A SUMMER TRAINING PRESENTATION ON

IMPACT OF FOREIGN EXCHANGE ON PROFITABILITY

AT
YASHASHVI RASAYAN PVT.LTD.
Presented By Ms. Priyanka Pagedar Ms. Zalak D. Desai
Guided By Mr. Ronak A. Mehta (NLSIMCS)

Naran Lala School of Industrial Management & Computer Science

Contents
Introduction Objective & Limitation Theoretical Framework Research Methodology Analysis of Data Findings & Inferences Suggestion Conclusion

Introduction
THE PG GROUP COMPNIES

ENGINEERING GROUP COMPANIES

CHEMICAL GOUP COMPANIES

HLE Engineers Pvt.Ltd. (MAROLI) H.L.Equipments (SILVASSA)

Yashshvi Rasayan Pvt.Ltd (MAROLI) Heerasons Chemical Pvt.Ltd. (MAROLI) Newpar Aeromatics Pvt.Ltd.(MAROLI) Yashshvi Rasayan Pvt. Ltd (JHAGADIA)

Cont
GENERAL INFORMATION OF YASHASHVI RASAYAN PVT LTD
Name of the company Year of Establishment Address Yashashvi Rasayan Pvt. Ltd 1990 B-1/B-4 Maroli Udhyognagar, Post. Maroli 396436 Dist. Navsari, . Mr. Mitesh Patel Mr. Devesh Desai Private Four Hiren Divan& co. HDFC GEB

Unit Head Finance Executive Nature of Industry No. of Unit Auditors Lead Bankers Electricity Supply

Cont
Export Countries
Country
Germany Switzerland China

Export Percentage
60 10 17 8 5

USA Brazil

Cont
Import Countries
Country
Germany Switzerland China

Import Percentage
40 25 35

Objective and Limitation

Objectives
1. To study impact of foreign exchange rate on profitability. 2. To measure profitability of Yashashvi Rasayan Pvt Ltd. 3. To be aware about import export functioning at Yashashvi Rasayan. 4. To compare the profit at contract and current rate. 5. To analyze the fluctuation in foreign currency viz that of Indian rupee. 6. To analyze implication of the changes in exchange rate on their decisions and minimize the foreign exchange risk.

Cont
Limitation
1. Project is based on secondary data so all data are provided by company only. 2. Yashashvi Rasayan company is an organization where multi level management so there may be some power struggle or issue which may affect study toughly.

Theoretical perspective
Foreign Exchange Markets:
The foreign exchange market is the markets where the currency is exchanged for the currency of another country. Most currency transactions are channeled through the worldwide interbank market. The foreign market operators are guided by different motives when they deal in the foreign exchange markets. The following classification is a typical classification of the participants in the foreign exchange markets.

Arbitrageurs: Traders: Hedgers: Speculators:

 Foreign Exchange Rates:

The foreign exchange rate is the price of one currency quoted in terms of another currency. When the rate is quoted per unit of domestic currency, it is referred as direct quote. When the rate is quoted as unit of domestic currency, it is referred to as indirect quote.

Cross Rate Spot Exchange Rate Forward Exchange Rate Bid-ask Spread

Research Methodology
Research Definition: Yashashvi Rasayan Pvt. Ltd. is making/producing chemical for pharmaceuticals and others types of business and major of their products are exported to other countries and some of the components of chemical has to be imported from different different countries. So, the exchange rate for import export is heavily impact on their profit. With the help of this project report/research
researcher would like to describe the situation if the profitability of organization is affected by exchange rate and how much? So, on this problem researcher would like to throw some light with their research.

 Data Resources:
After defining the research the most important function is to gather data with various sources which are mentioned below.

Secondary Data:
Secondary Data has been gathered with the help of management of the organization and from Websites.

Research Designing:
After determining the research objectives and the nature of the data to be collected, the researchers must choose in appropriate research design, which in turn will influence what tasks they will perform in the remainder of the project. The research design may be descriptive.

Research Instruments: Annual reports ERP reports.

Identification of the Sample:

2010-11 -70 export and 15 import transaction 2009-10 - 37 export and 12 import transaction 2008-09 -30 export and 10 import transaction 2007-08 -23 export and 5 import transaction 2006-07 -11 export and 5 import transaction

Collection of Data:
Once the data collection form and the sample design were ready, the next was to collect the data. Before data analysis could begin, the responses generated by the data collection procedures were checked for completeness, consistency and adherence to pre specified instructions. Analyze The Data And Interpret The Results: Analysis presented here is in graphical, table and in chart format.

Analysis
Year Production (Rs) 2006-07 2007-08 2008-09 2009-10 2010-11 123207214 299690842 343793722 464721365 494321920 Sales (Rs) 82939851 202301047 215923862 278852210 277732840 Annual Inventory holding (Rs) 40267363 97389795 127869860 185869055 216589080

Year 2006-07 2007-08 2008-09 2009-10 2010-11

Sales in Rupee 82939851 202301047 215923862 278852210 277732840

Profit in Rupees 4860275 18207094 19670664 26490959 24162757

Cont
Fluctuation in Foreign Exchange
Month January February March April May June July August September October November December 2006 44.2324 44.2284 44.3378 44.8245 45.2226 45.8886 46.3775 46.4461 45.3581 45.3282 44.7209 44.4781 2007 44.2117 44.012 43.7936 42.0176 40.0596 40.5905 40.28 40.679 40.173 39.3661 39.3168 39.3752 2008 39.2704 39.6724 40.1452 39.9668 41.8814 42.7633 42.723 42.9248 45.4264 48.6196 48.7905 48.4804 2009 48.7326 49.1914 51.2062 50.0596 48.5497 47.7459 48.4358 48.3314 48.3606 46.7192 46.5619 46.5987 2010 45.9216 46.3472 45.4982 44.4714 45.8716 46.5758 46.8363 46.5791 45.9904 44.425 44.9986 45.1192 2011 45.3975 45.423 44.9699 44.3954 44.9377 44.8426 44.4849

Cont
Year wise Analysis of Transaction
Year 2006-07 2007-08 2008-09 2009-10 2010-11 Export Amount ($) 639188 998659.6 1724132.8 1909660 Profit/ loss (Rs) Import Amount($) Profit/ loss (Rs)

21477.17 122654.178 34780.199 494214.38

697186
704832 1354302.5 993817.37

-10984
5937

285827.755 -43745.0026

3921001.5

101061.993 1052071.80 -1034716.97

Findings
Impact of Foreign Exchange on Profitability (Export)
Year 2006-07 2007-08 2008-09 2009-10 2010-11 Profit/loss 21477.17 122654.178 34780.199 494214.38 101061.993

Cont
Findings:
There is no any relation between number of transaction and profit. Sometimes few export transaction create good profit to the company due to positive fluctuation. In 2006-07 Yashashvi Rasayan Company had not much expanded in export business yet they made profit due to fluctuation in USD. In 2007-08 their business expanded slowly still they made good profit in that year.

Con
While in 2008-09 there was a heavy recession in U.S.A, so company had a great impact of USD fluctuation on profitability. As in 2008-09 price of USD was around Rs.51 so there was impact of fluctuation on profitability. In 2009-10 and 2010-11 company earn profit due to fluctuations.

Cont
In year 2009-10 there is a huge profit in compare to other years because from currency fluctuation graph of 2009-10 you can see that the max payment received during the month June to November. So, company has taken maximum benefit of currency fluctuation in this particular year. In year 2006-07 minimum profit is there due to the rupee fall down at the time of payment received. May be their prediction was wrong. So net profit was reduced.

Cont
Impact of Foreign Exchange on Profitability (Import)
Year 2006-07 2007-08 2008-09 2009-10 2010-11 Profit/loss -10984.74 5937 285827.755 -43745.0026 -1034716.97

Cont
Findings:
In year 2006-07 company had loss due to fluctuation in US dollar. In 2007-08 company earned minor profit in import business. In 2009-10 and 2010-11 company had loss due to fluctuations.

Cont
From the study conduct on the financial credentials of the company following results have come up. 1. Percentage decrease in the profitability of the organization in the year 2010-11. 2. Positive chances of the rupee appreciation for next month have to come if the government monetary or fiscal policy remains unchanged. 3. The change in forex rate has the great impact as company carry out its transaction in foreign currency, the appreciation in rupee affect the profitability of company. Thus, company is highly exposed to the rupee appreciation risk and which affects its profitability.

Suggestions
Company can perform transaction with the customer who are from country other than U.S in their currency if the currency show less volatility compare to the U.S dollar. Company can also perform transaction with the customer in the Indian rupee with the fixed rate in the Indian currency. Company can also use Swap option available to reduced risk associated in the foreign transaction. Company can adopt arbitrage by taking reverse position in future position in future market where currency is listed in N.S.E. There are number of different foreign exchange markets where different different foreign exchange rates are listed and company can be member such exchange and take advantage of future rates.

Cont
Company also can adopt STOP LOSS POLICY if company got loss in forward contract.

Company also can go for EEFC (exporters earning foreign currency) policy through bank. Where company can open an account in bank and put his foreign currency as it is, so there is no effect of foreign exchange rates fluctuation. Company can also go for FCNR(B) Loan (Foreign currency Nonresident Bank loan) for foreign currency where libour rate (libour rate is a interest rate of external borings) are applied and have a lower interest rate other than domestic rates.

Conclusion
Yashashvi Rasayan Pvt. Ltd. is making/producing chemical for pharmaceuticals and others types of business and major of their products are exported to other countries and some of the components of chemical has to be imported from different countries. So, they face risk of foreign exchange on profitability. So we have taken the last five years import export transaction of the company and make an analysis. Lastly we can conclude that as there is a fluctuation in foreign exchange creates a high impact on profit. So , if company follow the above recommendations, it will help to minimize the foreign exchange risk.