Improving process efficiency & convenience through E - Finance mode

Tata Steel, established in 1907 is Asia's first and India's largest integrated private sector steel producer is the world's 6th largest steel producer. With the recent acquisition of Corus, the combined enterprise has a total crude steel production capacity of around 30 million tonnes and over 82,000 employees across four continents. Tata Steel has operations in 27 countries and is the second most globally diversified steel group.

Backdrop

Tata Steel operates through 6 profit centers viz. Flat Products,Long Products,Tubes SBU,Bearings SBU, Rings & Agrico & SSL (Special Steels). All these six profit centers have got their exiting distribution chain through which the finished (prime) products are being sold. Before 2001 Tata Steel used to sell its prime products to these distributors attached to various profit centers on interest free credit terms. The credit tenure used to vary from 15 days to 90 days depending on the geography in which the distributors used to operate. The credit sales used to translate into high debtors and fear of bad debts in a falling market scenario which impacted the top-line of the company.

Objective of launching Channel Finance

The objective of launching channel finance - a short term revolving credit facility in Tata Steel was conversion of credit sales into cash sales thus improving the margin. This also translated into better supply chain visibility for the company. This has been widely successful with transactions growing from Rs.60 crores in Fy02 to Rs.3000 crores in Fy09. The scheme initially targeted for the big ticket size distributors of Tata Steel became so popular that eventually it was extended to all the distributors of Tata Steel across the country. Today channel finance covers a pan India distributor network of more than 160.

The Arrangement - Delivery Mechanism

Unlike traditional channel finance the e-channel finance application/platform designed, developed & hosted by MJ is tripartite in nature. The application is integrated with the legacy system of Tata Steel on one side and on the other side it has a back-to-back integration with the Core Banking System of various banks in India which makes the transaction seamless as well as complete "Straight Through Processing" without any manual intervention. The channel finance application acts as a financing aggregator for Tata Steel where with a single integration touch point, the company & its distributors have access to multiple banks for their financing need and requirements.

The Process Flow

This is a unique fully automated 4 step process starting from Sales Order to Money Receipt generation in Tata Steel SAP R3 system and finally dispatch of materials from the stock-yard which is powered by the integrated channel finance application designed , developed and hosted

------>STEP I-------------------------->STEP II------------------------>STEP III----------------------------->STEP IV--->

Unlocking Value for the Stakeholders

TATA Steel:

• 100% secured receivables
• 100% timely payment
• Increased buying power of the distributors
• Improved margin and supply chain visibility
• Single window in terms of visibility of MIS

The above graph is just a pictorial depiction of the continual & sustainable increase in channel Finance as a proportion of Sale towards regular Distribution Channel of Tata Steel. Credit Sales of Tata Steel have steadily decreased over the period from Fiscal 02 to Fiscal 08.

Value Proposition to Distributors

• Competitive cost of Funds
• No Security / Collateral Attached
• Hassle free documentation
• Over & above existing line of Credit
• Straight through processing

Value Proposition to Partner Banks

• Minimum Risk of Default / NPA
• Assurance of Bulk Business

Client Testimonials

"Website is very user friendly and a naïve person can easily understand and access the contents."

- Vijay Sheets & strips, Tisco - Flat Division

"Financial approval message through SMS is very helpful."

- B M W Ventures, Tisco - Flat Division