Best Investing Solution Highly Commended: Royal Enfield (Eicher Motors Ltd)

Published: Feb 2023

Krishna M

Financial Controller
Royal Enfield (Eicher Motors Ltd)

Established in 1982, Eicher Motors Limited is the flagship company of the Eicher Group in India and a leading player in the Indian automobile industry. Eicher Motors is the listed parent of Royal Enfield, the global leader in middleweight motorcycles and the world’s oldest motorcycle brand in continuous production since 1901.

in partnership with

Eicher uses its own cash to improve ROI in this win/win SCF solution

The challenge

Eicher Motors was running a traditional supply chain finance programme for its supplier ecosystem, which faced the following challenges:

  • Cumbersome paperwork, including KYC, for both Eicher and its vendors.
  • Low returns on funds from traditional sources.
  • Intensive manpower requiring high oversight.
  • Multiple banks with multiple procedures and documentation requirements.
  • Negative feedback from vendors and a low level of participation.

Eicher Motors wanted to create a best in class service experience for its suppliers. The company was looking for access to cost-effective and competitive financing options responsive to unique supplier requirements, especially post-Covid, as the pandemic had impacted the overall supply chain with many suppliers struggling to fund their working capital needs. Moreover, the company wanted to drive automation and process efficiency to reduce day-to-day transactional friction, and bring transparency, reliability, flexibility and control to the operational running of the programme.

The solution

Eicher Motors chose to partner with C2FO and implement its flagship Early Payment Programme, a highly flexible and 100% digital solution to support the evolving needs of its supplier partners.

A fully automated solution, the programme has eliminated the need for suppliers to manually follow up and provide KYC for any documentation. It also provides suppliers with the flexibility of just-in-time funding with invoices of their choice, and at the time of their need. Eicher benefits from the unified interface for its suppliers to view, act and monitor their cash flows. The platform allows Eicher to customise the programme structure to suit its accounts payable (AP) and payment workflows without disrupting any of its existing processes. With this, Eicher suppliers can transition seamlessly from traditional programmes. Looking at the successful implementation of the programme, Eicher Motors has extended the programme to its group company, VECV.

Best practice and innovation

While the programme was effectively implemented independently by VECV, it was funded by Eicher Motors’ treasury. This provided Eicher Motors with an opportunity to both support the group company and optimise its yield on surplus funds. This was a unique approach as the treasury pool of the parent company was utilised to run VECV, with the intrinsic value being delivered to suppliers and equally balancing the treasury management aspects. This also enabled Eicher Motors to decouple its suppliers, to a large extent, from the effects of the global macro-economic turmoil since the pandemic while reducing its supply chain dependency on external financing sources.

The programme is automated, fully digital, fast and simple and eliminates all paperwork.

Eicher has complete control and visibility over the programme from operational and treasury perspectives. Moreover, it has the flexibility to modify its cash allocation and returns from the Early Payment programme. The programme follows the principles of dynamic pricing at the individual vendor level and price discovery of market rates based on vendor participation (demand) and cash availability (supply) in the market. This method leads to an optimal level of vendor participation and, thus, returns for Eicher.

What is unique about this solution is that Eicher utilises its own treasury funds to generate a higher ROI in comparison to the traditional means of financing. The funds are also dispersed at a faster rate, which helps the suppliers meet their cash flow requirements quicker.

Key benefits

  • Cost savings.
  • Process efficiencies.
  • Return on investment (ROI).
  • Increased automation.
  • Risk mitigated.
  • Improved visibility.
  • Number of banking partners/bank accounts reduced.
  • Manual intervention reduced.
  • Future proof solution.
  • Exceptional implementation (budget/time).

The Adam Smith Awards Asia is the industry benchmark for best practice and innovation in corporate treasury. The 2022 awards attracted a record-breaking 416 nominations. To find out more please visit treasurytoday.com/adam-smith-awards-asia

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