Voltas Ltd.: From Turnaround to the 'Big Bang'

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Case Details:

Case Code : BSTR225
Case Length : 21 Pages
Period : 1996-2006
Organization : Voltas Ltd.
Pub Date : 2006
Teaching Note :Not Available
Countries : India
Themes: Diversification | Turnaround
Industry : Consumer Electronics

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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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The Restructuring

The restructuring process began with the formation of a core management team . Each business of the company was first analyzed to determine whether it was viable. For this analysis, Voltas evaluated the business on market size, growth potential, and strength of the competition. Then, it assessed whether the company had the necessary competence to compete successfully against the competition on critical success factors in the particular business. When a business did not fare well in the evaluation, it was identified to be sold.

The restructuring exercise also involved the reorganization of Voltas' businesses around their core competencies of air conditioning and engineering - two businesses which, according to company sources, had yielded the most sustainable growth for many years.

Another priority for the top management of Voltas was to stabilize the cash flow position of the company. For this, the company's idle assets were either leased or were sold off to help finance the restructuring.

For example, in 1998, Voltas sold a part of its unutilized real estate and realized Rs. 560 million...

Identifying Avenues For Growth

The turnaround efforts of the company took three years to bear fruit. From a loss of Rs. 119 million in 1998-99, Voltas recorded an operating profit of Rs. 69 million in 2000. The company offered a dividend of 12 per cent in 2000. Though Voltas' turnaround efforts had begun to show results, it still had to address the issue of low operating margins, which were at less than five per cent. In 2001, there was another change in management with Ashok Soni (Soni) taking over as the managing director of the company...

The Electro-Mechanical Business

Voltas' electromechanical division delivered solutions in several areas. It operated in India as well as in several markets, either independently or through joint ventures. This division had been very successful all through and contributed significantly to the company's profits.

Over the years, through its wholly-owned subsidiary, Voltas International Limited (VIL), Voltas had executed a number of electro-mechanical projects at several overseas locations .

The unit, which won several awards for its export performance, maintained good relations with several international consultants...

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