The challenge

TE Connectivity (TE) runs four entities in India, with its trading entity being operated from the country’s Free Trade Warehousing Zone (FTWZ) – a highly regulated Special Economic Zone (SEZ) that facilitates trading and warehousing activities with ease of customs-related benefits.

As the nature of TE’s business did not directly fit the criteria of ‘trading unit’ or ‘service unit’ under the FTWZ guidelines, the company was not able to fully capitalise on the financial benefits of operating within the SEZ, governed under separate rules.

TE’s internal and external stakeholders also lacked overall clarity around FTWZ regulations, leading to further delays in transaction processing. Furthermore, TE’s overall banking structure in India had become highly fragmented and this needed to be addressed.

The solution

Teaming up with J.P. Morgan, TE has revolutionised its treasury and shared service centre (SSC) operations in India within the space of just six months, which includes establishing a tailored account structure for a FTWZ entity to reap the full financial benefits of operating in the SEZ. This was possible with the bank’s in-depth understanding of local regulations governing such an account structure, which assisted with the interpretation of ‘service unit’ under the FTWZ framework. Such regulatory expertise helped TE to get the solution verified by an independent party.

FTWZ-specific bank structure – TE put in place a customised workflow and set-up foreign currency accounts with minimal documentation within the local regulatory framework, enabling it to process foreign currency transactions. By establishing TE as a ‘FTWZ entity’, the company can now:

• Hold foreign currency export proceeds beyond the next operating month of receipt, significantly reducing FX conversion costs.

• Invoice eligible local customers in foreign currencies.

• Utilise surplus foreign currency proceeds for import payments.

Treasury transformation – TE worked with its bank to rationalise its archaic banking infrastructure and digitised end-to-end processes to eliminate paper-heavy and offline-based workflows across its four Indian entities, including a SSC that involved a different support set-up. The comprehensive solution includes:

• Reducing the number of accounts by having each of its four entities utilise a single INR account to centralise cash investment and maximise yields through time deposits.

• Adopting ISO XML file formats across all domestic and cross-border payments to standardise and streamline payment initiation and processing.

• Leveraging virtual branch to digitise the submission of supporting documents for statutory and cross-border payments.

• Digitising day-to-day interactions with the bank including the issuance of guarantees, transaction processing, reporting and eliminating reliance on emails and other offline channels.

The above was completed within six months in July 2023.

Best practice and innovation

By establishing its trading unit as a FTWZ entity, the company can now capitalise on the full financial benefits the SEZ has to offer particularly as India is a key market for TE.

TE is in the process of adopting new-age treasury solutions including leveraging an artificial intelligence (AI) powered fintech solution to auto-match and reconcile invoices, as well as adopting machine learning algorithms to enhance cash flow projections.

Key benefits

• Cost savings (circa US$240,000).

• Headcount savings.

• Number of banking partners/bank accounts reduced (44% reduction).

• Process efficiencies.

• Improved key performance indicator (KPI) metrics.

• Increased automation.

• Risk mitigated.

• Improved visibility.

• Errors reduced.

• Manual intervention reduced (3,000+ man hours saved).

• Future-proof solution.

• Exceptional implementation (budget/time).

“For TE to team up with the right bank to help us ensure regulatory compliance while equipping the firm with the optimal banking structure and solutions to operate one of its entities within the FTWZ in just six months – marks an incredible milestone for our company.”

Aniruddha Bhattacharyya, Head – Finance & Accounts