Ans.1 :- In FY 2000, Garuda Udyog's profit before tax was observed to fall to Rs 385 crores & finally, faced a huge loss of Rs 269 crores in FY 2001. And to add-on to the financial crunch, the total debt of the company increased from Rs 546 crores in FY 2000 to Rs 1112 crores in FY 2001. That is when Garuda resorted to increase its equity capital. From Rs 2642.5 crores in FY 2001 to Rs 4378.8 in FY 2005. The increased shareholder funds helped Garuda to pay-off a major chunk of its debts and adopt the policy of localization of manufacturing components. Ans.2 :- Garuda Udyog had started incurring losses by FY 2001 & its total debts had increased to a net amount of Rs 1112 crores. It was not advisable for Garuda to resort to external debts to fill-up the losses and revolutionarize its manufacturing process. Resorting to shareholders funds was, thus, a rational policy as it could reinvest its profits and then later distribute higher returns to its shareholders. Ans.3 :- In FY 2005, a net profit before tax of Rs 1304.9 crores was recorded by Garuda Udyog. And it debt status stands at Rs 307.6 crores. Thus, Garyda Udyog can afford to resort to debt financing for 20% of its planned investment of Rs 6000 crores. That would increase its debt by Rs 1200 crores. But for the rest of the investment, it would be rational & profitable for Garuda to resort to equity capital.
Query No.1: basic financing strategy between 2000 and 2005: Though the Company's cash/reserve position is quite healthy, but, the management of the same is not quite in tune with the modern financial strategies. Number 1 there is a huge pile up of inventories. Number 2. Receivable are at teh higher end. Number 3. Investment are quite substantial which in other way could have been pruned enabling investment in its own ventures/technology upgradation.etc and No.4 Debt option has not been leveraged to the optimum.
QUERY NO.2: RAtionale of the Fianancing Policy: The rationale as perceived from the financials has been to"Adopt a very conservative, 100% risk free approach to financing options" which policy is devoid of pragmatic solutions thereby curbing agressive technological innovations leading to the competitors eating away into the company's market share.
QUERY NO.3: Future CApital Investment: The Company while pursuing its risk-free-low debt policy should perceive Debt as a catalyst to galvanise the almost redunadant investments,i.e., by raising debt marginally (Say upt0 10% of the accumulated investments) and offload 30% of its investments). The company should paralelly improve its inventories which are a huge pile up on the cost of finance. Added with a rigorous and aggressive receivable management, the cost is drastically reduced which can be leveraged to service the debt as well as offset the loss of income from investment ploughed back to finance future investments.
Its more important to address WHAT then HOW, according to me today brand Garuda (Mar*ti) has been looked by people as it was once with PREMIAR AUTO (FIAT ) and Ambassador ...its not that they r not coming out with new models but people see it as Garuda (Mar*ti) a local kind of brand and not a STATUS brand. Its a BRAND problem...people now a days consider it as a DESI BRAND so increase the status by 1. Changing Name 2. Even forign collobration can help, even for the name sake !
this sucks im not an MBA i thought of posting a solution after reading terms & condition im not willing to post it. please stop these kinda articles MBA, NON-MBA shit!!!
Similarly, the cost of debt was lowered by repaying a substantial part of borrowed capital between 2001 and 2005. The company's debt that stood at Rs 1,112 crore (Rs 11.12 billion) was brought down to Rs 3,076 crore (Rs 30.76 billion.)
When a car company goes loss..the top management have to thing about the market trent. Like Tata, and Mahidra done. Indica V2 and Scorpio is very simple examples. makers of our Ambassidor and old Fiat did not understood the capasity of wast indian car market when they enjoyed the supremacy. That vacum filled by foreign makers later. Any company need to be succeed they should be aware of the market trent. present competative market giving option to the custemer to choose. Other part of the world unpopular cars of Devoo and Hyudai catch indian Market due to they are the first comers, If Nissan, Toyota and all enter first with their all models manufatured in India (present high prices of these cars are due to importing) Korian cars never get a good shre. Even now our ambassador cars change its body like aerodinamic and fittings of lights, wipers doors, handles, swictes etc like new generation things it would lead the market again. Whatever management people calculate about the profit the ultimate decision should come from the tail end customer, so any product, it should be custemer friendly. Otherwise forget about the profit.
"The company's debt that stood at Rs 1,112 crore (Rs 11.12 billion) was brought down to Rs 3,076 crore (Rs 30.76 billion.)" Are we sure of this?????Doesnt look correct to me..
MBA's the company have, are not able to find solution so they are asking for public(Specially MBA) if any MBA answers this they should give him a Job in the company instaed of paying just 25000Rs
This is the real story of Maruti Udyog Limited so the solution should b in hands of maruti's officers(MBA Grads, i cant say anything bout Garuda Udyog Limited but i know that if the readers read this long artical completly, the rediff will be the # 1 site and it will improve his profit....... just understand the strategy of rediff.......... hey rediff plz dont giv me Rs. 25000/- cash even i know ur business strategy...
Here is the link for terms and conditions http://www.thesmartmanager.com/tcs/tcs_cs_tc.asp You can see that there is no cash prize for non mba. So guys, dont waste time on such things. Rediff should have atleast given a link to the terms and conditions so that valuable time is not wasted
