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By- Rohan Sachdeva 231118 Kirti Ramesh. Obhan 231076 Kshitij Sethi 231088 Rahul Sharma 231112 Rohit Malhotra 231082 Jayant Adlakha 231070 Pranav Gupta 231100 Himanshu Trivedi 231064 Naveen Kumar Suman 231094 Pulkit Sehra 231106 AAYAM DURABLES LTD Scenario II

Aayam durables

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By-

Rohan Sachdeva 231118

Kirti Ramesh. Obhan 231076

Kshitij Sethi 231088

Rahul Sharma 231112

Rohit Malhotra 231082

Jayant Adlakha 231070

Pranav Gupta 231100

Himanshu Trivedi 231064

Naveen Kumar Suman 231094

Pulkit Sehra 231106

AAYAM DURABLES LTD

Scenario II

Introduction

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.

DETAILS OF THE CASE.

Expecte

d Growth

• Expected Growth Rate in 2015 is 15%.

Net Revenue

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

Losses

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

Manpower

Cost

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

Company

• ADL saw a loss in all three products and an overall loss of 46 cr.

Scenario II

• 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).

Solution

• Attrition of employees

• Layoff due to underperformance

• Reduction in hiring

• Reduction in the % of salary increase

• Increased manpower in R & D Department

• Increased manpower in sales Department

Reduction due to AttritionManpower cost reduction due to attrition Band 4 :

10% of 12 = 1 (approx)

1* 1.2= Rs 1.2 cr

Band 3

10% of 83 = 8 (approx)

8* 0.75 = Rs 6 cr

Band 2

15% of 158 = 23 (approx)

23*0.35 = Rs 8.05 cr

Band 1

25% of 327 = 81 (approx)

81* 0.15= Rs 12.15 cr

Total Cost Reduction is Rs 27.7 crores

HR Department

Firing of 1 General Affairs HR – Band 3 Band 3 has average CTC of 0.75 Crore.

Cost Saving = 1 * 0.75 = 0.75appendix 7

Firing of 1 Regional HR – Band 3appendix 7

Band 3 has average CTC of 0.75 Crore.

Cost Saving = 1 * 0.75 = 0.75

Total Cost Saving = 0.75 + 0.75 = 1.5 cr

Finance Department

Firing of 2 Corporate CFO – Band 3Band 3 has average CTC of 0.75 Crore

Cost Saving = 2 * 0.75 = 1.5

Firing of 3 Corporate CFO – Band 2Band 2 has average CTC of 0.35 Crore

Cost Saving = 3 * 0.35 = 1.05

Total Cost Saving = 1.5 + 1.05 = 2.55 Cr

R & D ElectronicsFiring of 3 persons – band 2

Band 2 has average CTC of 0.35 Crore

Cost Saving = 3 * 0.35 = 1.05 crore

Supply ChainFiring of 1 person – Band 3

Band 3 has average CTC of 0.75 Crore

1 person – Band 2

Band 2 has average CTC of 0.35 Crore

Total Cost Saving = 0.75 + 0.35 = 1.1 Crore

Marketing Department

Firing of 1 person – Band 3

Band 3 has average CTC of 0.75 Cr.

Total Cost Saving = 1 * 0.75 = 0.75 Crores

Thus the total saving due to manpower reduction (crores) = 1.5 (HR) + 2.55 (Finance) +1.05 (R n D) + 1.1 (Sales) + 0.75 (Marketing) = 6.95 Crores

Attrition Recruitments

The recruitment schedule is as follows:

Total cost incurred = Rs 11crores

Bands\Dept.

Customer Service

R & D Corp- HR

S & M CTC (in cr)

Band 4 - - - - -

Band 3 1 - 1 - 1.5

Band 2 2 4 1 3 3.5

Band 1 15 10 - 15 6

Calculations

Total amount invested in the company in 2014

= Revenue - Profit

= 842 - (-46) = 888 (Appendix 8)

Expected amount to be invested in 2015

= Expected Revenue + provision for loss + Increment in salary

= 900 + 2.5% of expected revenue+ 24.39 cr

= Rs 946.89 cr

Therefore extra fund for investment for year 2015

= 946.89 – 888

= Rs 58.89 cr

Continued…

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

= 27.7 + 6.95 – 11

= Rs 23.6 crore

So extra funds that the company needs in order to meet expenses :

= 58.89 -23.6 = Rs 35.29 crores

THANK YOU