ABC Group: The Saga of Expansion
Published: 2018
Author(s) Name: Varsha Gupta, Sanjeev Chaddha |
Author(s) Affiliation: Assist. Prof., School of Mgt. Studies, Baddi Univer. of Emerging Scie. and Tech., Himachal Pradesh.
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Abstract
ABC Private Limited, a manufacturer of auto parts was
supplying majority of its products to well-known Indian
original equipment manufacturers (OEMs) including
Ashok Leyland, Swaraj Mazda, Escorts, Bharat Gears,
and Mahindra and Mahindra. In FY 2012-13, ABC
Private Limited intended to acquire majority state in
Devki Enterprises Limited3 (DEL). The management
of the company scouted for alternative sources of
funds for clinching the deal as bank financing was not
permissible for takeover in accordance with Reserve
Bank of India (RBI) norms and the equity market not
easily accessible. The company already had private
equity investment, therefore decided to raise further
resources from short term & long term borrowings
and by selling some fixed assets for this acquisition.
After the successful takeover of DEL, the higher
increase in the current liabilities as compared to the
current assets caused liquidity issues for ABC Ltd. The
problem was aggravated further by reduced profits by
the end of FY 2014-15. Now the company wanted to
offer exit route to private equity fund and was looking
for various alternative sources of finance for resolving
the impending liquidity issues and further technical upgradation
of the plant.
Keywords: Acquisition, Equity Market, Expansion, Liquidity, Private Equity
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