Session 5, Havel's case study
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Questions and Answers

What does 'others receivables' include?

  • Deferred financing costs
  • Restructuring costs
  • VAT recoverable (correct)
  • Accrued income taxes
  • Which of the following is classified as 'accrued expenses'?

  • Brazil sales tax
  • Average currency rates
  • Deferred financing costs
  • Payroll and related costs (correct)
  • Which year had the highest average Indian rupee to US dollar exchange rate?

  • 2000
  • 1997
  • 2005
  • 2006 (correct)
  • Which of the following is NOT included in 'accrued income taxes'?

    <p>Restructuring costs (C)</p> Signup and view all the answers

    What is included in 'other assets'?

    <p>Excess reorganization value (C)</p> Signup and view all the answers

    Who holds the position of Chief Executive Officer at SLI Sylvania?

    <p>Paul J. Griswold (D)</p> Signup and view all the answers

    Which individual is listed as COO/CFO at SLI Sylvania?

    <p>Mark T. Becker (C)</p> Signup and view all the answers

    What is the primary role of Carlos Pietri in the organization?

    <p>President of SLI Latin America (C)</p> Signup and view all the answers

    Which title is associated with Per Langholz at SLI Sylvania?

    <p>President of SLI Sylvania Europe (A)</p> Signup and view all the answers

    Who oversees Sales & Marketing at SLI Sylvania?

    <p>John Smith (C)</p> Signup and view all the answers

    What were the main channels for distributing electrical and lighting products?

    <p>Institutional buyers, wholesalers, and retail stores (A)</p> Signup and view all the answers

    Which retailers primarily distributed lighting products in emerging markets like India?

    <p>Specialized small retail shops (D)</p> Signup and view all the answers

    What was one strategy Anil used to transition into his senior executive role?

    <p>He visited the plants and interacted with managers one on one. (A)</p> Signup and view all the answers

    What factor prompted Havells to pursue an initial public offering (IPO)?

    <p>Need for resources and reputation of a listed company. (D)</p> Signup and view all the answers

    What was the approximate margin for wholesalers in the distribution of electrical products?

    <p>15 per cent (A)</p> Signup and view all the answers

    Which of the following describes the market challenges Havells faced in the mid-1990s?

    <p>Competition from both Chinese imports and European imports. (C)</p> Signup and view all the answers

    Which aspect posed challenges for foreign firms in emerging markets?

    <p>Time-consuming local standards approval (A)</p> Signup and view all the answers

    What significant achievement did Havells accomplish in 1997?

    <p>Crossed an annual sales volume of Rs50 crores. (D)</p> Signup and view all the answers

    What position did Havells India hold in the miniature circuit breaker market by the early 2000s?

    <p>Largest manufacturer in India (D)</p> Signup and view all the answers

    What was Havells' overall market share in India by the early 2000s?

    <p>35 per cent (A)</p> Signup and view all the answers

    Which joint venture did Havells initiate in 1996?

    <p>With Electrium of the United Kingdom. (B)</p> Signup and view all the answers

    What was one of the reasons Anil believed going public was beneficial?

    <p>It offered access to additional capital for expansion. (B)</p> Signup and view all the answers

    Which of the following channels was rarely used for sales transactions?

    <p>Online channels (B)</p> Signup and view all the answers

    How did Havells respond to the competitive pressures in the market?

    <p>By entering into international collaborations. (C)</p> Signup and view all the answers

    What are two of the stock exchanges where Havells shares were listed?

    <p>National Stock Exchange and Delhi Stock Exchange (D)</p> Signup and view all the answers

    What was one outcome of the IPO for Havells?

    <p>Investment in setting up new manufacturing plants. (C)</p> Signup and view all the answers

    What was the name of the company formed after Siemens sold Sylvania’s European and Latin American operations?

    <p>Sylvania Lighting International B.V. (B)</p> Signup and view all the answers

    Which company acquired SLI in 1997?

    <p>Frank Ward's Chicago Miniature Lamp, Inc. (D)</p> Signup and view all the answers

    By the end of 1996, what was SLI's annual sales figure?

    <p>US$600 million (D)</p> Signup and view all the answers

    How many countries did SLI operate in by the end of 1996?

    <p>30 (C)</p> Signup and view all the answers

    After filing for bankruptcy, which consortium purchased SLI in March 2003?

    <p>DDJ, Cerebrus, and JP Morgan (B)</p> Signup and view all the answers

    What significant action did Paul Griswold's management team take in 2004?

    <p>Rationalized manufacturing capacity (D)</p> Signup and view all the answers

    What was the primary cause of SLI filing for bankruptcy?

    <p>Failed acquisitions and economic slowdown (A)</p> Signup and view all the answers

    By December 30, 2001, how many employees did SLI Inc. have globally?

    <p>8,400 (B)</p> Signup and view all the answers

    What was the total sales amount for the year ended March 31, 2006?

    <p>11,151 million rupees (C)</p> Signup and view all the answers

    Which expenditure category had the highest amount in the year ended March 31, 2006?

    <p>Materials (C)</p> Signup and view all the answers

    What was the profit after tax for the year ended March 31, 2004?

    <p>210 million rupees (D)</p> Signup and view all the answers

    What was the amount of other income for the year ended March 31, 2005?

    <p>29 million rupees (A)</p> Signup and view all the answers

    Which asset category showed a positive increase from 2003 to 2006?

    <p>Total current assets (D)</p> Signup and view all the answers

    How much did the total current liabilities amount to in the year ended March 31, 2006?

    <p>2,336 million rupees (D)</p> Signup and view all the answers

    What was the total assets reported for the year ended March 31, 2005?

    <p>4,016 million rupees (C)</p> Signup and view all the answers

    What was the amount for managerial remuneration in the year 2006?

    <p>6 million rupees (D)</p> Signup and view all the answers

    Which year had the lowest income tax expense among the years reported?

    <p>2003 (A)</p> Signup and view all the answers

    Which of the following was a component of total liabilities in 2006?

    <p>Secured loans (D)</p> Signup and view all the answers

    What was the change in cash and bank balances from 2003 to 2006?

    <p>Increased by 27 million rupees (A)</p> Signup and view all the answers

    What was the total costs and expenses for the year ended March 31, 2005?

    <p>6,382 million rupees (B)</p> Signup and view all the answers

    What was the total stockholders' equity reported for the year ended March 31, 2004?

    <p>594 million rupees (D)</p> Signup and view all the answers

    Flashcards

    Distribution System

    A system where goods are moved from manufacturers to consumers. It includes various intermediaries like wholesalers and retailers, and can be complex depending on the market.

    Non-tariff Barriers

    Government regulations or standards that affect the trade of goods. These can include safety rules, quality standards, or import restrictions.

    Miniature Circuit Breaker (MCB)

    A type of circuit breaker designed to protect electrical circuits from overcurrents. They are commonly used in homes and offices.

    Market Share

    A company's share of the total market sales for a particular product or service.

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    Contract Bidding

    A formal process where companies submit bids to win contracts for goods or services. Often used by governments or large organizations.

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    Financials

    A company's financial performance, including revenue, profits, and expenses.

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    Revenue Breakdown

    A breakdown of revenue by different product categories or services.

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    Dominant Player

    A company that dominates a particular market segment and has a strong brand recognition.

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    Initial Public Offering (IPO)

    The process of a company going public by offering its shares for sale on a stock exchange.

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    Imitation Strategy

    A strategy used by businesses to achieve significant growth by imitating successful practices of other companies.

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    International Market Capability

    A company's ability to compete in a global market with different national regulations and customer preferences.

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    International Collaborations

    Collaborations between companies from different countries to share resources, expertise, and markets.

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    Joint Venture

    A type of business venture where two or more companies combine resources and share ownership to achieve a common goal.

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    Multinational Corporation (MNC)

    A company that operates in multiple countries, often having headquarters in one country and branches in others.

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    Market Entry

    The entry of new competitors into a market, which can be challenging for existing players.

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    Importing

    The practice of importing goods from a country with low production costs, often affecting local industries.

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    Anti-trust Asset Sale

    The sale of a company's assets to a private equity firm in order to comply with anti-trust regulations, resulting in the creation of a new entity separate from the original company.

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    Formation of SLI

    A privately held company, Sylvania Lighting International B.V. (SLI), was formed by a private equity firm after acquiring assets from the original Sylvania.

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    SLI's Global Expansion

    SLI rapidly expanded globally, establishing a significant presence in various countries and becoming a major player in the lighting industry.

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    SLI Sale to Frank Ward

    Citicorp sold SLI to Frank Ward, the owner of CML, after several years.

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    Merger of CML and SLI

    SLI was merged with CML under the SLI Inc. name, creating a larger entity encompassing both operations.

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    SLI Inc.'s Acquisition Challenges

    Acquisition spree by the new management led to unexpected challenges, coupled with economic slowdown and increased competition, pushing SLI Inc. towards bankruptcy.

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    Private Equity Acquisition of SLI Inc.

    A private equity consortium bought SLI Inc. from Ward, aiming to invest and revive the struggling company.

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    SLI Inc.'s Restructuring

    New management under Paul Griswold focused on structural changes, including streamlining production and increasing geographic reach, to revitalize SLI Inc.

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    Others receivables

    Includes amounts owed by customers for purchases made on credit, including SLI Glass, Brazil receivables, and VAT recoverable.

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    Other assets

    Represents assets that are not readily categorized as typical assets, such as excess reorganization value from a merger and deferred financing costs related to loans.

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    Accrued expenses

    Involves costs that have been incurred but not yet paid, such as accrued expenses for employee wages, restructuring costs, and payroll-related expenses.

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    Accrued income taxes

    Includes taxes that have been incurred but not yet paid, such as accrued income taxes, VAT payable, and Brazil sales tax.

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    Average Currency Rates

    Represents the average exchange rates between the Indian Rupee (INR) and US Dollar (USD) and Euro (EUR) during the period 1993 to 2006.

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    Sales Revenue

    The total value of goods and services a company sells during a specific period.

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    Other Income

    Income earned from sources other than the primary business activity.

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    Materials Cost

    The cost of raw materials used in the production process.

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    Office and Administration

    The cost incurred for managing and administrating the company's operations.

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    Selling and Distribution

    The cost of distributing and marketing the company's products.

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    Financial Costs

    The cost incurred for borrowing money or managing financial investments.

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    Liabilities

    The total amount of money owed by a company to its creditors.

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    Stockholders' Equity

    Funds invested by shareholders or owners in the company.

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    Cash and Bank

    The amount of money a company has readily available to use.

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    Inventories

    The value of goods that are available for sale.

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    Total Assets

    The total value of a company's assets.

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    Current Liabilities

    Short-term debts that a company needs to repay within a year.

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    Statement of Income

    Financial statements that show a company's financial performance over a period of time.

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    Balance Sheet

    A financial statement that shows the company's assets, liabilities, and equity at a specific point in time.

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    Profit

    The difference between a company's revenue and expenses.

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    Study Notes

    Havells India: The Sylvania Acquisition Decision

    • Havells India, a leading electrical manufacturer, received an offer to acquire Sylvania Lighting International (SLI) in early 2006.
    • Havells was positioned to emerge as a dominant player in India's electrical market.
    • SLI, headquartered in Frankfurt, was a major global lighting company with substantial European and Latin American operations.
    • The board had to make a decision within a week about taking over the offer to purchase SLI.

    Electrical and Lighting Industry

    • The electrical and lighting industry encompasses various businesses involved in the production, transmission, and distribution of electricity.
    • Key segments include building systems, electronics, emerging technologies, industrial automation, insulating materials, lighting systems, medical imaging, and technology, power equipment, security imaging and communications, and cable and wire.
    • Both segments in the industry (electricals and lighting) are sold globally through common distributors and retailers.
    • Global and national standards impacted consumer choices and safety requirements.
    • The leading companies included Siemens, ABB, GE, and Philips.

    Electrical Components

    • Electrical components, including circuit breakers, switches, and cables, are key products in the industry.
    • Safety and quality are crucial for these products, adhering to international standards such as IEC and CE Marking, and sometimes local country-specific standards.
    • Industry growth mirrored GDP growth; Asian markets experiencing quicker growth than the European and American markets.

    Lighting Industry

    • The lighting segment comprises light sources (bulbs) and lighting fixtures.
    • Products like fluorescent lamps (CFLs) and solid-state lighting (LEDs) were gaining popularity as replacements for traditional incandescent lamps.
    • Global and national standards for lighting safety affected the performance of the industry and consumer preferences.

    Havells India Background

    • Havells started as a small trading business in Delhi in 1958.
    • It gradually expanded its product portfolios and manufacturing capacity.
    • The company's board consisted of QRG (founder), Anil Gupta (joint managing director) and relatives/other professional managers.
    • Havells India emerged as a dominant player in the circuit breaker market in India.
    • Key competitors existed within the industry like Larsen & Toubro and Siemens in industrial switchgear, Legrand and Indo Asian in domestic switchgear, Polycab, Finolex, CCI and Universal Cables (cable business).

    Havells Growth Strategies

    • Havells focused on expanding within the wider electrical and lighting market through acquiring other companies.
    • Havells pursued a combination of internal growth, strategic acquisitions, and global market expansion strategies.
    • Havells made collaborations with multinational companies such as German companies and UK companies.

    SLI Sylvania Background

    • SLI Sylvania was a global lighting company with sales exceeding €473 million.
    • They had eleven manufacturing facilities in multiple countries across Europe, South America, and the Middle East.
    • SLI focused extensively in the industrial, architectural and residential lighting markets.

    Challenges of the SLI Acquisition for Havells India

    • The acquisition was estimated to cost over $200 million, potentially demanding a major investment from Havells India.
    • Integrating SLI's predominantly European management team with the Indian workforce posed an integration challenge.
    • Sylvania's marketing networks and product assortment extended their presence in Europe and the Americas, creating potential growth opportunities for Havells India.

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    Test your knowledge on corporate finance topics, including accrued expenses, exchange rates, and organizational roles. This quiz also covers aspects of SLI Sylvania's management and distribution strategies in the electrical products sector. Perfect for students and professionals in finance and business management.

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