1. Prof. Harkirat Singh Professor & Consultant IIFT, New Delhi Prof. Harkirat Singh Professor & Consultant IIFT, New Delhi FINANCIAL LAYERING IN EXPORT CHAIN & SUSTAINABILITY – LIVE CASE LEARNING

2. BASIS FOR CALCULATING MONEY LAYERING IN EXISTING EXPORT CHAIN Raw material requirement per month10,000,000 Percentage of manufacturing cost in term of raw material consumed 20% Percentage of packing charges in term of raw material consumed 5% Percentage of profit in term of raw material consumed 10% Interest charged by bank on rupee pre & post shipment finance 7.5% P.A. Interest charged by banks for USD pre & post shipment finance foreign currency loan facility (6LIBOR +2%) 2.5% P.A. Average size of export order per shipmentUSD 100,000(Approx.)

3. STUDY OF EXISTING EXPORT CHAIN OF THE COMPANY Cash Raw Material Stock in Process (Semi finished goods) Export bill receivable Furnished goods and export consignment in transit, warehouse and custom clearance 3 months 21 days Bucket 1 Bucket 2 Bucket 3 Bucket 4 Bucket 5 3 months usance Upper Portion Money Layered Horizontal Line Lower Portion EXISTING EXPORT CHAIN (FUNDS )

4. FINANCIAL STRUCTURE OF EXISTING EXPORT CHAIN OF THE COMPANY BucketAverage period of Stock in the Bucket Money Layered in BucketCost of Money layered @ 7.5% p.a. Raw material3 monthsRM = 30,00,0005,6250 Stock in (process semi finished goods) 21 daysRM = 6,99,999.99 20%ME = 1,39,999.99 8,39,999.98 3,624.65 Finished Goods & Consignment in Transit and warehousing) 3 monthsRM = 30,00,000 20%ME= 6,00,000 5%PC= 1,50,000 TC = 1,00,000 38,50,000 72,187.50 Export Receivables90 Days +20 NTP = 110 days Interest Rate @ 7.5% p.a. 45,00,0001,01,712.33 Total1,21,89,999.982,33,774.48

5. CALCULATION OF MONEY LAYERED & COST OF IMPROVED EXPORT CHAIN BucketAverage period of stock Money layeredMoney released as compared to existing chain Cost of money layered @7.5% p.a. Raw material1 monthRM = 10,00,00020,00,0006,250 Stock process (semi finished goods) 15 daysRM = 5,00,000 ME = 1,00,000 6,00,000 2,39,999.981,849.32 Finished goods & consignment in transit and warehousing 45 daysRM = 15,00,000 ME = 3,00,000 5% PC = 75,000 TC = 1,00,000 19,75,000 18,75,00018,261.99 Export receivables60 days interest @ 7.5% USD 100,000 1 USD = 45 INR 45,00,000NIL55,479.45 Total80,75,00044,14,999.9882,200.76

6. INNOVATIVE EXPORT CHAIN USING USD FINANCING Cash Raw Material Stock in Process Export bill receivable Furnished goods 1 months 15 days Bucket 1 (Funds in USD) Bucket 2 (Funds in USD) Bucket 3 (Funds in USD) Bucket 4 (Funds in USD) 60 days Bucket 5 (Funds in USD) INNOVATIVE EXPORT CHAIN 45 days

7. CALCULATION OF MONEY LAYERED & COST OF INNOVATIVE EXPORT CHAIN BucketAverage taken to period stock same as in previous chain Money layered in USDMoney released in rupees as compared to improved chain Cost of money layered @7.5% p.a. in USD Raw material1 monthRM = 10,00,000 or $ 22,222.22 Advance 20% of order = $20,000.00 Balance = $2,222.22 20% of advance order 9,00,000 $4.63 Stock in process (semi finished goods) 15 days cost as per improved chain Cost of = 6,00,000 Stock in process or $13,333.33 $13.70 Finished goods stock in transit & warehousing 45 days cost as per improved chain Cost of finished 19,75,000 Stock in transit or warehousing $43,888.89 $135.27 Bill receivables60 days from bill of lading as per new arrangements Export Bill $ 100,000$410.96 Total$159,444.24 Or 71,74,990.80 9,00,000$564.56 Or 25,405.20

8. COMPARATIVE FINANCIAL EFFICIENCY OF EXPORT CHAINS Export ChainTotal Money Layered Money Unlayered Interest Cost of Money Layering Interest Cost Saving from previous chain Existing Export Chain 1,21,89,999.99NIL2,33,774.48NIL Improved Export Chain 80,75,00041,14,999.9982,200.761,51,574.48 Innovative Export Chain 71,74,990.80900,00025,405.2056,794.80