KPIT - Improving cashflow through ARP
DBS customises an Accounts Receivables Purchase programme to optimise KPIT’s working capital
“The non-recourse ARP programme had to work across multiple locations and multiple debtors. Despite the complex structure, DBS managed to implement it in just 30 days after the execution of the agreement. It has significantly improved the DSO in our last quarter. We’re in the process of adding more geographies that will cover 75% business in the near future. With this outcome, DBS has demonstrated an excellent understanding and clarity of our business requirements and offerings.”
Mandar Kulkarni, Head of Treasury, KPIT
KPIT is a global leading provider of technology solutions that power the Connected, Autonomous, Share & Electrification (CASE) future of the automotive industry. Headquartered in India, KPIT has established its presence across Europe, North America and Asia.
Enhancing Shareholder Value Was A Challenge
As a listed entity, KPIT was expected to optimise working capital and enhance various value drivers for their shareholders. This was challenging given its limited track record as a separate legal entity. KPIT looked at financial levers to drive working capital efficiency and identified improving its Days Sales Outstanding (DSO) as a critical path to enhancing the desired value drivers.
To optimise its working capital across the group, KPIT wanted to reduce its DSO on a consolidated basis. This meant enhancing cash flows across its different subsidiaries in various geographies simultaneously.
A Scalable, Efficient Working Capital Solution for Multiple Countries
DBS teams in India and Singapore collaborated to customise a multi-jurisdiction, multi-debtor, non-recourse Accounts Receivable Purchase (ARP) programme for KPIT’s US and German subsidiaries with approximately 10 debtors which are mostly unlisted corporations. The USD35 million programme allowed KPIT to improve its cash conversion cycle and achieve optimal working capital efficiency.
Customised workflows were also required to ensure that the exchange of information and transactional documents went smoothly with the time differences between US, Germany, India and Singapore.
DBS and KPIT also created workstreams to concurrently address credit, legal, and operational aspects of implementing this programme across the multiple countries. Due to the large volume of invoices, KPIT and DBS arranged for ARP via a summary invoice listing, rather than submitting individual invoices in hard copy formats. This provided KPIT the ability to scale up this programme easily and quickly, supporting its overall business expansion across markets.
Record Implementation with Multi-fold Benefits
This project was unprecedented in terms of the global scope and the tight timeframe. DBS delivered a solution that exceeded expectations.
- The non-recourse ARP programme for KPIT’s US and German subsidiaries helped KPIT reduce its DSO - by up to 35 days, unlocking up to USD20 million of working capital within 30 days for its business expansion without having to utilise other higher-cost sources of funding.
- The complex multi-jurisdiction, multi-debtor ARP programme was executed efficiently with a path to scalability across their other markets in the UK and Japan.
- The end-to-end origination-to-execution was completed within record time of 30 days, which required intensive coordination amongst more than 20 project members across KPIT, DBS, legal counsel and other third parties.
- The technical interface between KPIT and DBS via DBS’ digital trade finance platform (“iOAT”) enhanced straight-through processing. It also created the foundation for KPIT to scale up the programme to include additional debtors in additional geographies.