the shipment is made ,the pre-shipment is nullified and the same
amount is made outstanding as post shipment credit.This can be availed in two
forms:
• Packing Credit: They take loan against the exports of the company. The
export cell liquidates these loans by discounting the export bills from the
bank.The interest at this loan is approx 7-8%.
• Packing credit in foreign currency: This is exactly the same as PC .The

difference is just, that PCFC is in foreign currency. The interest at this loan
is approx 4.5%.But in this loan we need to face the foreign exchange rate
fluctuations.
The amount of loans raised for exports in last 2 years is given as under:
Amount of Amount of
loans raised in loans raised in
2006-07(in Rs. 2007-08(in Rs.
Crores) Crores)
PC/PC
FC 191 408
METHODS OF PAYMENT
To succeed in today’s global marketplace and win sales against foreign competitors,
exporters must offer their customers attractive sales terms supported by appropriate
payment methods. Because getting paid in full and on time is the ultimate goal for each
export sale, an appropriate payment method must be chosen carefully to minimize the
payment risk while also accommodating the needs of the buyer.
• To succeed in today’s global marketplace and win sales against International trade
presents a spectrum of risk, which causes uncertainty over the timing of payments
between the exporter (seller) and importer (foreign buyer). • For exporters, any sale is a
gift until payment is received. • Therefore, exporters want to receive payment as soon as
possible, preferably as soon as an order is placed or before the goods are sent to the
importer. • For importers, any payment is a donation until the goods are received. •
Therefore, importers want to receive the goods as soon as possible but to delay payment
as long as possible, preferably until after the goods are resold to generate enough income
to pay the exporter.
Cash-in-Advance
With cash-in-advance payment terms, the exporter can avoid credit risk because payment
is received before the ownership of the goods is transferred. Wire transfers and credit
cards are the most commonly used cash-in-advance options available to exporters.
However, requiring payment in advance is the least attractive option for the buyer,
because it creates cash-flow problems. Foreign buyers are also concerned that the goods
may not be sent if payment is made in advance. Thus, exporters who insist on this
payment method as their sole manner of doing business may lose to competitors who
offer more attractive payment terms.
Letters of Credit
Letters of credit (LCs) are one of the most secure instruments available to international
traders. An LC is a commitment by a bank on behalf of the buyer that payment will be
made to the exporter, provided that the terms and conditions stated in the LC have been
met, as verified through the presentation of all required documents. The buyer pays his or
her bank to render this service. An LC is useful when reliable credit information about a
foreign buyer is difficult to obtain, but the exporter is satisfied with the creditworthiness
of the buyer’s foreign bank. An LC also protects the buyer because no payment obligation
arises until the goods have been shipped or delivered as promised.
Documentary Collections
A documentary collection (D/C) is a transaction whereby the exporter entrusts the

collectionof a payment to the remitting bank (exporter’s bank), which sends documents to
a collecting bank (importer’s bank), along with instructions for payment. Funds are
received from the importer and remitted to the exporter through the banks involved in the
collection in exchange for those documents. D/Cs involve using a draft that requires the
importer to pay the face amount either at sight (document against payment) or on a
specified date (document against acceptance). The draft gives instructions that specify the
documents required for the transfer of title to the goods. Although banks do act as
facilitators for their clients, D/Cs offer no verification process and limited recourse in the
event of non-payment. Drafts are generally less expensive than LCs.
Open Account
An open account transaction is a sale where the goods are shipped and delivered before
payment is due, which is usually in 30 to 90 days. Obviously, this option is the most
advantageous option to the importer in terms of cash flow and cost, but it is consequently
the highest risk option for an exporter. Because of intense competition in export markets,
foreign buyers often press exporters for open account terms since the extension of credit
by the seller to the buyer is more common abroad. Therefore, exporters who are reluctant
to extend credit may lose a sale to their competitors. However, the exporter can offer
competitive open account terms while substantially mitigating the risk of non-payment by
using of one or more of the appropriate trade finance techniques, such as export credit
insurance.
LETTER OF CREDIT
A letter of credit is a document typically issued by a bank or financial institution, which

authorizes the recipient of the letter (the "customer" of the bank) to draw amounts of
money up to a specified total, consistent with any terms and conditions set forth in the
letter. This usually occurs where the bank's customer seeks to assure a seller (the
"beneficiary") that it will receive payment for any goods it sells to the customer.
For example, the bank might extend the letter of credit conditioned upon the beneficiary's
providing documentation that the goods purchased with the line of credit have been
shipped to the customer. The customer may use the letter of credit to assure the
beneficiary that, if it satisfies the conditions set forth in the letter, it will be paid for any
goods it sells and ships to the customer.
In simple terms, a letter of credit could be said to document a bank customer's line of
credit, and any terms associated with its use of that line of credit. Letters of credit are
most commonly used in association with long-distance and international commercial
transactions.
Elements of a Letter of Credit
• A payment undertaking given by a bank (issuing bank)

• On behalf of a buyer (applicant)
• To pay a seller (beneficiary) for a given amount of money
• On presentation of specified documents representing the supply of goods
• Within specified time limits
• Documents must conform to terms and conditions set out in the letter of credit
• Documents to be presented at a specified place
PARTIES TO AND ASSOCIATED WITH THE LETTER OF CREDIT
1. Applicant
The applicant is the party who requests and instructs the issuing bank to open a letter of
credit in favor of the beneficiary. The applicant usually is the importer or the buyer of
goods and/or services. The applicant can also be another party acting on behalf of the
importer, such as a confirming house. The confirming house is equivalent to a buying
office, it acts as an intermediary between importer and exporter, and it can be located in a
third country or in the exporter’s country. The confirming house negotiates and books the
order on behalf of the importer and guarantees payment to the exporter, and often
finances the importer. When dealing with importers in a country with a foreign shortage,
for example Nigeria, the exporter may deal with the confirming house in the United
Kingdom or in other areas to ensure payment.
2.Beneficiary
The beneficiary is entitled to payment as long as he can provide the documentary
evidence required by the letter of credit. The letter of credit is a distinct and separate
transaction from the contract on which it is based. All parties deal in documents and not
in goods. The issuing bank is not liable for performance of the underlying contract
between the customer and beneficiary. The issuing bank's obligation to the buyer, is to
examine all documents to insure that they meet all the terms and conditions of the credit.
Upon requesting demand for payment the beneficiary warrants that all conditions of the
agreement have been complied with. If the beneficiary (seller) conforms to the letter of
credit, the seller must be paid by the bank.
3.Issuing Bank
The issuing bank's liability to pay and to be reimbursed from its customer becomes
absolute upon the completion of the terms and conditions of the letter of credit. Under the
provisions of the Uniform Customs and Practice for Documentary Credits, the bank is
given a reasonable amount of time after receipt of the documents to honor the draft.
The issuing banks' role is to provide a guarantee to the seller that if compliant documents
are presented, the bank will pay the seller the amount due and to examine the documents,
and only pay if these documents comply with the terms and conditions set out in the letter
of credit.
Typically the documents requested will include a commercial invoice, a transport

document such as a bill of lading or airway bill and an insurance document; but there are
many others. Letters of credit deal in documents, not goods.
4.Advising Bank
An advising bank, usually a foreign correspondent bank of the issuing bank will advise
the beneficiary. Generally, the beneficiary would want to use a local bank to insure that
the letter of credit is valid. In addition, the advising bank would be responsible for
sending the documents to the issuing bank. The advising bank has no other obligation
under the letter of credit. If the issuing bank does not pay the beneficiary, the advising
bank is not obligated to pay.
5.Confirming Bank
The correspondent bank may confirm the letter of credit for the beneficiary. At the
request of the issuing bank, the correspondent obligates itself to insure payment under the
letter of credit. The confirming bank would not confirm the credit until it evaluated the
country and bank where the letter of credit originates. The confirming bank is usually the
advising bank.
6.Negotiating Bank:
The bank which negotiates the draft or documents presented by the beneficiary or
bonafide holder is known as negotiating bank. When the bank negotiates the draft and
documentsi.e.the negotiation it gives value to such draft and documents ,not just
examination of the documents.
Bank Charges
Bank charges are the charges paid by the Company for availing various facilities from the
banks like Cash Management Service , Demand Draft Issue , Upfront Fees, Gurantee
Fees, Foreign Bank Facilities like L/C opening, L/C amendment, L/C advising, etc.. In
simple terms, these fees are called the Service Charges that the banks levy on its
customers for its operations.
The Vardhman Group is majorly into export of its thread and fabric material. Due to the
dollar depreciating in value, the company is facing a huge cost. The company is
constantly making efforts to reduce its expenses in all its other areas to compensate the
rising export cost. The Bank Charges Analysis is a major area of interest to reduce the
cost as negotiations can be done with the banks to reduce the charges levied seeing the
increasing size of the company and huge transactions. Moreover the banks also devise
new products/ facilities to make the dealings easy with the corporates and provide faster
funds.
A brief summary of all the charges paid by the company is explained below.
The bank charges levied by various banks are listed below, further with there detailed
explanation:
1. Credit Rating Charges
2. Debenture Trusteeship Fees
3. Up Front Fees
4. Forex Booking and Cancellation
5. Import L/C Bill Retirement /Collection Charges
6. Guarantee Charges
7. DD Issue
8. TT Issue
9. CMS Charges
10. Inland Bill Retirement Charges
11. Lead Bank Charges
12. Processing Charges
13. Export Negotiation Charges
14. Foreign Bank Charges
15. Early Delivery Charges
16. Other Financial Charges
The following data shows the above charges paid by the subsidiaries of Vardhman
Textiles along with the codes given to each charges for easy operation.
Credit Rating Charges: In order to avail finance from the open market, the credit
worthiness of a company needs to be rated by a recognized credit rating agency. These
agencies charge a fee for providing a credit rating, which is generally a percentage of the
amount rated subject to a minimum amount of fee.
Debenture Trusteeship Fees: Since debentures are transferable instruments, a single

contact point is needed for purposes of security creation, etc. The company appoints a
Debenture Trustee for this purpose, paying him an annual fees which might be fixed or a
%age of the outstanding amount of debentures.
Since the company has the facility of loan sanction under TUFS and the outstanding
debentures would be fully repaid in March,2008 , hence it doesn’t require funds from the
open market. This would act as a huge saving potential for the company.
Upfront Fees: When the company enters into the documentation for a term loan, the
bank charges an upfront fees, which is generally %age (usually around 1%) of the loan
sanctioned.
The company has to pay these charges only once i.e at the time of the inception of the
loan. As most of the loans had been tied up during the year against the coming
expansions, these charges are likely to be NIL in the FY2007-08.
Forex Booking and Cancellation: These are the charges levied by the banks on
booking/cancellation of the forward contarcts. Booking charges are generally between
Rs.250-1000/- per contract and cancellation charges are between Rs. 100-500/- per
contract.
The company has negotiated with the banks and these charges are likely to be Nil in the
FY2007-08.
Import L/C Bill Retirement/ Collection Charges: These charges are levied by the
banks for opening of a Letter of Credit. It basically include:
L/C Opening Charges
L/C Amendment Charges
L/C Advising Charges
L/C Transfer Charges
The company pays these charges on negotiated terms with the banks like 0.05% per
month for an average period of 3.25 months for SBOP and PNB and 0.06% per month for
an average period of 8 months against transactions in USD.
The charges can be reduced by settling with a lower flat rate for more number of
documents.
Guarantee Charges: The company is required to give gurantee for the purpose of
insurance of its properties and various statutory grarantee. The banks levy a charge for
giving such guarantees on behalf of the company.
These charges are given by the company mainly for insurance, power(HPSEB),
power(MPSEB) and for subsidy.
The corporation enjoys a concession of 50% in rates for all gurantees other than
insurance where it is 75% on grounds of higher amount involved.
DD Issue : These are the service charges levied by the bank against the issuance of
demand drafts. The charges are incurred for making various payments and also for
receiving various payments from the customers.
Currently the company is getting the DDs issued both in INR for various payments and in
foreign currency for payments of agency commissions, etc. the normal DD charges in
INR are Rs.2.50 to Rs.3.00 per thousand.
For the company to reduce its charges further, negotiations have been done with a few
private banks to issue the DDs free of cost.
TT Issue: These are the service charge levied by the bank against the telegraphic
transfer of funds which is both domestic and overseas fund transfer.
The normal TT issue charges for domestic transfers are in the range of Rs.2.50 to Rs.3.00
per thousand. In regards to TT issue charges for overseas fund transfer, a sanction of
Rs.900 to Rs.1000 per transaction is availed.
Seeking a saving potential in these charges, negotiations are been carried out with few of
the foreign/private/nationalized banks to transfer the funds free of cost. In regards to
overseas fund transfer, a flat rate of Rs.500 to Rs.750 per transaction is expected.
CMS Charge: Cash Management Service is associated with the collection of cheques
and cash. It provides its customer(s) speed, accuracy and efficiency. It ensures not only
unlocking of funds in transit, but also enhances liquidity in corporate system and enables
effective funds management. In simple words, CMS means anywhere banking. Under
this, money reaches the bank account of the company usually one day after the cheque is
issued by the customer for payment provided it is a Local Cheque. Well the beauty of the
CMS is that it makes most of the cheques a Local Cheque.
Inland Bill Retirement Charges: These are the inland bills which are sent on collection
basis to the customer’s bank for realization of payment.
The company has concessional rate of Rs.4.50 per thousand for all its documents with
SBOP in yarn and fabric business. In case of steel business, the charges has been reduced
to Rs.2.50 per thousand paid to HDFC as opposed to Rs.4.50 per thousand paid to SBOP.
Lead Bank Charges: Lead bank charges are levied by the lead bank who heads the
consortium of banks which provide working capital finance to the company through fund
based and non-fund based credit limits.
The normal lead bank charges are 0.1% of the limits sanctioned. The credit limits are
generally renewed in November every year and the charges are paid for the next one year.
The bank has agreed to give a concession of 75% on the normal bank charges.
Processing Charges : These are levied by the consortium banks towards working capital
limits( fund based and non- fund based). These expenses are levied as a fixed %age of the
limits sanctioned(as per the bank’s internal guidelines) or they are pre-negotiated with the
company.
As per the worked out terms with the banks, the company receives a concession of 75%
on the normal charges. SBOP has decided to waiver off these charges fully. Further
conciliations were made to make the charges inclusive of service tax.
Export Negotiation Charges: Export negotiation is a service offering by which the

exporter’s corresponding bank receives and authenticates the full set of export documents
submitted by the exporter, before paying for the bills and documents.
Foreign Bank
Charges
Out of the total turnover of the Vardhman Group, approximately 19.94% consists of
exports amounting to Rs.489.23 crores. Majority of the exports is L/C based with a
usance period of 90 days to 120 days. Some other is on sight basis. In addition to that, a
small part of exports is on CAD/DA/DP/Advance payment basis.
The customer’s bank deducts certain charges on the realization of documents. These
charges are deducted from the amount received by the beneficiary, by an intermediary
bank and/or the beneficiary's bank. The charges relate to their role in transmitting and
processing the payment, and can vary. These are Foreign Bank Charges (FBC).
These charges are normally on account of Telex, re-imbursement and/or Discrepancies. In

the FY2006-07, Vardhman paid an amount of 154.83 lacs on account of foreign bank
charges.
NORMAL FBC
Reimbursement Charges (per document) US$30 US$40
Swift / Telex Charges (per document) US$30 - US$40
Total Charges for Clean Documents US$60 - US$80
Discrepancy Charges (only in case of discrepancy) US$50 - US$60
Total Charges for Discrepant Documents US$110 - US$140

DETAILS OF DISCREPANCIES
A significant portion of the foreign bank charges pertain to discrepancy charges.
Discrepancies Generally Observed In The Export Documents:
1. L/C expired.
2. Late shipment.
3. Photo copy of courier receipt presented
4. Late presentation
5. Certificate of origin not legalized.
6. Beneficiary differs
7. Name of the manufacturer not indicated on certificate of origin.
8. Bill of lading not showing L/C issuing bank’s name & actual port of loading.
9. Packing list not indicating that goods are packed in standard export packing.
10. Unauthorized carrier issues bill of lading.
11. Declaration of no wood material not presented.
12. Fumigation certificate not presented.
13. Shipping company not showing ship mark.
14. Beneficiary certificate not as per L/C.
15. Packing List not as per L/C.
16. Shipping certificate not presented.
17. Alteration on shipping company certificate not authenticated.
18. Partial shipment.
19. Gross weight and contract number differs from L/C.

TOP 20 CUSTOMERS
The top 20 customers of Vardhman group along with their respective countries
according to invoice total is as follows :
CUSTN
COUNTRY
NISSHINBO INDUSTRIES INC. Total

japan
PACIFIC OVERSEAS TEXTILES MACAO Total

CHINA
SHINKO SANGYO CO. LTD. Total

japan
PROMPTEX YARNS INC. Total

canada
IM INTERNATIONAL Total
australia
PROSPERLINK(MACAO COMMERCIAL Total

SRI LANKA
MASUMA KHATUN TEXTILE INDUSTRIESLTD Total

BANGLADESH
OCEAN LANKA (PRIVATE) LIMITED Total

SRI LANKA
CHORI CO. LTD. Total

japan
FOUNTAIN SET LIMITED Total

HONGKONG
SERVIFIOS IMPORTACAO E EXPORTACAO- Total

PORTUGAL
AUSTRALIAN WEAVING MILLS Total

australia
SACOTEX YARNS N.V. Total

BELGIUM
GOLDTEX LTD. Total

BANGLADESH
STANDARD KNITTING MILLS PTY LTD Total

australia
HOJET INDUSTRIES LTD Total

HONGKONG
UNION TEXTILE DE TOURCOING Total

BELGIUM
FABRIQUE DE FLANELLES SAMIR Total

egypt
TOP 20 CUSTOMERS
.
The top 20 customers of Vardhman group along with their respective countries according
to FBC total is as follows :
CUSTN
COUNTRY
PACIFIC OVERSEAS TEXTILES MACAO Total

CHINA
NISSHINBO INDUSTRIES INC. Total

JAPAN
IM INTERNATIONAL Total
AUSTRALIA
AUSTRALIAN WEAVING MILLS Total

AUSTRALIA
OCEAN LANKA (PRIVATE) LIMITED Total

SRI LANKA
PROMPTEX YARNS INC. Total

CANADA
SHINKO SANGYO CO. LTD. Total

JAPAN
PROSPERLINK(MACAO COMMERCIAL Total

SRILANKA
GULF DENIM FZE Total

UAE
SERVIFIOS IMPORTACAO E EXPORTACAO- Total

PORTUGAL
FOUNTAIN SET LIMITED Total

HONG KONG
MASUMA KHATUN TEXTILE INDUSTRIESLTD Total

BANGLADESH
MARUBENI CORPORATION JAPAN Total

JAPAN
GENEVIEVE YARNS DYERS AUSTRALIA PTY Total

AUSTRALIA
CDL FABRICS LTD. Total

MAURITIUS
CHORI CO. LTD. Total

JAPAN
PROEXSA S.A. Total

SPAIN
MARUBENI TEXTILE ASIA PACIFIC LTD. Total

HONG KONG
The Foreign Bank Charges are in totality customer based because these charges are paid
by them when they receive the desired material. Hence a separate report on these charges
customer wise along with recommendations with each gives a clear picture of the
discrepancies and ways to reduce them
OBSERVATIONS
AND
RECOMMENDATIO
N
AFTER
ANALYSIS OF
TOP 20 FOREIGN
CUSTOMERS
CUSTOMER NAME: NISSHINBO INDUSTRIES INC.
IMPORTER BANK: MIZUHO CORPORATE BANK
OBSERVATIONS:
1) This customer has the highest share in the exports in value terms (i.e.
14267703.48 )
2) This customer has the second highest amount of FBC charges(i.e. $29032.45)
3) NO. OF INVOICES ARE ABOUT 262
4) Average FBC per document is $110.81
5) AVERAGE AMT OF INVOICE 491.44
FINDINGS:
1) MOST COMMON EXPENSES ARE all bank charges and reimbursement
,advising ,amendment, commission
2) The main Discrepancies present in case of this customer are
• Late shipment
• L/C expired
• Port of Discharge not as per L/C
RECOMMENDATIONS:-
• If late shipment is on demand of the applicant then charges should be borne by the
applicant
• If LC is opened through The Bank of Tokyo-Mitsubishi UFJ Ltd. then discrepancy

charges would be comparatively less
CUSTOMER NAME: PACIFIC OVERSEAS TEXTILES MACAO.
IMPORTER BANK: 1. THE HONGKONG AND SHANGHAI BANKING

CORPORATION LTD.
2. BNP PARIBAS MACAU BRANCH
3. HANG SENG BANK LIMITED
OBSERVATIONS:
1) This customer has the maximum share in the total FBC charges of the
organization i.e. 45829.24
2) FBC charges range from $147.53-$403.7
3) NO. OF INVOICES ARE ABOUT 212

4) Average FBC per document is $ 213.63
5) AVERAGE AMT OF INVOICE 219.92
6) This customer has the second highest share in business amounting to.
$9960115.4
FINDINGS:
1) MOST COMMON EXPENSES ARE

• $40-$50 as Discrepancy fees,
• $104-$80 as Cable charges
• , Deferred payment Comm. $110.57-$353.15,
• Reim. Fees $30
• Acc. Fees $114.99-$243.08(variation due to diff. bank and diff.
in invoice amount)
• Late shipment
• L/C expired
• Fumigation not showing L/C no., RMP no. etc.
• Port of Discharge not as per L/C
• AGE OF VESSEL EXCEED 20 YEARS
• COURIER RECEIPT DTD. 5 DAYS AFTER SHIPMENT

RECOMMENDATIONS:-
• We recommend our customer to open l/c with THE AGRICULTURE BANK OF

CHINA then the discrepancy charges will be less
applicant.
• I Also recommend that VARDHMAN should take Care that fumigation will show
l/c no. and RMP no.
• VARDHMAN have to care in the future that port of discharge will be according to
l/c
• Company is recommended to either ask it’s customer to waive off the vessel age
norms from the l/c or contact shipping company regarding it
• Bank charges will get reduced if the customer open l/c with one bank instead of
three.
CUSTOMER NAME: IM INTERNATIONAL
IMPORTER’S BANK : NATIONAL AUSTRALIA BANK LIMITED
OBSERVATIONS:
 FBC charges range from $20-$308.13
 Average FBC per document is $185.36
 NO. OF INVOICES ARE ABOUT 101
 AVERAGE AMT OF INVOICE 203.76

 TOTAL FBC ARE ABOUT 18721.36
 TOTAL VALUE OF CUSTOMER IS 3814572.07
FINDINGS:
• Discrepancy fees $65 or AUD 85,
• Reim. Comm. $65 or AUD 85
• ACC. Comm. $66.52-$99.24 or AUD 80- AUD 122.78(variation due to
diff. in invoice amount)

• Late shipment
• Late presentation
• L/C expired
• L/C OVERDRAWN
RECOMMENDATIONS:-
• The Beneficiary should present all the documents on time

applicant
• Company should request its customers to extend the date of expiry
CUSTOMER NAME: AUSTRALIAN WEAVING MILLS
IMPORTER’S BANK : AUSTRALIA AND NEW ZEALAND BANKING

GROUP LIMITED
OBSERVATIONS:
FBC charges range from $25-$367.8

FINDINGS:
MOST COMMON EXPENSES ARE
• Discrepancy charges $83.43-$85.87
• Rnb. Fees $100.12-$106.80
• Acc. Fees $83.43-$133.50
• OTHERS $20(variation due to diff. in invoice amount)
The main Discrepancies present in case of this customer are

• Late shipment
• Late presentation
• L/C expired
• L/C OVERDRAWN
• DESCRIPTION OF GOODS NOT AS PER L/C

RECOMMENDATIONS:-
• If late shipment is on demand of the applicant then charges should be borne by

the applicant
• Beneficiary should present all the documents on time
• If LC is opened through ST. GEORGE BANK LIMITED Limited then

charges will be less
• COMPANY should send goods as per the description mentioned in l/c

CUSTOMER NAME: OCEAN LANKA (PRIVATE) LIMITED
DRAWEE BANK: STANDARD CHARTERED BANK (HONG KONG)

LIMITED
OBSERVATIONS:
FBC charges range from $56-$385

FINDINGS:

• $60 Discrepancy fees
• $60 Reimb FRR,
• $120 TELEX
• $55 others

• L/C EXPIRED
• COPY OF NO WOOD PACKING MATERIAL NOT PRESENTED

• SHIPPING CO CERT NOT PRESEDTED
• FUMI CERT NOT CERTIFYING AS PER LC
• F/C IS NOT AS PER L/C
RECOMMENDATIONS:-

• Company should attached certificate of fumigation as per l/c norms
• Copy of no wood packing must be presented as per l/c norms so that
discrepancy charges can be reduced
CUSTOMER NAME: PROMPTEX YARNS INC.
DRAWEE BANK: THE TORONTO-DOMINION BANK
OBSERVATIONS:
FBC charges range from $56-$385

FINDINGS:

• $100 Cable charges
• L/C EXPIRED
• LATE PRESENTATION
• L/C AMT. OVERDRAWN
• LATE SHIPMENT
• B/L NOT SHOWING DDC CHARGES PREPAID AS PER L/C

REQUIREMENT
• QUANTITY OVERSHIPPED
• B/L SHOWING NOTIFY PARTY TO INSTEAD ULTIMATE

CONSIGNEE
RECOMMENDATIONS:-

• If late shipment is on demand of the applicant then charges should be
borne by the applicant
• Company should try to avoid the over shipment as much as possible
• If overdrawn is done on the request of customer then charges should be

borne by the customer not the beneficiary
• If LC is opened through The Bank of Nova Scotia then charges will be

less
CUSTOMER NAME: SHINKO SANGYO CO. LTD.
DRAWEE BANK: THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.
OBSERVATIONS:
 Average FBC per document is MINIMUM OF ALL i.e. 54.75

 FBC CHARGES RANGES FROM $7 - $268.49
FINDINGS:
• Discrepancy fees $45
• All BANK CHARGES
• L/C EXPIRED
• LATE SHIPMENT
RECOMMENDATIONS:-
CUSTOMER NAME: PROSPERLINK (MACAO COMMERCIAL
DRAWEE BANK: 1. STANDARD CHARTERED BANK (HONG

KONG) LIMITED
2. SUMITOMO MITSUI BANKING CORPORATION
OBSERVATIONS:
 Average FBC per document is 188.38
 FBC CHARGES RANGES FROM $70 - $295
FINDINGS:

• $60 Reimb. Charges
• $120 TELEX
• $41 others CHARGES

• L/C EXPIRED
• LATE SHIPMENT
• E- SHIPPING MARKS DIFFER
• OVERSHIPMENT EFFECTED FOR GOODS ITEM NO. 1.
• DESCRIPTION OF GOODS ON B/L NOT AS PER LC
RECOMMENDATIONS:-

the applicant
• COMPANY should send goods as per the description mentioned in l/c

• Bank charges will get reduced if the customer open l/c with SUMITOMO
MITSUI BANKING instead of two banks.
CUSTOMER NAME: GULF DENIM FZE

DRAWEE BANK: HSBC BANK MIDDLE EAST LTD.
OBSERVATIONS:
 FBC CHARGES RANGES FROM $80.63 - $290
FINDINGS:
• All bank charges
• reimbursement
• acceptance ,
• discount charges

• SHIPPING CO. CERT. - CERTIFICATION NOT AS PER DC
• DC NO. NOT SHOWN. QUALITY APPROVAL CERT.
• . QNTY. OF GOODS INCONSISTANT WITH INV
• Late shipment
RECOMMENDATIONS:-

the applicant
• Quantity of goods should be matched with invoice
CUSTOMER NAME: SERVIFIOS IMPORTACAO E EXPORTACAO-
DRAWEE BANK: BANCO ESPIRITO SANTO S.A.
OBSERVATIONS:
 FBC CHARGES RANGES FROM $60 - $328.8
FINDINGS:

• all bank charges
• discount 70 usd
• telex and cable usd 20
• commision and advising charges
• LATE SHIPMENT
• L/C EXPIRED
• B/L WITH UNAUTHENTICATED ERASURES
• BENF. DECL. NOT EXACTLY AS PER LC TERMS
• E- LC IS ISSUED AFTER INVOICE DATE
• QTY. EXCEEDED
RECOMMENDATIONS:-

the applicant
• Beneficiary declaration should be as per l/c terms

CUSTOMER NAME: FOUNTAIN SET LIMITED
DRAWEE BANK: STANDARD CHARTERED BANK (HONG

KONG)LIMITED
OBSERVATIONS:
 TOTAL FBC ARE ABOUT 7018
FINDINGS:

• $91 SWIFT charges
• $24 others
2)The main Discrepancies present in case of this customer are

• L/C EXPIRED
• LATE SHIPMENT
• DECL. OF NO WOOD PCKG. MATERIAL NOT PRESENTED
• B/L DID NOT INDICATE NAME OF CARRIER
• SHIPPING MAKES IN D/C IS NOT AS PER LC\
RECOMMENDATIONS:-
applicant
• Copy of no wood packing must be presented as per l/c norms so that discrepancy
charges can be reduced
• Bill of landing should indicate name of carrier
MITSUI BANKING instead of two banks.
CUSTOMER NAME: MASUMA KHATUN TEXTILE INDUSTRIESLTD
DRAWEE BANK: SOUTHEAST BANK LIMITED
OBSERVATIONS:
FINDINGS:
• REIMBURSEMENT AND FUND TRANSFER

• Beneficiary Extended the MATURITY DATE
RECOMMENDATIONS:-
• If extension of maturity date is on demand of the applicant then charges

should be borne by the applicant
CUSTOMER NAME: MARUBENI CORPORATION JAPAN
DRAWEE BANK: THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.,

MIZUHO CORPORATE BANK LTD.,
OBSERVATIONS:

FINDINGS:

• Cable charges $40
• Acc. Commission $92.65-$138.05
• Reimb. Fees of $50
• others $18(varriation due to diff. bank and diff. in invoice amount)
• L/C EXPIRED
• LATE SHIPMENT
• POD IS NOT AS PER LC
RECOMMENDATIONS:-
applicant
CUSTOMER NAME: GENEVIEVE YARNS DYERS AUSTRALIA PTY
DRAWEE BANK: ST GEORGE BANK LIMITED
OBSERVATIONS:
FBC charges range from $82.5-$195

Average FBC per document is 152.36

FINDINGS:

• $75 Acc. Commission
• $45 Reimb. Commission
• $45 Discount charges
• $18 others
• L/C EXPIRED
• LATE SHIPMENT
• ALTERATION ON B/L NOT SIGNED
• SHIPPING MARKS ON ALL DOCUMENTS DIFFER TO B/L
• PARTIAL SHIPMENT
RECOMMENDATIONS:-
applicant
• If there will be alteration then it should be signed by authorized person
• If partial shipment is on demand of the applicant then charges should be borne by

the applicant
• Shipping marks on documents should be matched with bill of landing
CUSTOMER NAME: CDL FABRICS LTD.
DRAWEE BANK: THE MAURITIUS COMMERCIAL BANK LIMITED
OBSERVATIONS:

 FBC charges range from $20-$628
FINDINGS:

• Discrepancy fees $75-$160
• Disc. Comm. $75-$340
• others $30-$48(variation due to diff. in invoice amount)

• MARKS AND NUMBERS DIFFER
• FREIGHT PREPAID SUBJECT TO CHEQUE
REALISATION ON BILL OF LADING
• COURIER RECEIPT: DATED MORE THAN 3 DAYS
AFTER SHIPMENT
• Beneficiary differs
RECOMMENDATIONS:-
• l/C should be transferred to the name of the beneficiary through which
shipment is done
• Company should take due care that marks and number don’t differ
• Bank charges will get reduced if the customer open l/c with STATE
BANK OF MAURITIUS instead of THE MAURITIUS COMMERCIAL
BANK LIMITED
CUSTOMER NAME: CHORI CO. LTD.
DRAWEE BANK: 1. MIZUHO CORPORATE BANK LTD.

3. BANK OF CHINA
OBSERVATIONS:
FINDINGS:

• $50 Discrepancy fees,
• $30 Cable charges
• $7 others

• BENEFICIARY DIFFER
• L/C EXPIRED
• LATE SHIPMENT
• E- APPLICANT REF. NO. ON B/L IS NOT AS PER LC
• B/L SHOWING UNAUTHENTIC CORRECTION.
•
RECOMMENDATIONS:-
• l/C should be transferred to the name of the beneficiary through which shipment
is done
applicant
MITSUI BANKING CORPORATION
CUSTOMER NAME: PROEXSA S.A. Total

DRAWEE BANK: 1. DEUTSCHE BANK S.A.E.
2. BANCO DE SABADELL S.A.,
OBSERVATIONS:
FINDINGS:

• ,commission
• Reimbursement CHARGES

• LATE SHIPMENT
• E- LC EXPIRES
• QUALITY CER.- DOES NOT IDENTIFYING THE SIGNER AS THE
MILL MANAGER
RECOMMENDATIONS:-
is done
applicant
• Bank charges will get reduced if the customer open l/c with DEUTSCHE BANK
S.A.E
CUSTOMER NAME: MARUBENI TEXTILE ASIA PACIFIC LTD.
DRAWEE BANK: 1. MIZUHO CORPORATE BANK LTD.

2. THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.
OBSERVATIONS:
 FBC charges range from $48-$318.61
FINDINGS:

• Acc. Commission $92.65-$138.05
• Reimbursement Fees of $50
• others $18 (variation due to diff. bank and diff. in invoice amount)
• LC EXPIRED
• LATE SHIPMENT
• FUMIGATION CERT. NOT SUBMITTED
• B/L NOT SHOWING BY WHOM THE CORRECTION

AUTHENTICATION IS MADE
RECOMMENDATIONS:-
applicant

• Company should attached certificate of fumigation as per l/c norms
• Bank charges will get reduced if the customer open l/c with MIZUHO
CORPORATE BANK LTD instead of three banks
CUSTOMER NAME: SACOTEX YARNS N.V.
DRAWEE BANK: CBC BANQUE S.A.
OBSERVATIONS:
FINDINGS:
• $137.07 Discrepancy fees
• $8.50 SWIFT charges
• E- LATE SHIPMENT
• LC EXPIRED
RECOMMENDATIONS:-
applicant
is done
• Bank charges will get reduced if the customer open l/c with BANQUE
POPULAIRE DU NORD,
CUSTOMER NAME: GOLDTEX LTD.
DRAWEE BANK: 1. THE HONGKONG AND SHANGHAI BANKING

CORPORATION LTD.
2. STANDARD CHARTERED BANK
OBSERVATIONS:

 TOTAL VALUE OF CUSTOMER IS 1428306
FINDINGS:

• $50 Reimbursement
• $20 Remittance
• Cable $10
• $18 others

• LC EXPIRED
• SHIPPING CO. NOT AS PER DC
• BILL OF LADING NOT SHOWING THE CLAUSE AS PER L/C TERMS
• B/L NOT CONSIGNED TO THE ORDER OF ISSUING BANK
• E- LATE SHIPMENT
RECOMMENDATIONS:-
• Shipping co. should be as per dc
LIMITATIONS
OF THE STUDY
• Details regarding some of the charges were not available with the banks.
Therefore, bifurcation of these charges was not possible because of which
recommendations to some of the foreign clients could not be given.
• Because of time constraint all the foreign customers of Vardhman could not be
studied and given recommendations.

Vardhman

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Summer internship project report on

“Export financing and

Submitted towards the fulfillment of

SUBMITTED BY : VISHESH GARG

Name of the company :- VARDHMAN TEXTILES LIMITED

Address of the company :- CHANDIGARH ROAD

Phone No. of the company :- 0161-2228943/44/45/46/47/48

Date of internship Commencement :- May 15th 2008

Date of internship Completion :- July 7,2008

Signatures & Name of the industry Guide :- Mrs. Seema Saggar

Designation of the industry Guide :-

Student’s Name :- Vishesh Garg

Student’s Roll Number :- 27078

Student’s E-mail ID :- visheshgarg1986@gmail.com

Student’s Mobile/ residence numbers:- 09999091440

EXPLORATORY RESEARCH USING SECONDARY DATA

Preparation of fibres for-

DURING THE INDUSTRIAL REVOLUTION:-

POST INDUSTRIAL REVOLUTION:-

THE INDIAN TEXTILE INDUSTRY WITHIN THE INDIAN

 The Indian Textile and Apparel industry :

Main markets of Indian textiles are:-

MULTI-FIBRE ARRANGEMENT (1974)

 Indian Textile Industry is an Independent & Self-Reliant industry.

 Indian Textile Industry is highly Fragmented Industry.

 Growth rate of Domestic Textile Industry is 6-8% per annum.

 Competition from other developing countries, especially China.

To make balance between price & quality

COMPETITOR STRENGTHS AND WEAKNESSES

The largest exporter of textiles &

This accounts for 17% of world

World’s largest producer of

World’s largest producer of

Textile sector generates 10% of

Relatively low labour costs.

Also enjoys quota free, & duty Leads to congestion &

Has mastered the garment trade

Textile & Apparel Industry has Small domestic fabric base.

It is the country’s biggest

Highly developed garment Limited research &

 Infrastructural bottlenecks like the transaction time at ports, inland transportation

 The speedy development of the technology in the world textile industry.

 And the increasing cost of HR and other.

1. PRODUCT Products are inadequate to suit the demands of both

Vardhman is one of the largest textile conglomerates in India having footprints in

HISTORY OF THE GROUP

Various unit locations of Vardhman Group are as follows:

 Total customer focus in all operational areas.

 Product to be of best available quality for premium market segments through

 Global orientation targeting – at least 20% production for exports.

 Integrated diversification / product range expansion.

 Faith in individual potential and respect for human values.

 Encouraging innovation for constant improvements to achieve excellence in all

 Accepting change as a way of life.

o Largest producer of Cotton, Synthetics and Blended yarns in the country

o Largest Dyeing Capacity of Fibre and Yarn

o Largest Exporter of Cotton Yarn

o Market Leader in Hand Knitting Yarns in India

o Largest range of Textile products

o Second largest producer of Sewing Thread in the country

o Collaborations with specialist worldwide

FINANCING OF SHORT TERM REQUIREMENTS:-