Balrampur Chini Mills


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Case Details:

Case Code : BSTA012
Case Length : 15 Pages
Period : 1990 - 2005
Pub Date : 2005
Teaching Note :Not Available
Organization : Balrampur Chini Mills
Industry : Sugar
Countries : India

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction

In 2005, Balrampur Chini Mills (Balrampur), the largest sugar manufacturer in India, was also one of the most efficient producers of sugar in the country. High capacity utilization rates, good recovery of sugar and a well-diversified business model with revenue streams from sugar, alcohol derivatives and power had kept Balrampur afloat even during the sugar industry's lean years. Balrampur had also been remarkably successful in acquiring inefficient sugar mills and turning them around.

Since 2000, Balrampur's turnover and net profits had grown at a compounded average growth rate (CAGR) of 21.37% and 27.25% respectively.

During the same period, EPS (earnings per share) had nearly tripled from Rs 11.82 (2000) to Rs 31.88 (2004). Even as Balrampur had been expanding its capacity, it had been paying a dividend of around 35%. Balrampur had posted a turnover of Rs 853.85 crore and a net profit of Rs 60.49 crore in 2003-04.

Balrampur's financial health was reflected in the highest rating for its commercial paper from credit rating agencies such as ICRA (A1+) and CRISIL (P1+). Thanks to this rating, Balrampur could mobilize finances at the most competitive rates. Balrampur also enjoyed high cash credit limits.

As 2004 drew to a close, competition was intensifying for Balrampur. At the same time, with many of the low hanging fruits having been plucked, there were no underperforming sugar mills suiting the company's requirement, up for sale in the Indian state of Uttar Pradesh (UP). Balrampur's managing director, Vivek Saraogi (Vivek) wondered what moves his company should make to build on the competitive advantages that had been created in the last two decades...

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