1

REPORT ON
TREASURY MANAGEMENT
OF
RITES LIMITED










2

INTRODUCTION
Treasury management (or treasury operations) includes management of an enterprise's
holdings, with the ultimate goal of maximizing the firm's liquidity and mitigating its operational,
financial and reputational risk. Treasury Management includes a firm's collections,
disbursements, concentration, investment and funding activities. In larger firms, it may also
include trading in bonds, currencies, financial derivatives and the associated financial risk
management.
For non-banking entities, the terms Treasury Management and Cash Management are sometimes
used interchangeably, while, in fact, the scope of treasury management is larger (and includes
funding and investment activities). In general, a company's treasury operations come under the
control of the CFO, Vice-President / Director of Finance or Treasurer, and are handled on a day
to day basis by the organization's treasury staff, controller, or comptroller.
OBJECTIVE OF STUDY
RITES LTD is the cash rich company, and this is further substantiated by looking its financial
performance for last 10 years.

Fig.1
So it is important to study how RITES LTD manages its cash or treasury, where does it invest by
following DPE guidelines in order to maximize cash availability and interest income on idle
funds without any risk exposure to its treasury.
0
50
100
150
200
250
300
PAT (crores)
PAT (crores)
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The goals of cash management include:
To maximize yields on surplus liquidity.
To minimize idle surplus.
To reduce internal administrative cost.
To control foreign exchange and interest rate exposure risks.

ABOUT RITES LIMITED
Rail India Technical & Economic Services (RITES) Limited was incorporated in India in
1974 under the Companies Act, 1956 for rendering consultancy services for railways in India
and abroad. The company soon transformed itself from a mere railway consultancy firm to the
activities connected with other modes of transport, with multidimensional activities and its
names had been changed from Rail India Technical & Economic Services to RITES LIMITED.
Today RITES Ltd. is a multi-disciplinary organization as it provides services as consultant,
engineers and project managers in railways, highways, airports, ports, ropeways, urban transport,
and inland waterways areas in India and abroad.
RITES, an ISO 9001 and a Mini Ratna Schedule A company, provides comprehensive array
of services under a single roof and believes in transfer of technology to client organizations. In
overseas projects, RITES actively pursues and develops cooperative links with local consultants/
firms both as means of maximum utilization of local resources and as an effective instrument of
sharing its expertise.
RITES is internationally recognized as a leading consultant with operational experience in over
62 countries in Africa, Middle East, South East Asia and Latin America. The company would
aim at leadership in every business by synergizing values, integrity, and drive for technology and
innovative spirits. They have always ensured value for money to its clients and benefits to
society at large.




4

DPE GUIDELINES FOR INVESTMENT OF SURPLUS
FUNDS OF CPSEs
RITES LTD is CPSE (Central Public Sector Enterprise) so its investment policy is guided by
DPE guidelines (Department of Public Enterprise). Various DPE guidelines are cited below:
Maximum safety investment instrument.
No element of speculation.
Interest rate on investment > borrowing interest rate
Maximum investment Tenor
For term deposits with banks: 3 years
Other investments: 1 year
Surplus availability at management discretion in consultation with ministry.
Investment tenor in Govt securities, Treasury bill increased to 3 year.
Removed restriction on investment in Units/Scheme of UTI.
Investment in Call Money Market was allowed.
For short term investment no consultation with ministry required, ministry to be informed
only.
Asset-liability mismatch at management discretion.
CPSE can invest surplus funds in mutual funds.
Nirvana/Miniratna is allowed to invest in Public sector mutual fund.
At least 60% of the funds should be placed with Public Sector Banks.
Practice of competitive bid should be discontinued for parking funds.
Limit of 30% of available surplus funds is for investment in Public Sector Mutual Funds
as a whole and not for only equity schemes of Public Sector Mutual Funds.

Central Public Sector Enterprises can park surplus funds in term deposits with any
scheduled commercial bank (i.e. banks incorporated in India) with a paid up capital of at
least Rs. 100 crores, fulfilling the capital adequacy norms, as prescribed by the RBI from
time to time.
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CURRENT FINANCIAL PERFORMANCE (Highlights)
During the year 2012-2013, Company has achieved highest ever operating turnover of Rs
953 crores as against Rs 836 crores of previous year, which is higher by 14%.
Total revenue of Rs1076 crores as against Rs 934 crores of the previous year, which is higher
15%.
Income has increased from all streams of business activities; the net worth has increased
from Rs 1001 crores to Rs 1195 crores.
Company has spent Rs 6.4 crores towards corporate social responsibility.
Total foreign exchange earnings during the year under review were Rs342.14 crores,
previous year it was Rs 310.15 crore , rise by 10%.
Net foreign exchange earnings are Rs 317.47 crores compared to Rs 281.58 crores, leds to
rise 13%.
Current investment has increased from Rs 5 crores to Rs 122 crores.

TREASURY RISK & LIQUIDITY MANAGEMENT
Execution of foreign projects necessitates balancing of inflows and outflows of foreign exchange
rate fluctuations. In order to mitigate this risk, foreign exchange movement are constantly
monitored. To cope up with challenges posed by continuous changing external environment
Rites has sound currency risk management policy in place. Policy covers various aspects of
currency risk management approach, benchmarking, hedging and risk appetite, permissible
instrument, hedging policy, structure of risk management committee and treasury group.
Company has committee comprising of Director (Finance), three executive directors of
operations units, general manager (treasury), additional general manager (treasury) and an
external consultant. Committee provides guidance for day to day decisions with regards to
efficient treasury operation. Company has continued to optimize the returns from investment of
surplus funds by adhering to efficient decision process through which funds are invested in the
instruments of highest safety and yielding high returns, by following DPE guidelines.
Inline with DPE guidelines, company invest its surplus funds in deposits with banks, mutual
funds and corporate bonds etc. To enhance the yield from short term investments, RITES has
also started investing in public sectors mutual funds with strong financials, in addition to UTI
mutual fund. The investments made by the company are being reported to the Board of Directors
on periodic basis.

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RITES POLICY
1) Banks Qualifying Criteria
Scheduled Commercial Bank
i. Excluding cooperative and foreign banks
Net Worth = 1000 Cr
i. 100 Cr in DPE guidelines
Minimum CAR of 10%
As per DPE guidelines minimum of 9%
NPA <= SBI NPA
Not mentioned in DPE guidelines
Profitable for last 3 years
Not mentioned in DPE guidelines
Investment in single bank should not exceed the 50% of the total
investment. Sub ceiling of maximum investment in Public sector bank
is `200Cr and in private sector bank is `75 Cr

2) Mutual fund qualifying criteria

Investment in Mutual Fund is generally done to maintain Short Term
Liquidity.
a. Maximum Investment Limit = 150 Cr or 5% of the Fund Size
b. Mutual Fund Qualifying Criteria
c. Must be a SEBI Regulated Public Sector Mutual Fund
d. Minimum Total Assets under Mutual Fund Company (as on 31
st

march) = `5000 Cr
e. Minimum Funds Size (as on 31
st
march) = `500 Cr
f. Fund must have only Debt instruments in its portfolio
g. Fund should have the highest credit rating


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RITES LTD PROCEDURES AND INVESTMENTS
1. Deposit in banks
1) Fixed deposit
2) Flexi deposit

FDR from banks (procedure)
a) Estimation of Surplus fund
b) Information of interest rates from banks -via e-mail or Fax
c) Bank providing maximum rate for desired duration is selected
d) Approval of GM/F is required
e) Fund is transferred through RTGS to the A/C specified by the bank

CONCEPT OF POOLING IN RITES LIMITED
RITES LTD uses unique concept of pooling account, under which Axis Bank is given instruction
for making Flexi Deposit if the balance in pool A/C is above a certain limit.
Interest can be earned only after 7 days & Interest on Flexi Deposits = MIBOR 0.4 %
Balance in Pool A/C can be used by any of the POs or Regions. At the end of the Day, debit/
credit balance in POs & Regions is transferred to pool A/C at corporate office. In case the
amount in Pool A/C is more than required, it is transferred to Flexi Deposits.
Pool a/c adjustments
Pool A/C adjustments is done at the corporate office
Bank has been given instructions to provide MIS
Statement containing all the receipts/payments pertains to unit concern is sent by
corporate office
Showing net amount debited/credited to units
Voucher is passed accordingly by using A/C code 5556 by units
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Corporate office will use the specific A/C code of units.
Balance is confirmed or discrepancy in corporate office statement is informed
immediately by the units
All transaction should be rooted through corporate office
RETURN ON BANK DEPOSIT

Fig-2

Return on bank deposit is quite steady, hovering around the level of three percent. In 2012-2103
return was 4%. Average return on bank deposit for last four years is 54.78 crore on the
investment of 1493.24 crore i.e. return of 3.78% annually.







0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
2009-2010 2010-2011 2011-2012 2012-2013
return
return
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2. Mutual funds

Rites ltd is currently investing in:
Mutual funds Amount

SBI Mutual Fund 23 crore
UTI liquidity cash plan 24 crore
CANARA Robeco liquid fund 74 crore

Total Rs 122 crore are invested in various mutual funds
Mutual fund (procedures)
a) Assess the investable surplus
b) Proposal is initiated by 2 AGMs

c) After approval of GM/F, the proposal is sent to the investment committee for approval

d) If approved, the funds are transferred to the A/C of UTI mutual fund

















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3.IRFC Bonds
To maximise the yield from RITES investment portfolio, the funds are placed in
Corporate Bonds, if providing higher returns then any other investment option available.
Corporate Bond - Qualifying Criteria
a. Bond must be a issued by a Public Sector Undertaking
b. Bond should have the highest credit rating
c. Should have an Exit Option (Listed in Stock Exchange)


Bonds Amount
INDIAN RAILWAY FINANCE COPRPORATION 50 crore
(7 year secured redeemable 6.30% Tax free bonds)

INDIAN RAILWAY FINANCE COPRPORATION 50 crore
(7 year secured redeemable 6.32% Tax free bonds)

INDIAN RAILWAY FINANCE COPRPORATION 25 crore
(10 year secured redeemable 7.55% Tax free bonds)

INDIAN RAILWAY FINANCE COPRPORATION 30 crore
(10 year secured redeemable 7.21% Tax free bonds)

INDIAN RAILWAY FINANCE COPRPORATION 10 crore
(10 year secured redeemable 7.22% Tax free bonds)

INDIAN RAILWAY FINANCE COPRPORATION 10 crore
(10 year secured redeemable 7.18% Tax free bonds)

So overall Rs 175 crore are invested in IRFC of total non current investment i.e. Rs 195 crore.
Corporate bond & Deposit (procedure)
a) Proposal is initiated by Banking Cell
b) After approval of GM/F, the proposal is sent to the investment committee for approval
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c) Approval of BOD is also sought for the same.
d) In case investment is for more than 3 years, ministry of railway is informed

RETURN ON IRFC BONDS

Fig-3
Above graph shows return on IRFC bonds for last four years. In 2009 -2010 it was below
percent but after that there is significant rise in return constantly hovering around five
percent.
Average return for last 4 years is 5.33 crore from investment of 112.5 crore yearly i.e.
4.7% annually.





0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
2009-2010 2010-2011 2011-2012 2012-2013
return
return
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SUGGESTIONS
RITES LTD needs to make sure that they have a clear view of the true cash position at
any point of time. They are using effective concept of pooling account with axis bank,
which led to avoiding in dealing with multiple banks.

Since RITES LTD has presence in 60 and more countries so there should be parallel
convergence in international trade towards open account, electronic payment and the
automation of information flows. This will reduce the time of the transaction and will
enhance the safety and authenticity.


Investment should be more in other mutual funds apart from UTI; to improve return on
investment.

Return on bank deposits is quite low so firm should look out for more options in
accordance DPE guideline for bank deposit.