Corporate View: Kuldeep Maheshwari, Volkswagen Group India

Published: Sep 2013

Kuldeep Maheshwari

Head of Operations, Treasury Centre

After qualifying as a Chartered Accountant at the Institute of Chartered Accountants of India (ICAI), Kuldeep Maheshwari, Head of Operations – Treasury Centre, Volkswagen Group India, began his career in 2006 with the second largest petroleum company in India, Bharat Petroleum Corporation Limited (BPCL), first in funds management and then foreign exchange (FX). In 2008, Maheshwari moved to Volkswagen Group Sales India Private Limited, which is a wholly owned subsidiary of Volkswagen AG, as Treasury Specialist, Operations and was promoted to his current position in 2010.

Volkswagen became number one in the European car market decades ago and continues to do so through exceptional value for money and premium products, which are reliable and of high quality. About Volkswagen Group India: With its headquarters in Pune, Maharashtra, the Volkswagen Group is represented by five brands in India: Audi, Lamborghini, Porsche, ŠKODA and Volkswagen. The Volkswagen Group has been present in India for the last 12 years and began its India journey with the entry of the ŠKODA brand in 2001, Audi brand and Volkswagen brand in 2007, Porsche brand and Lamborghini brand in 2012. Each brand has its own character and operates as an independent entity in the market. Volkswagen Group India has over 25 models in India and 262 dealerships and operates through two plants – Pune and Aurangabad.

When Kuldeep Maheshwari first joined Volkswagen Group Sales India in 2008, there were three Volkswagen subsidiaries in the country, each with its own treasury function. Group Treasury Volkswagen AG in Germany decided to centralise treasury operations across India, which had only been in operation for one year at the time. When asked whether they could manage all three companies, the Indian treasury team responded with a resounding “yes”.

Maheshwari and two colleagues set out to create a treasury centre from scratch, which is almost complete five years on. The team was instrumental in establishing the structure of TC-India, which is now responsible for the treasury activities of VW India Group. In 2010, Maheshwari was promoted to Head of Operations for all Volkswagen Group India companies and the treasury centre, and currently oversees a treasury team of five.

“There are certain processes which remain manual because of specific regulations in India, but this situation is slowly improving.”

Maheshwari clearly articulates the strategic role of treasury within the company, which is what drives his passion for the job. “The events over the past few years, with the global financial crisis and increased risk levels – whether that is foreign exchange (FX), market or operational risk – prove that treasury is one of the main pillars of the corporate structure. Ultimately, the decisions treasury make go to the bottom line of the business. We have the responsibility to ensure adequate funds to the business at the right price and put in place safe, robust and secure payment processes, as well as to mitigate financial risk for the business.”

He positions treasury as a service centre, whose main motive is not to earn a profit but “to serve the needs of all the departments across the company”. The treasury team has regular meetings with procurement, controlling, accounts payable (AP) and business, for example, to determine if there are areas of improvement that need addressing. “It is similar to a customer satisfaction survey to define expectations and find out how satisfied our internal clients are with our services. In these meetings, we also explain our treasury policies so that they understand what we can do and how we can work together to solve a problem.”

For example, when Maheshwari first joined the company, the AP department’s payment process was inefficient and issues were cropping up almost on a daily basis. Through dialogue, treasury discovered that the payment process was completely manual and Excel-based. It took a lot of time to process payments and then required manual reconciliation, which made it very frustrating and time-consuming for the AP department. Treasury supported AP by putting in place a fully automated payment process in SAP, and now the company’s payment factory is running smoothly.

Effects of the global financial crisis

When the global financial crisis began to bite in late 2008, mainly affecting US banks, Indian banks proved to be more resilient and there was little or no effect on the country’s banking system. However, when the second wave of the global crisis hit Europe, Volkswagen Group India was directly impacted because its counterparty currency risk is in euro, as a result of its parent company, Volkswagen AG, operating in euro. In addition, as global economic growth slowed down, so did the Indian economy – previously growing at 8%-9% per annum, it is now predicted to grow by only 6%.

The automobile industry is one of the first sectors to suffer when an economy is in decline. In the past two to three years, the Indian automobile industry was experiencing double-digit growth, as was Volkswagen India. However, this year the Indian automobile market is expecting negative growth and this will, to some extent, impact Volkswagen as well.

The second major impact of the crisis has increased currency volatility. After a period of relative stability from mid-2012, the Indian rupee began to lurch higher (depreciate) against the US dollar from early May. Since then, it has lost more than 11% of its value and is likely to weaken further. “This is a big risk for us,” says Maheshwari. “Although the US economy is growing – albeit weakly – and most currencies in the world also suffered depreciation, the Indian currency has been affected the most.”

Volkswagen Group India responded to these two challenges in a number of ways. In order to maintain growth considering sluggish Indian market, Volkswagen Group India has now started to focus on the export market, which would mean earning foreign currency for the company. This would act as a natural hedge to the existing imports of the company.

In terms of the Indian economy, Maheshwari is doubtful that further improvements will occur until after the national elections in 2014 – and even then it depends on the outcome. “If there is a decisive victory in the elections, then the country will most likely experience economic growth. However, if a minority government comes to power, they will have a difficult time taking decisions on growth projections. So let’s hope for the best outcome in the 2014 elections.”

Banking relationships

Volkswagen Group India deals with a mix of foreign and Indian banks for its needs and services. TC-India works under broad guidelines set up by Group Treasury Volkswagen AG Germany.

Interestingly, since the financial crisis, the number of banks that Volkswagen Group India deals with has increased. When Maheshwari first joined, the company only dealt with three to four global banks, but gradually it started working with more global banks and also added a couple of regional banks.

The banks are segregated into two segments: lenders and operating/transactional banks. In terms of evaluating the company’s banking partners, Maheshwari views the global banks as “quite similar” in terms of systems and products on offer; fundamentally, it’s the relationship manager that is the differentiating factor for him. In contrast, when choosing its regional banking partners, cost is the highest priority, as the company is predominantly looking to these banks for funding. Therefore, treasury performs a quarterly analysis on these banks to evaluate their rates (first) and service (second).

The operating banks, on the other hand, cannot be changed as frequently as lending institutions. Volkswagen Group India uses a mix of global banks for day-to-day transactions, such as collections and payments. These banks are reviewed on a more ad hoc basis than its regional partners, but Maheshwari is not shy in voicing his opinions as to where he would like to see improvement. “There are certain processes which remain manual because of specific regulations in India, but this situation is slowly improving,” he says. “I generally ask all our banks about further optimisation possibilities, and Citi for one has come to us with solutions on the reconciliation side, which has helped us a lot.”

According to Maheshwari, the company borrows both on a long- and short-term basis and all its funding is a mix of equity, external commercial borrowings, and long- and short-term rupee loans. The working capital short-term loans are arranged from the banks. Until now, Volkswagen Group India has not tapped the bond market for alternative sources of funding.


Volkswagen Group India’s treasury department, like so many other treasuries, remains reliant on spreadsheets, and currently it doesn’t use a treasury management system (TMS). However, Group Treasury Germany plans to roll out its fully-fledged global treasury platform (GTP) to the subsidiary instead of investing in a small local TMS. Most likely this extension will happen in 2014-15. In the meantime, Maheshwari will continue using SAP – accounting software and spreadsheets.

In terms of process automation, Maheshwari tells a mixed story. For local currency payments and sales collections from car dealers, 100% are fully automated. “We have host-to-host connectivity with our banks. For collections, we automatically upload the banks’ SWIFT MT940 statements on a daily basis, which are already customised for our enterprise resource planning (ERP) system, SAP, so the large numbers of collection entries are automatically posted to SAP,” he says.

However, manual processes are still a large part of money market deals. “When we take quotes from three to four banks, we have to manually create deal tickets and record the deals in our Excel spreadsheets, and then prepare letters to send to the banks. We also have to send letter copies to our accounting department to book the entry in SAP FI,” Maheshwari explains. “But this problem will be solved once the TMS is rolled out. A deal will be captured in the ERP system and automatically an approval will go back to accounting and be put in SAP FI – hopefully it will be 100% automatic.”

Although FX portals are well-known in India, mainly because almost every bank is offering a type of FX portal, Maheshwari is not sold on them. “If you go with one bank’s portals it will only offer that bank’s rates and we are not able to compare them with another bank’s rates,” he explains. “Therefore, we are not using an FX portal but we use Reuters for all types of FX deals.”

He is also not a great fan of mobile technology. “Banks have approached us to trial mobile technology, such as authorising payments. However, our transactions are not as frequent as, let’s say, corporates in the retail sector. I am not fully convinced that this is useful for us because we do not have any urgent transactions and furthermore we like to initiate payments in our ERP system.”

But Maheshwari is unequivocal in his view that technology is a vital part of treasury, not just an enabler. “When I joined the treasury department, it was very time-intensive working on Excel spreadsheets and issuing paper cheques. But by using technology, such as ERP systems and host-to-host connectivity, to make numerous payments, what used to take one day is now completed in ten minutes. This technology plays a vital role in my day-to-day job – it reduces processing times, increases efficiency and enforces controls and limits.”

Tasking treasury processes

Foreign currency payments is one process which takes up a fair amount of his team’s time. Because the Indian rupee is not fully convertible, in order to make a payment a company has to submit to the bank original, hard copy documents, including invoices, custom duty receipts, bill of lading and regulatory forms. The automotive industry faces a heavier burden than many other industries because of the hundreds of different parts imported to construct a vehicle, each one needing its own custom duty receipt. “Sometimes we have to submit the documents in boxes,” Maheshwari says. The bank then needs to check the documents, which can take four to five days, to make sure everything is in order before the payment is made.

But there have been some recent advances. He explains: “Banks have come with a number of solutions, such as Import Warehouse, in which they warehouse all the documents and regularly provide different types of management information systems (MIS), which help to manage the bulk payments. Now the regulatory forms are also digitalised, which has automated this process to some extent. Once the documents have been checked and approved, the same are uploaded onto the bank’s website and the payment is processed as soon as it is authorised. Citibank is working towards further automation of this process.”

Another tasking function is cash flow forecasting, the bane of many treasurers’ existence. The company performs a cash flow forecast on a day-to-day basis for a three-month period, based on data from controlling and planning, as well as the AP and AR departments. Further daily cash flow analyses are also made. “On that basis, we estimate how many payments will need to be made on that day and what our sales collection will be, which means there will be either a surplus or we will need to borrow from the market,” says Maheshwari.

Next challenges

Maheshwari’s next goal is to have all of treasury’s processes fully automated and in a global standard, instead of manually preparing hard copies and letters. This pain will be alleviated to some degree by rolling out the company’s GTP, hopefully from next year.

Maheshwari would also like to have SWIFT access, so that treasury uses a single format type used for every bank. “Right now our main transactional banks have different payment formats, so we have had to customise our ERP system to accommodate these formats. Suppose that one of those banks closes its doors and we have to go to another bank, for example HSBC, then we will have to make even more changes to our ERP system according to HSBC’s requirements,” he says.

Currently, Volkswagen India’s treasury centre uses FTP like all other Indian corporates, which doesn’t incur bank or third-party costs on a regular basis. “SWIFT will definitely be more expensive, but it will be helpful to have the same formats, it won’t incur extra cost for customisations and we will have greater flexibility. Additionally, managing the host-to-host connectivity with our banks will be a lot easier compared to the current set-up,” he explains.

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