blend financial services limited · punjab national bank- 2nd largest public sector bank in india...
TRANSCRIPT
BUILDING FACTORING BUSINESS PLATFORM PRESENTED BY
BLEND FINANCIAL SERVICES LIMITED
AT
WORKSHOP ON
“ACHIEVING SUCCESS THROUGH FACTORING”
ORGANIZED BY
AFRICAN EXPORT – IMPORT BANK
(AFREXIMBANK)
ON 2ND, DECEMBER, 2011
AT
ACCRA, GHANA
Private & Confidential
AGENDA
BLEND: AN OVERVIEW
FACTORING: AFRICA OVERVIEW
FACTORING: INDIA EXPERIENCE
BLEND : OFFERING
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BLEND FINANCIAL SERVICES LIMITED
AN OVERVIEW
Private & Confidential
BLEND OVERVIEW
Market Position
India based fast growing
Corporate Advisory company
offering wide range of
financial services
People
Strong Management
team, 130 strong
professionals supported by
team of experts in Banking, Factoring &
Financial services
Global presence
Pan India network with International presence in Dubai, Hong
Kong, Sri Lanka, USA and UK
Customer
Strong clientele globally with cumulative
mandates of USD 2.42 billion
Relationship
Strong banking and corporate
network in India and
Internationally
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Private & Confidential
BLEND : BUSINESS MODEL
MSME focused financial advisory company poised to offer 360 degree financial solutions.
Seed Startup Growth Established Expansion Exit
Debt Syndication Angel Funding
Working Capital & Structured Products
Venture Capital
Private Equity Mezzanine Capital
Initial Public Offer
Promoter funding/ Foreign Subsidiary funding
FCCB/Private Placement
Mergers & Acquisitions/LBO
GR
OW
TH
MANAGEMENT CONSULTANCY SERVICES
Expert Advisory in Factoring
Debt Syndication
Investment Banking
Allied services/advisory in Banking & Financial Services
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Private & Confidential
JOINT VENTURE – FACTORING
FIM Bank
Banca IFIS
Punjab National Bank
Blend Financial Services Limited
IFFSPL
Facilitating trade
through factoring
and related financial
services in trade
Finance.
India Factoring and Finance Solutions Pvt. Ltd (IFFSPL)
Blend has catalyzed the globalization of factoring services in India by bringing PNB, FIM BANK and BANCA IFIS together to facilitate trade promotion through factoring
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Private & Confidential
JOINT VENTURE – ROLES
FIM Bank- Credit institution having specialization in International trade finance & Factoring.
Punjab National Bank- 2nd largest Public Sector Bank in India with Business of USD 113616 million.
• Focused on developing Markets and to expand its foot print in India.
• To provide technical support and assistance to the company.
• Foray into new business.
• Acts as Strategic Investor. Gives its Brand to the JV company.
• To Provide line of credits.
Banca IFIS (Strategic Partner)- Italy based bank having
expertise in factoring and trade finance business
Blend Financial Services: A leading financial services company with expertise in Factoring and allied activities
• Brings Global expertise of factoring business.
• Brings new factoring and leasing products.
• Marketing partner.
• New product development.
India Factoring and Finance Solutions Private Limited (IFFSPL)
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Private & Confidential
CERTIFICATES & ASSOCIATIONS
MOC with Afreximbank
Blend Certified with Quality
Management System
Member of
International Network of SMEs
Member of
International Factors Group
“Extending support to the SME Sector in the continent of Africa.
Blend and Afreximbank agree to cooperate in developing and promoting trade services between India and Africa”
“Signifying its linkage with Global SME support organizations”
The network comprises at present 80 members based in 32 countries in 5 continents
Blend is among the few Financial Services Company to avail ISO 9001:2008 Certification.
“IFG is the first international association of factoring companies.”
IFG helps factoring companies to conduct cross-border business acting as correspondents for each other
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Private & Confidential
FACTORING : BLEND’S EXPERTISE
With the experience and expertise gained in India and with the intermediation of relevant institutions, Blend can play a pivotal role in developing factoring product in Africa
Proven Track record
Technical Knowhow &
product capability
Understanding of SME
SME centric organization and understands SME
funding requirement and issue
Expert team with complete knowledge of factoring business/ product and business
processes.
Instrumental in setting up India Factoring, in 12 months time has factoring turnover of
approx USD 250 million with zero NPA
Wide structuring ability for each transaction. Have developed unique industry specific product.
In factoring business for past 12 years; in depth understanding of all challenges of the business & product
Resource management – ability to
assist raising funds through
innovative structures
Knowledge of
challenges of product
and business and its
mitigate
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FACTORING
INDIA EXPERIENCE
Private & Confidential
FACTORING – INDIA SCENARIO
India - 2010-11
Number of Factoring companies: 11
Domestic Factoring Turnover (in Millions of EUR): 2,600.00
International Factoring Turnover (in Millions of EUR): 150.00
Total Factoring Turnover (in Millions of EUR): 2,750.00
Started in 1991 with SBI factors
Grew by over 800% from 1998 to 2003
Between 2003 to 2006 grew by 120%
Slowdown had a large effect on the product and turnover became half vis-à-vis 2008 in 2009
85% of the market share of SBI Global Factors
Turnover Growth from 2009 mere 4% in 2010
Source – Factor Chain International
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Private & Confidential
FACTORING – INDIA SCENARIO
Till date limited nos. of players engaged in factoring activity.
In 2010, factoring turnover reached Euro 2750 million, which constitutes roughly 0.40% of India’s GDP. Factoring turnover in India is approx. 0.048% of the total Bank credit.
Factoring turnover in India is mere 0.17% of the World Factoring turnover and 0.77% of total Asia turnover.
Products offered by factoring companies constitutes Domestics, International, disclosed, undisclosed. Currently facility offered are with recourse factoring due to ban on credit insurance.
International Factoring still to gain momentum and factoring volume constitutes 95% of domestic factoring.
Majority of the factoring business in India is controlled by top 3-4 major players.
1625
1990
3560
5055 5200
2650 2750
0
1000
2000
3000
4000
5000
6000
2004 2005 2006 2007 2008 2009 2010
Factoring Volume - India
Million €
Source: Reserve Bank database/Factor Chain International
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Private & Confidential
FACTORING – INDIA SCENARIO CHALLENGES
Absence of Regulatory framework.
High stamp duty on factoring transaction.
Lack of supportive legal framework – uneven playing ground with Banking system.
Competition from Commercial Bank.
Access to information on credit worthiness.
Mitigated once Regulation of Factor (Assignment of Receivables) Bill, 2011 is enforced
Improved since establishment of CIBIL; Reserve Bank of India has already given approval to 3 new players
Challenges are similar in African Market & the story can be build taking cue from Indian experience 13
Private & Confidential
FACTORING – INDIA SCENARIO FACTORING BILL
For any factoring business to grow, there has to have robust legal and regulatory framework. With the advent of “The Regulation of Factor (Assignment of Receivables) Bill, 2011”, the same will get addressed giving way to development of Factoring in India and allowing International Factors to set up shops.
What we are going to achieve with “The Regulation of Factor (Assignment of Receivables) Bill, 2011”
Registration of NBFCs as a Factor with Reserve Bank of India (RBI) and RBI to regulate the Factoring Companies.
Clarity on the Rights and Obligations of parties to the contract for Assignment of Receivables and setup of Central Registry for registration of assignments.
Linkage with MSME Act, 2006 which will give better market coverage to the Factor.
Central Registry to be set up under section 20 of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 to give right to the Factor(Assignee) on specific Assignment.
Amendment in Civil Procedure Code, 1908 to extend the law relating to recovery of Debt to dues under a Factoring Arrangement.
Amendment in The Credit Information Companies (Regulation ) Act, 2005, bringing disclosure with regards to recovery of Assigned Receivables.
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Private & Confidential
FACTORING – EMERGING BUSINESS OPPORTUNITY
Trade finance to drive the global economies for years to come.
Emerging economies will consolidate their position as the ultimate provider of commodities, food and fuel to the rest of the world.
Emerging economies are enhancing their political – economic influence in the world.
International trade is shifting towards open account terms – supply chain financing and innovative trade finance to replace L/Cs.
Factoring critical for trade finance – global economy.
SMEs in emerging markets are important for driving global economy.
Factoring becoming a mainstream product and getting wide acceptability.
Liquidity crunch and factoring (boutique of services).
Rewarding for – all stakeholder, i.e. institutions, investors, the product and economy. 15
Private & Confidential
FACTORING – BENEFITS TO SME
Source: A Study on Factoring by SIDBI
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FACTORING
AFRICA – OVERVIEW
Private & Confidential
Factoring Companies in AFRICA
FACTORING - AFRICA
Africa Number of Factoring
companies
Domestic Factoring Turnover (in Millions
of EUR)
International Factoring Turnover (in Millions of
EUR)
Total Factoring Turnover (in Millions of EUR)
Egypt 5 50 150 200
Mauritius 2 122 3 125 Morocoo 4 905 166 1,071 South Africa 5 14,895 225 15,120
Tunisia 4 260 35 295
Major Factoring Companies - AFRICA
Egypt
1. Egypt Factors S.A.E.
2. Export Credit Guarantee Company
of Egypt
Mauritius
1. MCB Factors Ltd
2. Mauritanie Leasing
Morocoo
1. Attijari Factoring Maroc.
2. Banque Marocaine pour le Commerce et
l'Industrie
3. Maroc Factoring
South Africa
1. Nedbank Corporate
2. Standard Bank Debtor Finance
Tunisia
1. UNION DE FACTORING
(UNIFACTOR)
2. Tunisie Factoring SA
Source : Factors-chain international
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Private & Confidential
Factoring Companies currently present in Africa
NEED TO ESTABLISH MORE FACTORING COMPANIES
With the experience and expertise gained in India, Blend can play a pivotal role in development of factoring in Africa by way of assisting existing companies developing sound systems and establishing new companies/divisions (with a Financial Institution) on Turnkey Basis.
Source: Factor Chain International
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BLEND: OFFERING
Private & Confidential
WHO SHOULD GO FOR FACTORING?
HOW TO PREPARE A FEASIBLE BUSINESS PLAN?
WHAT SHOULD BE THE CAPITAL OUTLAY?
HOW TO IMPLEMENT THE BUSINESS PLAN?
WHEN TO START THE BUSINESS?
DEMOGRAPHIC VS DOABLE BUSINESS
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THE THOUGHT OF STARTING A FACTORING COMPANY
Private & Confidential
Blend proposes to take up projects for establishing Factoring Business Platform on turnkey basis
Training of staff
Implementation of pre sanction process
Credit & risk management process.
Operations (Collection & Debt Management)
Sales & Marketing
Resource mobilization structres
Setting up the business process –
Establishment of policy guidelines and standard operating procdures
IT – Factoring Management System
Finance
Simulations & Trial Runs
System control audits
Handover to pre trained team
Periodic Audits and system enhacements
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FACTORING ADVISORY – START UPS
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Private & Confidential
Advisory to existing factoring companies – New product development. Assistance in building Credit, risk monitoring and scoring systems.
Risk management & mitigation, fraud prevention systems and processes.
Assistance on building sound IT interface to suit factoring.
Assistance on Innovative resource mobilization structure (depending upon
strength of the principal and economic environment of the country).
Credit Insurance advisory and liaising to facilitate down selling of portfolio.
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FACTORING ADVISORY – EXISTING COMPANIES
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Private & Confidential
SUCCESSFUL FACTORING STARTUP – KEY ELEMENTS
AT THE START – Thorough understanding of economic condition/environment of the country a. Regulatory environment, development of financial
system, legal system support.
Understanding of existing factoring setup/environment a. Analysis of existing factors and their business b. Liaise with the association, if any present in the country Choosing the right team to prepare the plan which is
profitable for the investors/stakeholders
Elements of successful startup – a. Local business specs
b. Legal requirements for the business
c. Human Resource Management
d. Financing/Fund Raising options
e. Suitable IT platform/solution
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Private & Confidential
SCOPING – KEY INFLUENCING FACTORS
Country’s legal infrastructure needs to address the issues with respect to legal assignment of receivables, security interests of the property, requirements of registration system of collaterals etc.
Legislative
Framework
The role of judiciary in settlement of disputes is also of extreme importance to ensure effective factoring operations in any country
Judicial Framework
Governed by a regulatory body and in case of no regulations factoring companies operate as per the corporate governance rules
Regulatory
Framework
The accounting rules and tax code and their application and other key elements and thus this essential to clearly define the tax provisions
Tax Framework
POLITICAL
•Political change : Change in government through democratic election can influence future business strategy
• Trade policy
•Political uncertainty can lead to a fall in investment by businesses and influence decisions on expansion and business ventures
ECONOMIC
• Sophistication of Financial Markets – ease with which capital can be moved and raised
• Monetary and Fiscal Policies – interest rates, tax regimes, government aid
SOCIAL
•The impact on the local environment not only affects human communities but can also inflict widespread ecological damage.
TECHNOLOGICAL
•Availability and developments in technology can have a powerful influence
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Private & Confidential
SCOPING - MARKET & PRODUCT SEGMENT
Advanced
Stable
Growth
Start up
SME
Mid & Large
Corporate
Factorable
Industry Growth products
Complex Products
Advanced products
Geographical Coverage
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Private & Confidential
SCOPING - COMPETITION & BARRIERS
Banks &
Financial
Institutions
Existing
Factoring
Company
Competitive
Products
Competitors
MAJOR COMPETITOR
• Existing presence
• Vast resources
• Product Reach
Lack of established players leaves gaps to explore the market
Product / Services
Value Proposition Competition
Factoring Cash flow finance; increases with business
-
Traditional Financial Products
Only finance/balance sheet funding/low cost
Domestic & International Factoring
Trade Finance Payment system widely used International Factoring & Invoice Discounting
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Private & Confidential
RISK MANAGEMENT
Board Approved Risk Policy & Procedures
Risk Committees at Board/ Management Level
Combination of Rating and Appraisal System
Evaluation of Performance and Financial Risk
Non Traditional Information Sources
Independent Concurrent Internal Audit Reports to Board
New Product Introduction Process
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Private & Confidential
START UP SUPPORT
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BUSINESS Start up Manuals
Training
Daily Communication
On Ground help & Support
IT Implementation
Decision making matrix
Human Resource
Private & Confidential
BUSINESS SETUP
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Private & Confidential
SOP’S AND PROCESS FLOW
•Describes and structure the different phases of process of selling services, assisting marketing activity and its decision making process.
Sales
•Provides guidance on the risk appetite and risk policies. Credit & Risk
•Contains the various processes of Finance and eligibility and authorization matrix.
•Functions, duties and responsibilities of the finance department within the company.
Finance
•Details the various processes of operations with organization.
•Functions, duties and responsibilities of the department within the company along with work flow for operations activity.
Operations 31
Private & Confidential
SALES – SOP & PROCESS
Describes and structure the different phases of process of selling services, assisting marketing activity and its decision making process.
Products
Formal Selling Structure
Credit Assessment/
Approval Process
Guidelines on pricing
Sales & Marketing Strategy
- Products to offer - Basic qualifying criteria & requirements
- Prospect tracking - Indication of terms - Client visits - Documentation - KYC guideline
- Client risk scoring - Financial spreads - Client survey - Approval
- Fees - Funding cost/Interest - Collection cost - Stamp Duty & Taxes - Tariff Card
Application Form
Debtor/Vendor Information Sheet
Client Information
Sheet & KYC
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Private & Confidential
CREDIT & RISK – SOP & PROCESS Provides guidance on risk appetite and risk policies
Risk Management
Managing Risk
KYC - Policy & Procedure
Credit Approval Process
Quality of Asset & Provisioning
Capital Adequacy
Maximum Exposure
Approval Powers
Credit Risk Policy
Counterparty Exposure
Company information form
Personal information form
Client Assessment note
Financial Spread
Client Risk score
Client survey form
Debtor Assessment
- Responsibilities - Risk Categories
Policy guideline for managing risk categories
- Provisions - Revenue recognition
Policy guideline on credit approval process & client assessment
Management of CAR as per statutory regulation/requirement
Guidelines on concentration risk/exposure norms
Approving authority as per the facility type & exposure
Framework for monitoring Credit
risk as per the statutory and
regulatory requirement
Framework for decision making and internal limits for counterparty/country
exposure
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Private & Confidential
FINANCE – SOP & PROCESS Details the function, duties and responsibility of Finance Function
(overall control and management of company’s Finances)
Duties &
Responsibilities
Liability Management
Bank Accounts
Investment & Treasury
Accounting
Expense Management
Approving Authorities &
guidelines
- Approving Authority - Levels of authority - Exceptions
- Budgetary controls - Statutory monitoring & reporting - Pricing & cost benefit analysis - Expense control
- Borrowing - Pricing
- Authorization - Monitoring - Liaising with Banks
- Investment - Treasury
- Financial Statements - Record keeping - Financial Reporting - Accounting System - Statutory Audit - Internal Audit
- Capital - Operating
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Private & Confidential
OPERATIONS – SOP & PROCESS Details the function, duties and responsibility of Operations
(work flow of operations activity in accordance with the Factoring Management system)
Client Setup
Debtor Setup
Processing of Documents
Disbursement
Payout
Receipt & Appropriation
Client Contact
Debt Management
- Collection follow up - Debtor follow up - Vendor follow up
- Facility note - Facility Setup - Amendments if any
- Debtor Setup - Debtor limit - Debtor contact
- Required documents - Document handling - Document checking - Checking procedure
- Fund availability - Limit availability - Exchange rates - Authorization
- Client -Entry - Authorization - Advise
- Correspondent
- Cheques handling - Receipt - Appropriation - Non Factored cash - Cheque returns
Dispute resolution
Dunning
Adjustments & Reassignments
NPA
Disaster recovery
Controls
Authorization Matrix
Document checklist
- Overdue/Dunning - NPA Management - Legal recourse
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Private & Confidential
IT – FACTORING MANAGEMENT SYSTEM
IT system enables, integrated management of various assets involved in the factoring business.
Why it is required? Factor processes and input massive amount of
complex data everyday.
Fast and reliable info necessary for business to identify trends.
Proper tools are always required to take informed and effective decision.
Increased productivity and optimal resource utilization.
It cannot do – Replace human judgment
Find and provide appropriate solution to the problem
Real time account management
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Private & Confidential
SYSTEM INTEGRATION Integration of Factoring Management System with other systems
(inside and Across organization)
Factoring Management
System
Bank
Regulatory systems
Other External Systems/
Organization
Accounting System
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PRE SANCTION PROCESS
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Client/Prospect
Visits
Preliminary Analysis
Indication of Terms
Field Survey
Internal Risk Rating
Credit Assessment
Approval
Verifications
- Debtor/Vendor Verification - Client plant visit - Credit history verification - Reference checks – Bank & Trade
- Adherence to risk parameters as per the policies - Product parameters
- Performance risk - Debtor/vendor track record
- Recommendation on overall performance and credit risk - Recommendation on term & condition - Recommendation on contract - Documentation requirement – Transaction & Legal
A well defined and co ordinate process facilitates informed decision and enable risk mitigation
Private & Confidential
OUR OBJECTIVE
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Factoring Africa
Emerging Business Opportunity
BLEND PREPOSITION
Build Train Transfer
Feasibility/Scoping/Business Plan
Business Setup
Train the team on ground Transfer the business setup to trained team
POST TRANSFER SUPPORT (IF REQUIRED)
THANK YOU
Blend Financial Services Ltd
4th Floor,C Wing, Pramukh Plaza, Cardinal Gracious Road, Chakala, Andheri(East), Mumbai 400099, India t +91 (22) 67770000 |f +91 (22) 67770019
E [email protected] | w www.blendfinance.com