THE CASE OF CORE BUSINESS WITH NON- CORE BUSINESS ACTIVITIES

KK DYES AND CHEMICAL (P) ltd. is having a net worth of 60 crore. The company is expanding its business operations in places other than Gujarat and Uttar Pradesh. The company reported a net profit of Rs. 10 crore for the fiscal year 08-09.The company PBIT stood at Rs. 27.3 crores. After the company goes for expansion the company will generate Rs 35 crore (PBIT). The amount that is required to fund the project is estimated at Rs. 62 crores. The real benefit that will accrue to the company is from 2011 due to fertilizer policy that will add to the bottom line Rs 5 crore. The company is having a debt equity mix of 2:1. The financial institution has offered the company that the fresh loans can be raised at 18% if debt equity goes beyond 2:1. The company wants to expand in order to benefit from the new fertilizer policy.the promoters are in no position to contribute fresh capital The company hires you as a consultant in order to recommend how to finance the project needs. The promoters are ready to use accruals of the firms. The company has provided you with the financial statements and the expectations in terms of PBIT are provided above. Recommend what should be done by the firm in order to make the project feasible. The expectation of the owner in terms of cost of capital is next to nil from additional investment. However they will not accept if the project uses the current cash flow generated by the company. The company will accept the recommendation of the consultant and he will receive huge rewards if the project kicks in but if lay out for funding is not prescribed than the company need not pay anything to the consultant. Being a consultant you have to find a feasible solution or walk away without any reward...... Other details available through mail
If you are interested in getting the details of the entire case., relevant facts on it and solve the case. Write to us asking for a copy of the same @ splconquest@gmail.com. Before that make sure you add yourself to the followers list. This case is available only for the followers of SPL Conquest team.