Case Study 1: Solved Growth Issues with Zero Risk Plan

A leading manufacturer of an agro based nutrition product with Rs 600crores of revenue got constrained by ideas for growth, despite having a strong retail brand. The owners were uncomfortable with investing more money and experimenting with new talent for wider domestic market penetration. When our Directors went deeper into the business, we understood constraints as fear of other stronger competitors and therefore unwillingness to risk capital to achieve growth. Being a conservative family, owners were contemplating selling the business too. However, the real aspiration was to achieve growth with focus on profits without risking capital. Team Ethica studied the strengths of the business and organized a strategic partnership with a multi-billion dollar Indian MNC. In addition to their existing retail brand sales, our client landed up with an initial order of Rs 200crores from this new partner under a sourcing agreement with our client. Growth with profits in their area of expertise without risking capital.

Case Study 2: Solved Valuation & Liquidity Issues

A leading pharmaceutical company with Rs 1200 crores revenue was stuck in a situation, with high debt threatening to turn NPA. The situation arose from a large order failing leading to heavy stocks with the company which could not be sold in any alternative channel. The company had assets but the owners could not reach a decision to liquidate some assets with the level of debt overhang and a wrong assessment on the intrinsic value of those assets and of the residual business. Our team studied and highlighted different metrics of the business to rebuild confidence in the owners and to enable their negotiations with lenders. What surprised them was the valuation we drew up with a methodical process making them realize the intrinsic worth of their business/various assets and our recommendation to move ahead with the sale of non-productive assets to achieve their overall objectives. Our recommendations found reconfirmation as the owners mustered the courage to sell the non-strategic assets, realizing valuations similar to what we recommended. Negotiations with lenders done simultaneously on valuation of the residual business allowed them a suitable restructuring package. The business is now flourishing, and loans have been repaid, supporting the thesis that team Ethica had finalized.

Case Study 3: Planned and Executed to Expand Market

A leading manufacturer of pencils struggled to expand their distribution reach in Mumbai city. The market was saturated with competing brands, making it critical to identify and strengthen differentiators, expand market reach and further tap into completely unexplored market opportunities. The strategy was laid out after a thorough analysis of Mumbai’s neighbourhood and demographics. New relationships were forged with Hotels, as a profitable segment, that were not being properly tapped by competitors and were willing buyers for high quality products. Further OEM relationships were forged with certain MNCs to do pencils under their own brands for special needs, such as for gifting. Tailored merchandising displays to align with the preferences of specific neighbourhoods, fostering a local connection. New products were conceptualized to use idle manufacturing capacity further strengthening product offerings to OEM customers and to retailers. Introduced bulk purchase incentives for retailers, enhancing retailer’s ability to offer better pricing to end consumers. The result of all these strategies was a significant uptick in sales right in first quarter of the implementation of the plan.

Case Study 4: Changed Business Model to Collect Better

One Company that gained from our expertise is a leading IT hardware and services company that had raised maximum permissible bank borrowings permitted for its operations, that included supply of equipment on a turnkey basis and its maintenance over a long period. The company was stuck in growth as the customers were mostly large PSUs and the turnkey projects were taking a long time in its approval cycle and the whole receivables could be realised only after approval of the projects. In this process, they also ran into budget issues, as the company had to wait for the next budgetary sanctions delaying the collection cycle beyond six months.

The company was advised to go for renting of equipment as a business model as they were earning more from the services space as part of their offerings. The company identified large corporates that did not want to own these assets, due to high obsolescence of these assets, and complex audit for statutory purposes, high uptime requirements etc. The company entered into an operating lease model designed by one of our Directors for large-value transactions to rent equipment. The model included medium-term contracts and covered committed maintenance of the equipment and their customer’s all IT needs. Large back-to-back funding was arranged from Banks and NBFCs for equipment finance, against the receivables. This not only resulted in acquisition of new large customers, but also ensured committed maintenance service revenues, apart from enhanced margins for the company. The company was able to witness significant growth in revenues and profits as a result of this change in strategy.

Case Study 5: Sold A Business

A manufacturer of custom-built metal products for different applications for the export markets was looking for a solution to succession issues in the family. Ageing owner was concerned about the fate of his 1000 employees if illness were to strike him. We offered an alternative in organizing a CEO that could handle his business and the succession issue will be taken care of with his children overseas continuing with the same arrangement, and with regular payouts to the owner and his successor. Ethica itself offers to oversee the work of such an appointed CEO. The owner thought he would prefer to sell and offer the company to such an owner that was not going to disturb his team and the existing arrangements. Selling to a competitor was less preferred with fear of customers getting disturbed in the process. Ethica took on the assignment after other advisory firms' unsuccessful attempts to close an acceptable transaction. A suitable buyer was organized from overseas who was not a competitor, retaining the existing team and arrangements and paying a price that pleased the vendor as a fair price. The overseas company further built the business with a series of other acquisitions providing an enhanced role and better salaries to the existing team. A win-win for all parties concerned. Ethica handled the assignment from start to finish with no sweat for the owner and in full confidence.

Case Study 6: Sold A Business

A manufacturer of snacks developed a beautiful brand and excellent products with his hard work. Kindhearted that he was, he brought all his brothers into the business, and each was given a role to handle. Little did he anticipate that he was going to put himself into shackles with this structure. In time the business grew with his efforts, but the brothers felt very comfortable with cash flows coming and therefore counted their share of the cash flows. They did not have the vision to grow the business, they were more interested in the cash flows. The owner started facing resistance from his brothers in expanding the business to fight against competition, which involved taking some risks.

Any structural decisions if forced by the owner would have disturbed family equations, which the owner was unwilling to undertake.

With the business stable, there was no further excitement in running the business, and he realized that he was missing the real potential of the business of 20x revenue. To resolve the problem for all, Ethica brought in a larger business in the same line to buy stakes of the other brothers. The owner got into a partnership structure with the acquiring company for the strengths of the acquirer in a wider distribution network, bigger manufacturing facilities, a powerful sales team and big capital to spend. Both owners had a mutual respect that enabled a transaction of this nature. The selling company then grew leaps and bounds under a bigger umbrella, with its own brand strengths and unique products. The business started working to its true potential.