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    Question Paper

    Integrated Case Studies III (MSF3S3): January 2008

    Case Study (100 Marks)

    This section consists of questions with serial number 1 - 8.

    Answer all questions.

    Marks are indicated against each question.

    Case Study*

    1.Diversification of business involves entering into different industries either to exploit untapped potential or to minimize the risk of

    changing business trends. In this context explain the characteristics of a successful diversification strategy. (12marks)

    2.Discuss the rationale behind Videocon in going for acquisition spree. Do you think the new acquisitions will help Videocon in obtaining

    a global footprint? Explain. (15marks)

    3.In the cut-throat world of durables and electronics manufacturing, controlling the cost of production is a matter of concern. Discuss

    the strategy of Videocon in controlling the costs. (12marks)

    4.Do you think that Videocon Groups strategy of taking acquisition route for becoming global is a hasty and hazy act? Discuss the

    challenges Videocon faces in case of Consumer Electronic Goods. (12marks)

    5.Big brand wants to be a tomorrows equipment supplier to the world. Discus why Videocon is reversing its traditional business logic? (12marks)

    6.Discuss the financial restructuring that has been adopted by Videocon Group. And also discuss the possible risks faced by Videocon in

    raising capital? (12marks)

    7.Videocon Group Chairman Venugopal Nandalal Dhoot, acquired Thomson SAs entire color picture tube business and the entire stake of

    loss making AB Electroluxs Indian operations Electrolux Kelvinator. Evaluate the synergic benefits that Videocon can enjoy from

    these twin deals. (12marks)

    8.While raising capital, firms face a tough challenge of deciding upon the capital structure. In this context, discuss the various sources of

    raising capital to meet various types of financial requirements. (13marks)

    Videocon Group

    As Indian business starts to go global, Videocon has proved that it

    Part A : Basic Concepts (30 Points)

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    Part A : Basic Concepts (30 Points)

    is right in front. With 10 brands in its portfolio and with factories globally,

    Dhoot has proved that with strategy and fire in the belly, you can achieve much.

    Lakshmi Mittal, Chairman and CEO of Mittal Steel

    Speaking on Videocon Global Acquisition.

    Videocon Group, which has never been in short supply of ambitious desires to have more global presence, has scripted two blitzkrieg

    acts with; by the first act, Videocon Group Chairman Venugopal Nandalal Dhoot, on June 28, 2005, acquired Thomson SAs entire

    color picture tube business spread in Europe, America and China. From this deal, V N Dhoot also got Thomson SA to invest in

    Videocon International and Videocon Industries, the two flagships of Videocon Group. Later, to increase falling market share of Videocon

    in electronic consumer goods and appliances, he acquired the entire stake of loss making AB Electroluxs Indian operations Electrolux Kelvinator, and got the AB Electrolux to invest in Videocon Industries. After scripting the twin deals, Mr. Dhoot moved to play

    the second act by merging Videocon International with Videocon Industries on the advice of Development Bank of Singapore and ICICI Bank,

    giving Videocon the cash to play for a greater role in the global market. But the acts surprised the financial markets. Market analysts wondered

    whether Videocon Group ambitious vision of becoming a global firm is a hasty and hazy act. The financial markets also wondered

    whether Videocon had the financial strength to carry on its further investment plans.

    Mr. Dhoot, after having got two high profile low-cost acquisitions amidst severe competition, began reinventing Videocon with an eye on

    the global equipment manufacturing market. After completing the acquisition, Videocon Group expects to increase its total turnover

    from Rs.50 billion to Rs.175 billion, with more than Rs.87 billion coming from the global markets. He adopted a new slogan for its group

    The Sun never Sets in Videoconand began moving towards making the group a multinational Indian company. Currently, he is planning

    to tap financial resources from capital and debt markets.VIDEOCON GROUP THE EXPANSION PATH

    Videocon Group came into being with the incorporation of Videocon International Ltd. (VIL) in 1985. At present, the group consists of

    four listed companies Videocon International, Videocon Appliances, Videocon Industries and Videocon Narmada Electronics

    Limited. Within a decade, the group shot its way into the big league and became a leading manufacturer of consumer electronic goods

    and house appliances in India.

    The Dhoot family, hailing from the backwaters of Maharashtra, traveled a long way from being producers and sellers of sugar and cotton

    to become producers of hi-tech products like Color TVs, refrigerators, washing machines, air-conditioners, and digital assistants.

    Videocon group was founded by late Nandalal Madhavlal Dhoot, who migrated from Marwar region in Rajasthan to Maharashtra

    and established himself as a successful sugarcane and cotton grower. Nandalal established sugarcane mill based on French technology in

    1955 at Gangapur near Aurangabad, an important industrial center in the Marathwada region of Maharashtra. Madhavlal Dhootssons Venugopal, Rajkumar and Pradeep Kumar built their business empire Videocon Group, and raised it to become the leading producer

    of electronic appliances in India.

    Venugopal Dhoot, the eldest son of Nandalal Dhoot, graduated in electronics engineering from Poona Engineering College and had

    also trained in TV engineering from Toshiba Corporation in Japan; he followed his fathers business managing the sugar mill and cotton

    gins. Venugopal Dhoot sighted an opportunity for producing color TVs in India when he noticed that Indians took a fancy for Color TVs

    ever since color TVs were introduced in India during the 1982 Delhi Asian Games. He procured a license and through a technical tie-up

    with Toshiba, Japan, set-up VIL in the year 1985 with an initial capital of Rs.100 million and began producing Color Television sets and also

    monochrome television sets. Their venture with Toshiba gave Videocon group to focus on product quality and durability and the right

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    Part A : Basic Concepts (30 Points)

    platform for establishing themselves in electronic appliances industry in India. Videocon International Limited got listed at Bombay

    Stock Exchange in 1992 and at the time of listing the company had an authorized capital of Rs.200 million and paid-up capital of

    Rs.82.80 million.

    The company raised money from the markets whenever it required the capital for investments since it got listed at the stock exchange in

    1992. It also issued GDRs and Euro issues in the year 1994. In January 1994, the company issued GDRs at an issue price of Rs.255 and

    raised Rs.2.82 billion and later in October 1994 the company went for Euro issue, issuing non-convertible bond at an issue price of

    Rs.100 raising Rs.340 million from the issue. In 1998, Videocon Narmada Electronics Limited, a flagship company under Videocon

    Group, manufacturing glass shells that go into production of picture tube was merged with Videocon International Limited. The merger

    was taken by exchanging one share of Videocon International Limited for every 12 shares of Videocon Narmada Electronics Limited.

    WIDE RANGE OF PRODUCTS

    Videocon International Limited, along with Color TV sets, also manufactures digital videos, and home theaters under consumer electronics.

    It also manufactures refrigerators, washing machines, air conditioners and micro ovens under home appliances. In Color TVs, Videocon

    was the first Indian Company to introduce Picture-In-Picture, Turbo Sound, Surround Sound, Larger Screen Sizes, the Full Flat Square

    Tube, Bazooka technology and the Freedom features.

    It was the first to introduce frost-free refrigerators. Videocon tied-up with leading brands that entered into India post reforms era,

    and positioned itself as a multi-brand company. It also built a stronger distribution network and by the end of 1990s it steadily emerged

    from being the maker of color televisions to being the largest manufacturer of consumer electronic appliances in India.

    Videocon Group, taking the advantage of Tax holiday given to the industries set-up in rural areas, located its manufacturing units inpolicy-friendly locations. Its production facilities, located in the backward region of Marathwada, fall under Special Industrial

    Development Zones schemes. Its plants located in the industrial belt of Aurangabad get a tax benefit of 135 percent on investment, and

    about 70 percent of sales of Videocon group come from plants that are exempted from sales tax. The groups major production facilities

    of home appliances are:

    1. Videocon International Ltd., Chitegaon, Aurangabad. (Color TV assembly Plant)

    2. Videocon International Ltd., Gandhinagar (Monochrome TV assembling Plant)

    3. Videocon Appliances Ltd., Chitegaon, Aurangabad (Washing Machines and Air Conditioning assembling)

    4. Videocon Narmada Electronics Ltd., Bharuch (Glass shells funnels and Glass shell panels)

    5. Videocon Communications Ltd.., Bh