A

REPORT ON

TRADE FINANCE OPERATIONS

By:

MEHAK JUNEJA

ENROLLMENT No.: 18BSP1729

Name of the organization: JINDAL STAINLESS LIMITED

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 REPORT

ON

TRADE FINANCE – IMPORT/ EXPORT

By:

MEHAK JUNEJA

ENROLLMENT No.: 18BSP1729

ICFAI Business School

A report submitted in partial fulfilment of the requirements of PGPM Program of

IBS GURGAON

Distribution List:

Company Guide: Faculty Guide:

Mr. VEERJI PANDITA Prof. BHAVNA CHHABRA

AGM (IBS GURGAON)

(Jindal stainless Limited)

Date of Submission: 21/5/2019

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 TO WHOM IT MAY CONCERN
This is to certify that Ms. Mehak, student of IBS Gurgaon (PGPM Program) has undergone three
months of summer internship training from 25th Feb 2019 to 24th May 2019 with Jindal Stainless
Limited,Gurugram.

She has worked in Trade Finance function under the guidance of Mr. Veerji Pandita,

Associate General Manager- Trade Finance.

During her internship she was found hardworking and sincere.

Thanking you,

With best wishes

Jindal Stainless Limited

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 AUTHORIZATION
I, Mehak Juneja hereby state that this project work entitled “TRADE FINANCE OPERATIONS -
JSL” is an original piece of work done and submitted by me towards fulfilment of the requirement
of PGPM Program of ICFAI University. The findings and conclusions expressed in this report are
genuine and for academic purpose. It is our own and has neither been submitted nor published
anywhere before. Any resemblance to earlier project or research work purely coincidental. It is
totally based on my hard work and creativity.

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 ACKNOWLEDGEMENT
I would like to express my profound gratitude to all those who have been instrumental in
the preparation of my project report. To start with, I would like to thank Jindal Stainless
Ltd. for providing me the opportunity to undertake this internship study and allowing me
to explore the area of trade finance ( import /export) which was entirely new to me and
which will surely prove to be very beneficial to me in my future assignments, studies and
career ahead.

I wish to place on records, my deep sense of gratitude and sincere appreciation to my

company guide Mr. Veerji Pandita who suggested and helped me to prepare the frame
work of the project. I would also like to thank him for his continuous support, advice and
encouragement without which this report could never have been completed.

I am deeply grateful to my faculty guide prof. Bhavna Chhabra for her invaluable
suggestions, comments, feedback and support throughout the internship. They have served
as a beckon of light. Her patience and faith in my abilities always boosted my confidence.

I would also like to mention the unconditional help put forth by Mr. Vijay Pratap (AGM).
A special thanks to Mr. Deepak Ranjan and Mr. Karan Bhatia who have cleared my
doubts on numerous occasions. They all have been very kind to help even at the busiest
hour.

However, I accept the sole responsibility for any possible error or omission and would be
extremely grateful to the readers of this project report if they bring such mistakes to my
notice.

Thank You
Mehak Juneja

(18BSP1729)

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 TABLE OF CONTENT

S.NO PARTICULARS PAGE NO.

1 Executive summary 7
2 Industry Overview 9
3 Company profile 10
4 About the company 12
5 Major competitors 16
6 SWOT analysis 17
7 Financial analysis 19
8 About SIP project 28
9 Introduction to trade finance 31
10 Understanding the process 33
11 Documents required 43
12 SIP working 49
13 findings 61
14 learnings 62
15 Recommendations 63
16 CONCLUSION 64
17 References 65

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 EXECUTIVE SUMMARY
Student Name: Mehak Juneja

Enrollment No: 18BSP1729

Industry Type: Steel

Address : Stainless Centre, plot -50 Sector 32, Gurgaon

Project Title

 Trade Finance Operations of JSL

Objective of the project

 To ascertain the practical knowledge of the import/export trade finance operations.

 How to open import letter of credit (LC) and its role in trade finance operations.
 What kinds of documents are required in export trade finance and their importance?
 How lodgement of bills is done.
Background

 JSL is one of the leading players in steel industry in India. The main purpose of
doing this project is to check the growth of such a big company in its diverse fields
of business and also to do a detailed research on trade finance operations of JSL. To
gain a comprehensive experience I worked with Jindal steel ltd. For 14 weeks as a
full-time intern in the trade finance dept.
 The project has explored the need for trade finance and introduced some of most
common trade finance tools and practices.
 While doing this project, different aspects such as buyer’s credit, supplier credit,
usance credit, concept of LIBOR, margins in interest rate is studied.
 My work at JSL’s is to make letter of credit (LC), record all the LC’s in SAP, then
make acceptance of it and track how many documents are attached to letter of credit
according to the specific conditions mentioned in the terms of letter of credit.
 Analysis of net outstanding amount of LC in each bank through which JSL is tie up.
 Analysis of the LC which is open at bank but its due date has gone and checking at
our sight which LC has to closed in bank and then same is inform to bank.
 My work at JSL’s in export trade finance team was to rectify errors and make draft
of export trade documents and send them bank for settlement.
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 Entering letter of credit and preparing draft for it.
 How to issue Bank Realisation Certificate and its role which is major part of the
export trade finance operations of Jindal stainless limited.
 It was a great learning experience and I got great guidance from my guide who
excelled in the field of his work.

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 INDUSTRY OVERVIEW
Stainless steel is crucial to the development of any modern economy and is considered to
be the backbone of human civilization. The level f per capita consumption of steel is treated
as an important index of the level of socioeconomic development and living standards of
the people in any country. It is a product of a large and technologically complex industry
having strong forward and backward linkages in terms of material flows and income
generation. All major industrial economies are characterized by the existence has been
largely shaped by the strength of their steel industries in their initial stages of development.
Sector has made rapid strides since then.

The new greenfield plants represent the latest in technology. Output has increased, the
industry has moved up in the value chain and exports have risen consequent to a greater
integration with global economy. Trade involves purchase of merchandise from the seller
by a purchaser for his onward selling (with or without value addition to the goods) for a
profit.

Any trade transactions involve movement of the documents representing settlement of the
transaction. While the merchandise passes through a range of logistics player operating at
different levels of supply chain, bank have traditionally been playing a significant role in
the movement of documents and funds. Though this basic concept of trade and the role
played by banks (as a lender or otherwise) remains the same, the dimensions of trade and
the role of players undergo a lot of change depending on whether the entire trade
transaction (sale / purchase) is carried on in the country, or it is a cross border transaction.

Imports

Year 2013-14 2014-15 2015-16 2016-17 2017-18

Total finished steel 5.45 9.32 11.71 7.42 8.95
(mt)

Exports

year 2013-14 2014-15 2015-16 2016-17 2017-18

Total finished steel 5.98 5.59 4.07 8.24 10.6
(mt)

 Mt – metric tone

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 3. COMPANY PROFILE
About Jindal Group
Jindal organization, set up in 1970 by the steel visionary Late Sh. O.P. Jindal, has grown
from an indigenous single unit steel plant in Hisar, Haryana to present multi- billion, multi-
national and multi product steel conglomerate. Jindal Stainless is one of the largest
stainless-steel conglomerates in India and ranks amongst the top 10 stainless steel
conglomerates in the world. It’s not only the magnitude of our operations that determines
our credibility and name, but we remain inspired by our vision for innovation and enriching
lives. Jindal Stainless Group has an annual crude steel capacity of 1.6 MTPA and the group
has an annual turnover of US $ 3.1 billion (as on March'18).

The Jindal organization today is a global player. Its relentless quest excellence has reaped
rich benefits and it is today one of the worlds most admired and respected groups within
the steel fraternity.

In august, 1997- The Rs 2700 crore O P Jindal group has initiated a move to split its assets
among four sons of patriarch Prithviraj, Sajjan, Ratan and Naveen Jindal.

Naveen Jindal holds the maximum stack of Jindal Group as Jindal steel and power ltd.

Rattan Jindal got the Stainless of the group as Jindal Stainless ltd. While Sajjan Jindal was
provided Jindal Steel works and Prithviraj Jindal holds Jindal Saw in Jindal Group.

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11
4. About the Company

Jindal Stainless Limited

Jindal Stainless Limited is one of the largest manufacturers of stainless in India with a
capacity of 1 million tons per annum. A leader and a name synonymous with enterprise,
excellence and success the company’s ethos mirrors most characteristics similar to metal
it produces. Akin to stainless steel Jindal Stainless Limited is innovative and versatile in
its thought process, strong and unrelenting in its operations.

The state-of-the-art unit of Jindal stainless is located in the eastern part of India in the state
of Odisha. The plant comprises of 250000 tons per annum of ferro alloy’s facilities with
world class technology and equipment’s sourced. The complex, equipped with captive
power generation facility, is eventually scalable up to 3.2 million tons per annum of
stainless-steel making.

Grades of Steel Products:

 200
 300 (including SS304, SS316)
 400
 For kitchenware (modular kitchen, utensils), commercial & industrial applications.
International Standard Stainless-Steel Grades:

 Austenitic
 Ferritic
 Martensitic
Nature of Business

 Exporter
 Manufacturer
 Supplier
Product and Services

 Stainless Steel Utensils

 Tableware and Cutlery

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Manufacturing Plants in India
 Haryana – Hisar
 Andhra Pradesh - vizag
 Orissa - Jaipur
Overseas manufacturing operations takes place in Indonesia & service centre in Spain.

Export markets in over 40 countries including US, Europe, Middle East & South Asian
Countries.

Capacity of manufacturing 1 million tones per annum.

Annual crude steel capacity of 1.8 MTPA & annual turnover of US $ 3.1 billion as on
March’18.

Applications of Stainless Steel

 ART - automative, railway & transport

 ABC - architecture, building & construction
 Chemical & petrochemical industries
 Capital goods
 Kitchenware & food processing industries
Subsidiaries Companies of Jindal Stainless

 PT Jindal stainless Indonesia

 Jindal stainless steel way limited
 Jindal architecture limited
 Jindal stainless UK limited
 Jindal coke limited
Alongside contributing to India’s growth story, the company is driving an ambitious global
expansion plan with its sights set on energizing as a leading transnational business group.
The company continues to capitalize on opportunities in high growth markets, expanding
its core areas and diversifying into new businesses.

In Indonesia, the company has invested on the development of two greenfield exploration
assets. It is also exploring investment opportunities in the power and infrastructure sector
in Indonesia.

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Process
Mining - melting - hot rolling - cold rolling

(Source: Company Brochure)

Scope of Stainless Steel in Future

 Resistance to erosion & corrosion
 Light weight & does not compromise on strength
 Heat resistant, durable, impact resistant, low maintenance, flexible, hygienic, Low
Life – cycle cost & an aesthetic appearance.
*Contains 60% of recycled content & called “Green Metal”.
*Global economy loose over $5000 bn USD every year on account of corrosion.
Increase in stainless steel can check this loss to a great extent.
Corporate Social Responsibility - CSR

 SDP – Skill Development Programme

 WEP – Women Empowerment Programme
 CHAP – Community Health for All Programmes
 RBPO – Rural BPO

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  GIP – Green Initiative Programme
 GP – Global Partnerships
 EVP – Employee Volunteering Programme

Vision, Mission and Values

Vision:

 Improving lives through trustworthy and innovative stainless solution.

Mission:

 To be leading stainless steel company in the world.

 Forging reliable relationships with customers, suppliers, employees and all other
stakeholders.
 Building strong capabilities driving innovative practices, high quality and
competitive solutions.
Values:
Company aims to work towards their vision, driven by values of Jindal Stainless

that are integrity, meritocracy, dynamic thinking, creativity and innovation and

social responsibility.

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5. Major Competitors

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6. SWOT Analysis:
STRENGTH
• Jindal Stainless Ltd. has come very far from a single factory establishment to become a
multilocation company having plants at abroad also. It is also the largest integrated
manufacturer of stainless steel in India. It is single handedly meeting over a one-third of
total demand for stainless steel in the nation with production capacity of more than 720000
TPA.
• JSL introduced GPS system in their transportation trucks to track them.
• By riding the experience curve, the 49 years old group has been able to lower its project
costs through in-house design and fabrication.
• Knowing the current shortage of power economy coupled with the fact that steel is a
power intensive sector, Jindal Stainless Ltd. increased their captive power in Hisar to
ensure self-sufficiency and also ensure production through low cost captive power.
• Having service centers in place at three major locations like Gurgaon, Mumbai & Chennai
gives JSL an extra edge to cater prime customer segment on JIT concept.

WEAKNESS

• Transportation cost incurred on raw materials & finished goods export being plant located
away from major ports of the country.
• Delivery problem of goods is one of the major weaknesses.
• Relatively high production costs in comparison to international standards.

OPPORTUNITIES

• Centre of World Trade is shifting to Asia.

• Export market can be tapped in an extensive way.
• Per capita consumption of stainless steel in India is less. There is much scope for increase
in consumption.
• Emerging demands in ABC & ART segments.
• Can improve upon quality.

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 THREATS

• Increase in domestic competition of stainless steel.

• Increase in volatility of prices of major raw materials like scrap, Nickel and other
ferroalloys.
• Small production units penetrating into existing SS market of Jindal Stainless.
• Growth of imported Stainless steel market in India.

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Financial analysis

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7. Cash Management Analysis
One of the techniques of assessing financial analysis of the company is measuring the
performance of cash management. The finance manager must maintain adequate liquidity
so that the firm can pay off its obligations. In order to test the liquidity of a firm one of the
best techniques that can be used is the liquidity ratios.

7.1 Current ratio (CA/CL)

The liquidity and efficiency ratio that evaluates an organization’s capability in paying off
its short-term debts using the current assets is called current ratio.
This chart shows that that the current ratio is fluctuating over the years. The rate is between
1.6 and 0.8 which indicates a sound liquidity position of the company initially but it keeps
on decreasing with the years passing by.

7.2 Quick Ratio (CA-INVENTORY/CL)

Quick ratio measures how efficiently the company can pay off its short-term financial
liabilities. It is a better measure than current ratio as it deducts fewer liquid assets such as
inventory.
From the above chart a fluctuating quick ratio of JSL can be observed over the years. But
it is considered that a quick ratio of 1:1 is satisfactory. So, it can be said that JSL is not
performing very well in managing its cash. In the year 2017 the ratio was lowest which

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indicates decreased current asset in comparison to current liabilities. After 2017 the ratio started
to increase.
This should be taken care by the management of the organization soon.

7.3 Inventory Management Analysis

Inventory Period is an efficiency ratio that shows how quickly a company uses up its supply
of goods over a given time frame. While inventory period is shortening in some industries,
such as grocery stores, then in others, such as department stores, comparatively lengthening
inventory period means that a company has poor sales or too much inventory. It is
computed by dividing inventories by the company's average daily cost of goods sold.

Inventory Turnover = COGS or Net Sales/Average Inventory

Inventory Holding Period = 365/Inventory Turnover

From the above analysis we can see that the inventory holding period is highest in the year
2016. After that there was a fall in the inventory holding period which is a sign of increase
in performance of the products.

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7.4 Asset turnover ratio:
ASSEST TURNOVER
YEAR RATIO
2013-14 76.16
2014-15 44.2
2015-16 52.71
2016-17 80.92
2017-18 106.1

Interpretation:

This ratio establishes a relationship between total assets and sales. The ratio
enables to know the efficient utilization of total assets of a business. The ratio is
increasing from the past 2 years which means higher ratio the better it is , it implies
the company is generating more revenues per dollar of assets.

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8. Profitability ratio: profitability ratio is a class of financial metrics that are used to
assess a business’s ability to generate earnings as compared to its expenses and other
relative expenses and other relative cost incurred during a specific period. For most of
these ratios having a higher value relative to a competitor’s ratio or the same ratio from
the previous period indicate that the company is doing well.

The profitability ratios are calculated to measure the operating efficiency of the company.

Interpretation:

This ratio shows that the profit before depreciation, interest and taxes is increasing in
2016-17 i.e.13.62 and also it decreases in 2017-18 i.e. 12.29 .

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Net profit margin

Interpretation:

The net profit margin was declining since 2014 economic slowdown in steel industry as
now there is increase in their NPR from past year i.e. 2.95% which is good sign that
company is going on its track because of more demand.

Total Revenue
YEAR REVENUE
2013-14 11,993.10
2014-15 6,063.73
2015-16 6,597.35
2016-17 8,336.84
2017-18 10,829.96

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Interpretation:
Till 2014, the revenue of JSL increased at increasing rate but after that revenue start
decline due to less demand in the market but a from last year its demand is increasing and
its revenue start increasing due to its more exports.

Total Expenses
YEAR EXPENSES
2013-14 12,989.74
2014-15 7,015.29
2015-16 7301.63
2016-17 8274.26
2017-18 10,348.09

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Interpretation:
As revenue increases till 2014, so expenses were also more in that year but the expenses
go down in upcoming years due to low production and economic slowdown in steel
industry.as in 2017-18 its expenses increase because of more demand the company is
producing at large quantity for doing more exports.

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 ABOUT SIP PROJECT
Origin:
Internship is a part of PGPM program in ICFAI Business School. The report is originated
from the curriculum requirement of PGPM program. I have done my internship at “Jindal
Stainless Limited” and have done my report on “trade finance and its operations in Jindal
Stainless Limited” I chose the topic as per consultation with my SIP supervisor Prof.
Bhavna Chhabra and my company guide Assistant General Manager Mr. Veerji Pandita

Objective:
The objective of preparing this report can be explained under two categories.

Broad objective:
The objective of the study is to gain an insight into the concept of credit management, how
trade finance activities is managed at a multinational corporation and how it influences the
overall performance of the company.

Specific objective:

 To learn about modes of international trade.

 To get the knowledge of types of payment (sight, deferred, commercial
invoices, transport documents and documents relating to services).
 To get the knowledge of documentation and requirements (e.g., commercial
invoices, transport documents and documents relating to services).
 To get the knowledge of communication of letters of credit, collections, and
associated documents electronically via the Internet (SWIFT).
 To learn about efficient and fast client onboarding process.
Methodology:
There are two types of methodology used in the preparation of data i.e. primary data and
secondary data. Primary source refers to the collection of data which is not available
anywhere but obtained and Secondary refers to use of already available data.

 The primary sources:

 Include the conversation with the company mentor for preparation of
concepts and collecting annexures of documents.
 Personal experience gained by visiting different desks.
 Experience gained through report handling.

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  Learnings through query handling and problem solving.

 The secondary sources:

 Reports prepared by the company.
 Company’s official site.
 Other websites.

Limitation of the Report:

The report faced some problems during its preparation, which has limited the purpose of
the report. The limitations are:

 Some information has been omitted as it was confidential.

 Study is restricted to current company only.
 The internship has been made for 14 weeks long duration but it is very much
difficult to set true practical experience with current world circumstances in this
short span of time.
In spite of all these limitations I have tried to put the best effort as possible.

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TRADE FINANCE

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INTRODUCTION TO TRADE FINANCE
Trade finance signifies financing for trade, and it concerns both domestic and international
trade transactions. A trade transaction requires a seller of goods and services as well as a
buyer. Various intermediaries such as banks and financial institutions an facilitate these
transactions by financing the trade.

Trade finance can include Documentary collection, Trade Credit Insurance, Fine trading,
Factoring or Forfaiting, some forms are specifically designed to supplement traditional
financing.

Secure trade finance depends on verifiable and secure tracking of physical risks and events
in the chain between exporter and importer. The advent of new information and
communication technologies allows the development of risk mitigation models which have
developed into advance models. This allows very low risk of advance payment given to
the exporter, while preserving the importer’s normal payment credit terms and without
burdening the importer’s balance sheet. As trade transactions become more flexible and
increase in volume, demand for these technologies has grown.

JSL Trade Finance

With JSL, we offer our customers import financing services through Letter of Credit (L/C)
which are well accepted globally and supported by strong trade finance setup.

We have correspondent banking arrangements with a large number of banks worldwide

for this service. Our trade team is equipped to structure solutions for a variety of

purchase requirements, ranging from simple L/C is to revolving L/C, bid bonds, standby

L/C and other performance guarantees.

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Understanding the process and
documents required

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Process of Import Trade Finance:

Production department intimates purchase department about the material needed.

Purchase department confirms order for material with supplier and requests trade
finance for LC and funds to fulfil purchase obligations.

Trade finance gets LC issued and sends fund request to fund planning team.

Supplier receives the LC, makes the shipment and intimates the issuing bank about
the shipment and the due date of payment (counted after the date of shipment).

Supplier also forwards the documents as mentioned in the LC to the issuing bank.
These should reach the issuing bank within 21 days of shipment.

The issuing bank forwards the documents to trade finance (buyer), procurement
inspects the material and gives acceptance if he finds them right.

Payment becomes due after acceptance and the same is maintained in records. Just
before due date trade finance requests fund planning team for funds and the same are
paid to the bank.

LC is closed after payment.

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Letter of Credit:

Banks provide two types of financing to a firm.

Financing

Fund Based Non Fund Based

Term Loans Cash Credit Letter of Credit

Bank Guarantee

Letter of credit is a financial instrument widely used in international trade for security of
payments due from the importer and satisfactory delivery of goods from exporter. It is an
agreement where a bank acting at the request of a customer promises to pay a third party
on a given date according to agreed stipulations and against presentation of documents.

Parties to letter of credit:

 Applicant (Importer): He is normally the buyer of the goods who applies for the
LC.
 Issuing Bank: It is the bank which issues the LC and undertakes to make
payment.
 Beneficiary (Exporter): He is normally the seller of the goods. LC is issued in his
favour to take payment on surrender of documents.

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  Advising Bank: It advises the LC to the beneficiary thereby assuring the
genuineness of the LC.
 Negotiating Bank: Negotiation is the process of giving value to the documents.
The negotiating bank is the one with whom documents may be negotiated.
 Reimbursing Bank: It is the bank authorised to honour the reimbursement claim
in settlement of acceptance lodged with it by the negotiating bank. It is the bank
with which the issuing bank has an account.

Process Details:

1. The buyer and seller agree on terms of sale and enter a contract encompassing type
of goods, delivery schedule, mode of payment etc. The buyer then issues an LC in
seller’s favour.
2. The buyer’s bank or the issuing bank sends the letter of credit to the advising bank
in the seller’s country.

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 3. The advising bank sends the LC to the seller after checking its authenticity. The
seller then goes through the terms and conditions the buyer has laid down. He may
notify the buyer if he wants some amendments in the LC.
4. The seller ships the goods after all the conditions have been finalised. The seller
acquires the bill of lading and other documents the buyer needs in the terms of LC.
5. The seller sends the documents to the negotiating bank indicating compliance with
the terms in LC. The negotiating bank sends the documents to the issuing bank.
6. The issuing bank forwards the reimbursement claims to the reimbursing bank.
7. The reimbursing bank pays the negotiating bank as per instructions issued by the
issuing bank.
8. On receipt the negotiating bank, pays the beneficiary if the bill is not discounted
by him.
9. After receiving the documents, the issuing notifies the buyer to collect them and
adhere to payment terms to take possession of goods.
10. The issuing bank pays the reimbursing bank.

The process of the issuing bank receiving documents from the supplier and the intimation
of the same to the buyer is called Lodgement. It plays a key role in determining the exact
amount of payment to be made and its due date. Any firm cannot default on its payments
for LC’s to its banks as it severely affects its credibility.
There are limits on LC value with every bank the firm deals with called sanction limit. If
the cash credit limit is not used, its amount can be transferred to the LC limit issued. This
is called interbank transfer.
For example: Bank A has sanctioned limit up to 100 crores. A firm raises a request for LC
of value 20 crores. After the issuance of LC 20 crore is used and 80 crore limits is still
unused. This 80-crore unused limit can be used in another LC’s.
The supplier sends documents only worth 10 crore instead of 20 crores. In this case the goods
are sent only for 10 crore and payment is sought only for that amount. After giving
acceptance for that the firm is liable to pay only 10 crores but the LC value of 20 crore will

35
 still remain blocked. This limit of 10 crore will be freed when the payment of 10 crore is
made. And the remaining 10 crores will remain blocked till the LC expires. Hence, a
judicious use of LC’s has to be ensured so that they are used efficiently and no amount of
limit is wasted which may lead to shortage of funds, wastage of resources like LC opening
charges and interest paid on the LC amount.

This pictures show the amount of total LC in sight and in usance day of
120,150,60,90,30.Mostly in case of ILC the LC open is for 90 days at usance.

36
These pictures show the details of FLC opened by the JSL. Mostly the JSL opened the
FLC of usance days of 150 days.

37
Export trade process
Trade Domestic process

The process of transferring goods within the domestic territory. Below, mentioned the steps
undertaken after the dispatch of the goods from factory.
Dispatch of goods

Preparation of tax invoices, lorry receipts and material testing certificates (MTC)

Preparation of billing file

Send documents to bank for negotiation

Follow up acceptance and receive payment on due date

Above mentioned the process follow while transport of goods, after the dispatch of goods
from the factory, finance department plays the role for preparation of its billing documents
as per the Purchase Order. With this the proper billing set for the requested order quantity
sent to the bank (intermediate party) for negotiation. Here, it plays the role to safeguard the
interest of beneficiaries.
Following follow up for acceptance against that files is done to prevent the case of default.

Trade Export process:

It is the process of transportation of goods to the foreign countries.
Steps undertaken in Export Trade after the dispatch of goods from factory to port.
Dispatch of goods

Send goods to port

Prepare shipping bill file

Export invoices and bill of lading

Send documents to bank for negotiation

Follow up acceptance and receive payment on due date

Above is the detailed follow up process of goods loading from warehouse to its unloading
to the port. As after the dispatch, goods sent to the port. Finance Department plays role in
preparing export documentation. Different documents like Bill of Lading, Export Invoice,

38
Bill of Exchange sent to the bank to safeguard beneficiary interest. And then follow up
for the acceptance goes on.

Total Exports of JSL in 2018-19

The pie chart above shows that % of the total payment from sales is received as follows-
12.95% as 100% advance; 15.76% as CAD; 16.39% as DA Based; 48.34% as LC Based
and 6.57% as Scan Dox.

It can be analyzed that the most used mode for receiving funds by Jindal Stainless
Limited is LC Based. It is so because it is the most secured mode of receiving the funds.

39
From the above graph, it can be interpreted that LC Based is bifurcated into:
• L/C Sight
• LC 30 Days
• LC 60 Days
• LC 90 Days

And L/C Sight is the most used form of LC Based mode of receiving payments as it can
be seen from the graph above.

L/C Sight holds 70.54% of LC Based mode of finance; LC 30 days holds 2.95%; LC 60
days holds 17.17%; LC 90 days holds 9.34%.

INCO Terms
The Incoterms or International Commercial Terms are a series of pre-defined
commercial terms published by the International Chamber of Commerce (ICC) relating to
International Commercial Law. The Incoterms rules are intended primarily to clearly
communicate the tasks, costs, and risks associated with the global or international
transportation and delivery of goods. Incoterms inform sales contracts defining respective
obligations, costs, and risks involved in the delivery of goods from the seller to the buyer.
The Incoterms rules are accepted by governments, legal authorities, and practitioners
worldwide for the interpretation of most commonly used terms in international trade. They
are intended to reduce or remove altogether uncertainties arising from differing
interpretation of the rules in different countries. As such they are regularly incorporated
into sales contracts worldwide.

"Incoterms" is a registered Trademark of the ICC.

Defined terms in INCO terms
• Delivery: The point in the transaction where the risk of loss or damage to the goods is
transferred from the seller to the buyer.
• Arrival: The point named in the Incoterm to which carriage has been paid.
• Free: Seller has an obligation to deliver the goods to a named place for transfer to a carrier.
• Carrier: Any person who, in a contract of carriage, undertakes to perform or to procure
the performance of transport by rail, road, air, sea, inland waterway or by a combination of
such modes.
• Freight forwarder: A firm that makes or assists in the making of shipping arrangements.
• Terminal: Any place, whether covered or not, such as a dock, warehouse, container yard
or road, rail or air cargo terminal.
• To clear for export: To file Shipper’s Export Declaration and get export permit.

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Rules for any mode of transport-

• FOB- Free on Board (named port of shipment)

Under FOB terms the seller bears all costs and risks up to the point the goods are loaded
on board the vessel. The seller's responsibility does not end at that point unless the goods
are "appropriated to the contract" that is, they are "clearly set aside or otherwise identified
as the contract goods". Therefore, FOB contract requires a seller to deliver goods on board
a vessel that is to be designated by the buyer in a manner customary at the particular port.
In this case, the seller must also arrange for export clearance. On the other hand, the buyer
pays cost of marine freight transportation, bill of lading fees, insurance, unloading and
transportation cost from the arrival port to destination.

• CFR- Cost and Freight (named port of destination)

The seller pays for the carriage of the goods up to the named port of destination. Risk
transfers to buyer when the goods have been loaded on board the ship in the country of
Export. The Shipper is responsible for origin costs including export clearance and freight
costs for carriage to named port. The shipper is not responsible for delivery to the final
destination from the port (generally the buyer's facilities), or for buying insurance. If the
buyer does require the seller to obtain insurance, the Incoterm CIF should be considered.
CFR should only be used for non-containerized sea freight and inland waterway transport.

• CIF- Cost, Insurance & Freight (named port of destination)

This term is broadly similar to the above CFR term, with the exception that the seller is
required to obtain insurance for the goods while in transit to the named port of destination.
CIF requires the seller to insure the goods for 110% of their value under at least the
minimum cover of the Institute Cargo Clauses. The policy should be in the same currency
as the contract. The seller must also turn over documents necessary, to obtain the goods
from the carrier or to assert claim against an insurer to the buyer. The documents include
(as a minimum) the invoice, the insurance policy, and the Bill of Lading. These three
documents represent the cost, insurance, and freight of CIF. The seller's obligation ends
when the documents are handed over to the buyer. Then, the buyer has to pay at the agreed
price. Another point to consider is that CIF should only be used for non-containerized sea
freight.

• DAP- Delivered at Place (named place of destination)

The seller delivers when the goods are placed at the disposal of the buyer on the arriving
means of transport ready for unloading at the named place of destination. Under DAP
terms, the risk passes from seller to buyer from the point of destination mentioned in the
contract of delivery.
Once goods are ready for shipment, the necessary packing is carried out by the seller at his
own cost, so that the goods reach their final destination safely. All necessary legal

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formalities in the exporting country are completed by the seller at his own cost and risk to
clear the goods for export.
After arrival of the goods in the country of destination, the customs clearance in the
importing country needs to be completed by the buyer, e.g. import permit, documents
required by customs and etc., including all customs duties and taxes.
Under DAP terms, all carriage expenses with any terminal expenses are paid by seller up
to the agreed destination point. The necessary unloading cost at final destination has to be
borne by buyer under DAP terms.

Export Trade Finance Documentation

Documentation

International market involves various types of trade documents that need to be produced
while making transactions. Each trade document is differed from other and present the
various aspects of the trade like description, quality, number, transportation medium,
indemnity, inspection and so on. So, it becomes important for the importers and exporters
to make sure that their documents support the guidelines as per international trade
transactions. A small mistake could prove costly for any of the parties.

For example, a trade document about the bill of lading is a proof that the goods have been
shipped on board, while inspection certificate certifies that the goods have been inspected
and meet the quality standards. So, depending on these necessary documents a seller can
assure a buyer that he has fulfilled his responsibility whilst the buyer is assured of his
request being carried out by the seller.

Air Waybills

Air Waybills make sure that the goods have been received for shipment by air. A typical
air way bill sample consists of three original and nine copies. The first original is for the
carrier and is signed by an export agent, the second original, the consignee’s copy is signed
by the export agent, the third original is signed by the carrier and is handed to the export
agent as a receipt for the goods.

Air waybills serve as:

 Proof of the receipt of goods for shipment.

 An invoice for the freight.
 A certificate of insurance.

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  A guide to airline staff for the handling and dispatch and delivery of the
consignment.
Bill of lading

Bill of lading is a document given by the shipping agency for the goods shipped for
transportation from on destination to another and is signed by the representative of the
carrying vessel.

Bill of lading is issued in the set of two, three or more. The number in the set will be
included on each bill of lading and all must be accounted for. This is done due to the safety
reasons which ensures that the document never comes into the hands of an unauthorized
person. Only one original is sufficient to take possession of goods at a port of discharge so,
a bank which finances a trade transaction will need to control the complete set. The bill of
lading must be signed by the company or its agents, an must show how many signed
originals were issued.

Certificate of origin

The certificate of origin is required by the custom authority of the importing country for
the purpose of imposing import duty. It is usually issued by the chamber of commerce and
contains information like seal of the chamber, details of the goods to be transported and so
on.

It would normally include:

 The name of the company an address as exporter.

 The name of the importer.
 Package numbers, shipping marks and description of goods to agree with that on
other documents.
 Any weight or measurements must agree with those shown on other documents.
 It should be signed and stamped by the chamber of commerce.
Combined Transport Document

Combined transport document is also known as multimodal transport document an is used

when the goods are transported using more than one mode of transportation. In the case of
multimodal transport document, the contract of carriage is meant for a combined transport
from the place of shipping to the place of delivery. It also evidence receipt of goods but it
does not evidence on board shipment, if it complies with ICC 600, Article 26(a). The

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liability of the combined transport operator starts from the place of shipment and ends at
the place of delivery.

Multimodal Transport Document would normally show:

 That the consignee and notify parties are as the credit.

 The placed goods are received, or taken in charges and place of final destination
 Whether freight is paid or to be collected.
 The date of dispatch or taking in charge, and the “on board” notation, if any must
be dated and signed.
 Total number of original.
 Signature of the carrier, multimodal transport operator or their agents.
Commercial Invoice

Commercial invoice document is provided by the seller to the buyer, also known as export
invoice or import invoice, commercial invoice is finally used by the custom authorities of
the importer’s country to evaluate the goods for the purpose of taxation.

The invoice must:

 Be issued by the beneficiary named in the credit (the seller).

 Be address to the applicant of the credit (the buyer).
 Be signed by the beneficiary (if required).
 Include the description of the goods exactly as detailed in the credit.
 Be issued in the stated number of originals and copies.
 Include the price and unit prices if appropriate.
 State the price amount payable which must not exceed that stated in the credit.
 Include the shipping terms.
Bill of Exchange (Draft)

A bill of exchange is a special type of written document under which an exporter ask
importer a certain amount of money in future and the importer also agrees to pay the
exporter that amount of money on or before the future date. This document has special
importance in wholesale trade where the large amount of money is involved.

Following persons are involved in a bill of exchange:

Drawer: the person who writes or prepares the bill.

Drawee: the person who pays the bill.

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Payee: the person to whom the payment is to be made.

Holder of the bill: the person who is in the possession of the bill.

Insurance Certificate

Also known as insurance policy, it certifies that goods transported have been insured under
an open policy and is not actionable with little details about the risk covered. It is necessary
that the date on which the insurance becomes effective is same or earlier than the date of
issuance of the transport documents. Also, if submitted under a LC, the insured amount
must be in the same currency as the credit and usually for the bill amount plus 10 percent.

The requirements for the completion of an insurance policy are as follows:

 The name of the party in the favour of which the documents has been issued.
 The name of the vessel and the flight details.
 The place from where the insurance is to commence typically the seller’s warehouse
or the port of loading and the place where insurance cases usually the buyer’s
warehouse or the port of destination
 Insurance value specified in the credit.
 Marks and numbers to agree with those on other documents.
 The description of the goods, which must be consistent with that in the credit or on
the invoice.
 The name and address of the claims setting agent together with the place where
claims are payable.
 Countersigned where necessary.
 Date of issue to be no later than the date of transport documents unless cover is
shown to be effective prior to that date.
Packing List

Also known as packing specification, it contains details about the packing materials used
in the shipping of goods. It also includes details like measurement and weight of goods.

The packing list must:

 Have a description of the goods consistent with the other documents.

 Have details of shipping marks and numbers consistent with others documents.

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Inspection Certificate

In many cases the importer requests/requires the consignment to be inspected by a third

party at a point of shipment/exporter’s factory or warehouse before the goods are sealed or
transported. This requirement is often incorporated into the terms and conditions of the
letter of credit. Thus, the exporter needs to submit a valid Inspection Certificate along with
the other trade documents like Invoice, Packing list, Shipping bill, Bill of lading etc. to the
bank for negotiation.

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SIP WORKING

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Tasks Performed Under Import Trade Finance Team

 Prepared LC in SAP (/N/OBIZ/IMP)

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The above pictures show how letter of credit is created.
The following are the steps:
 In SAP, log in with code (/n/obiz/imp) and then in letter of letter request mode
enter the LC request number.
 The whole details of LC are opened and then select the bank in which bank LC
is to be send.
 Then approve the LC and send it to the bank for issue.

Punched the details of letter of credit

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The above pictures show the punching details of LC in the SAP
The following steps are:

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  In SAP when LC is opened by bank in the document part of letter of credit, enter
the LC request number whole details of LC is opened.
 Then fill the bank LC NO. which bank issued and save the details. The
document 5-digit number is generated.
 Then approve the LC.
 After that through the document 5-digit no. all the documents are tracked in the
LC.

Recorded amendment record

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Prepared Acceptance

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The above pictures show the preparing of acceptance in SAP

The following are the steps:

 In SAP, the acceptance is prepared by the document 5-digit number as enter the
document 5 digit the whole details of commercial invoices are opened and approve
the invoice which is attached to the LC.
 Then check all the details of invoices if some error occurred rectify it.

Prepared outstanding report of letter of credit

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The above picture shows the outstanding report of ILC in which I analyzed free days and
interest days of LC in Jindal stainless limited and at which rate the interest is charged.

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The above picture shows the outstanding report of FLC in which I analyzed the terms and
interest payment of letter of credit.

Analysis of net outstanding amount of LC in both JSL and JSHL

JSL

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The above picture shows the analysis of net outstanding amount of LC of JSL in the
bank. As analysis how much net acceptance given for the amount of LC and how much
amount is outstanding at bank related to the LC amount.

JSHL

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The above picture shows the analysis of net outstanding amount of LC of JSHL in the
bank. As check how much amount of acceptance is given against the LC and how much
is net outstanding in the bank.

Tasks Performed Under Export Trade Finance Team

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 Export documentation in SAP (/n/obiz/zeam)

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The above pictures show how the documentation part takes place in SAP in export
department. The following are the steps:

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 This picture shows how the LC settlement take place in export trade finance team.

 Do work related to bank realization certificate: how to issue BRC’S and then submitted to
the incentive team to claim the incentive on the export amount.

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FINDINGS
Following findings were observed: -
• After the export contract takes place, then the product manufacturing starts.
• The company follows secured as well as unsecured payment terms.
• The most preferred payment term used by Jindal Stainless Limited is LC Based as it is
most secured.
• Various INCO terms are used by the company like CIF, CFR, DAP, FOB, etc. and the
most common and used INCO term is CIF.
• Outstanding report of LC is prepared on a daily basis so as to know the payment yet to
be made to the suppliers.
• There are still some customers who are at default in paying money to JSL which are
known as sticky customers so the bill is write off foe this.
• The no. of days for paying to suppliers for raw materials or labour purchased should be
maximized.
• Liquidity Ratios of the company keeps on decreasing which is not good for the
company as it indicates decreased current assets in comparison to current liabilities.

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 y learning

 Working with one of the leading steel manufacturing company of India was indeed a
great experience. The knowledge and expertise of the company officials helped me
throughout during my summer internship program.
 The project provided great amount of exposure and knowledge not just in finance but
also with the way how company operates in exports. It was a great opportunity for
learning as well as to show my potential in this particular field.
 Data analysis and preparation of reports through SAP and Excel requires skills, which
was a great learning experience to nurture oneself.
 Every customer has different payment terms and learning about it was really useful as
the terms were new to me.
 Interaction with the employees of the organisation provided me knowledge of how to be
more assertive at the time of need and what all it requires to work in a big firm.
 The project required me to understand the mindset of customers of JSL and their
purchasing behaviour from JSL.
 In BRC’s, in most of the cases JSL receives less amount than the actual invoice amount
from the party to whom goods are sent in this, for adjusting the short amount in two
ways: -

1) Short realised: it is the first method by which the short amount can be adjusted in the
bills. JSL gives a list of bills to the bank and request a request letter of short
realisation so that bill can be settled. Bank should short realise the case if the amount
of short realised is less than 25% of the invoice amount.

2) Write off: In this method the short amount can be settled by writing off the amount.
For writing off the cases JSL need CA certificate for closing the bills and that has to
send to bank for writing off the cases. In this the short amount should not exceed
25% of the invoice amount.

 The project gave me an opportunity to understand the basic guidelines of company and
its working.

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Recommendations

 Management should make the proper use of inventory control techniques like fixation of
minimum, maximum and ordering levels for all the items for less blockage of money.
 The unit should also adopt proper inventory control like ABC analysis etc. This inventory
system can make the inventory management more result oriented. EOQ can be followed in
stores.
 Due to competition, prices are market driven and for earning more profits/margin, JSL
company must concentrate on cost reduction technique by improving its efficiency.
 The investments of surplus funds are made by the corporate office, and the unit/mill is not
generally involved while taking decisions with regard to structure of investment of surplus
funds. The corporate office must involve the units/mill so as to better ascertain the future
requirements of funds and accordingly investments are made in different securities.
 The stock should be maintained beforehand so that there could be no delay in the delivery the
products.


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CONCLUSION: -

By concluding the study about the trade finance, it is found that the trade finance of
Jindal Stainless Limited is good. JSL has sufficient funds to meet its current obligation
every time which is due to sufficient profits and efficient management of Jindal Stainless
Ltd.
Cash Management, Inventory Management and Receivables Management show a good
position in the present years. Raw materials purchased for JSL is in bulk which is the best
way so as not to delay the production. Debtors of JSL are also in good position and the
payment is received on time from the customers.
Overall the trade finance of JINDAL STAINLESS LTD. is efficient.

 The project has explained the need of trade finance and introduced some of the
most common trade finance tools and practices.
 The proactive role of government in trade finance may alleviate the lack of trade
finance in emerging countries and contribute to trade expansion.
 The role of trade finance reduces the elements of risk and easily do transactions
domestically and internationally.
 The trade finance system is legal and transparent.
 The whole process is controlled by the regulatory of government DGFT
(Directorate General of Foreign Trade) is the agency of ministry of commerce and
industry of the government of India, gives us idea of what is permitted and hat is
restricted within the entire existing framework.

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References
https://www.jslstainless.com/pdf/EARNINGSPSTXJSL060219.pdf
https://www.jindalstainless.com/
https://www.jslstainless.com/
https://www.infodriveindia.com/companies/jindal-stainless-ltd-258052.aspx
https://economictimes.indiatimes.com/markets/stocks/earnings/havells-india-reports-rs-
171-crore-profit-for-july-september/articleshow/61183702.cms
http://www.creditmanagementworld.com/letterofcredit/lcinternationallocpayments.html
https://www.jindalstainless.com/pdfs/18-03-2019-Press-Release-BW4HANA.pdf
https://www.moneycontrol.com/financials/jindalstainless/cash-flow/JSL01
https://www.indiasteelexpo.in/industry_overview.php

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