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8/8/2019 SFM Case 1 Group 3
http://slidepdf.com/reader/full/sfm-case-1-group-3 1/7
Strategic Financial ManagementStrategic Financial Management
(MG782)(MG782)Case 1: Pristine Consumer Case 1: Pristine Consumer
Products Ltd.Products Ltd.
GROUP NO. 3
AVDHOOT BANE (09927813)ANIRVAAN DUTTA GUPTA (09927849)
SUBODH JOSHI (09927903) VISHWAS GUPTA (09927906)
8/8/2019 SFM Case 1 Group 3
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Q1) Analyze the strengths and weakness of the company andreport key financial parameters you think are important.
Strengths
Weaknesses
E stablished player since last 25 yearsGood distribution reach across the countryEx cellent relationship with distributorsDecent credit terms from suppliers due to their dependency on PristineSignificant value addition at suppliers end
Some additional capacity unlocked due to replacement of eqipment
Higher increase in transportation costs vis-à-vis increase in salesLiberal credit terms [official credit period: 45 days, realised credit period
60-65 days]Slow cash cycle due to cheque payment systemUnscientific inventory stocking method resulting in overstocking &
shortagesHigh WIPHigh level of finished stocks due to long lead time of transportation to
distributors
Internal transportation capacity constraints
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Q1) Analyze the strengths and weakness of the company andreport key financial parameters you think are important.
Oppo rtunity
Threats
Growing market in semi-urban & rural areaPossibility of pick-up in e x port in 2010Opportunity to locate production capacity in ta x havens in the country
Adverse global scenario in 2009 affecting e x isting marketsCompetition by multinational company offering similar products in IndiaForay of other local competitorsLess liberal credit terms from suppliers in future due to increased
number of players in kitchenware industry
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Q2) What recommendations would you provide in light of thecurrent financial and business position of the company?
R ec omm endati o ns f o r I mp r ov ed Financial P o siti o nDiscount on timely payment by distributorsUse of factoring serviceUse of online money transfer for quicker cash collectionAsking for discount in return of reduction in credit period asked from
suppliers.
R ec omm endati o ns f o r I mp r ov ed Business P o siti o n
Suppliers do significant value addition. Reduce credit period asked from
suppliers to avoid loosing them to local rivals mushrooming in the market.
Distribution is the constraint to local players & newly entered MNC.
Incentivize distributors by offering discounts for timely payment.
Locate new manufacturing facility in µta x heavens¶ located in the eastern
India to serve low demand areas.
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8/8/2019 SFM Case 1 Group 3
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Q4) What are the steps that may have to be taken prior to thee x pansion of the company?
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Q5) What would be your suggested financing plan for thise x pansion?
Company needs to maintain its current debt-equity ratio of approx
. 1,because-High e x pected inflation -> High interest rate -> Low PAT -> Lower
shareholders¶ wealthHigher debt-equity ratio -> Negative outlook by marketAs cash & bank balances (9.3 crore) & investments (7.5 crore) are
small. If used for capital investment, reduces acid-test ratio.
C apitalRequirement
(40 crore)
Fresh Equity(20 crore)
Loans(20 crore)