The Hindu Business Line : Liquid funds, fixed maturity plans aid corporate treasury

Liquid funds and other short-term funds have remained among the key props for treasury departments of corporates, figuring in their fiscal-end financial statements more prominently than ever.

As the latest crop of balance sheets reveals, companies have aimed at using their surpluses efficiently, courtesy liquid and floating-rate funds as well as fixed maturity plans. For treasury managers, the move was guided principally by two clear goals – preservation of capital and maximisation of returns.

Increasing interest rates and an absence of too many alternative investment avenues prompted corporates’ exposure to such short-term products. Mostly institutional plans of the funds in question were used.

Products

Companies were active on this front during 2006-07, mutual fund circles suggest while referring to the round-the-year sale of products that carried tags such as ‘Institutional’, ‘Super Institutional’, ‘Institutional Premium’ or ‘Institutional Plus’, depending on the fund house in question.

In some cases concerning large corporates, the lists of liquid fund investments cover several pages of their balance sheets. ITC Ltd has a roster of over 100 investments that were bought and sold during the course of the fiscal, covering products offered by almost all the leading fund houses.

The company, in its directors’ report, has mentioned that it has tried to focus on “proactively managing temporary surplus liquidity” as well as forex exposures within a definite risk-management framework. The forex scenario, incidentally, was volatile, marked by an appreciating rupee and a weakening of the dollar against most of the crucial currencies.

Tata Motors

Tata Motors Ltd’s investments (bought and sold in 2006-07) have underlined a marked preference for daily dividend options, including daily dividend reinvestments. Its transactions included funds managed by players such as Birla Sun Life, ICICI Prudential, Tata and UTI.

Reliance Petro for its part has chosen daily dividend plans offered by, inter alia, Deutsche Insta Cash Plus, DSP Merrill Lynch Liquidity Fund, Fidelity Cash Fund, HSBC Liquid Plus, Templeton India Treasury Management Account etc.

Companies used fixed maturity plans (FMPs) extensively throughout the year. Incidentally, fund houses have launched FMPs untiringly, offering a wide range of maturity periods. Monthly, quarterly, half-yearly and annual plans have been very common. While a small decline in the number of FMP launches has indeed been noticed in recent months, the scenario will continue to remain strong in the days ahead, it is felt.

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