Introduction

Abstract

Sound financial management policies and decisions have a marked bearing on the survival and long-term success for firms. The subject assumes greater significance now (than ever before) for the business enterprises in view of the present dynamic and turbulent business environment. Given the importance of sound conceptual framework in decisions related to finance function, it would be useful to know the present practices of Indian corporates in this regard.

Appendices

Appendices

Appendix 1.1: Constituent companies and sectors of BSE 200 (as of 1 April 2010)

Company name	Sector
Aban Offshore Ltd.	Oil and gas
ABB Ltd.	Capital goods
ACC Ltd.	Housing related
Adani Enterprises Ltd.	Diversified
Adani Power Ltd.	Power
Aditya Birla Nuvo Limited	Diversified
Allahabad Bank	Finance
Ambuja Cements Ltd.	Housing related
Amtek Auto Ltd.	Transport equipments
Anant Raj Industries Ltd.	Housing related
Andhra Bank	Finance
Apollo Hospitals Enterprises Ltd.	Healthcare
Areva T&D India Ltd.	Capital goods
Ashok Leyland Ltd.	Transport equipments
Asian Paints Ltd.	Chemical and petrochemical
Aurobindo Pharma Ltd.	Healthcare
AXIS Bank Ltd.	Finance
Bajaj Auto Ltd.	Transport equipments
Bajaj Finserv Ltd.	Finance
Bajaj Hindustan Ltd.	Agriculture
Bajaj Holdings & Investment Ltd.	Finance
Balrampur Chini Mills Ltd.	Agriculture
Bank of Baroda	Finance
Bank Of India	Finance
BEML Ltd.	Capital goods
Bharat Electronics Ltd.	Capital goods
Bharat Forge Ltd.	Transport equipments
Bharat Heavy Electricals Ltd.	Capital goods
Bharat Petroleum Corporation Ltd.	Oil and gas
Bharti Airtel Ltd.	Telecom
Bhushan Steel & Strips Ltd.	Metal, metal products and mining
Biocon Ltd.	Healthcare
Bombay Dyeing & Mfg Co Ltd.	Textile
Bosch Ltd.	Transport equipments
Cadila Healthcare Ltd.	Healthcare
Cairn India Ltd.	Oil and gas
Canara Bank	Finance
Castrol India ltd.	Oil and gas
Century Textiles	Diversified
CESC Ltd.	Power
Chambal Fertilisers & Chemical	Agriculture
Cipla Ltd.	Healthcare
Colgate-Palmolive (India) Ltd.	FMCG
Container Corporation of India	Transport services
Crompton Greaves Ltd.	Capital goods
Cummins India Ltd.	Transport equipments
Dabur India Ltd.	FMCG
Deccan Chronicle Holdings Ltd.	Media and publishing
Dena Bank	Finance
Divi’s Laboratories Ltd.	Healthcare
DLF Ltd.	Housing related
Dr Reddy’s Laboratories Ltd.	Healthcare
Educomp Solutions Ltd.	Information technology
Engineers India Ltd.	Miscellaneous
Essar Oil Ltd.	Oil and gas
Essar Shipping Ports & Logistics Ltd.	Transport services
Exide Industries Co. Ltd.	Transport equipments
Federal Bank Ltd.	Finance
Financial Technologies (India) Ltd	Information technology
Gail (India) Ltd.	Oil and gas
GlaxoSmithKline Pharmaceuticals Ltd.	Healthcare
Glenmark Pharmaceuticals Ltd.	Healthcare
GMR Infrastructure Ltd.	Diversified
Godrej Consumer Products Ltd.	FMCG
Godrej Industries Ltd.	Chemical and petrochemical
Grasim Industries Ltd.	Diversified
Great Eastern Shipping Co. Ltd.	Transport services
Great Offshore Ltd.	Transport services
GTL Ltd.	Information technology
Gujarat Mineral Development Corporation	Metal, metal products and mining
Gujarat Nre Coke Ltd.	Metal, metal products and mining
Gujarat State Petronet Ltd.	Oil and gas
GVK Power & Infrastructure Ltd.	Diversified
Havells India Ltd.	Capital goods
HCL Technologies Ltd.	Information technology
HDFC	Finance
HDFC Bank Ltd.	Finance
Hero Honda Motors Ltd.	Transport equipments
Hindalco Industries Ltd.	Metal, metal products and mining
Hindustan Construction Co. Ltd.	Housing related
Hindustan Copper Ltd.	Metal, metal products and mining
Hindustan Oil Exploration Co. Ltd.	Oil and gas
Hindustan Petroleum Corp Ltd.	Oil and gas
Hindustan Unilever Ltd.	FMCG
Hindustan Zinc Ltd.	Metal, metal products and mining
Housing Development & Infrastructure Ltd.	Housing related
ICICI Bank Ltd.	Finance
Idea Cellular Ltd.	Telecom
IFCI Ltd.	Finance
India Cements Ltd.	Housing related
India Infoline Ltd.	Finance
Indiabulls Financial Services Ltd.	Finance
Indiabulls Power Ltd.	Power
Indiabulls Real Estate Ltd.	Housing related
Indian Bank	Finance
Indian Hotels Co Ltd.	Tourism
Indian Oil Corporation Ltd.	Oil and gas
Indian Overseas Bank	Finance
IndusInd Bank Ltd.	Finance
Industrial Dev Bank of India	Finance
Infosys Technologies Ltd.	Information technology
Infrastructure Development Finance Co. Ltd.	Finance
IRB Infrastructure Developers Ltd.	Housing related
Ispat Industries Ltd.	Metal, metal products and mining
ITC Ltd.	FMCG
IVRCL Infrastructures & Projects Ltd.	Housing related
Jai Corp Ltd.	Metal, metal products and mining
Jain Irrigation Systems Ltd.	Agriculture
Jaiprakash Associates Ltd.	Housing related
Jaiprakash Hydro-Power Ltd.	Power
Jindal Saw Ltd.	Metal, metal products and mining
Jindal Steel & Powers Ltd.	Metal, metal products and mining
JSW Steel Ltd	Metal, metal products and mining
Jubilant Organosys Ltd.	Chemical and petrochemical
Kotak Mahindra Bank Ltd.	Finance
KSK Energy Ventures Ltd.	Power
Lanco Infratech Ltd.	Housing related
Larsen & Toubro Limited	Capital goods
LIC Housing Finance Ltd.	Finance
Lupin Ltd.	Healthcare
M M T C Ltd.	Miscellaneous
Madras Cements Ltd.	Housing related
Mahanagar Telephone Nigam Ltd.	Telecom
Mahindra & Mahindra Ltd.	Transport equipments
Mangalore Refinery & Petro Ltd.	Oil and gas
Maruti Suzuki India Ltd.	Transport equipments
Max India Ltd.	Diversified
MCLEOD RUSSE	FMCG
Mphasis Ltd.	Information technology
MRF Ltd.	Transport equipments
Mundra Port & Special Economic Zone	Transport services
Nagarjuna Construction Co. Ltd.	Housing related
National Aluminium Co. Ltd.	Metal, metal products and mining
Nestle India Ltd.	FMCG
Neyveli Lignite Corporation	Power
NHPC Ltd.	Power
NMDC Ltd.	Metal, metal products and mining
NTPC Ltd.	Power
Oil India Ltd.	Oil and gas
ONGC Ltd.	Oil and gas
Opto Circuits (India) Ltd.	Healthcare
Oracle Financial Services Software Ltd.	Information technology
Oriental Bank of Commerce	Finance
Pantaloon Retail (India) Ltd.	Miscellaneous
Patel Engineering Ltd.	Housing related
Patni Computer Systems Ltd.	Information technology
Petronet LNG Ltd.	Oil and gas
Piramal Healthcare Ltd.	Healthcare
Power Finance Corporation Ltd.	Finance
Power Grid Corporation of India Ltd.	Power
Praj Industries Ltd.	Capital goods
PTC India Ltd.	Power
Punj Lloyd Ltd	Capital goods
Punjab National Bank	Finance
Ranbaxy Laboratories Ltd.	Healthcare
Reliance Capital Ltd.	Finance
Reliance Communications Limited	Telecom
Reliance Industries Ltd.	Oil and gas
Reliance Infrastructure Ltd.	Power
Reliance Natural Resources Limited	Oil and gas
Reliance Power Ltd.	Power
Rolta India Ltd.	Information technology
Rural Electrification Corp. Ltd.	Finance
Sesa Goa Ltd.	Metal, metal products and mining
Shipping Corporation Of India Ltd.	Transport services
Shree Renuka Sugars Ltd.	Agriculture
Shriram Transport Fin Co. Ltd.	Finance
Siemens Ltd.	Capital goods
Sintex Industries Ltd.	Housing related
State Bank of India	Finance
Steel Authority of India Ltd.	Metal, metal products and mining
Sterlite Industries Ltd.	Metal, metal products and mining
Sun Pharmaceutical Inds Ltd.	Healthcare
Sun TV Network Ltd.	Media and publishing
Suzlon Energy Limited	Capital goods
Tata Chemicals Ltd.	Diversified
Tata Communications Ltd.	Telecom
Tata Consultancy Services Ltd.	Information technology
Tata Motors Ltd.	Transport equipments
Tata Power Co. Ltd.	Power
Tata Steel Ltd.	Metal, metal products and mining
Tata Tea Ltd.	FMCG
Tata Teleservices (Maharashtra) Ltd.	Telecom
Tech Mahindra Ltd.	Information technology
Thermax Ltd.	Capital goods
Titan Industries Ltd.	Consumer durables
Torrent Power Ltd.	Power
UCO Bank	Finance
Ultratech Cement Limited	Housing related
Union Bank of India	Finance
Unitech Ltd.	Housing related
United Phosphorus Ltd.	Agriculture
United Spirits Ltd.	FMCG
Videocon Industries Ltd.	Consumer durables
Vijaya Bank	Finance
Voltas Ltd.	Diversified
Welspun Gujarat Stahl Rohren Ltd.	Metal, metal products and mining
Wipro Ltd.	Information technology
Yes Bank Ltd.	Finance
Zee Entertainment Enterprises Ltd.	Media and publishing

Appendix 1.2: Finance sector companies excluded from the sample

Name	Sector
Allahabad Bank	Finance
Andhra Bank	Finance
AXIS Bank Ltd.	Finance
Bajaj Finserv Ltd.	Finance
Bajaj Holdings & Investment Ltd.	Finance
Bank of Baroda	Finance
Bank Of India	Finance
Canara Bank	Finance
Dena Bank	Finance
Federal Bank Ltd.	Finance
HDFC	Finance
HDFC Bank Ltd.	Finance
ICICI Bank Ltd.	Finance
IFCI Ltd.	Finance
India Infoline Ltd.	Finance
Indiabulls Financial Services Ltd.	Finance
Indian Bank	Finance
Indian Overseas Bank	Finance
IndusInd Bank Ltd.	Finance
Industrial Dev Bank of India	Finance
Infrastructure Development Finance Co. Ltd.	Finance
Kotak Mahindra Bank Ltd.	Finance
LIC Housing Finance Ltd.	Finance
Oriental Bank of Commerce	Finance
Power Finance Corporation Ltd.	Finance
Punjab National Bank	Finance
Reliance Capital Ltd.	Finance
Rural Electrification Corp. Ltd.	Finance
Shriram Transport Fin Co. Ltd.	Finance
State Bank of India	Finance
UCO Bank	Finance
Union Bank of India	Finance
Vijaya Bank	Finance
Yes Bank Ltd.	Finance

Appendix 1.3: Questionnaire on financial management perspective of BSE 200 companies

Objective: This study is a part of a research project. The purpose of the study is to develop a comprehensive financial perspective of the BSE 200 companies for the past decade (2000–2010) and to derive useful conclusions therefrom. Your response will be extremely important to complete the present work. The information provided by you will be kept confidential and reported only in summary form.

Though we would appreciate your response to all questions, you may find a few questions of sensitive nature; we appreciate your constraints of nonresponse to such questions.

Flow of questions: Section A commences with the basic information about the company. Sections B, C and D relate to the corporate finance decisions of the company. Dividend policy for shareholders and the corporate governance decisions have been dealt in Sections E and F. Sections G and H conclude with aspects related to globalisation and its resultant impact on risk management for the company.

Section A: Basic Information

• 1. (a) Name of the company _________________________

• (b) Year of incorporation _______

• (c) Nature of industry (products manufactured/services rendered) _____________

• (d) In order of their importance, please rank the financial objectives of your organisation (e.g. 1 for most important, 2 for next important)

  • (i) [ ] Maximise return on assets

  • (ii) [ ] Achieve desired growth rate in earnings per share

  • (iii) [ ] Maximise ordinary share prices

  • (iv) [ ] Maximise aggregate earnings

  • (v) [ ] Maximise return on capital employed

  • (vi) [ ] Any other (please specify) ________________

Section B: Items Related to Capital Budgeting Decisions

• 2. In the past decade, the capital expenditure of your company has mainly constituted of outlays on

  • (a) [ ] New investment in existing line of business (capacity build-up)

  • (b) [ ] New investment in other areas (diversification)

  • (c) [ ] Technology upgradation (modernisation)

  • (d) [ ] Replacement of machinery

  • (e) [ ] Any other (please specify) ____________________

• 3. During the course of capital expenditure projects, does your company opt for sound capital structure to ensure a low cost of capital for the project?  Yes [ ]  No [ ]

• 4. In your company, the new investment proposals originate

  • (a) [ ] At central/head office level

  • (b) [ ] At divisional/regional office level

  • (c) [ ] At plant level

  • (d) [ ] At any other level (please specify) ____________________

• 5. How many year(s) ahead do you plan for capital expenditure?

  • (a) [ ] For next 1 year only

  • (b) [ ] For next 5 years

  • (c) [ ] For next 10 years

  • (d) [ ] As and when the opportunity takes place

  • (e) [ ] Any other (please specify) __________________

• 6. Does your company ever forego any expected profitable investment opportunity because of paucity of financial resources?

  •  Yes [ ]  No [ ]

• 7. (A) Please identify capital expenditure evaluation technique(s) used in your company

  • (a) [ ] Accounting rate of return on investment

  • (b) [ ] Payback period

  • Discounted cash flow techniques

    • (i) [ ] Net present value

    • (ii) [ ] Internal rate of return

    • (iii) [ ] Profitability index/Present value index

    • (iv) [ ] Any other (please specify) __________________

• (B) ³ Is your company using the following techniques?

  • (a) [ ] Real options  Yes [ ]  No [ ]

  • (b) [ ] Abandonment options  Yes [ ]  No [ ]

• 8. If your company is using payback period method, please state the reason(s)

  • (a) [ ] Shortage of liquid funds

  • (b) [ ] Obsolescence due to technological developments

  • (c) [ ] Easy to explain to top management

  • (d) [ ] Simplicity leading to less time and cost involved

  • (e) [ ] Any other (please specify) _________________

• 9. Please state method(s) followed to incorporate project risk into your investment decision

  • (a) [ ] Shorter payback period for risky projects

  • (b) [ ] Higher cut-off rate for risky projects

  • (c) [ ] Sensitivity analysis

  • (d) [ ] Any other (please specify) _______________

• 10. In the past decade, the reasons for failure of capital budgeting decisions (if any) have been (rank in order of impact: 1 for highest, 7 for lowest)

  • (a) [ ] Higher cost of capital

  • (b) [ ] Decrease in cash inflows due to decrease in expected sales

  • (c) [ ] Unexpected increase in cost of production

  • (d) [ ] Inefficiencies in terms of technology usage and revamp

  • (e) [ ] Very high fixed cost component

  • (f) [ ] Increased competition in the chosen area impacting sales

  • (g) [ ] Any other (please specify) _______________

Section C: Items Related to Capital Structure Decisions

• 11. (A) Which method do you use to determine cost of capital?

  • (a) [ ] Weighted average cost of long-term sources of finance

  • (b) [ ] Marginal cost of additional funds raised to finance new asset

  • (c) [ ] Decided by the top management

  • (d) [ ] Any other (please specify) _________________

• (B) Weights used for average cost of capital are equivalent to

  • (a) [ ] Market value weights

  • (b) [ ] Book value weights

  • (c) [ ] Target weights

• 12. (A) Have there been changes in the capital structure of your firm in the wake of liberalisation of the country’s economy and globalisation?

  • [ ] Yes [ ] Expected in near future  [ ] No

• (B) If yes, it is moving towards [ ] More equity [ ] More debt

• (C) In the wake of opening up of the economy, your company’s dependence on the capital market has [ ] Increased [ ] Remained unchanged [ ] Decreased

• 13. In your opinion

  • (A) Debt should be tapped to the maximum extent possible.  Yes [ ]  No [ ]

  • (B) The ratio of debt to equity should be maintained less than 1, 1:1, 2:1, 3:1 or greater than 3.

  • (C) In general, the debt is preferred to equity as

    • (a) [ ] Debt is cheaper than equity.

    • (b) [ ] It is easier to raise debt as investors are risk averse and equity is risk capital.

    • (c) [ ] Debt is more flexible than equity in terms of callability clause, repayment schedules, etc.

    • (d) [ ] The perceived advantage of flexibility in payment of dividend is more illusory than real.

    • (e) [ ] Any other (please specify) ______________

• 14. If your firm prefers to have predominantly more equity, the reason(s) could be

  • (a) [ ] Firm is not under obligations to pay dividends.

  • (b) [ ] There is flexibility in paying dividends.

  • (c) [ ] Equity is easy to raise.

  • (d) [ ] Any other (please specify) ________________

• 15. Cost of equity capital in your firm is equivalent to

  • [ ] Primary rate of return available to investors on securities of balanced mutual funds

  • [ ] Primary rate of return plus risk premium

  • Absolute sum

    • (i) [ ] >20%

    • (ii) [ ] 15–20%

    • (iii) [ ] 10–14%

    • (iv) [ ] Any other (please specify) __________

      [ ] Dividend valuation model

      [ ] Capital Asset Pricing Model (CAPM)

      [ ] No cost is considered

• 16. Cost of retained earnings in your company is equivalent to

  • (a) [ ] Cost of equity capital

  • (b) [ ] Opportunity cost of using these funds by company

  • (c) [ ] Opportunity cost of using these funds by equity-holders

  • (d) [ ] No cost is considered

  • (e) [ ] Any other (please specify) _______________

• 17. Do you use a pecking order approach in financing projects (i.e. order of preference is using retained earnings first followed by debt and issue of additional equity capital as a last resort)?  Yes [ ]  No [ ]

• 18. Please give your opinion regarding the importance of the following factors in the capital structure decision

  	1	2	3	4
  (a) Corporate control	[ ]	[ ]	[ ]	[ ]
  (b) Stability in sales/profits	[ ]	[ ]	[ ]	[ ]
  (c) State of the capital market	[ ]	[ ]	[ ]	[ ]
  (d) Business/Operational risk	[ ]	[ ]	[ ]	[ ]
  (e) Financial risk	[ ]	[ ]	[ ]	[ ]
  (f) Restrictions imposed by lenders	[ ]	[ ]	[ ]	[ ]
  (g) Regulatory framework	[ ]	[ ]	[ ]	[ ]
  (h) Corporate tax	[ ]	[ ]	[ ]	[ ]
  (i) Any other (please specify) ________________
  (1. Very important, 2. Important, 3. Not so important, 4. Not at all important)

Section D: Items Related to Working Capital Management

• 19. Which of the following forms the basis for working capital determination?

  • (a) [ ] Percentage of budgeted production

  • (b) [ ] Percentage of budgeted sales

  • (c) [ ] Length of operating cycle

  • (d) [ ] Determination of individual components of current assets and current liabilities (based on raw material holding period, debtors collection period, creditors payment period and so on)

  • (e) [ ] Any other (please specify) _______________

• 20. Please state your company’s policy regarding financing of working capital

  • (a) [ ] Mainly from long-term sources

  • (b) [ ] Mainly from short-term sources

  • (c) [ ] Temporary/seasonal needs from short-term sources and only for period needed

  • (d) [ ] Permanent needs from long-term sources and temporary/seasonal needs from short-term sources

  • (e) [ ] Any other (please specify) _________________

• 21. (A) Have you experienced working capital shortage?  Yes [ ]  No [ ]

• (B) If yes, it occurs  Very frequently [ ] Occasionally [ ]

• (C) Main reason(s) of the shortage may be

  • (a) [ ] Excess inventory

  • (b) [ ] Less than expected sales

  • (c) [ ] Default from debtors

  • (d) [ ] Any other (please specify) _____________

• 22. (A) Were there any excess working capital situations?  Yes [ ]  No [ ]

• (B) If yes, excess was

  • (a) [ ] Temporarily invested (say, in marketable securities)

  • (b) [ ] Invested in long-term securities

  • (c) [ ] Invested in fixed assets

  • (d) [ ] Utilised for repayment of debt

  • (e) [ ] Any other (please specify) ________________

• 23. How do you manage emergency requirements of cash?

  (Arising due to unexpected events or to exploit an opportunity)

  • (a) [ ] Always maintain minimum cash balance over and above the required amount

  • (b) [ ] Bank overdraft

  • (c) [ ] Utilisation of cash credit limit from bank

  • (d) [ ] Discount bill receivables

  • (e) [ ] Have special arrangements with some lending agency for such purposes

  • (f) [ ] Sell marketable securities

  • (g) [ ] Raise loan against warehouse receipt

  • (h) [ ] Any other (please specify) ______________

• 24. In case your lending agency has given assurance to stand by you in emergency, the terms are

  • (a) [ ] At normal rate of interest

  • (b) [ ] At more than normal rate of interest

  • (c) [ ] Any other (please specify) ______________

• 25. (A) Please rank the objectives of your credit policy

  • (a) [ ] Growth in sales

  • (b) [ ] Match credit terms with that of competitors

  • (c) [ ] Better credit terms than those of competitors

  • (d) [ ] Any other (please specify) ______________

• (B) Is risk analysis of customers made before granting credit? Yes [ ]  No [ ]

• (C) Is the ageing schedule of debtors prepared?  Yes [ ]  No [ ]

• 26. In general, payment from debtors is received

  	Never	Infrequently	Frequently	Always
  (a) Before due date	[ ]	[ ]	[ ]	[ ]
  (b) On due date	[ ]	[ ]	[ ]	[ ]
  (c) After due date	[ ]	[ ]	[ ]	[ ]

Section E: Items Related to Dividend Policy

• 27. (A) Does your company follow a stable dividend policy?  Yes [ ]  No [ ]

• (B) Does your company follow a constant payout ratio?  Yes [ ]  No [ ]

• (C) If yes, please specify the percentage of earnings paid out generally as dividends by your company

  • (a) [ ] Less than 10%

  • (b) [ ] 10–25%

  • (c) [ ] 25–50%

  • (d) [ ] Above 50%

• 28. What were the considerations that affected your dividend policy in the past decade?

  • (a) [ ] Consideration of taxes

  • (b) [ ] Consideration of returns

  • (c) [ ] Contractual constraints

  • (d) [ ] Legal constraints

  • (e) [ ] Cash flow constraints

  • (f) [ ] Any other (please specify) ______________

• 29. (A) Did your company issue bonus shares in the past decade?  Yes [ ]  No [ ]

• (B) If yes, what were the benefits of such a decision?

  • (a) [ ] Made the stock more attractive to the investors

  • (b) [ ] Eased the sale of new common stock

  • (c) [ ] Sent a positive signal about the firm’s future prospects

  • (d) [ ] Helped conserve cash

  • (e) [ ] Any other (please specify) ______________

• 30. (A) Did your company announce a stock split in the past decade?

  •  Yes [ ]  No [ ]

• (B) If yes, what were the benefits of such a decision?

  • (a) [ ] Brought the share price into a popular trading range

  • (b) [ ] Increased the number of shareholders

  • (c) [ ] Made the stock more attractive to individual shareholders by lowering the share prices

  • (d) [ ] Sent a positive signal about the firm’s future prospects

  • (e) [ ] Any other (please specify) ______________

Section F: Items Related to Corporate Governance

• 31. (A) Does your company have a corporate governance policy?

  •  Yes [ ]  No [ ]

• (B) If yes, your corporate governance policy focuses on

  • (a) [ ] Shareholders

  • (b) [ ] Management

  • (c) [ ] Board of Directors

  • (d) [ ] Customers

  • (e) [ ] Employees

  • (f) [ ] Creditors

  • (g) [ ] Regulatory authorities

  • (h) [ ] Suppliers

  • (i) [ ] Community at large

  • (j) [ ] Any other (please specify) ___________________

• 32. (A) Does your company have an internal team dedicated to corporate governance?

  •  Yes [ ]  No [ ] If yes,

• (B) The internal corporate governance policy includes

  • (a) [ ] Monitoring by Board of Directors

  • (b) [ ] Balance of power

  • (c) [ ] Remuneration

• (C) The external corporate governance policy includes

  • (a) [ ] Competition

  • (b) [ ] Debt covenants

  • (c) [ ] Demand for and assessment of performance information (especially financial statements)

  • (d) [ ] Government regulations

  • (e) [ ] Managerial labour market

  • (f) [ ] Media pressure

  • (g) [ ] Takeovers

• 33. (A) Has the company been assessed for its corporate governance practices by any rating agency like CRISIL or ICRA?

  •  Yes [ ]  No [ ]

• (B) If yes, kindly state the corporate governance rating of the company by rating agency

  GVC level 1 by CRISIL [ ]	CGR1 By ICRA [ ]
  GVC level 2 by CRISIL [ ]	CGR2 By ICRA [ ]
  GVC level 3 by CRISIL [ ]	CGR3 By ICRA [ ]
  GVC level 4 by CRISIL [ ]	CGR4 By ICRA [ ]
  GVC level 5 by CRISIL [ ]	CGR5 By ICRA [ ]
  GVC level 6 by CRISIL [ ]	CGR6 By ICRA [ ]
  GVC level 7 by CRISIL [ ]
  GVC level 8 by CRISIL [ ]

• 34. Is senior management incentivised to work towards a higher share price for the company through ESOPs, share in profits etc.?

  •  Yes [ ]  No [ ]

• 35. Please state the percentage of equity holding of CEO/MD in the company’s equity?

  • (a) [ ] Below 10%

  • (b) [ ] 10–25%

  • (c) [ ] 25–50%

  • (d) [ ] Above 50%

• 36. (A) Does the company publish its annual report within stipulated time (6 months) of the end of the financial year?

  • Always [ ] Mostly [ ] Occasionally [ ] Sometimes [ ] Never [ ]

• (B) Does the company publish/announce semi-annual reports within 1 month of the end of the half-year?

  • Always [ ] Mostly [ ] Occasionally [ ] Sometimes [ ] Never [ ]

• (C) Does the company publish/announce quarterly reports within 1 month of the end of the quarter?

  • Always [ ] Mostly [ ] Occasionally [ ] Sometimes [ ] Never [ ]

• 37. Does the company consistently disclose material-sensitive information to stakeholders?

  • Always [ ] Sometimes [ ] Never [ ]

• 38. Are the Board Members and members of the executive/management committee separate individuals?  Yes [ ]  No [ ]

• 39. Are the statutory auditors of the company unrelated to the top management of company?  Yes [ ]  No [ ]

• 40. Does the Board include direct representatives of banks, financial/strategic investor and other large creditors of the company?  Yes [ ]  No [ ]

• 41. (A) Is there a whistle-blower policy in your company?  Yes [ ]  No [ ]

• (B) Is there an investors’ grievance cell in your company?  Yes [ ]  No [ ]

• 42. (A) Is your company listed on any exchange abroad?  Yes [ ]  No [ ]

• (B) If yes, on which ones? _________________ _________________ _____________

• 43. ⁴Is your company required to comply with Sarbanes–Oxley Act (SOX)?

  •  Yes [ ]  No [ ]

• 44. (A) Does your company have an executive chairman?  Yes [ ]  No [ ]

• (B) Does your company have more than 50% independent directors on your Board?  Yes [ ]  No [ ]

• (C) Does your company have more than 33% independent directors on your Board?  Yes [ ]  No [ ]

• 45. Do the CEO and CFO of your company establish and maintain internal controls and implement remediation and risk mitigation towards deficiencies in internal controls?

  •  Yes [ ]  No [ ]

• 46. Does your company submit a quarterly compliance report on corporate governance to the stock exchange (where it is listed) in the prescribed form?  Yes [ ]  No [ ]

• 47. Does your annual report contain a separate section on corporate governance with a detailed compliance report?  Yes [ ]  No [ ]

• 48. Does your company obtain a certificate either from auditors or practising company secretaries regarding compliance of conditions as stipulated in clause 49 and annex the same to the director’s report?  Yes [ ]  No [ ]

• 49. (A) Does your company have the mandatory committee on corporate governance as per clause 49?  Yes [ ]  No [ ]

• (B) Does your company have the mandatory audit committee as per clause 49?  Yes [ ]  No [ ]

• (C) Does your company have the remunerations committee as per clause 49?  Yes [ ]  No [ ]

• 50. (A) Does your company disclose contingent liabilities as per clause 49?  Yes [ ]  No [ ]

• (B) Does your company disclose the utilisation of the proceeds from an IPO to the audit committee on a quarterly basis as per clause 49? Yes [ ]  No [ ]

Section G: Items Related to Global Finance

• 51. (A) Does your company have international transactions also?  Yes [ ]  No [ ]

• (B) If yes, the transactions are in the form of

  • (a) [ ] Exports

  • (b) [ ] Imports

  • (c) [ ] Borrowing from abroad

  • (d) [ ] Receiving capital from abroad

  • (e) [ ] Subsidiary abroad

  • (f) [ ] Investing capital abroad

  • (g) [ ] Investing in foreign securities

• 52. What is the size of your yearly foreign exchange transactions?

  • (a) [ ] Less than Rs. 10 million

  • (b) [ ] Between Rs. 10 million and Rs. 50 million

  • (c) [ ] Between Rs. 50 million and Rs. 100 million

  • (d) [ ] Between Rs. 100 million and Rs. 500 million

  • (e) [ ] Between Rs. 500 million and Rs. 1 billion

  • (f) [ ] Above Rs. 1 billion

• 53. (A) The holding pattern of your company in percentage terms

  	In 2000	In 2010
  Domestic holding	________	________
  Foreign holding	________	________

• (B) The investment pattern of your company in percentage terms

  	In 2000	In 2010
  Foreign portfolio investment vis-à-vis total investment	________	________
  Foreign direct investment vis-à-vis total investment	________	________

• 54. Please rank your sources of foreign currency in order of preference (1 being the most important, 2 for the next important and so on)

  • (a) [ ] Development financial institutions (DFIs)

  • (b) [ ] GDRs/ADRs/Euro issues, etc.

  • (c) [ ] Private banks

  • (d) [ ] Foreign banks

  • (e) [ ] Foreign collaborations/joint ventures

  • (f) [ ] Any other (please specify) __________________

• 55. (A) Do you project (forecast) exchange rates for future dates?

  •  Yes [ ]  No [ ]

• (B) Your exchange rate forecasts are done for

  • (a) [ ] 1 week

  • (b) [ ] One fortnight

  • (c) [ ] 1 month

  • (d) [ ] 2 months

  • (e) [ ] 3 months

  • (f) [ ] Any other period (please specify) ______________

• (C) Which of the following techniques/analyses are used for exchange rate forecast?

  • (a) [ ] Fundamental analysis

  • (b) [ ] Technical analysis

  • (c) [ ] Any other technique/model (please specify) ________________

• (D) While using fundamental analysis for exchange rate forecasts, you consider

  • (a) [ ] Structure of balance of payment

  • (b) [ ] Foreign exchange reserves

  • (c) [ ] Interest rates

  • (d) [ ] Inflation rates

  • (e) [ ] Any other (please specify) ____________

• (E) In technical analysis, your organisation uses

  • (a) [ ] Bar charts

  • (b) [ ] Graphs

  • (c) [ ] Any other (please specify) ______________

Section H: Items Related to Risk Management

• 56. How would you summarise the attitude of your company towards overall risk management and internal controls?

  • (a) [ ] Risk is understood in its entirety and measures are taken to mitigate it.

  • (b) [ ] The Board thinks that risk management is ‘not its problem’.

  • (c) [ ] The company is focused only on internal financial control rather than the wider scope of internal control.

  • (d) [ ] Risk management is seen as the responsibility of one function, such as audit or insurance.

  • (e) [ ] No key risk indicators have been determined.

  • (f) [ ] Employees have no training or experience in risk management.

  • (g) [ ] Any other (please specify) ______________

• 57. What kind of risks does the company specify under risk management?

  • (a) [ ] Financial risk

  • (b) [ ] Business/Operational risk

  • (c) [ ] Market risk

  • (d) [ ] Any other (please specify) ______________

• 58. What kind of risks does your company face?

  • Financial risk

    • (a) [ ] Credit risk

    • (b) [ ] Interest risk

    • (c) [ ] Currency risk

    • (d) [ ] Liquidity risk

    • (e) [ ] High cost of capital

  • Business/Operational risk

    • (f) [ ] Missed or ignored business opportunities

    • (g) [ ] Stock-out of raw materials

    • (h) [ ] Physical disasters (e.g. fire and explosion)

    • (i) [ ] Failure to create and exploit intangible assets

    • (j) [ ] Inability to reduce cost base

  • Market risk

    • (k) [ ] Over-reliance on key suppliers or customers

    • (l) [ ] Failure of new products or services

    • (m) [ ] Poor service levels

    • (n) [ ] Any other (please specify) _____________

• 59. What are some of the steps your company takes to mitigate its financial risk?

  • (a) [ ] Keep the debt/equity ratio close to the industrial benchmark.

  • (b) [ ] Make conscious efforts to keep the financial leverage as low as possible by reducing debt in the capital structure.

  • (c) [ ] Have internal control ratios like cash flow return on investment.

  • (d) [ ] Make conscious efforts to keep the interest coverage ratio as high as possible.

  • (e) [ ] Make extensive use of financial derivatives.

  • (f) [ ] Examine tax consequences of cross border activities and incorporate it in financial planning.

  • (g) [ ] Any other (please specify) _____________

• 60. What are some of the steps your company takes to mitigate its business/operational risk?

  • (a) [ ] Use adequate insurance coverage against fixed asset loss.

  • (b) [ ] Use leasing/hire-purchase arrangements to keep long-term investment as low as possible.

  • (c) [ ] Examine components like transfer pricing, excise duties, etc., as consequences of cross border activities and incorporate it in operational planning.

  • (d) [ ] Review acquisitions and handle disposal/liquidation of business components/joint ventures.

  • (e) [ ] Budgets are regularly monitored and reallocated in line with revised risk/resource needs.

  • (f) [ ] There is a strong and conscious effort to focus on variable-costs-dominated ventures and strategies.

  • (g) [ ] Any other (please specify) _____________

• 61. If operating risk is high, does your company make a strong effort to reduce financial risk (or vice versa) in order to keep the overall risk low?  Yes [ ]  No [ ]

• 62. (A) Do you think with the advent of liberalisation process, volatility in the market has increased in the past decade?  Yes [ ]  No [ ]

• (B) If yes, how is volatility getting manifested in your company?

  • (a) [ ] Fluctuations in input cost

  • (b) [ ] Uncertainty about the product prices

  • (c) [ ] Fluctuations in investments

  • (d) [ ] Fluctuations in exchange rates

  • (e) [ ] Increased uncertainty about receivables

  • (f) [ ] Any other (please specify) _____________

• 63. (A) Do you think with the advent of liberalisation process, opportunity in the market has increased in the past decade?

  • Yes [ ]  No [ ]

• (B) If yes, how has your company been benefitted in the past decade due to increased opportunities?

  • (a) [ ] Lower input cost

  • (b) [ ] More lucrative investment opportunities

  • (c) [ ] Hedging of risk by diversification of investments

  • (d) [ ] Economies of scale

  • (e) [ ] Any other (please specify) ______________

• 64. Indicate the order of preference as to which of the following precautions could help in minimising the political risk in international operations. (1 for most important, 2 for next preference and so on)

  • (a) [ ] Incorporating a risk premium in the cost of capital

  • (b) [ ] Integrating products of the host country in your business

  • (c) [ ] Taking loans from the financial institutions of the host country

  • (d) [ ] Increasing the number of the host country employees

  • (e) [ ] Creating joint ventures with an enterprise of the host country

  • (f) [ ] Any other (please specify) _______________

• 65. (A)⁵ For managing exchange rate risk, do you use the following technique(s)

  	Yes	No
  Leads and lags	[ ]	[ ]
  Netting	[ ]	[ ]
  Back-to-back swap	[ ]	[ ]
  Re-invoicing through a centralised system	[ ]	[ ]
  Risk sharing	[ ]	[ ]
  Any other (please specify) ______________

• (B) In case of anticipated depreciation of local currency, which of the basic hedging strategies are used by your company? (Please tick mark)

  • (a) [ ] Buy foreign currency forward.

  • (b) [ ] Reduce levels of local currency cash and marketable securities.

  • (c) [ ] Reduce local currency receivables.

  • (d) [ ] Delay collection of hard currency (appreciating currency) receivables.

  • (e) [ ] Borrow locally.

  • (f) [ ] Delay payments of local currency payable.

  • (g) [ ] Speed up dividend and other remittances to parent.

  • (h) [ ] Invoice exports in foreign currency and imports in loc.l currency.

• (C) In case of anticipated appreciation of local currency which of the basic hedging strategies used by your company? (Please tick mark)

  • (a) [ ] Sell foreign currency forward.

  • (b) [ ] Increase levels of local currency cash and marketable securities.

  • (c) [ ] Relax local currency credit terms (i.e. increase local currency receivables)

  • (d) [ ] Speed up collection of soft currency (depreciating currency) receivables.

  • (e) [ ] Reduce local borrowing.

  • (f) [ ] Speed up payments of local currency payable.

  • (g) [ ] Delay dividend and other remittances to parent.

  • (h) [ ] Invoice exports in local currency and imports in foreign currency.

• 66. What percentage of foreign exchange exposures does your company cover?

  • (a) [ ] 100%

  • (b) [ ] 90%

  • (c) [ ] 80%

  • (d) [ ] 70%

  • (e) [ ] 60%

  • (f) [ ] 50%

  • (g) [ ] Any other percentage (please specify) ______

• 67. Which of the following instruments are used by your company to hedge exchange rate risk? (Give order of preference, 1 for most important and so on)

  • (a) [ ] Currency forward contract

  • (b) [ ] Money market hedge

  • (c) [ ] Currency futures

  • (d) [ ] Currency options

• 68. Interest rate risk manifests in the form of

  • (a) [ ] Decrease in the value of credit

  • (b) [ ] Increase in the value of debts

  • (c) [ ] Decrease in financial income

  • (d) [ ] Increase in financial charges

  • (e) [ ] Any other (please specify) ______________

• 69. Indicate the order of preference for the use of following instruments when available to cover interest rate risk. (1 for highest preference, 2 for next and so on)

  • (a) [ ] Forward interest rate agreements (FRA)

  • (b) [ ] Forward contracts

  • (c) [ ] Interest rate futures

  • (d) [ ] Interest rate options

  • (e) [ ] Interest rate caps

  • (f) [ ] Interest rate floors

  • (g) [ ] Interest rate collar

  • (h) [ ] Interest rate swaps

• 70. From where do you get advice for foreign risk management?

  • (a) [ ] Outside individual consultants

  • (b) [ ] Outside institutional consultancy services

  • (c) [ ] Internal team

  • (d) [ ] Any other (please specify) ________________

Any other information which you feel may be useful for the study (please mention)

Thank you for your time and cooperation