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Summer Internship

Krishak Bharati Cooperative Limited

Nikita Nath BFIA 3B 75037

Krishak Bharati Cooperative Ltd. (KRIBHCO) is a Multi-state Cooperative Society

registered under the Multi-State Cooperative Societies (MSCS) Act, 2002.

KRIBHCO is primarily a fertilizer production cooperative, with a total production capacity of 21.65 Lakh MT of Urea.

It primarily has the following products:

Urea Hybrid Seeds

Bio fertilizer
Ammonia Argon

Financial Performance
(Rs in Crore) 2010-2011 Sales including Subsidies 3554.09 2009-2010 2597.07

Other revenue
Increase/(Decrease) in Stock Income Profit Before Tax Provision for Tax Profit after Tax

50.50 3904.35 230.26 29.71 200.55

(38.19) 2863.66 252.77 24.60 228.17

Surplus Fund Investment

Net profits of Rs. 200.55 Crore in FY 2011. It invests a certain part of its surplus cash with banks, thus

enabling it to generate interest income.

KRIBHCO assesses the security of the deposits it places with different kind of deposit accepting institutions in the country. Assigned ICRA Management Consulting Services (IMaCS) the task of recommending the maximum amount that can be

invested by it in each institution.

Analyzed the financial data of 26 public-sector banks, 10 private-sector banks and 11 State co-operative banks. Adopted a Risk Grading Model to grade the public-sector

banks, private-sector banks and State co-operative banks on

certain parameters. Calculated scores and grades based on the parameters.

The parameters used for grading were as follows:

Asset Size Asset Quality Capital Adequacy Profitability Liquidity

Publicly Available Ratings

Investment of Funds
The total investment was Rs. 4,015 crore. The following allocations were made: Public sector banks were allocated Rs. 2,810 crore - 69.99% of the total investment. Private sector banks were allocated Rs. 1,050 crore 26.15% of the total investment.

Co-operative banks were allocated Rs. 155 crore 3.86% of the total investment due to the tax benefits enjoyed by KRIBHCO under Section 80(P).

Hedging of Foreign Exchange Risk

Need for Hedging

In 2010-2011, a huge quantity of phosphatic fertilizers and capital goods were imported. This involved payments in foreign exchange. The company would have been exposed to transaction risk without

availing the hedging facility.

The company managed to make payments in foreign currency competitively by using currency swaps and forward contracts.

This Exchange Risk Management resulted in earning a profit of

approximately Rs. 21 crore during the financial year.

Hedging has not only helped KRIBHCO to reduce its losses, but has also enabled it to earn a considerable amount of income in terms of savings from hedging against transaction exposure of foreign exchange.

Its sound investment strategy of investing its surplus funds has enabled it to earn a huge return on the sum invested.