Restructuring – Perceptions & Realities Neelakantan, Senior Consultant

Definition Ownership, control & Financial Structure Business Portfolio Operating Environment Any substantial change in…

Negative Vocabulary Financial Distress – Need to change the way the cash flows / finances are managed Poor Sales Performance – Need to change market strategy High Employee Cost – Need to change the organizational structure System breakdown – Need to change the processes & systems

Why, How & When What is the fundamental problem to be solved – derive from a review process Why Create & Preserve Value – not diminish How Pre-emptive not under duress? When

Planning & Execution Analyze the financials Evaluate the reasons for performance / non – performance Conduct a root – cause analysis Evolve an Action Plan Give it a project management framework Monitoring Progress – Don’t be ashamed to change decisions Revisit your Financials

Inference Post- Mortem Prevention

A CASE STUDY

Case Study – Current Situation Revenue30,880,27337,230,66245,224,861 Cost of Sales18,366,81322,032,12229,559,284 Gross Margin12,513,46015,198,54015,665,577 Expenses10,842,55712,151,63211,915,251 Net Profit1,670,9033,046,9083,750,326 Revenue per month 3,860,034 3,102,555 3,768,738 Gross Margin (%)40.52%40.82%34.64% Expenses per month 903,546 1,012, ,938 Net Profit (%)5.41%8.18%8.29% Trade receivables12,673,4489,007,4859,976,192 Inventory5,648,4516,797,2096,324,981 Cashflow problems Unable to grow Excessive Micro- Management at the top Diminishing Returns on Equity Enviable Distributorship arrangements

Fix the Business Market – Increased Trading Focus – Expand Geographical Base – Review Pricing Policies People – Sales Team Structure; review sales incentive structure – Competence for trading Process – Processes to address cross border trade

Fix the Finance Cash Flow Planning – Proactive budgeting and monitoring – Improve Receivables Management Consider Leverage – Need to walk a tight rope between interest costs and better utilization of shareholders’ funds Use the trading business line to improve cash flows

Strategic Partnerships Trading Focus Geography based JVs Bring fresh ideas to management team Don’t be stuck with the current valuation Approach with future value-addition in mind