Currency depreciation fueled talk about repatriation at NeuGroup’s debut meeting of treasury leaders with responsibilities in India.
The rupee’s 12% decline against the U.S. dollar in the last two years is a big incentive for treasury leaders coping with excess cash in India to repatriate funds back to the U.S. The question is how best to do that. “In the past, we have been repatriating dividends once a year. So what else can we do?” asked one member attending the first session of a new NeuGroup group launched for members with responsibilities in India. - A peer also looking for ways to move money back to the U.S. said, “We have a good amount of cash built up in India and we are looking at the options to repatriate it—and would be happy to hear from other folks.”
- A third participant joined the chorus: “I just want to understand what options other organizations are utilizing currently, and I'd like to learn more about that.”
More frequent dividends. Concerns about depreciation have sparked conversations about doubling the number of dividends from India at the company that does it once annually. The member told NeuGroup Insights, “Our main strategy has been to declare a dividend that will consume all local cash once we get audited financials. It seems to make more sense to just get rid of all of our cash rather than only a little at a time to break it up over the year and keep INR around for depreciation risk.”
- But dividends come at a cost, including withholding taxes, while paying them more frequently can increase the administrative burden. A treasurer interviewed for a NeuGroup Insights story on global liquidity structures noted, “It costs money because you have to go through a closing of your books, do an interim set of financial statements. It’s a lot of work, but you’re getting your money out faster than you otherwise would.”
- The member considering doing two dividends annually also wants to explore dynamic discounting to use excess cash held in India. That would entail the company paying vendors early—and putting excess cash to work—in exchange for discounts. “Are there any more opportunities to use the money more efficiently?” she asked.
Pondering pooling. For companies looking beyond dividends to address excess cash in India, cross-border pooling is an obvious avenue to explore. The problem is that mainland Indian entities generally cannot participate in conventional cross-border pools. And while GIFT City , home to India’s international financial services center, has made physical and notional cross-border pooling possible, a U.S. multinational cannot simply sweep excess cash from its mainland Indian subsidiaries into a GIFT City pool; such transfers remain subject to India’s foreign-exchange rules. - Greater access to onshore liquidity could make GIFT City far more useful to multinationals. NeuGroup founder and CEO Joseph Neu recently spoke to two corporates with interests in India. They “validated that making GIFT City entities eligible for cross-border pooling structures, with participation of onshore India entities, is critical to make it of interest,” he said.
- But it’s important to note that pooling itself is not the same as repatriation. “Even if cross-border pooling were liberalized, it would primarily improve liquidity access and fungibility, rather than constitute permanent repatriation,” a senior banking official told NeuGroup Insights this week.
A note of caution. Earlier this year in Singapore, members of NeuGroup for Asia Treasury cautioned banks and other service providers not to oversell solutions such as GIFT City, especially with headquarters, before regional treasury has vetted whether they fit the company’s actual structure, funding model and operating needs. Several members said the current value proposition remains narrow and highly fact-specific. - Mr. Neu attended the meeting and later observed, “This fits into another theme about restructuring legal entities as a strategic role for regional treasurers as part of their business partner responsibilities. To maximize liquidity and facilitate repatriation, business structure and capitalization often needs to be rethought in collaboration with tax, accounting and legal.”
NeuGroup members interested in connecting with peers about solutions to their challenges in India should reach out to peer group leader Chris Hall by clicking here . 
