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Poornima Mohandas

It is hard to tote up the number of active corporate treasury desks but some indication can be had by the increasing membership of the Indian Association of Corporate Treasurers, which now stands at 49 more than double of 23 last year.

Mumbai , Oct. 13

AS cash piles mount, more number of Indian corporates have put in place formal treasury desks often independent of their bankers.

Acting as business centres, the treasury desks are taking positions on the money and forex markets and seem to be quite smart at the job of managing the risks of their business bosses.

Earlier the treasury department looked at smaller functions such as accounting and taxation, but now corporates manage the treasury more like a business by getting into resource mobilisation, hedging against interest rate fluctuations and so on, according to Ms Preetha Misra, Director & Member Secretary, Indian Association of Corporate Treasurers, an association of CFOs/treasurers, which shares industry best practices and suggests regulatory changes.

It is hard to tote up the number of active corporate treasury desks but some indication can be had by the increasing membership of the Indian Association of Corporate Treasurers, which now stands at 49 more than double of 23 last year, with names such as Cadbury India, Hindustan Times and Ballarpur Industries on the scrolls.

According to Mr S.K. Joshi, Executive Director, Corporate Treasury, Bharat Petroleum Corporation Ltd, "Of late, treasuries perform several functions independent of their bankers. We go in for external commercial borrowings or avail import/export credit for resource mobilisation. We no longer solely depend on banks for funding. While internal accruals are sometimes used, private placement of debentures and floating of commercial papers, for which banks are in fact our customers, are the other operations carried out through treasuries. With interest rates heading southwards for the last two years, we have derived tremendous cost benefits through these alternative modes of fund raising."

Most treasurers still insist that they have no `defined' profit targets from trading and are far less aggressive vis-à-vis banks.

While some trade in dollar forwards, others have investments in mutual funds, Government of India securities, corporate bonds and commercial papers.

"We enter the Indian debt markets only when there are major price movements or a correction occurs. Mostly we trade to keep in touch with the market to get a feel," explained an official in Grasim Industries Ltd, a flagship of the Aditya Birla group which splits up to Rs 800 crore between Government securities and mutual funds.

The volume of the investment portfolio fluctuates in companies depending on their internal cash requirements, and is best exemplified by the Rs 9,600-odd crore, Larsen & Toubro, a long-time player in treasury functions, which has investments in G-Secs/mutual funds, fluctuating between zero and Rs 200 crore.

Safety, liquidity and returns make the tripod of intentions before a treasury desk thinks of playing the markets.

Even now only the relatively large corporates who have cash surpluses or have large foreign exchange exposures perform treasury operations.

When does a treasury become important for a corporate? Mr Deosthalee, CFO, Larsen & Toubro, explains, "A corporate treasury is made necessary when cash flows in a business are not uniform throughout the year. It takes care of funds availability, parking of funds till utilisation and also hedging of forex and interest rate risk."

Treasuries take active interest in developing views on interest rates and exchange rate movements of the foreign currencies the company trades in.

The company accordingly instructs its bankers on hedging positions to be taken on its exposures.

As of today most imports are unhedged and exports are hedged in the backdrop of the consistently appreciating Indian rupee.

Interestingly enough, people in corporate treasuries are rarely former dealers in commercial banks.

The age profile of corporate treasurers are often higher and "... the skills required are rather different", explained a Cipla treasury officer.

While trading and marketing skills are desired of a forex dealer in a bank, a corporate treasury person is usually a MBA/CA with an in-depth understanding of accounting, budgeting and tax aspects in addition to an understanding of the financial markets and instruments.

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