SFM Case 1 Group 3

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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)



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



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



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.



Q4) What are the steps that may have to be taken prior to thee x pansion of the company?



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)

SFM Case 1 Group 3

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