The challenge

India’s liquor industry has traditionally had a long working capital cycle of approximately five months. Radico’s suppliers were therefore getting paid in 90-120 days instead of the agreed-upon payment terms of 45-90 days. Such delays often stifle the growth of small and medium-sized enterprises (SMEs), as banks shy away from lending amounts that are sufficient for their needs.

The onset of COVID-19 and the subsequent lockdown measures brought unprecedented challenges to the entire ecosystem. Liquor shops were forced to close for several weeks and the whole supply chain came to a standstill. Suppliers faced even more stress, as banks were not extending credit and payments were stuck with large corporates. To contribute to the fight against COVID-19, Radico diverted its manufacturing lines to produce hand sanitisers, which it supplied to the Government of India.

The solution

To address the structural issues in Radico’s ecosystem, DBS Bank India and C2FO proposed developing a supplier payment services (SPS) programme which enabled suppliers to get liquidity with two clicks. By the time the stringent lockdown was announced, however, the programme had just commenced and only a few suppliers could be onboarded. Further onboarding was affected due to operational difficulties. The joint solution enabled dynamic discounting of approved invoices for suppliers on the platform, while the financing was done through the bank’s SPS programme.

To reignite the entire supply chain and address Radico’s challenges, the bank enabled a fully digital onboarding process that allowed Radico’s suppliers to participate in the programme remotely. As a special COVID-19 relief measure, overdue invoices were approved for processing. This innovative solution created significant working capital efficiency for Radico and its suppliers, helped to ensure that Radico’s suppliers could overcome the negative impacts of the pandemic, and enabled them to channel their resources to manufacturing hand sanitisers. Radico is now able to offer early payments to its suppliers against mutually agreed commercial discounts and opt for days payable outstanding (DPO) extensions to improve its working capital cycle.

Best practice and innovation

The bank harmonised the documentation between Radico and C2FO in order to eliminate the need for paper-based acceptance from suppliers, which would have been challenging to execute with lockdown measures in place. Paper documentation was replaced with a digital acceptance process, which enabled an accelerated pace of onboarding of suppliers.

The bank also launched a digital supplier onboarding tool, which reduced the supplier onboarding turnaround time from nine days to just one. This digitised and automated the end-to-end onboarding process and eliminated the need for paper documentation. Small suppliers of Radico were onboarded by utilising the bank’s payment platform to enable end-to-end digital authorisations and settlement. Moreover, the bank provided exceptional support to Radico by approving invoices up to 150 days old for payment. This solution ensured that transactions continued smoothly during the lockdown, even when Radico’s staff were working remotely.

Key benefits

• Strengthened relationship between Radico and its suppliers.
• Improved working capital.
• Enabled early payment.
• Onboarding enhanced workflow, saved time and costs.

“Our customers and suppliers are like our extended family. The lockdown brought unprecedented challenges and disruption for the entire supply chain. Our partnership with DBS on SPS offered DPO extension on one hand and early payments to our suppliers on the other. This helped smooth the shock of the lockdown and provided immediate liquidity and respite to our SME suppliers in a tough economic environment,” stated Dilip Banthiya, CFO.

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