xInstitute of Integrated management Studies

Corporate Finance
Marks: 100

NAME: DINAKARAN SWAMIRAJ PILLAI

SUBJECT: CORPORATE FINANCE
COURCE DETAILS: E-MBA (FINANCE
MANAGEMENT) PROGRAM
ENROLLEMENT NO.: IP67914041PS
Q 1) Steel Authority of India Limited (SAIL), one of the world’s largest government-owned steel
making
companies and India’s largest, was incorporated on January 24, 1973. The Government of India held
75% of the stake in SAIL.
The working capital management at SAIL was vital to ensure the firm’s liquidity and profitability as a
large
part of the assets was attached to its current assets. This case is designed to analyze the working
capital
management at SAIL in order to understand the current assets and current liabilities of a
manufacturing
firm vis-a-vis a non-manufacturing firm. The computation of the operating cycle and analysis of
liquidity
ratios provide an important basis for decision making.
a. Analyze how the global market situation may impact a firm’s working capital. (10)
Answer:

Abstract: Steel Authority of India Limited (SAIL),

one of the world’s largest government-owned steel
making companies and India’s largest, was
incorporated on January 24, 1973. The Government
of India held 75% of the stake in SAIL. The working
capital management at SAIL was vital to ensure the
firm’s liquidity and profitability as a large part of the
assets was attached to its current assets. This case
is designed to analyze the working capital
management at SAIL in order to understand the
current assets and current liabilities of a
manufacturing firm vis-a-vis a non-manufacturing
firm. The computation of the operating cycle and Case Studies on Best Case Studies on Aviation
analysis of liquidity ratios provide an important basis Practices - Vol. I Industry

for decision making. For Case Books Click Here >>

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Pedagogical Objectives:
 Understand the working capital situation in a steel manufacturing company.

 Analyze how the global market situation may impact a firm’s working capital.
 Identify the areas where business can take strategic decisions for optimizing the operating
cycle.

 Understand the concept of Working Capital, Working Capital Gap, Gross Operating
Cycle, Net Operating Cycle or Cash Cycle.

Keywords : Working Capital Management,Operating Cycle,Net Operating Cycle,Gross

Operating Cycle,Cash Cycle,Working Capital Gap,SAIL,Steel Authority of India
Limited,Steel Manufacturing Industry,Manufacturing Industry,India,Steel Industry,Corporate
Finance,Current Assets,Current Liabilities
b. Identify the areas where business can take strategic decisions for optimizing the operating
cycle. (10)
Q2) Set in the backdrop of one of the best stated IndianCFOs, the primary objective of the
case is
to analyze the emerging roles of a Chief Financial Officer (CFO) in the changing business
environment of the 21st century.CFOs, previously known for maintaining accurate financial
details of the company, have now become the strategic decision-makers in the company. The
case
mainly focuses on various roles played by Praveen Kadle, the CFO of Tata Motors, in turning
around the company and the crucial role played by him in implementing the management's
decisions effectively in times of crisis.
a. Comment on the core function of a CFO and his/her changing roles with the increasing
business demands (10)
Answer:
A chief financial officer (CFO) is the senior executive responsible for
managing the financial actions of a company. The CFO's duties include
tracking cash flow and financial planning as well as analyzing the company's
financial strengths and weaknesses and proposing corrective actions.

The CFO is similar to a treasurer or controller because they are responsible

for managing the finance and accounting divisions and for ensuring that the
company’s financial reports are accurate and completed in a timely manner.
Many have a CMA designation.

KEY TAKEAWAYS

 The chief financial officer, or CFO, of a company is the top-level

financial controller, handling everything relating to cash flow and
financial planning.
 Although the role of a CFO can be rewarding, there are legal
considerations that must be strictly adhered to.
 CFOs oversee taxation issues for their companies.
 Often, a CFO is the third-highest position in a company, playing a vital
role in the company's strategic initiatives.
How Chief Financial Officers Work
The CFO reports to the chief executive officer (CEO) but has significant input
in the company's investments, capital structure and how the company
manages its income and expenses. The CFO works with other senior
managers and plays a key role in a company's overall success, especially in
the long run.

For example, when the marketing department wants to launch a new

campaign, the CFO may help to ensure the campaign is feasible or give input
on the funds available for the campaign.

In the financial industry, a CFO is the highest-ranking financial position within

a company.
The CFO may assist the CEO with forecasting, cost-benefit analysis and
obtaining funding for various initiatives. In the financial industry, a CFO is the
highest-ranking position, and in other industries, it is usually the third-highest
position in a company. A CFO can become a CEO, chief operating officer or
president of a company.

The Benefits of Being a CFO

The CFO role has emerged from focusing on compliance and quality control to
business planning and process changes, and they are a strategic partner to
the CEO. The CFO plays a vital role in influencing company strategy.

The United States is an international financial hub and global economic

growth increases employment growth in the U.S. financial industry.
Companies continue to increase profits leading to a demand for CFOs.
The U.S. Bureau of Labor Statistics predicts the job outlook for financial
managers to grow 7% between 2014 and 2024.

Special Considerations
The CFO must report accurate information because many decisions are
based on the data they provide. The CFO is responsible for managing the
financial activities of a company and adhering to generally accepted
accounting principles (GAAP) established by the Securities and Exchange
Commission (SEC) and other regulatory entities.

CFOs must also adhere to regulations such as the Sarbanes-Oxley Act that
include provisions such as fraud prevention and disclosing financial
information.

Local, state, and federal governments hire CFOs to oversee taxation issues.
Typically, the CFO is the liaison between local residents and elected officials
on accounting and other spending matters. The CFO sets financial policy and
is responsible for managing government funds.
b. Analyze the factors that made Praveen Kadle,CFO of Tata Motors, the Best Indian CFO of
2006. (10)
Q 3) Essar Steel Ltd. (Essar Steel) is the largest integrated producer of steel in Western India
with
a capacity of 4.6 million tonnes per annum (mtpa). Essar diversified its business by
expanding
into various sectors. The simultaneous launch of several projects during the 1990s pushed the
group towards a liquidity crunch. To tide over the financial crisis, Essar Steel decided to avail
the
option of CDR to get out of the debt trap and strengthen its balance sheet. The case discusses
Essar Steel’s financial crises and its reengineering. It also discusses how financial problems
affected the liquidity of Essar Steel and the several financial strategies formulated by Essar
Steel
to tide over the problems. It also helps to evaluate the reengineering strategy undertaken by
Essar
Steel to repay the debt and expansion of related projects.
a. Comment on the factors lead the Essar Steel towards financial crises. (10)
b. To evaluate the re-engineering Strategy adopted by Essar Steel to overcome its
problems. (10)
Q4) The primary objective of the case is to deal with the problems encountered by Suzlon
Energy
Ltd., due to the liquidity crisis that surfaced in the company in the year 2008. Suzlon started
as a
very small company to provide alternate source of energy to the textile company of the
founder,Tulsi R.Tanti.With in no time, it evolved as the world's fifth largest manufacturer of
wind
turbines. However, the company faced several problems in the year 2008 due to over
leveraging,
increased costs involved in replacing the faulty blades that it supplied to its US and Portugal
clients and slow down in sales due to the global financial downturn. The liquidity crisis was
further compounded by the acquisition commitments for stake in REpower. Suzlonis looking
at
various financing options to meet its commitments. Given these pressures, what are the
different
alternative finance sources, which Suzlon can tap in order to come out of the liquidity crisis?
a. Evaluate the reasons for the current crisis in Suzlon (10)
b. Suggest the various options available for Suzlon to come out of the liquidity crisis.
(10)
Q5) Kingfisher Airlines, which redefined air travel in India, hit financial turbulence in late
2011
due to mounting debt and a shortfall in expected revenue. Despite restructuring the debt with
the
help of creditors, the airline found it difficult to extricate itself out of its troubles. The case
tracks
the transformation in the Indian aviation sector as well as the ups and downs of Kingfisher
Airlines. It provides information on the complex debt restructuring exercise at Kingfisher
Airlines.
a. Analyze the changing regulatory environment, tax structure, and tariff with regard to the
airline industry in Emerging Indian economies (10)
b. Comment on the debt restructuring process and the challenges of making it successful
(10)