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Bannarilal amman group case study by Manpreet singh Digital

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Case solution of bannari lal amman group Case study by Manpreet Singh Digital

Case solution of bannari lal amman group Case study by Manpreet Singh Digital

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  • 1. B Growth of Bannari Amman Group- A Family Owned Enterprise Group 4 S a r a n g B n a u b a k d e & M a n p r e e t S i n g h Page 1
  • 2. B Growth of Bannari Amman Group- A Family Owned Enterprise Group 4 S a r a n g B n a u b a k d e & M a n p r e e t S i n g h Page 2 Synopsis : Bannari Amman Group (BAG) was one of the largest industrial conglomerates in South India with manufacturing, trading, distribution and financing corporations in the group. This group had the legacy of conducting business ventures over the past 40 years. Starting as a group of related and unrelated businesses in a purely family-owned entity, now the group had three publicly listed companies and over 15 family-owned businesses in its fold. Following the tradition that the eldest in the family headed the group, the group performed under the leadership of the chairman. Manufacturing and trading units involved goods such as sugar,liquors,granite and cotton yarn, as well as distribution of renowned brands. The service sector units were compromised of winds power energy, education, healthcare, real estate, and financial sector companies. The group’s net worth exceeded from Rs 12,073 Million with sales turnover crossing Rs 25,513 million. Under the BAG there are three listed companies: Bannari Amman sugar Ltd,(BASL) Bannari Amman Spinning Mills Ltd(BASML) Shiva texyarn Ltd(STL) They started as Coimbatore Alcohol and Chemical Ltd near Erode District Tamil Nadu in 1978.Used alcohol for industrial and portable use using sugar industry molasses as raw material. This led to birth of Shiva distillers Ltd, in Coimbatore in TN, which was leading producer of Indian made liquors. In 1983 Bannari Amman Sugar ltd was incorporated which have IPO in 1983 which was oversubscribed by more than 16 times. They recived huge funding from bnks and public to start with their projects. This was due to creditworthiness of Balasubramaniam, chairman of BAG. He believed “if you need to run a business, you should be conversant with all aspects of business”. He was qualified CA,CS and had hands on experienced in sales, export, finance and administration. They extended their business to Sugar, alcohol, food, textile, health, finance, transport, granite and cogeneration, developing synergies in all its business. For example. Waste of sugar industry was used in alcohol and alcohol waste was used as manure in agriculture and all transportations was taken care by their owned transport companies. They generated additional revenue sources being in collaboration with TN& Karnataka power grid provided them with power generated from bio waste. It provided 245.42 million units of power in 2009-10. Balasubramaniam established strategic units and implemented decentralization where his highly qualified brothers helped in achieving this family managed consortium. They went into huge diversification on interrelated industries and developed great supply chain to manage the whole business.
  • 3. B Growth of Bannari Amman Group- A Family Owned Enterprise Group 4 S a r a n g B n a u b a k d e & M a n p r e e t S i n g h Page 3 Problem Definition The chairman of BAG had a day long meeting with the unit heads of BAG on January 6, 2011 to review whether the business heads were capable of handling their units by themselves, what was the appropriate method of hand holding for the new generation of entrepreneurs and how would the unit heads act to optimize performance of their units. He observed that the business group's units emerged as independent entities, but the businesses were complementing each other to a certain extent. This was especially true for the logistics. Due to this, the group's businesses enjoyed an inherent advantage. As he looked at the challenges that the units would come across under new leadership in the forthcoming years, he was also aware of the need to develop the vision across the spectrum of units big and small, flagship companies and the smaller stragglers. The chairman looked for processes to keep the group synergies in place and identify the businesses that could be strengthened over time. The main question remains as How will this private regime that turned into a reputed corporate structure sustains its operations and advance future in all corridors? Situational Analysis In 2010, share price at NSE stands at Rs,1365 (Exhibit 1) Total Capacity of BASL 21,500 TCD Cogeneration of power, capacity 84.8 MW, producing 244.52 million units of power & exported 168.78 million units in 2009-10 119 wind turbine generators totaling 44.53 MW of power Total equity of 37.5 million INR with debt of 57.5 million INR Authorized dealer for Ambassador cars for more than 30 years along with Lancer, trekkers RTV utility vehicles, GM India, Yamaha Motor(motorcycle) in south India. Total Capacity of 160 Klit, of alcohol per day Major private sector sugar producer in south India with capacity 19,000 TCD.(exibit2) Implemented famer friendly programs, provide financial incentives, technology education, insurance against accidents and did prompt payment to farmer within 14 days. Satyamangalam unit of BASL stood number one in country’s sugar industry. Developed synergies between all its businesses. Granite division is one of the best in Indian stone industries. SDL has annual production capacity of 6.6 million cases and turnover of RS 4050 million Kerala Alcohol has capacity of more than 1 million cases Shiva textile awarded with ISO 9001 exported 40% of its capacity of approx. 18 tonnes per day. Coimbatore Agro produce 120 metric tons of wheat products. They also had presence in cargo, education industry, healthcare industries They have “Philanthropreneurs “ approach .
  • 4. B Growth of Bannari Amman Group- A Family Owned Enterprise Group 4 S a r a n g B n a u b a k d e & M a n p r e e t S i n g h Page 4 Conclusions/ Recommendations  Bannari Amman group is diversified conglomerate in South India with vast presence in many industries.  They have very well used their synergies to coordinated between their supply chain of various industries.  They have good decentralization approach which gave freedom to many top mangers to create value for their stake holders.  Current ratio of company stands at 1.72 and cash profit turnover ratio is 27.9%, which implies that company need to utilize their available assets in more better way.  Try not giving dividends and using the amount for sustainable growth.  Can foray into international cargo business.  Enter into dairy farming and food products which is current trend, as they have good raw material availability from their own industries like wheat & sugar.

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