The Client
A fast-growing infrastructure consultancy with significant reliance on bank guarantees and working capital facilities.
The Challenge
Most promoters focus on increasing banking limits. Few realise the equally significant impact that optimising banking costs and pricing structures can have on profitability.
At the time of engagement, the client's blended cost of banking facilities was approximately 3.2%, creating a significant recurring cost as the business continued to expand its banking exposure.
The TAP Approach
Pricing Optimisation
We negotiated with both existing and new lenders to improve the pricing structures across the client's banking facilities.
Banking Cost Reduction
We focused on reducing BG commission rates while also lowering processing and renewal costs.
Facility Optimisation
The facility mix was reviewed and optimised to better align the company's banking requirements with its growth plans.
Lender Competition
By engaging multiple lenders and increasing competition, TAP created greater leverage to negotiate improved commercial terms.
Capital Execution
These negotiations were executed simultaneously with the enhancement of banking limits, ensuring the business could expand its banking exposure without proportionately increasing its cost of capital.
The Outcome
The company's banking exposure increased from ₹32 Cr to ₹140 Cr, while its blended banking cost reduced from 3.2% to 1.9%.
This represented a 1.3% reduction in blended cost and more than 40% savings in overall banking and guarantee-related costs, achieved while simultaneously expanding the company's available banking facilities by more than four times.
Key Takeaway
The cheapest capital is not always the most visible saving. Strategic optimisation of banking structures can create recurring profitability improvements year after year.