tata home finance

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TATA HOMEFINANCE LTD. (A

ComprehensiveCase Study onMIS)

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Tata Home Finance Ltd. (THF) is located at Shivajinagar, Pune-411 004, India . THF was

established in the year 1999 to serve the home market need of funds for buying a new house or

to improve the existing house. In addition to head office in Pune, THF has branches at Mumbai,

New Delhi, Bangalore, Ahmedabad, Hyderabad and Chennai. THF's well-trained personnel

assist the customer in offering a Total Home Solution that is right from funding to helping the

customer to build a dream home. The personnel are trained to answer all kinds of questions,

doubts across the table.

The total funds disbursed since inception is Rs.500 million against the total number of over

1000 accounts. Total Employee strength is a little over hundred today and is planned to grow to

200 in next two or three years.

THF right now is in home finance products business but has plans to diversify into other

products and services in Insurance, Deposits, Credit Cards, Mutual Funds, Customer Durables,

and Property Advisory Services. It is estimated the total housing shortage in urban Indian is to

the tune of 6.6 millions. The housing finance market is Rs. 250 million and is expected to grow

at 10 to 12% per annum. Because of Government initiatives on a number of fronts such asmodification of rent control act, increase in the interest exemption to Rs. 150000, 40% tax

depreciation on housing investments by corporate and many more; the market for housing is

expected grow at the rate of 30% annually.

THF therefore feels strongly that there is perceptible shift towards fonnal funding sources and

THF could be an additional player in the Home Finance Market. The competitors of THF are

HDFC, ICICI, LIC housing, and all banks. These organizations are already established and they

enjoy brand image and loyalty from their existing customers. The present Home Finance Market

is a buyer's market, therefore the competition is well placed in this market and THF has a

challenge to become successful in a short duration. The challenge is accepted on the strategy of

leveraging on 'TATA' strong brand equity reflecting Trust, Stability, and Integrity, the values

home owner respects most.

The Mission Statement of THF is

'To be the first choice in fulfilling the needs for a home, by providing financial and other

value added services through personalized and world class service at competitive rates '.

1. BUSINESS INFRASTRUCTURE

The business infrastructure is small today but is planned to grow rapidly in next one year. TheInfrastructure Business Model is given in Fig. 1.1.

The infrastructure scope is so determined that customer can get all services at single window

for building a dream home. The structure is designed to reach anybody anywhere also caters to

all kinds of customers, namely Corporate, Group Housing, Family and Individuals, who wish to

go for Housing complex, Apartments, Flats, Plots and bungalows.

THF has its own infrastructure of alliances and partners working in building and construction

industry to meet multi dimensional needs of the customers, spreads across the society.


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2. BUSINESS

THF, besides offering initial services to build confidence in the customer, has several innovative

products carefully built for all types and kinds of customers. The products currently offered and

their business in percentage is given in Table 1.1.

The business is obtained through several channels. Each branch deals with Walk-in

customers and helps them to run through a process of request for loan, starting from

Assessment, Requirement, Application Submitting, Sizing and Costing, Technical and Legal

guidance, Facilitation, Processing and Disbursement.

Next important business sourcing is through Builders and Real Estate Developers throughProject Tie-ups. The personal approach to customers is through DSAs.

DSA visits prospects and solicits business. The corporate business is brought through Sales

Manager who interacts with CEO and MD of the organization.

The breakup of business by channels is shown in the Table below:

CHANNELS PERCENTAGE OF BUSINESS

Branch 80

Builders -

DSAs 5

Sales Mangers 15

Total 100


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3. THF ENTERPRISE MODEL

THF organization structure is flat, built over five levels .The structuring principles are single

window service concept, Dual approval, segregation of competencies, select jobs multi-skilled.

4.CURRENT SYSTEMS AND TECHNOLOGY.

The Current Uses

Business software Loan Management Solution (LMS) for Front End Loan Management

operation

*0 Accounting Software: Tally - for Financial Accounting

*1 An Integrated Software for Loan Management and Accounting with interface to back end

Financial Accounting Software

THF has realized the need of a better system to overcome the problems faced due to current

software application systems. Besides non availability of on-line real time information for

operations and decision making, following difficulties are encountered in the information

management:

*2 Open separate set of books for each branch.

*3 Make accounting entries separately for each branch.

Consolidate manually the accounts for each branch and then at head office.

To overcome these problems the information management strategy is evolved. It hascomponents:

*4 ERP Systems.

*5 For centralized accounting for branches and head office.

*6 Loan Management System.

*7 Front End Customer Interaction System.

*8 For handling queries, assisting customers in proposal building, proposal

Application Processing and decision making.

As a step towards implementation of this strategy, THF evaluated number ofERP packages

most suited for Finance/management industry and have signed for ORACLE-Financials.

It is also working with a local software company to build integrated loan management system

for front end interaction and back end integration with provision to go on web a year later.


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5. MIS REPORTS CURRENTLY IN USE

Since THF has started operations very recently the management feels that MIS needs

improvement for effective business operations achieve customer satisfaction.

THF generates 11 reports through present MIS. The 11 reports can be classified in the

following category.

6. MOVING THF TO INFORMATION DRIVEN ORGANISATION

The management of THF has taken a bold step to modernize the business processes in line

with the mission statement and with the objective of cutting cost of business operations and

maximizing the gains to shareholders. THF approached the problem systematically using Life

Cycle Model of system development and using the increment model of development.

6.1 Business Analysis and Strategy

THF faces competition from established organization such as HDFC, ICICI, LIC Housing and

some leading banks. Since, all players are attacking the same market segments; the

prospective customer can be won over only through creation of broad image of a trusted fund

provider with the difference. The Strategy is to attract the prospects to THF by providing broad

band of services at competitive rates.


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THF is now riding the growth phase in Sigmoid or S curve after just coming out from the

phase of Introduction. It would therefore need business strategies that will accelerate the pace of

growth in next year or two. To build business strategy for rapid growth THF has focused on

customer and customer services that would bring rapid growth and attain a position of strength

in the Home finance market.

The strategy is built on the following four factors.

*0 Products to meet most sought requirements of customer

*1 Cost benefit ratio attractive to the customer.

*2 Service excellence through effective response.

Total solution assistance to build a dream home.

THF has 11 different home finance products meeting the needs of individuals, groups and

corporate for new home, home improvements, plots and bungalow. The products are so

designed that they can be customized to specific requirements of the customer. The product

design is such that if information is complete and correct, the funds can be sanctioned and

disbursed in less than 48 hours.

THF product and service strategy is such, that the benefits the customer gets are significant

compared to cost of loan servicing. The strategy is backed by wide range of techno-

commercial information support for quick and better decision making.

THF has taken care for providing excellent service across all stages of home finance servicing.

It has a information rich web site giving information on products, facilities and answers to

frequently asked questions. It has a four tier organization infrastructure where customer can

find a service provider of his choice. The service and interaction is possible through web site,direct sales agents (DSA), branch offices, regional offices, builder partners, franchisees and

will snit network or reputed manufactures, traders, specialists and consultants in home making

industry. This kind of support base creates confidence and comfort in the mind of customer to

come under the umbrella of THF All this support provides reach, knovrteoge, funds and

assistance at every stage of home building.

The fourth strategy is to provide total solution to the customer, through offer of funds at the

least cost, technical and legal assistance to complete the home fast, beyond home construction

and offer services through THF partners at attractive discounts to make a beautiful home. THFhas now competed strategy' build up and they are operative in most of the regions of the

country.


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6.2 Effectiveness of Business Strategies

All the four strategies and critical resource management that is funds, empowered, people,

products, Business partners, systems and solutions. While THF has good resource

management skills, it is necessary to manage them cost effectively to achieve dual objective of

performance excellence and highest customer satisfaction. This is possible through continuousmonitoring and mending of strategies and evaluating the business performance against these

strategies~ THF recognizes that this can be achieved through information support to customer

as well as to THF personnel at any level, when needed anywhere.

THF therefore has gone into detail requirement study of information needs required to manage

the following

*3 Customer servicing

*4 Customer performance monitoring

*5 THF performance evaluation

*6 Cost control; Finance and operations

*7 Credit appraisal

*8 Risk assessment

*9 Adherence to service standards, evaluation and monitoring

*10 Proposal processing: entry to disbursement to collection and recovery

THF has identified following business processes as mission critical applications:

*11 Loan application processing system

*12 Credit risk appraisal system

*13 Customer relations management system

*14 Funds management system

All other functional systems such as Accounting, HR, Purchase etc. are important but do not

have direct impact on the business of THE All such systems will be either integrated or

interfaced with mainly the business system mentioned above through suitable system

architecture.

6.3 Information Management Strategy (IMS) Objective

*15 Provide access to information from anywhere any time.

*16 Customer access to the proposal for status monitoring and tracking.

Near Paperless transaction processing to cut and control cost of customer servicingthrough reduction in processing time, overheads defaulters and bad debts.

*17 Do additional business to the tune of 30% within same manpower through quick

decisions and better control on cost and performance, resource.

*18 Create a business management database/data warehouse that is useful to

customer, DSAs, Sales Managers and Marketing Managers.

*19 Besides real time on line systems develop data mining application for strategic

management of business.


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Scope of New System

The scope covers broad band of systems and applications with emphasis on the following.

*20 Customer Interaction

*21 Customer Relations

*22 Resource Management

*23 Marketing and Sales

*24 Product Design and evaluation

*25 Credit appraisal and Risk Assessment

*26 Proposal Processing

*27 Building Support and dedicated database for designing innovative products

*28 Accounting and Finance Management

*29 Customer Servicing

*30 Strategic Management

*31 E-training and Learning

6.4 Information System Architecture

THF Business Function Systems Architecture

The Business System Architecture required for business strategy implementation is shown in

the figure. It has main functions namely:

*0 Customer Relations MGT

*1 Disbursement Management

*2 Loan Management System

*3 Marketing and Sales

*4 Resource Management

*5 Training


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Relationship Model

*6 The business model is executed through relations management between major

partners in home financing business. THF considers home financing as a 'people to

people' business where trust, integrity and service are held in high esteem. Relationship

Model is shown in Fig. 1.6.

*7 The core business functions model is given in Fig. 1.7. This business functions isfundamental of T!IF business operation.


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6.5 Technology Platform for IMS Strategy

Keeping in view the dynamic nature of business and need of satisfying the requirement of

information at anytime and anywhere, THF has chosen following technology platform.

*8 Operating system platform: NT 4.0 Unix

*9 Network: Internet/IntemalJExtranet/LAN

*10 Application Technology: Client/Server, Web Enabled applications.

*11 Application Solution: Oracle 8 i, Oracle Financials, Oracle Applications-II i.

*12 Front End: VB, lIS 4.0

*13 Back End: Database server, Application server, Microsoft transaction server, web

server

*14 Security: Firewall servers and Proxy server '.

6.6 Application System Architectur9

Four-pronged business strategy is supported by state of the art technology based information

Management solution. the solution is designed for THF enterprise as a business solution

supporting information needs for Operations management, Business Management and Strategic

Management of Resource and Product.

The solution is designed for supporting the following.

*15 Continuous Innovative Product Management.

*16 Fastest Service delivery.

The solution is expected to build THF towards:

*0First choice of customer for all home finance requirements and offer value added

services.

*1World class services provider at competitive rates.

The solution is made of 17 different applications systems, comprising ERP system, Legacy

systems; Groupware Applications, CRM and data warehousing systems.

Each application is designed with following characteristic.

*2No data redundancy.

*3Business policy, rules and guidelines embedded in the application.

*4Layered approval systems with technology application of work group and work flow.

*5Access to information processing to meet just in time need of decision making.

*6Capable of information processing analysis and decision making as a support for all

personnel across the organization.


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Figure 1.9 shows application systems architecture


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10. Management Information System (MIS)

With full implementation of this application system architecture, present MIS will be undergoing a

sea change. Besides normal status reporting it will provide following additional reports for

managers operating at various levels.

1. Project Status Report

2. Rejected Loan Applications

3. Turn Around Time Report

4. Demographic Details Report

5. Refinance Claim Report

6. Rural Housing Loans Disbursed

7. Repayment Reports

New MIS will strengthen decision making and is expected to improve management of the follow-

ing.

*0Resource

*1Risk

*2 RecoveryThis will also enable effective control on the following

*3Cost

*4Credit

*5 Customer choice

All this will result into a truly world class service company offering a basket of products through

single window creating a THF brand loyalty confirming trust, stability and integrity in Tata Home

Finance.


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tata home finance

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