MLK Ltd. is planning to expand its business both at domestic level and global level and therefore its Board has decided to: (a) enter into joint venture with TMK GmbH of Germany. This proposal will have an investment of

CS Professional · Capital Commodity and Money Market · PYQS · December 2021
MLK Ltd. is planning to expand its business both at domestic level and global level and therefore its Board has decided to: (a) enter into joint venture with TMK GmbH of Germany. This proposal will have an investment of Euro 40 Million. (b) acquisition of majority of shares of a PSU company under GOI disinvestment programme. This proposal shall involve an outlay of ₹5600 Million. As a Company Secretary of the company answer the following questions: (ii) If the floatation cost of financing from ECBs route is US$ 2 Million, what will be the amount of ECB to be raised in US$ if spot rates of Foreign Exchange are follows: 1 US$ = ₹70 1 Euro = US$ 1.25 Assume that company will be not be affected by the changes in exchange rates as it will hedge its position.

Answer & Explanation:

The amount to be raised through the route of ECB Amt. required for acquisition of PSU ₹5600 Million Applicable Rate of US$ ₹70/$ Amt. in US$ for acquisition of PSU Shares (A) US$ 80 Million Amt. required for Joint Venture in Euros € 40 Million Applicable Rate for € US$ 1.25/€ Amt. required for Joint Venture in US$ (B) US$ 50 Million Floatation Cost (C) US$ 2 Million Amount to be raised through, ECB (A) + (B) + (C) = US$ 80 Million + US$ 50 Million + US$ 2 Million = US$ 132 Million

Topics: External Commercial Borrowings (ECBs)

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