India’s growing ATM network opens up new avenues

The people of India have access to a growing network of cash dispensing machines. Netherlands-based company Syntech, one of the main providers of ATM cash management services, has found a partner in Rabobank which is financing the company’s ambitious plans for growth.

While India’s 1.2 billion inhabitants may still be accustomed to paying for goods and services in kind and in cash, this situation is changing rapidly. In a drive to make payments more efficient and less prone to corruption, the Indian government launched an ambitious plan several years ago to provide a bank account to every household in the country. Besides helping in the fight against poverty, access to banking services for all also promotes economic development in the country’s rural areas.
To make sure the Indian people can actually access their Rupees, the country is currently expanding its bank branch network and its installed base of ATMs, with thousands of cash points being added annually. And the next step is to supply all these cash dispensing machines and branches with cash.

Delivering cash to 12,000 ATMs

The Indian ATM revolution has – quite literally – opened up new avenues for Syntech, which was founded as a family business by the name of Kusters over a century ago. The company established itself as the world’s leading supplier of systems for coin crushing and bank note disintegration, a market with limited growth opportunities. Under the name Logicash, Syntech launched a joint venture in India in 2011 for armoured cash transport and ATM cash management services. Three years later, the company employs around 1,800 people and supplies cash to nearly 12,000 cash dispensing machines, placing it in the top five of Indian companies in this market. Logicash currently is active in 90 percent of the subcontinent.

Great leap forward for people of India

The company expects to increase its staff to an impressive 7,000 and to serve a total of 27,000 cash points by 2017. Syntech CFO Geert Litjens: ‘This is, without a doubt, a great leap forward for the people of India and it is very exciting for us, as a Dutch company, to be involved in such a massive project.’ As the company continues to grow and expand, it will be training more people as armoured car drivers and guards so as to facilitate secure cash transport.

Working capital financing and guarantees

But no matter how promising a market might be, any form of growth requires capital. As Litjens explains, it is not just the cost of offices and armoured vehicles that must be covered; his company also needs working capital and guarantees for its customers. ‘We handle very large sums of cash and customers understand that we have internal procedures and insurance policies in place to cover all our bases. Still, they do require us to provide guarantees.’ While these guarantees only amount to fractions of the sums Logicash transports in cash every day, these small amounts do add up to one sizeable amount, for which Logicash is required to provide security to its customers.
Syntech sat down with its local Rabobank in the town of Venlo, where it has been a customer for some years, to find a solution for financing the six million euros it needed to back its rapidly growing Indian business. Rabobank Mumbai, with a Dutch speaking international desk manager, is the first point of contact for the Indian business.

Guarantee from the Dutch Good Growth Fund

Rabobank Mumbai currently provides Logicash with loans and guarantees, based guarantees from Syntech’s holding company, Rabobank, the Dutch Good Growth Fund and the local Rabobank in Venlo. The Dutch Good Growth Fund was launched by the Netherlands Ministry of Foreign Affairs for domestic companies with business interests in developing countries and which also contribute directly to economic growth and positive social change. The fund has set a number of corporate sustainability criteria which its members must satisfy. Litjens: ‘We unequivocally endorse the fund’s efforts. Corporate social responsibility is still relatively new to India, and we are putting in place a system similar to the Dutch one, with an Indian flavour. That is a huge improvement for everyone involved.’

‘Corporate social responsibility is still relatively new to India, and we are putting in place a system similar to the Dutch one, with an Indian flavour.’

Geert Litjens, CFO Syntech

Exploiting market opportunities

When commenting on the Dutch Good Growth Fund, Litjens notes: ‘Since it is an expensive and complex arrangement, it certainly wouldn’t be the preferred choice of most SMEs. There is also the fact that the business, rather than the Dutch State, bears ultimate liability under the arrangement.’ ‘As with other facilities that are intended as stopgap measures, such as the guarantee credit and factoring, the Dutch Good Growth Fund comes with a price’, says André Bemer of Rabobank International Services. ‘On the upside, the fund enables businesses to strengthen their position by exploiting market opportunities. And Syntech’s Indian business venture is the perfect example of that.’

Room for growth

Although Syntech and Rabobank really had to put their heads together to work out a financing scheme, Litjens could not have been more pleased with the outcome: ‘The bank really went above and beyond to help us find the solutions we needed. India has strict rules when it comes to the use of foreign capital to finance domestic businesses, which made this a very complex project. What mattered in the end, though, was that Rabobank, the Dutch Good Growth Fund and our company were all comfortable with the arrangement. And the best part of all is that it has given us room for growth again.’