CA as a Business Advisor

CA Anil Khicha

CA as a Business Advisor

• Clients’ Expectations

• Different Roles of a CA

• Case Studies

• Accounting To Accountability• Accounting To Accountability

• Service Level & Client Effect

Client’s Expectations &

Role of a CA• Conventional Functions

– Accounting, Auditing, Certification, Taxation

• As a Financial Advisor• Financial Planning, Capital Structure, Working Capital

Management, Project Report, Raising Funds, Management, Project Report, Raising Funds,

Financial Re-structuring

• As a Business Advisor

– Business Plan, Organisation Development,

Growth, Expansion, Diversification, Business

Restructuring

Business failure• Poor marketing

• Cash flow problems

• Poor business planning

• Lack of finance

• Failure to embrace new technologies and new • Failure to embrace new technologies and new

developments

• Poor choice of location

• Poor management

• Poor human resource relations

• Lack of clear objectives

Business Advisor’s Merits

• Entrepreneurship

• Professionalism

• Fairness

• Ethics• Ethics

• Independence

Case study I

• Agriculturists family

• Engaged in farming of vegetables

• Well established for 3-4 generations.

• Started dairy, doing very well.• Started dairy, doing very well.

• Were concerned about chemical pesticides & its

negative impact on health

• Planned to start a bio pesticides plant

• Had about 20 crores of capital

Case study I

• Built world class office, plant & infra

• Introduced initially 5 products

• Marketing campaign started in 5 states

• Products got accepted by the customers• Products got accepted by the customers

• Company got into liquidity crisis

• Why……..

• Approached you to arrange an equity investment

of 5 crores

• …your input/valuation

Case Study II

• X Ltd operating in retail stores of garments & accessories in Chennai.

• Having 5 stores ranging from 10 – 20 k Sq fts each, totaling 75 k Sq fts of space.

• Well known in Chennai for last 5 years.

• The co. went for an expansion to expand with 5 • The co. went for an expansion to expand with 5 stores of 30 – 50 k sq fts totaling 2 lac Sq fts in Coimbatore, Hyderabad, Pondy & Gurgaon, with a Capital Outlay of Rs 100 Crores.

• The Debt Equity is 3.

• The client got into liquidity crisis within 6 months?

Points to consider

• Whether Local Expansion was explored?

• Whether the expansion was a part of Long Term

Business Plan / or an instinctive decision?

• Whether the Debt Equity Ratio in line with the • Whether the Debt Equity Ratio in line with the

Industry.?

• What was the basis of projected results..

• whether any market survey was conducted..?

• What was the basis of selection of these

locations, where co was not a known name..?

Points to consider

• Whether the size of Stores was based on market demand in the location.?

• Whether the management band width available to manage far off locations.?

• What was the arrangements if the projections were not met..?

• Whether the expansion could have been taken up in parts..?

CASE STUDY III• Y Ltd wants to put up a Steel Plant of 30000

MTs Capacity at Utkottai

• They already have the required land there

• The promoters are well experienced

• Were running a smaller plant of 15000 MTs, • Were running a smaller plant of 15000 MTs,

closed to put up the bigger plant.

• Capital to fund Capex of Rs 30 crore is available

• Need only Working Capital Finance of Rs 20 C.

• Have a good Technical, Managerial & Financial

Team

• Ur inputs r sought

Points to consider

• Why at Uthkottai..

• Whats the management band width

• Whats comfortable Debt Equity in the Industry Industry

• Whats the long term plan..

• Why this size of the plant..

• Why not a bigger plant..

CASE STUDY IV• X is an international trainer

• Has been in Training for more than 2 decades with different corporate.

• His co. charges Rs 50000/- a day to its clients for his training programs.

• He trains trainers too

• His present package is Rs 50 lac pa

• Wants to start a venture of his own

• Expects a revenue of Rs 2, 5 & 10 crores in first 3 years

• He does not have any capital & asks to arrange Rs 100 Lacs of initial capital.

Points to consider

• Whats the Business Plan

– Products / Target audience / Pricing /

Marketing / Competitors

• The proposed Financial Structure

• The proposed profit sharing ratio

• Prospective investors

Case Study V

• XY Ltd is operating in steel & power

• Have ambitious growth plans

• Debt Equity is above 2

• Plans to raising funds• Plans to raising funds

• Seek your advice

Points to consider

• Further Borrowing desirable?

• Alternative sources?

• Strategy?

Case Study VI

• A Ltd is a developer.

• Having about net worth of 100 crores & turnover of about Rs 1000 crores

• Borrowings 100 crores• Borrowings 100 crores

• Going for a 80 IA project

• Expected revenue Rs 300 crores & profit Rs 50 crores

• Mat 15%

• Seek Advice

Case Study VII

• Z Ltd is an integrated steel plants

• Net worth of the company 50 crores

• Debt TL 75 crores CC 75 crores

• Drawing Power 25 Crores• Drawing Power 25 Crores

• Liquidity Crisis

• Income not sufficient to pay interest

• Bank Has sufficient Primary & Collateral

• Client seeks more funds from bank.?

Accounting to Accountability

CLIENT EFFECT

Client’s expectation vis a vis

Service provided• Client Survival: Conventional Services

• Client Satisfaction: As a Finance Advisor

• Client Delight: As a Business Advisor

Accounting ……to…Accountability

Client Survival to Client Delight

Thank You

• Q & A