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A Case Study on Moser Baer

By:

Aabhas & Shubham

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Main Issues:-

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Overview of Moser Baer:

Headquartered in New Delhi

Established in 1983 by Deepak Puri

One of the world's largest manufacturers of Optical Storage

media like CDs and DVDs

Presence in over 100 countries

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Divisions

Moser Baer

Storage

OpticalStorage

Solid StateMedia

Entertainment Solar

Photo VoltaicCells

Solar EPCBusiness

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Causes of Failure

Storage Industry Trouble began somewhere in 2004-05.

Moser Baer was still growing in volumes but the profit on each CD

started declining. The price of a CD fell from about $1.20 to about 20

cents in just three years. To maintain its volume leadership, Moser Baerneeded money to invest in large manufacturing facilities.

It raised money from Warburg Pincus and International Finance Corp

(IFC). The company invested almost $900 million in expanding capacity

in 1999-2007. The idea was to build massive, global scale and destroy

the competitors.

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Solar Industry

Moser Baer in 2005 thought that Solar market is soaring one and itdiversified. Moser Baer made several financing arrangements. First, itissued FCCBs of about $150 million (Rs. 825 crore) in 2007. In October2007, the company raised another $100 million and Rs. 411 crore inSeptember 2008.

When Moser Baer was just about getting ready for its solar play, the worldwas hit by a severe financial downturn. And, the solar business changedcompletely. As the supply of polysillicon increased, its prices began to fell,while at the same time the economic crisis resulted in cutbacks in solarsubsidies across Europe which accounted for more than 60% of solar paneldemand in the world.

Also, Moser Baer completely underestimated Chinas manufacturingpotential, which is now the cheapest and largest manufacture of solarpanel.

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Growth Perspective of Various

Divisions

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Storage Industry

Optical Storage

Declining Market

Company is one of the largest

manufacturer of Optical

Storage

Company is operating with

huge unutilized capacity

Major Driver in this industry

could be popularity of Blu-Ray

Disk

Flash Storage

Growing Market

Company is in operation but

profit is very low

So, insignificant contribution

to companys revenue

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Entertainment Division

In 2011, The Indian Media & Entertainment (M&E) industry

witnessed growth of 12% y-o-y to reach INR 728 billion

Division is almost over

Company doesnt have fund to buy licenses of new movies

Still selling on old collection of movies & cds

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Solar Industry

Photovoltaic Cells

Highly Growing market

Company is unable to

compete with cheap Chinese

solar panels and so this

division is not successful

Solar EPC Business

Growing Market

Company is operating but

with a very small portfolio

So, not a big cash generator

But, can give a boost to photo

voltaic segment as well

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Strategies to Overcome Crisis:-

1. Debt Restructuring:

Reducing the Principal amount resulting in lower interest payment

liability.

Part payment of loan in equity shares and other part in cash.

Similar pattern of payment shall be followed for creditors.

2. Labour Cost Cuts: Retrenchment of workers in inefficient sector like entertainment.

Initial salary cuts.

Instead of bonus-in-cash sweat equity shall be used to retain and

appreciate employees.

3. Capital Infusion by Promoters: Puri family holds 15% stake in the business which has to be increased.

Since it would be utilized for expansion in Solar Sector.

Boost the morale of stakeholders as well as debt holders for safety of

their money.

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4. Dilution of Equity :

o Issuing more equity shares of MBSL shall be considered as a

plausible option. Since cost of oil products is on high rise.

Significant growth in India.

5. Tie-ups with different Production Houses:-

o Rather than purchasing the rights of new movies tie-ups with

various production houses shall be madeo This will result in utilising in unutilised capacity of Storage

Department

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