By- Rubina Verma 231123 Sanchi Grover 231129 Saumya Mittal 231135 Shefali Bhardwaj 231141 Shivam Singla 231147

Heena Aggarwal 231153 Stuti Shree 231159 Sazzad 231165 Veena Nair 231171 Dattatreya Singla 231177

AAYAM DURABLES LTD

Scenario II

Aayam Durables is a public company which deals in consumer durable selling•Flat panel display (LED/LCD)•Refrigerators &•Washing Machine

The company is facing tough time due to shortage of funds to invest in product innovation and marketing.

INTRODUCTION

• Expected industry growth in 2015 is 15% over 2014.

• Net revenue for the company is targeted to increase from 842cr. (2014) to 900cr. (2015).

• Losses have to be reduced from 5.5% to 2.5%.

• Manpower cost has to be reduced from 21.5% i.e Rs. 181.03 crores to 19.5% i.e Rs. 164.19. Thus a total saving of 16.84 crores has to be achieved.

• In 2014, ADL had de-grown by 5% (over 2013) with the loss of Rs 46 crores. The loss was seen in all of their 3 products.

So, Both top and bottom lines were shrinking.

DETAILS OF THE CASE

• It was felt that the industry will grow in 2015 by 15% over 2014. As penetration level in the industry was low in India and there might be global stagnation in economy.

• In the circumstances, it was felt that revenue growth for ADL was important. The strategic objective of ADL was to achieve a revenue of Rs 900 crores in 2015 & reduce the loss from -5.5% (2014) to -2.5% 2015). To achieve this objective, it was decided to reduce manpower cost from 21.5% to 19.5% (of 2014 revenue level).

SCENARIO II

• Firing of employees

• Attrition rate

• Reduction in hiring

• Increased investment in R & D Department

• Increased Advertisement budget

SOLUTION

Firing of 1 Corporate HR – Band 3 Band 3 has average CTC of 0.75 Crore.Cost Saving = 1 * 0.75 = 0.75

Firing of 1 Regional HR – Band 3Band 3 has average CTC of 0.75 Crore.Cost Saving = 1 * 0.75 = 0.75

Total Cost Saving = 0.75 + 0.75 = 1.5 crore

HR DEPARTMENT

Firing of 2 Corporate CFO – Band 3Band 3 has average CTC of 0.75 CroreCost Saving = 2 * 0.75 = 1.5

Firing of 2 Corporate CFO – Band 2Band 2 has average CTC of 0.35 CroreCost Saving = 2 * 0.35 = 0.70

Total Cost Saving = 1.5 + 0.70 = 2.2 Crore

FINANCE DEPARTMENT

R & D Appliances Firing of 3 persons – band 2 Band 2 has average CTC of 0.35 CroreCost Saving = 3 * 0.35 = 1.05 crore

Sales CorpFiring of 1 person – Band 3Band 3 has average CTC of 0.75 Crore1 person – Band 2Band 2 has average CTC of 0.35 Crore

Total Cost Saving = 0.75 + 0.35 = 1.1 Crore

Firing of 1 person – Band 3Band 3 has average CTC of 0.75 Crore.

Total Cost Saving = 1 * 0.75 = 0.75 Crores

Thus the total saving due to manpower reduction (crores) = 1.5 (HR) + 2.2 (Finance) +1.05 (R n D) + 1.1 (Sales) + 0.75 (Marketing) = 6.6 Crores

MARKETING DEPARTMENT

Manpower cost reduction due to attrition Band 4 :

10% of 12 = 1 (approx)1* 1.2= Rs 1.2 crores

Band 3 10% of 83 = 8 (approx)8* 0.75 = Rs 6 crores

Band 2 15% of 158 = 23 (approx)23*0.35 = Rs 8.05 crores

Band 125% of 327 = 81 (approx)81* 0.15= Rs 12.15 crores

Total Cost Reduction is Rs 27.7 crores

REDUCTION DUE TO ATTRITION

The recruitment schedule is as follows:

Band Number of employees

Cost incurred(CTC in Rs. Cr.)

4 1 1.2

3 5 3.75

2 15 5.25

1 70 10.5

Total cost incurred = Rs 20.7 crores

ATTRITION RECRUITMENTS

Total amount invested in the company in 2014 = Revenue - Profi t= 842 - (-46) = 888 (Appendix 8)

Expected amount to be invested in 2015= Expected Revenue + provision for loss= 900 + 2.5% of expected revenue= Rs 922.5 crores

Therefore extra fund for investment for year 2015 = 922.5 – 888= Rs 34.5 crores

CALCULATIONS

Total funds after cost reduction in manpower (Attrition + employee lay off – recruitment)

= 27.7 + 6.6 – 20.7 = Rs 13.6 crore

So total funds which the company has for investment in 2015= 13.6 + 34.5 = Rs 48.6 crores

CONTINUED…

As we already saw after reducing manpower costs we are left with 52 crore to still be able to spend on strengthening ADL.

High chances of industry to grow at 15% compared to only 1-2% in previous years.

Tap this opportunity by spending on:1. R&D – New features, product redesigning2. Sales & Marketing - Advertisement

INVESTMENT

THANK YOU