Airbus One Roof success in India
BIPIN KUMAR TIBREWAL CFO of the Year – India
When Bipin Kumar Tibrewal met Airbus Group CFO Harald Wilhelm in Toulouse head office sometime in 2014 to discuss his consolidation plan for Airbus in India, he prepared hard to convince his boss about the benefits of having a single Airbus entity in the country. To his shock and surprise, the discussion was over in few minutes with Wilhelm giving him his marching orders to implement his plan.
Tibrewal was among the first employees of Airbus in India when the European company started its greenfield project in the country. He joined in April 2007 and was appointed group CFO for Airbus India in mid-2014 and head of the finance team. By then, he already knew that there were a lot of areas that required immediate improvements to streamline the Airbus India operations.
“We have different systems, processes and support systems. In terms of finance, it was a totally disintegrated organization at that point in time,” he says. This came as Airbus India, prior to March 2015, operated with five different entities: EADS India, Eurocopter India, Cassidian (which used to be EADS DS India), Airbus Engineering and Airbus Training.
These represented the different business activities of the group in India, including IT-enabled engineering services; training, consultancy and various incidental-related services; flight maintenance training and operations support; engineering design; marketing support; and training services to pilots and mechanics.
It was a herculean task, but Tibrewal was determined to initiate the consolidation and streamline the business lines to form one single legal entity, called Airbus Group India Private Limited. There were all sorts of challenges, not to mention changing the people’s mindset at the beginning.
“While I felt consolidation was a good idea, nobody was sure that I would be able to implement it,” Tibrewal says. “But I was backed by a good team. You may have a good proposal, but if you are not supported by a good team, the chances of failure are very high.
Tibrewal was given a timetable of one-and-a-half years, but he wanted the consolidation exercise to be finished in five months. “Everyone was saying it can’t be done,” he recalls. “The auditors, the lawyers, the consultants were telling me I was mad and I can’t do it in five months. But I stood firm and told everyone this was my target.”
So Tibrewal’s finance, tax and treasury team of six literally worked day and night to finish the tasks, which involved, among others, getting approval from the High Court, securing clearances from various government departments and reviewing the tax arrangements – basically getting all approvals from five different jurisdictions for five different entities.
“Everything was well-planned by my team and we were aware of the different legal hurdles that would come along the way,” he points out. We devoted one month purely on the due diligence process, so that when a query came up, we were ready to address it or submit the documents that may be required.”
During the legal merger proceedings, Tibrewal identified the various projects that the team had to accomplish immediately and how to approach them step-by-step to ensure success. And one of the first things that he identified was to achieve efficiency in the treasury.
In doing so, Airbus India engaged BNP Paribas to structure comprehensive transaction banking solutions, addressing the business models of the different Airbus strategic business units (SBUs), for which the bank created an integrated One Roof solution for the company. Among other things, this concept helps reduce cost by standardization.
“To be able to act as an advisor to our clients has been one of our key strengths,” says Rupa Balsekar, head of transaction banking in India at BNP Paribas. In view of the complex consolidation project taken up by Airbus India, BNP Paribas structured a customized offering to Airbus India that would add value and reduce the complexities in the cash management processes for the new consolidated Airbus India entity.
Having five different legal entities did not only mean having different ERPs, but duplication of functions as well with multiple support teams handling IT and finance. There were also operational challenges with the sub-optimal use of real estate space as Airbus had to maintain various offices in the same location, such as in Bangalore and New Delhi.
The company also lacked what Tibrewal called one-voice, so individually, each entity was too small to have strong leverage and market presence, not to mention lacking a strong balance sheet.
The biggest treasury benefit starts with cash pooling. With five legal entities in India, any inter-company transfer between subsidiaries or between a subsidiary and the holding company is considered a dividend and, therefore, has tax implications.
This meant that even though there were entities that have cash surplus, while others have cash deficit, the company could not leverage on the cash surplus. Cash pooling makes moving funds within the group fairly easy and cash pooling solutions enhance the capacity of Airbus treasury to reduce the interest cost.
BNP Paribas also helped Tibrewal to move Airbus India into SwiftNet, making it the first Airbus company outside Europe to achieve that, and had it running within three months.Tibrewal’s consolidation project was so successful that what started as an India-centric project for Airbus has now become a global eye-catching model.