Implementing a Zero Debtor Policy through Channel Financing in an MNC

            
 
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Case Details:

Price:

Case Code : FINC089 For delivery in electronic format: Rs. 300;
For delivery through courier (within India): Rs. 300 + Rs. 25 for Shipping & Handling Charges

Themes: Working Capital Management

Case Length : 9 Pages
Period : 2013
Pub. Date : 2013
Teaching Note : Available
Organization : Testle India
Industry : FMCG
Countries : India

Abstract:

Testle India Ltd, a subsidiary of a global consumer packaged goods (CPG) giant Testle Inc, implemented a bold "zero debtor policy" in 2009 with a motive to encourage cash sales and have no credit sales. This enabled the company to realize a negative working capital cycle, but it faced a challenge from the company distributors. To make life easier for the distributors, Testle India tied up with HDFC Bank, a leading private sector bank in India, to provide channel finance to its distributors. While going in for channel financing brought about the much needed liquidity for the distributors, the facility came with its own set of problems and challenges.

Finance | Case Study in Management, Operations, Strategies, Finance, Case Studies

Issues:

  • Understand the advanced financing approach/facilities adopted by Testle.
  • Differentiate channel financing from other traditional working capital instruments.
  • Understand the process of CF financing.
  • Analyze the benefits of CF financing both to the companies and to the distributors.
  • Explore the key issues faced by companies during the implementation of this facility in India.
  • Contents:

      Page No.
    Introduction 1
    Company Background 1
    Industry and Competition 1
    Distribution Network: Key for Success of Trestle India 2
    Channel Finance at Trestle India 4
    Operating Architecture of Channel Finance at Trestle India 5
    Not a Cake Walk 5
    Exhibits 7

    Keywords:

    Zero Debtor, Negative Working Capital Cycle, Liquidity, Distributors, Re-Distributors, Working Capital, consumer packaged goods (CPG), FMCG, Cadbury, ITC, Amul, HDFC Bank, Over Draft, Current account, Leverage, Credit Period, Credit Limit, Area sales manager, MNCs, CRISIL , D&B, Credit Rating

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