by V.S. Parthasarathy, Group CIO, EVP – Group M&A, Finance and Accounts, Member of the Group Executive Board, Mahindra & Mahindra
M&M is a federation of companies with a decentralised approach to treasury management. There are some companies that Group Finance is mandated to support from a treasury perspective. However, typically each subsidiary company has its own CFO who is responsible for day-to-day management of cash and risk.
Despite our decentralised organisation and the diversity across more than 100 group companies, we are proactively developing a culture of ’One Mahindra’ with treasury acting as the centrepoint. Our aim is to achieve synergies across the group, leverage our scale and reach, and standardise the approach to treasury across the group. One of the ways in which we are achieving this is through a structure that is essentially an in-house bank, enabling subsidiaries to borrow from, and lend to each other. This is an attractive proposition for group companies, as they can achieve a yield on surplus cash of around 100 basis points higher than on the external market, while borrowers also achieve a financing rate at around 100 bps lower than external financing rates. Corporate treasury acts as the facilitator of these arrangements, identifying and executing on opportunities for intercompany borrowing and lending. Cash remains within the group, there is a balance sheet advantage, risk is eliminated, and there are no guarantees or covenants required for external lenders.
Another way in which corporate treasury adds value to the M&M group is to leverage the scale and reach of M&M to ensure that we source the most attractive commercial conditions and gain economies of scale. During 2012, we refinanced two bond issuances totalling INR 12 bn on behalf of two group companies. As well as issuing these bonds at a far lower rate than group companies would be able to achieve independently, the need for financial covenants is reduced. Therefore, by negotiating financing centrally, we are able to achieve a positive financial result both for individual group companies and for the group as a whole.