Operating context and challenges:

Indian FMCG sales are characterised by a fragmented distributive trade environment. More than 80% of HUL’s sales happen in this manner through a total reach of >7m stores, of which some 3m are directly covered, spread across the country and serviced through 3500+ distributors. It is also a key supplier to large Modern Trade chains and has a significant export business. HUL handles a cash velocity of over $8bn and more than a million transactions a year. The diverse and extensive operating landscape coupled with the scale of the company creates a multitude of touch points which need to be managed seamlessly by HUL treasury. Given this context the key challenge for the team has been to find ways to support growth and future needs of the business and an evolving environment whilst ‘doing more with less’.

The solution:

HUL treasury in collaboration with banking and transaction service partners, has focused on delivering a broad based agenda around:

• Deploying superior technology-enabled solutions for transaction banking.

• Sustaining effective risk management practices.

• Driving dynamic liquidity management.

• Reducing cost of capital across the extended value chain.

• Partnering with business on evolving business models.

With a view to overhaul the transaction banking capabilities, the team undertook phased cash management and trade transaction banking tenders. Solutions for collections, payments and cross border flows were developed and implemented, leveraging latest technologies around ERP-integration, SWIFT-enablement, advanced payment platforms and heuristics based recognition engines. Further, arising from a significant rationalisation exercise, bank accounts were reduced from 200 to 40 across the group. Additionally, SWIFT and the Wall Street Treasury Management System was leveraged to automate back office operations. For example, through a combination of MT101s and MT320s, all paper-based transaction initiation has been eliminated and bank reconciliations using the MT940 module are linked directly to HUL’s SAP. These initiatives delivered a significant simplification of operations, alongside process and cost efficiencies.

A range of off-balance sheet funding programmes have been established to provide access to cost effective capital for HUL’s supply chain and channel partners. These include invoice discounting for suppliers, term funding for co-packers capacity creation, revolving credit for distributors, start-up funding for beauty salon franchises and microfinance funding for Pureit range of water purifiers.

Sustaining superior controls is core to the treasury agenda and the team has deployed robust practices to manage FX, interest rate and counterparty risks. Dynamic liquidity management was done within a prudent framework of safety, liquidity and return.

Best practice and innovation:

HUL was an early-adopter of e-payments, SWIFT’s ISO-based XML payment and SAP integration. Leveraging this further, HUL initiated invoice discounting and a first-of-its-kind payment of statutory taxes and levies over this platform. Furthermore, HUL has exploited its early-adopter mind-set to develop a strong e-collections set up, using the new ACH Debit module of the National Payments Corporation (NPCI). It has also deployed a heuristics-based collections engine for automated reconciliations in the case of customer-initiated payment transactions. HUL has also been a pioneer in working with banking partners to build unique value chain funding programmes that have helped infuse liquidity into its extended supply chain at competitive rates.