restructuring – perceptions & realities neelakantan, senior consultant
TRANSCRIPT
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Restructuring – Perceptions & Realities
Neelakantan, Senior Consultant
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Definition• Ownership, control &
Financial Structure• Business Portfolio• Operating EnvironmentAny
substantial change in…
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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
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Why, How & When• What is the fundamental problem to
be solved – derive from a review processWhy
• Create & Preserve Value – not diminishHow
• Pre-emptive not under duress?
When
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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
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Inference
Post-Mortem Prevention
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A CASE STUDY
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Case Study – Current Situation 2011 2010 2009
Revenue 30,880,273 37,230,662 45,224,861
Cost of Sales 18,366,813 22,032,122 29,559,284
Gross Margin 12,513,460 15,198,540 15,665,577
Expenses 10,842,557 12,151,632 11,915,251
Net Profit 1,670,903 3,046,908 3,750,326
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 1,012,636 992,938
Net Profit (%) 5.41% 8.18% 8.29%
Trade receivables 12,673,448 9,007,485 9,976,192
Inventory 5,648,451 6,797,209 6,324,981
• Cashflow problems• Unable to grow• Excessive Micro-
Management at the top• Diminishing Returns on
Equity• Enviable Distributorship
arrangements
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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
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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
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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
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THANK YOU