Patel Housing finance Corporation

Price per Unit (piece):$12.00

IN Rs.666.98

Introduction

Patel Housing finance Corporation (PHFC), the first private sector housing finance company of India is the brainchild

of D.H. Patel who was doyen of financial world. The company began operations on July 18, 1978. In its earlier years,

Patel was able to mobilize funds and get support from diverse sources namely IEIEI, of which Patel was Chairman at

that time, IFC, his Royal Highness, Rashid Oberoi and most importantly the Indian Government. D.H. Patel was a

man ahead of his times; though he was a product of the system, yet he had a different philosophy. He was a man

who constantly thought out of the box. A man who never asked the question: Why? But rather, why not? For many

years he nurtured the idea of enabling households in India to access housing earlier in their life cycle rather than at

the end when lumpsum payments were received. The first five years of this company were spent in “Learning by

Doing”, a philosophy which had been imbibed by the organization. From its inception, PHCF had been a pioneer in

the activities they had undertaken. For example, they began to accept mortgages on deposit of title basis rather than

a registered “English Mortgage”, thus saving considerable stamp duty for the borrower. They also introduced

resourceraising products like “Certificate of Deposit”. Their efforts got a boost when the government decided to give

income tax exemptions under Section 80L to their deposit.

During the initial years, PHFC was supported by large loans from USAID which stands

testimony to the fact that even in their infancy, their credibility as an institution was accepted internationally, which led

to a strong growth in their initial years. By the end of their fifth year, they had a disbursement of Rs.109 crores and

the profit after tax was Rs.4.33 crores. The first five years formed the solid foundation for the epic journey of this

institution. The institution was being exposed to the international management practices courtesy USAID. PHFC was

in the process of establishing itself as a company, which was flexible in its interaction with customers and at the

same time responsive to their stated and unstated needs. By the end of the last century, PHFC had created a

network of institutions providing services in banking, real estate, mutual funds, IT enabled services, stock market,

credit rating and in Insurance (both life and general). Till mid -1990s PHFC was the biggest name in the Housing

Finance industry having no real competition. The second largest

operator was in the public sector domain and was no real competition to them. PHFC had

demonstrated that simple products, well executed can catch the imagination of the people. PHFC, from its very first

day of operations, had built a principle-centered organization, an organization that has been built on the basis of

fairness, kindness, efficiency and effectiveness. It gradually built trust between people, strengthening

communications and a participative management style. Trust was the very cement for meaningful relationships and

an open and creative management style.

Services in PHFC is not the icing on the cake – it is the ingredient that the cake!! This

emphasis on service epitomized the culture at the company, but somehow the sheer size of the organization and its

early domination had made the staff and the management complacent. With liberalization, nationalized banks were

forced by market conditions to enter the retail loan sector took pot shots at the leader who because of its size was

too big to miss and it could not retaliate. Salt was rubbed into wounds when IEIEI, the promoter of PHFC, entered the

housing finance industry, and in a short of five years, reached the top position.

Product Profile

Since liberalization commenced in 1991, PHFC had substantially with an average rate of 30% per annum in terms of

housing loans disbursed. During the earlier years of its operations, PHFC had a monopoly in the housing finance

market in India, providing plain vanilla products to people who opted for housing finance. The main thrust was on

processing applications, which arrived at its doorsteps. The proliberalisation policies of the government saw a large

number of players entering the market along with an increased demand for home loans. Thus, to meet increased

demand and to compete with the increased supply, PHFC took up the challenge through product innovation as well

as improved marketing focus. Product innovation, carried out at its New Delhi office, involved a changeover in terms

of providing flexibility in repayment of loans. Till 1997, PHFC was a single product company but later on adopting a

proactive strategy, the company began offering products, which suited the customer-specific requirements. Flexible

repayment options like step-up repayment facility (surf), flexible loan installment plan (flip), balloon payment, and

structured repayment plan were introduced. These flexible repayment options gave the customers the freedom to

structure the repayment schedule to suit them. Till 1999, fixed rate loans were provided on annual rest basis. Later,

the flexible interest rate regime began along with monthly rest calculations only in November 2001. The company

offered specially designed life insurance cover at attractive price from PHFC standards life, home / accident

insurance products from PHFC Chabra General Insurance Company Ltd., automatic repayment of PHFC bank

savings account with the low average quarterly balance, free PHFC bank international credit card and lower interest

for other loans availed from PHFC bank.

Earlier, salaried class employees formed a major segment of the customer because the income proof was easily

documented. In the case of self-employed persons, although cash rich, the lack of supporting documents for income

proved to be a hindrance. Later, to compete with the market forces, the Gwalior office of the company devised

strategies to exploit the self-employed group of customers by offering collateralized loans. Due to lack of documented

income, loan was provided on the basis of various liquid securities such as NSC and fixed deposits which were kept

as mortgage with the company. This segment now contributed up to 6-7% of the customers in value terms at the

Indore branch (the national average being 5% only). The interest rates on loans were subjected to negotiations from

customer to customer depending upon the loan amount and profile of the customers. The deal was negotiated

considering the risk profile, creditworthiness of the customer, his past track record with respect to loan repayment as

well as his present financial and social status. As part of its policy, the company charged 2% of the balance principle

amount as prepayment charges in a fixed interest rate loans. However, this was not applicable for flexible interest

rate loans. The company also provided refinance facility to housing loan customers of other institutions as well as

rental discounting for reputed and creditworthy builders and contractors.

Marketing

The marketing efforts of PHFC centered around its customers. Its major strength was its vast database and

experienced personnel. In addition to providing housing finance, quality services were rendered to customers through

additional services such as loan counseling, property identification, technical and legal advice, and other property

related solutions. In order to cater to the needs of the customers, PHFC had a wide network of 173 offices across the

country. It conducted outreach programs at over 90 locations. The company had a tie up with a number of blue chip

companies whereby, the

employees of the company were provided with easy home loans and the blue chip company automatically deducted

EMI payments from employee salaries. This arrangement benefited the blue chip companies as they were able to

show it as a staff welfare activity and at the same time, in case of employee default, PHFC did not hold the company

liable. As on March 2004, the company had a number of subsidiary companies like PHFC Developers Ltd., PHFC

Investments Ltd., PHFC Holding Ltd., PHFC Asset Management Company Ltd., PHFC Standards Life Insurance

Company

limited to name a few. It was able to cross-sell and offers customers a wide range of customer products and services

under the PHFC brand. The company had a three-pronged approach to target customers. First, it had a call centre,

where loan queries from existing and potential customers were attended. Secondly, the referral channel where

existing customers referred potential customers and thirdly, a subsidiary called Patel Housing Finance Services India

Limited, the employees of which were called “feet on street”. The customers identified by any of the three methods

were directly contacted and negotiated by PHFC personal, ensuring that at all times service quality was maintained.

In case of a high level lead i.e., a commercially important customer or where loan amount was high, or customer

enjoying a high stature in society, the customer was directly handled by the operation’s head. The company did not

believe in a brand ambassador nor did it advertise in electronic media. It believed that its existing customers were its

best brand ambassadors. This was contrast to its immediate rival IEIEI Bank, which used celebrity endorsement for

product promotion. Customers, especially non-resident Indians could use the services of PHFC through a website

which proved to be a good marketing tool. The company also participated in property fairs and exhibition fairs in

different parts of the country.

PHFC was known for its service quality and the speed of loan disbursement which was a minimum of two hours and

a maximum of five days. The bank had the advantage of a wide network and as an employee put it, “ at PHFC a

customer can take a loan from Indore buy a property in Manipur take a disbursement in Hyderabad and service his

loan from Nagpur “. The company accepted Cheques from anywhere without any clearing charges. PHFC used

various promotional tools to attract customers like its Diwali Bonanza where the loans were available at lower rates of

interest. These programs proved to be very successful. The company was a member of the Credit Information

Bureau Ltd (CIBIL). The Bureau traced the payments record of customers and collated individual credit information.

The customers who had defaulted on previous loans and credit card payments with other banks were recorded by

CIBIL and this record was shared with member banks. This ensured quality credit appraisal of customers and

allowed PHFC to offer more attractive rates to customers. The bank adopted a humane approach in collecting its

receivables, which was also a unique feature highly appreciated by its customers. PHFC had the lowest NPA of

1.10% in the industry.

Human Resource

Human resources were PHFC’s most valuable assets. The efficiency of PHFC’ staff was evident from the fact that

the number of offices Increased from 41 in 1998 to 173 as on 2004 as against the number of employees, which

increased from 806-1,230 during the same period. Total assets peremployees as on March 31,2004 stood at Rs

26.08 crores as compared to Rs 22.85 crores in the previous year. The net profit per employee as on March 31,2004

was Rs 69 lakhs as compared to Rs 60 lakhs in the previous year. The biggest challenge faced by the company was

employee retention.

The new players in the market found PHFC an attractive target for employee recruitment as the company had a

comprehensive training program, which helped to develop human skills. PHFC has a training centre at Shimla, near

Delhi. Training took place at all levels in mixed groups. So a young recruit could attend the training program with

vice-president of the company. The training programmes consisted of attitudinal change workshops, international skill

to name a few. Each branch nominated employees across all levels for a minimum of 2-3 workshops a year.

PHFC was extremely people-focused and ensured a healthy work environment. Branch

offices had their own in-house pantry, gymnasium, and library, to serve their employees. The work culture was

westernized with an open door policy and employees at all levels were on first name basis. Top-level executives

enquired about personal problems of lower level employees and met personal needs for recognition and concern.

Financial needs were also fulfilled, as the salary was at par with the best in the industry. Employee’s stock options

were also provided as incentives to employees. At the employee put it “monetary incentives tend to get spent but

stock options provided a security for the future “.The performance appraisal followed by PHFC was unique. 80% of it

was quantifiable and 20% was based on superior on superior review. The company had hired one of the HR

consultants in the country who had devised a unique system of appraisal for the company. Key result areas of each

level were identified and quantified. Thus, even an accounts officer was evaluated on the number of times accounting

reports had reached the head office on time. This reduced personal bias to a great extent. Due to these practice, the

company had the lowest employee turnover in industry.

Financial

PHFC has improved financial performance over the years. The loan approvals increased to Rs 15,216 crores in

2003-04 from Rs 1,494 crores in 1994-95. Whereas disbursements were Rs 1,212 crores in 1994-95, increasing to

Rs 12,697 crores in 2003-04. Its gross income increased from Rs 780 crores (in 1994-95) to Rs 2976 crores (in

2003-04). Profit after tax has also registered growth from Rs 146 crores (in 1994-95) to 852 crores (in 203-04) The

share price of PHFC has also increased from Rs 102.50 (on 01-04-1995) to Rs 645 (1-04-2004).

Future Ahead

Although PHFC had tried to change itself from initially a monopoly regime to a market competition scenario, the

company faced a number of issues. IEIEI, the current market leader in home loan disbursements was able to

undercut interest rates. Being the original player, competitors targeted PHFC customers for refinance facility, trying to

get the customer to switch banks and offering them attractive schemes in the bargain. Secondly, PHFC had a low

employee turnover and therefore had to teach its old employees new tricks. Nationalized banks which have so far not

been very aggressive in the home loan market have a distinct advantage as far as cost of funds is concerned,

customer base and distribution network. It is a matter of time before they aggressively expand operations. Foreign

banks are already operating in the market using high quality of services as their USP. In this scenario, the top

management wonders whether the elephant can dance.

1. Evaluate the strategies used by the management in the changed scenario.

2. Which strategies the company adopt for the future?

3. Evaluate the performance of the company financially, using financial ratios and figures.

4. Analyze the case using SWOT analysis.

Telecommunications Case study

Price per Unit (piece):$12.00

IN Rs.667.95

Telecommunications is one of the fastest growing service industries in the world. The accent of growth is on the

value added services, such as e-mail, cellular phones, etc. This sector plays a crucial role in spurring growth,

especially industrial services, in the Indian economy. Multinational companies are investing in India because of huge

latent demand .Telecommunications in India has been a state initiated and controlled sector. The last two decades

have witnessed a restructuring of the entire sector due to Liberalization, Privatization and Globalization. This has

triggered an influx of foreign capital and technology. India’s 21.59 million-line telephone networks is one of the largest

in the world and the third largest among emerging economies (after China and Republic of Korea). Given the low

telephone penetration rate 2.2 per 100 people of population, which is much below the global average, India offers

vast scope for growth. It is therefore, not surprising that India has on of the fastest growing telecommunication

systems in the world with system size (total connections) growing at an average of more than 20% over the last 4

years. The industry is considered as having the highest potential for investment in India. The growth in demand for

telecom services is not limited to basic telephone services but has witnessed rapid growth in cellular, radio paging,

value-added services, Internet and global mobile communication by satellite (GMPCS) services. This demand is

expected to soar in the next few years.

The Telestar Company Ltd (TCL) was formed in 1985 as a public sector undertaking. Till

1986, it was the only telecom service provider in India. It played a role beyond that of a service provider by acting as

a policy maker, planner, developer as well as an implementation body. In spite of being profitable, its non-corporate

entity status ensured that it did not have to pay taxes. In 1998, the company having a total asset value of Rs 630

billion turned corporate u/s 619 of Companies Act 1956. Although, the company still continued to have a 100%

government owned equity, it planned to disinvest this in the next 5 years. As on date, the company enjoyed a sales

of Rs. 1,160 billion and had an authorized capital base of Rs 1,000 billion Telestar being a government department

was initially laden with several social obligations, which burdened it with several financially unviable connections. The

company therefore, faced a number of shortcomings due to its bureaucratic setup. It was used to a monopolistic

environment, which resulted in hardened attitudes, limited skills resistance to change, lack of flexibility in decision-

making, low level of motivation of its employees and a total lack of cost benefit accounting system. Telestar had its

operations in all the states in India with a large network of 25 circles. The company therefore, enjoyed the benefits of

economies of scale. It was in a sector, which required a large amount of infrastructure facilities. Fixed costs

therefore, formed the major cost component. The approximate cost of landline was twenty seven thousand for a new

rural connection and eighteen thousand for a connection in an urban area. The Uttar Pradesh Circle had 43 Basic

Administrative Units .In U.P. the company faced competition from two major players namely, Telenet and Express

Net Pvt. Ltd. These companies had recently entered the telecom industry with a wide range of services and were

highly price competitive.

These companies were providing competition to Telestar and seeking market penetration by price-cutting with

technologically superior products. Telestar initially offered landline services and wireless service in U.P. However,

due to the increased competition in the recent years it had introduced a number of value added services, like voice

mail services, intelligent networking services, advanced roaming services and others .Although, the company’s

Lucknow unit had been recording profits for the year ending 2001 ,it did not have a systematic costing system. For

example, the investment decisions of the company were made by comparing the estimated revenue generated with

the estimated cost of the project. The estimated revenue was calculated on the basis of revenue generated in the

neighbouring circle. TSL had been following a traditional method of accounting and practically no costing system

existed. V.K. Gupta, General Manager Finance, Lucknow Unit was thinking of revamping the accounting system. He

was trying to devise an online, real time, vibrant accounting system that would enable him to generate information

required for decision-making. He hoped to have an accounting system which would provide data in the area of

costing, pricing, investment decisions, tax planning and controllable and non controllable costs.

1. Evaluate the company’s ability to sustain its performance in the present scenario.

2. Suggest the possible costing techniques which can help V.K. Gupta its decision-making (Illustrate using

examples).

3. Conduct a financial analysis of the company of the company and comment its financial performance?

4. Suggest the various funding patterns that may be adopted by the company in light of the company’s

capital structure.

Ramakrishna Motors

Price per Unit (piece):$9.00

IN Rs.500.96

Established in 1950 Ramakrishna Motors Ltd.is one of the India’s pioneers in vehicle Manufacturing with a total

investment of Rs.500 crore and currently has a gross capital Employed of Rs 906 crores (Annexure I).Over the

years, Ramakrishna Motors Ltd, has Established a reputation as a quality-conscious company with a unique

corporate culture. The company had collaboration with Tshi Mishu, Japan Ramakrishna Motors Ltd. Was Recognized

internationally for its expertise in design and manufacture of a wide range of Products from general purpose engines

to specialty, technology and processes. Ramakrishna Motors had a single product in the car segment named

Amanda. Ramakrishna Motors Ltd. Is a part of Ramakrishna group, which besides automobile manufacturing also

had an Export company? The company had enjoyed a monopoly in the passenger car segment for 50 years.

However it had failed to diversify into other related products or introduce cars; in different segments. It had started its

operations throughout the country and had plants located at Rajkot, Nagpur, Bangalore and Agra.

AGRAPLANT

The Agra plant was established in April, 1989 with an investment of Rs 150 crores. The project was an ambitious

venture started with the intention of converting Agra into the Detroit of India. The required investment of Rs.150

crores was funded by the promoter as Well as various financial institutions such as International Financial

Corporation (IFC), Asian Development Bank, IDBI, IFCI and ICICI. The institutions provided the funds on The basis

of the future projections of the Agra plant. The plant was able to acquire funds at The rate of 6.25% from foreign

financial institution namely, IFCI and Asian Development Back whereas, the loan from the Indian financial institutions

namely, IDBI, ICICI and IFCI was obtained at 16%. The plant was set up on 40 acres of land which was leased from

the Uttar Pradesh State Government for 99 years at the low rate of 0.05 paisa per square metre. The plant employed

a total of 1,000 persons consisting of both skilled and unskilled personnel to man the unit. The Agra plant had two

units namely, the gear box unit and engine unit. The machinery installed in the plant was state-of-theart technology

and imported mainly from Japan. The total investment in plant and machinery was Rs. 120 crores which was

depreciated under Schedule 14 of the Companies Act, 1956 at the rate of 4.75% for single shift and at the rate of

8.25% for the double shift for the purpose of Income Tax Act. The plant was initially hoping to come out with a car in

the small car segment called Libra. The car was expected to capture a large market segment due to its high quality,

cost competitiveness and few players in the market. However, the company failed to obtain the license for the

manufacture of the vehicle due to the government requirement of foreign currency which resulted in the license going

to Maruti Udyog Limited which was a foreign collaboration of

Government of Government of India with Suzuki, Japan. It was therefore, decided that the Agra plant would act as a

feeder plant for the Bangalore plant, which manufactured the model Amanda. The Agra plant hoped to supply 30,000

units and thereby, achieve 100% installed capacity utilization. In the early nineties the process of liberalization and

globalization was ushered into Indian economy. This process of liberalization saw the end of the license raj and a

number of new players in the car manufacturing segment entered the market. Due to this, the company’s product

faced stiff competition and there was a steady decline in the sales of Amanda. This resulted in a decline in demand

of the parent plant for the products manufactured at Agra. The parent company which had a total workforce of 16,000

began downsizing and retrenched 10,000 of its employees. The Agra plant which had 1,000 employee strength

downsized itself to a total of 500 employees. This plant which was set up anticipating 100% capacity utilization saw

itself facing a problem of under utilization of production capacity as only 40% of the capacity could be utilized. The

Agra plant being a feeder plant found itself in a loss making situation where it became difficult to recover its fixed

overheads. At around this time, the Indian economy too was hit by a recessionary phase and there was an overall

decline in demand in the passenger car segment. The Agra plant started considering ways to get itself out of the loss

making situation. The plant has been recording a loss and although it has paid back the IFC loan, it has been unable

to pay back the Indian financial institutions as a result of which it was unable to get any further funding from them. In

1999, one of its competitors Ford Company Ltd. Approach the plant with a proposal for using the unutilized capacity.

The proposal was that the five C’s namely, cylinder block, cylinder head, crank shaft, cam shaft and connecting rod

which the plant was making for its parent company, would be modified and homolocated for the Ford company cars.

This would involve an expense of approximately Rs. 2 crores in terms of general equipment. However, specific

equipment and tools would be invested by the Ford Company. In case the arrangement was discontinued at a later

date, the Ford Company would take away its equipment. The arrangement would increase capacity utilization of the

Agra plant to the extent of 5%. The

finance manager was seriously considering this proposal and was analyzing the investment decision on the basis of

Accounting Rate of Return.

Questions:

1. Evaluate the company’s investment decision with specific reference to the Agra plant.

2. Had you been the finance manager, would you accept Ford Motors proposal? Why?

3. Do you think the finance manager needs to be concerned about the low depreciation provision? Why?

4. What according to you is the source of finance available to Ramakrishna Motors Ltd in case it is required to

finance the Ford proposal for the Agra plant?

Sunlight Industries

Price per Unit (piece):$60.00

IN Rs.3,339.76

Financial ServicesCaselet 1Sunlight Industries Ltd manages its accounts receivables internally by its sales and credit department. The cost of sales ledger administration stands at Rs 9 crores annually. It supplies chemicals to heavy industries. These chemicals are used as raw material for further use of is directly sold to industrial units for consumption. There is good demand for both the types of uses. For the direct consumers, the company has a credit policy of 2/10, net 30. Past experience of the company has been that on average 40 per cent of the customers avail of the discount while the balance of the receivables are collected on average 75 days after the invoice date. Sunlight Industries also has small dealer networks that sell the chemicals. Bad debts of the company are currently 1.5 per cent of total sales.Sunlight Industries finances its investment in debtors through a mix of bank credit and own longterm funds in the ratio of 60:40. The current cost of bank credit and long-term funds are 12 per cent and 15 per cent respectively.There has been a consistent rise in the sales of the company due to its proactive measures in cost reduction and maintaining good relations with dealers and customers. The projected sales for the next year are Rs 800 crore, up 15 per cent from last year. Gross profiles have been maintained at a healthy 22 per cent over the years and are expected to continue in future.With escalating cost associated with the in-house management of debtors coupled with the need to unburden the management with the task so as to focus on sales promotion, the CEO of Sunlight Industries is examining the possibility of outsourcing its factoring service for managing its receivables. He assigns the responsibility of Anita Guha, the CFO of Sunlight. Two proposals, the details of which are given below, are available for Anita’s consideration. Proposal from Canbank Factors Ltd: The main elements of the proposal are: (i) Guaranteed payment within 30 days (i) Advance, 88 per cent and 84 per cent for the resource and non-recourse arrangements respectively (iii) discount charge in advance, 21 per cent for with resource and 22 per cent without resource (iv) Commission, 4.5 per cent without resources 2.5 per cent and with resource.Proposal from Indbank Factors: (i) Guaranteed payment within 30 days (ii) Advance, 84 per cent with resource and 80 per cent without resource (iii) Discount charge upfront, without resource 21 per cent and with resource, 20 per cent and (iv) Commission upfront, without resource 3.6 per cent and with resource 1.8 per cent.The opinion of the Chief Marketing Manager is that in the context of the factoring arrangement, his staff would be able to exclusively focus on sales promotion which would result in additional sales of Rs 75 crores.Question:1. The CFO of Sunlight Industries seeks your advice as a financial consultant on the alternativeproposals. What advice would you give? Why? Calculations can be up to one digit only.Caselet 2Following are the financial statements for A Ltd and T Ltd for the current financial year. Both firmsoperate in the same industry.BALANCE SHEETSParticulars Firm A Firm BTotal current assets Rs 14,00,000 Rs 10,00,000Total fixed assets (net) 10,00,000 5,00,000_____________ __________

Total assets 24,00,000 15,00,000_____________ ___________Equity capital (of Rs 10 each) 10,00,000 8,00,000Retained earnings 2,00,000 _14% Long-term debt 5,00,000 3,00,000Total current liabilities 7,00,000 4,00,000 _____________ ___________

24,00,000 15,00,000INCOME STATEMENTSNet sales Rs. 34,50,000 Rs 17,00,000Cost of goods sold 27,60,000 13,60,000__________ ___________Gross profit 6,90,000 3,40,000Operating expenses 2,96,923 1,45,692Interest 70,000 42,000__________ ___________Earnings before taxes (EBT) 3,23,077 1,52,308Taxes (0.35) 1,13,077 53,308Earnings after taxes (EAT) 2,10,000 99,000Additional information: __________________________________Number of equity shares 1,00,000 80,000Dividend payment (D/P) ratio 0.40 0.60Market price per share (MPS) Rs 40 Rs 15__________________________________Assume that the two firms are in the process of negotiating a merger through an exchange of equity shares. You have been asked to assist in establishing equitable exchange terms, and are required to:(i) Decompose the share prices of both the companies into EPS and P/E components, and also segregate their EPS figures into return on equity (ROE) and book value of intrinsic value per share (BVPS) components.(ii) Estimate future EPS growth rates for each firm.(iii)Based on expected operating synergies, A Ltd estimates that the intrinsic value of T’s equity sharewould be Rs 20 per share on its acquisition. You are required to develop a range of justifiable equityshare exchange ratios that can be offered by A Ltd’s shareholders. Based on your analysis in parts (i)and (ii), would you expect the negotiated terms to be closer to the upper, or the lower exchange ratiolimits? Why?(iv) Calculate the post-merger EPS based on an exchange ratio of 0.4 : 1 being offered by A Ltd. Indicatethe immediate EPS accretion or dilution, if any, that will occur for each group of shareholders.(v) Based on a 0.4 :1 exchange ratio, and assuming that A’s pre-merger P/E ratio will continue after themerger, estimate the post-merger market price. Show the resulting accretion or dilution in pre-mergermarket prices.

Dabur company case study

Price per Unit (piece):$3.00

IN Rs.166.99

Dabur India identifying five growth drivers in Dabur honey , Dabur chyawanprash, vatika , Anmol and Oral care

to maximize shareholder value.

In the developing the brand architecture, the dabur company decided to deploy far more resources for the growth of

the five key brands - Dabur, Vatika, chyawanprash,, Anmol and Real - and back these up with much stronger

advertising and larger marketing spends. As part of focused brand building strategy, Dabur will stress on certain key

brands already well established in the consumer's mind, devising a clear positioning for each.

Thus, Vatika will stand for herbal beauty, Oral care for teeth , Real for fruit-based drinks, Anmol for value for

money hair care and Dabur for natural health Dabur chyawanprash. Besides, Dabur has decided to extend the Vatika

brand from hair care products to personal wash category and this year could see the launch of Vatika soap. Vatika

will also be the skin care brand under which two products will be launched this year.

Besides restructuring the FMCG business, the company has also laid out its plans for the new pharma entity,

which include forging alliances and going aggressive overseas. Dabur company plans to be a major player in the

global Oncology generics business, supplementing its own strengths in this area by entering into key alliances with

pharma

majors.

a. Is branding helping Dabor company India in differentiating its products? Apart from branding, marketing

what are the other means available to Dabor India to differentiate its products?

b. Dabur company India is planning to promote the key brands by devoting more resources. How does

branding and advertising affect the cost functions of Dabor India? Explain with suitable diagrams.

Maruti 800 case study

Price per Unit (piece):$4.00

IN Rs.222.65

Read the caselet carefully and answer the following questions:

1. Can the ubiquitous Maruti 800, which has virtually become a generic brand in India and signifies the

dream of many a not so well-to-do Indian, be written off? Justify.

2. The future seems to have many challenges in store for Maruti 8 00. What are the threats and Maruti 800?

Explain.

It has survived end-of-the-road predictions for the last eight years. It can flit across the roads almost as dexterously

as a bike. It goes easy on your pocket to run and maintain too. It is now showing a decline after having held the

baton as the largest selling car for several years. While rivals have always been ranting that the end is near for the

fuel-sipping 800, if the car's manufacturer is to be believed, the car is not going anywhere in a hurry. Quite on the

contrary, Maruti Udyog Ltd is actively pushing the car in smaller towns and among indecisive motorcycle owners who

can be coaxed into graduating to four wheels and who represent a 3.7 million a year market. Maruti’s offerings

comprise models cheaper than Rs 250,000 and it accounts for a quarter of new car sales.

Maruti had an 83 percent share in 1998, when it was competing against only two local firms selling cars based in

1950s designs. This share considerably lessened by 2004. Maruti now faces rivalry from companies such as Hyundai

Motor, Fiat, ford Motor Co., and Tata Engineering and locomotive Co. after the government liberalized the sector in

1993.

While competition from the larger ‘B segment’ cars and the company's strategy of positioning its other model, the

Alto, as an alternative to Maruti 800 may have dented the small car's sales in recent months, Jagdish Khattar,

Managing Director , Maruti Udyog, believes that the 800 is still the answer to the first-time car buyer's needs. And

that is more true in smaller towns because in the larger metro markets, easier finance schemes have shifted

customer preference towards larger cars.

Maruti is not in a position to bring down its costs. The company is pushing sales in smaller centers and rural markets

with tie-ups with banks. The company already has a finance scheme tailored for farmers, which provides for six-

monthly installments to coincide with crop cycles. “I believe in Dr C. K. Prahalad’s concept of finding value at the

bottom of the pyramid. There is still a very large segment of our population which cannot afford a car,” says Khattar.

Maruti Udyog had already announced a ‘2599’ scheme, where the customer can take home the 800 at an EMI of Rs

2,599 per month. It recently launched its ‘Do ka Chaar’ offer for existing two-wheeler owners who can use their

motorcycle as the down payment to take home a Maruti 800. Similarly, the company has launched a scheme,

‘Teacher Plus,’ with State Bank of India. The scheme entailed offering a lower rate of interest for teachers under the

scheme. Khattar says that the idea behind the Teacher Plus scheme is rather simple. “Teaching is the profession

that accounts for the highest number of couples working in the same organization. Their combined income is about

Rs 30,000 per month. We find that in smaller places, a customer with Rs 30,000 monthly income has better spending

power than one in a metro earning double that amount.” Khattar says.

Buoyed by the scheme’s success, Khattar jocularly promises similar schemes for the media and lawyers. But on the

ground, the company has identified several large public sector companies and the Railways as the next target for

tailor - made finance schemes. The reasoning, again, is that many of these customers would opt for the 800.

Post price reductions, which Maruti says came about due to localization and higher efficiencies, the price difference

between the top-end Maruti 80 0 and the base version of Alto has narrowed down to Rs 35,000. As most cars are

financed, in EMI terms the price difference comes to under Rs 700 per month. But Khattar denies that the Alto is

being positioned as a substitute for the Maruti 800. “By bringi ng down the prices of Alto, we are only trying to give an

alternative to the customer who may not want to buy an 800 for some reason. We are concentrating equally on both

models and it is not as if one is meant to cannibalize the sales of the other,” he says.

It cannot be denied, however, that the sales volume of Maruti 800 that stood at about 13,000 last year has reduced to

about 10,000 cars per month this year and continues to slide. Alto, on the other hand, has more than tripled from

about 3,000 units to close to 10,000 units a month by the end of 2004.

While Maruti is confident that the numbers for even the 800 will start rising again, auto analysts say that the country’s

largest carmaker will face an uphill task pushing the car in the medium term. One of the factors, auto sector watchers

say, is that the second-hand car market in the country is becoming more mature. Across the world, the used car

market is twice the size of new cars. In India, the ratio is 1:1, i.e., the size of both the markets is nearly the same. In

India, the second-hand car market has seen sluggish growth due to several impediments imposed by the

Government. But it is obvious that the second-hand market is set to grow and Maruti has itself positioned the

company as the largest seller of used vehicles under the TrueValue brand. As of now, the company has just touched

the tip of the iceberg and is unable to match the supplies with the high demand. But as the market gets more

organized, it could affect the sales of the Maruti 800.

Another auto sector analyst was more critical of Maruti's strategy. “They have very little regard for their existing

customers and have come to be known as a company that constantly slashes prices. While the Tata's car is still on

the drawing board, the market expects it to debut at about Rs 1.3 lakh. The Tatas are yet to even define the basic

specs of their proposed car. But it can be safely predicted that by the time the car actually comes into the market,

Maruti would be in a position to launch a stripped -down version of the 800. Their investment in the die plant has

been recovered some 20 times over. They can really play around with prices when the need arises,” he said..

Johnson & Johnson case study

Price per Unit (piece):$6.00

IN Rs.333.98

Johnson & Johnson is considered to be the world’s most broadly based manufacturer of healthcare products

with more than 190 operating companies selling products in more than 175 countries as of 2003. Despite its success

in the industry, Johnson & Johnson’s attempt to use its company name on baby aspirin proved to be unsuccessful.

Johnson & Johnson products are perceived as gentle, but gentleness is not what people want in a baby aspirin.

Although baby aspirin should be safe, gentleness per se is not a desirable feature. Rather, some people perceived

that a gentle aspirin may not be effective enough. So, what intuitively seemed to be a natural move but without

proper marketing research turned out to be an incorrect decision.

Questions1. What lessons do you learn from the case given above?

2. What tactics and strategies would you adopt to make baby aspirin successful?

KFC Chicken case study

Price per Unit (piece):$7.00

IN Rs.389.64

KFC, the world’s largest chicken restaurant brand, is targeting 100 quick service restaurants in India by 2010 – end.

The $12.00

IN Rs.667.95-billion brand, which is owned by leading global restaurant company Yum! Brands, Inc. that also owns

other brands like Pizza Hut and Taco Bell, is present with 34 outlets across nine cities in the country.

The restaurant plans to close 2008 with a total of 50 stores. The business model of KFC is primarily a franchise one

and the aggregate investment involved in this expansion will be Rs. 200-300 crore (estimate). KFC has recently

inaugurated a quick-service restaurant in Kolkata which also happens to be the first in India to be manned entirely by

hearing-impaired employees.

According to sources, over the next one to one – and – a - half years, expansion will mainly be in the metros and

cities where KFC already has a presence. The company would be subsequently looking into tier-II and tier-III cities.

In this business, a lot depends on the back end, including the supply chain and vendors. The company needs to have

the infrastructure in place, before it moves into these smaller cities.

While growth will be primarily franchise-driven, about 20% of the new restaurants will be company-owned. The

new outlets will come up both in malls as well as in high-street locations. This apart, KFC will also be aggressively

expanding its menu in India by rolling out some 10-15 products over the next two to three years. Keeping Indian

tastes and preferences in mind, it will have offerings suited to the India palate, low cost items as well as significant

variety of vegetarian products. However, the brand does not want to compromise on its global image and will

continue to uphold that. The restaurant wants to have 80% of offerings as international while rest will be especially

for the Indian market.

The company was in a spot of bother with the outbreak of “bird-flu” in some parts of the country. The company

retorted to this by asking for a certificate of safety from their vendors. However, the company stopped serving

chicken during the ban.

Questions

1. Would the quick-service restaurants be successful in India? How can you use marketing research to help

the company succeed in its project of quick-service restaurants?

2. What tactics and strategies would you adopt to retort to bird-flu or other contingencies like this? How can

marketing research be helpful in this?

keywords : Kentucky Fried Chicken Case Studies , KFC

Global Banking: Decentralized Human resource Function

Price per Unit (piece):$4.00

IN Rs.222.59

Case Study: Global Banking: Decentralized Human resource Function

Global Banking operates in three states and several countries, including all major money centers: New York, London,

Hong Kong, Tokyo, and three locations in Switzerland. Because of different cultures and different laws, each office

has its own human resource department. Although these offices report directly to the manager of each bank, the

home-office human resource department in New York exercises functional authority to ensure uniformity in

procedures, requiring each office to coordinate its policies with the home office human resource department.

With the growing internationalization of business, the bank has a strategy that requires senior managers to maintain

relationships with key clients. When a senior executive or a client is reassigned, the bank sometimes tries to reassign

its senior manager to maintain the personal and banking relationship. Although this is an unusual tactic, the bank has

been able to retain and acquire major accounts through this process.

To ensure that reassignments involve capable people who can ascend to higher levels, all senior banking executives

are to go through Global Bank’s assessment center, which is in the early planning stages. Of particular concern are

cultural issues among different countries and the diversity among Global Bank’s domestic and international workers.

Another concern is the cost of running an international assessment center.

Assume you are assigned to the corporate planning committee that is to design the assessment center.

Questions:

1. Describe your recommendations about who should be selected to serve on this planning committee.

2. Describe what considerations should be weighed. Given the international composition o those who

are to be evaluated.

Human Resource Development case study

Price per Unit (piece):$14.00

IN Rs.779.08

Human Resource Development

Modern Industries Ltd. (MIL) in Bangalore is an automobile ancillary Industry. It has turnover of Rs. 100

crores. It employs around 4,000 persons. The company is professionally managed. The management team is

headed by a dynamic Managing Director. He expects performance of high order at every level. It is more so at the

Supervisory and Management levels. Normally the people of high calibre are selected through open advertisements

to meet the human resource requirements at higher levels. However, junior-level vacancies are filled up by different

types of trainees who undergo training in the company.

The company offers one-year training scheme for fresh engineering graduates. During the first six months of the

training, the trainees are exposed to different functional areas which are considered to be the core training for this

category of trainees. By then, the trainees are identified for placement against the available or projected vacancies.

Their further training in the next quarter is planned according to individual placement requirements.

During the last quarter, the training will be on-the job. The trainee is required to perform the jobs expected of him

after he is placed there. The training scheme is broadly structured mainly keeping in mind the training requirements

of mechanical engineering graduates.

Mr. Rakesh Sharma joined the company in the year 1983 after his B. Tech . degree in paint Technology from a

reputed institute. He was taken as a trainee against a projected vacancy in the paints application department In MIL,

the areas of interest for a trainee in Paint Technology are few. Hence, Mr. Sharma’s core training was planned for the

first 3 months only. Thereafter, he was put for on-the-job training in the paints application department. He took

interest and showed enthusiasm in his work there. The report from the shop manager was quite satisfactory.

The performance of the trainee is normally reviewed once at the end of every quarter. The Training Manager

personally talks to the trainee about his progress, strengths and shortcomings. At the end of the second quarter, the

Training Manager called Mr. Sharma for his performance review. He appreciated his good performance and told him

to keep it up. A month later Mr. Sharma met the Training Manager. He requested that his training period be curtailed

to 7 months only and to absorb him as an Engineer. He argued that he had been performing like a regular employee

in the department for the last one quarter. As such, there was no justification for him to be put on training anymore.

Further, he indicated that by doing so, he could be more effective in the department as a regular engineer. He would

also gain seniority as well as some monetary benefits as the trainees were eligible for a stipend only. The regular

employees were eligible for many allowances like conveyance, dearness, house rent, education, etc. which was a

substantial amount as compared to the stipend paid to a trainee.

The Training Manager turned down his request and informed him that it was not a practice of the company to do so.

He told him that any good performance or contribution made by the trainees during the training period would be duly

rewarded at the time of placement on completion of one year of training. Further, he told him that it would set a

wrong precedence. Quite often, some trainees were put on the job much earlier than the normal period of three

quarters for several reasons.

Thereafter, Mr. Sharma’s behaviour in the department became different. His changed attitude did not receive any

attention in the initial period. However, by the end of the third quarter, his behaviour had become erratic and

unacceptable. When he was asked by the Department Manager to attend to a particular task, he replied that he was

still on training and such task shouldn’t be assigned to a trainee. According to him, those jobs were meant to be

attended by full-time employees and not by trainees.

The Paintshop Manager complained to the Training Manager about Mr. Sharma’s behaviour and he was summoned

by the Training Manager. During the discussions, Mr. Sharma complained that while all the remaining trainees were

having a comfortable time as trainees, he was the only one who was put to a lot of stress and strain; the department

was expecting too much room him. He felt that he should be duly rewarded for much hardwork; otherwise, it was not

appropriate to expect similar work output from him.

The Training Manager tried to convince him again that he shouldn’t harp on rewards as he was a trainee; his sole

concern should be to learn as much as possible and to improve his abilities. He should have a long-term perspective

rather than such a narrow-minded approach. He also informed him that his good performance would be taken into

account when the right occasion arose. He warned him that he was exhibiting negative attitude for which he would be

viewed seriously. His demand for earlier placement was illogical and he should forget it as he had already completed

8 months and had to wait only for 4 months. He advised Mr. Sharma that the career of an individual had to be seen

on a long-time perspective and that he should not resort to such childish behaviour as it would affect his own career

and image in the company.

Mr. Sharma apparently seemed to have been convinced by the assurance given by the Training Manager and

remained passive for some time. However, when the feedback was sought after a month, the report stated that he

had become more perverted. He was called again for a counselling session and was given two weeks time to show

improvement. At the end of those two weeks, the Training Manager met the Department Manager, to have a

discussion about Mr. Sharma. It was found that there was absolutely no reason for Mr. Sharma to nurture a

grievance on poor rewards. It was decided that he should be given a warning letter as per the practice of the

company and, accordingly, he was issued a warning letter.

This further aggravated the situation rather than bringing about any improvement. He felt offended and retaliated by

thoroughly disobeying any instruction given to him. This deteriorated the situation more and the relationship between

the manager of the department and the trainee was seriously affected

In cases of rupture of relationship, normally the practice was to shift the trainee from the department where he was

not getting along well so that he would be tried in some other department where he could have another lease for

striking better rapport. But unfortunately, in the case of Mr. Sharma, there was no other department to which he could

be transferred, since that was the only department where his specialisation could have been of proper use. By the

time he completed his training, he turned out to be one who was not at all acceptable in the department for

placement. His behaviour and involvement were lacking. In view of this, the Department Manager recommended that

he be taken out of the department. When Mr. Sharma was informed about it, he was thoroughly depressed.

One of the primary objectives of the Training Department is to recruit fresh graduates who have good potential and

train them to be effective persons, in different departments. They are taken after a rigorous selection process which

includes a written test, a preliminary and a final interview. During the training period, their aptitudes, strengths and

weaknesses are identified. Their placement in departments is decided primarily on the basis of their overall

effectiveness there.

Here is a case where the person happened to be hard-working in the beginning but turned out to be a failure in the

end.

The Training Manager was conscious of this serious lapse and was not inclined to recommend his termination. But at

the same time it was difficult to retain a person whose track record was not satisfactory. He still felt that a fresh look

be given into this case but he was unable to find a way out. He was now faced with the dilemma whether to terminate

or not to terminate Mr. Rakesh Sharma.

Questions :

The questions that arise from this case are :

1. Where did the things go wrong?

2. What options are open for the Training Manager other than termination

of Mr Sharma?

3. Did the Paints Shop Manager handle the trainee properly?

4. How could you put Mr Sharma back into the right track?

Woodlands Apparel

Price per Unit (piece):$4.00

IN Rs.222.59

Business communication case study

Mr. and Mrs. Sharma went to Woodlands Apparel to buy a shirt. Mr. Sharma did not read the price tag on the

piece selected by him. At the counter, while making the payment he asked for the price. Rs. 950 was the answer.

Meanwhile, Mrs. Sharma, who was still shopping came back and joined her husband. She was glad that he had

selected a nice black shirt for himself. She pointed out that there was a 25% discount on that item. The counter

person nodded in agreement. Mr. Sharma was thrilled to hear that “It means the price of this shirt is just Rs. 712.

That’s fantastic”, said Mr. Sharma. He decided to buy one more shirt in blue color. In no time, he returned with the

second shirt and asked them to be packed. When he received the cash memo for payment, he was astonished to

find that he had to pay Rs. 1,900 and Rs. 1,424. Mr. Sharma could hardly reconcile himself to the fact that the

counter person had quoted the discounted price which was Rs. 950. The original price printed on the price tag was

Rs. 1,266.

Questions

1. What should Mr. Sharma have done to avoid the misunderstanding?

2. Discuss the main features involved in this case.