FINANCIAL RE-ENGINEERING

Presentation By:MANISH KHATRI

What is Re-engineering ?
Re-engineering is the radical redesign of business processes and organisational structure in order to achieve significant improvements in performance, such as productivity, cost reduction, cycle time, and quality.

brands and technology which has to be done with financial restructuring and financial requantification of every qualitative business variable. systems. people. .Financial Re-engineering Financial Re-engineering is the recementing or changing of products.

‡ Reduce the number of cost centre¶s in the General Ledger. . review and improvement of key process controls.Objectives of Financial Re-engineering ‡ Facilitation of the New Budget Framework. ‡ Improve the efficiency and accuracy of financial data capture. ‡ Identification. ‡ Introduce structures to facilitate future introduction of project costing.

Continuous Improvement Benefit.Benefits of Financial Re-engineering ‡ ‡ ‡ ‡ ‡ ‡ Ease of Access Benefit. Better Decision Making Benefit. Research Reporting Benefit. Ease of Analysis Benefit. . Risk Management Benefit.

Programmes and policies to reward various stakeholders. Product and process choices.Holistic Approach to Innovative Financial Engineering Benchmarking of the earning-expectations. costs and flexibility). Fund-deployment strategies. Funding structure (variations. ‡ Satisfaction of the shareholders. ‡ Perpetual sustenance of the financial and real growth of the business enterprise . ‡ ‡ ‡ ‡ ‡ ‡ . Monitoring and assessment systems.

Holistic Approach to Innovative Financial Engineering .

Various Forms of Financial Re-engineering ‡ Financial Restructuring ‡ Corporate Restructuring ±Mergers /Acquisitions ±Divestitures ±Demergers .

re-build or construct or form a new financial structure. 9 .Financial Restructuring Financial Restructuring is a process to re-arrange.

Corporate Restructuring Corporate Restructuring is a conscious effort to restructure policies. processes and people. products. . to serve the redefined purpose on a sustainable basis. programmes.

Merger A transaction where two firms agree to integrate their operations on a relatively coequal basis because they have resources and capabilities that together may create a stronger competitive advantage. .

.Acquisition A transaction where one firm buys another firm with the intent of more effectively using a core competence by making the acquired firm a subsidiary within its portfolio of businesses.

Overcome entry barriers.Reasons for Acquisitions ‡ ‡ ‡ ‡ ‡ Increased market power. ‡ Avoid excessive competition. ‡ Increased diversification. . Lower risk compared to developing new products. Cost of new product development. Increased speed to market.

 World leader in the recycling of used aluminum beverage cans.900 employees.  The world¶s leader in producing (19%) flat-rolled aluminum products.  No. ‡ the world . 1 in rolled products producers in Europe. 2 in rolled products producers in South America. South America and Asia.About Novelis  Novelis is globally positioned and operating in 11 countries with approximately 12.  No.

Technology sales. Distribution Services. Cans and closures. 10/3/2010 Template copyright 2005 www. Automotive and Transportation. Flexible and semi-rigid packaging. Specialty Consumer and Industrial.com 15 .brainybetty. The company caters to markets like: ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Building and construction. Printing and Lithography.

brainybetty.  Hindalco¶s Stock Traded on‡ Bombay Stock Exchange.About Hindalco  It is the flagship company of the Aditya Birla Group.  One of the most cost-efficient aluminum producers globally. India.com 16 . ‡ Luxembourg Stock Exchange. ‡ National Stock Exchange.  Based in Mumbai. 10/3/2010 Template copyright 2005 www.

which it converts into value-added products at the most reasonable prices.. ‡ Provide a strong platform for sustainable growth and ongoing success. ‡ Present leaders in their respective markets.Synergy: Reason behind merger ‡ The combination of Hindalco and Novelis will establish a global integrated aluminum producer with low-cost alumina and aluminum production facilities combined with high-end aluminum rolled product capabilities . ‡ Hindalco¶s motive was to cover the major market share that Novelis possesses. 17 . ‡ Novelis was to procure raw material from the market.

‡ Hindalco is getting a ready-made market. ‡ The performance of the two companies may be completely opposite to each other.Risk Associated ‡ Novelis has a high amount of debt. ‡ Hindalco will gain but Novelis will be at a loss. .

namely UBS. ABN Amro and Bank of America. ‡ Essel Mining & Industries. ‡ AV Metals ² the A V Birla group's will infuse US$ 3.8 billion from three financial institutions. a closely held company of the group. including approximately US $2.40 billion of debt. . ‡ AV Metals will take loans worth US$ 2.The Deal ‡ Hindalco has acquired Novelis in an all-cash transaction at approximately US$6 billion. will bring in US$ 300 million while Hindalco will mobilize US$ 450 million from its treasury operations.5 billion to finance Hindalco's proposed acquisition.

‡ The group would now have operations in 14 countries. ‡ The acquisition will help Hindalco to shorten the learning curve for technology. ‡ Overseas operations already account for nearly 30 per cent of the group's revenue now and the Novelis acquisition would increase it to 40 per cent in three years. ‡ The group would become the world's largest player in the downstream aluminum.The Outcome ‡ The Novelis acquisition will give immediate scale and a global footprint. .

technology and process leadership. it proved to be of strategic value in the long run. ‡ The deal showed losses at the earlier stage. ‡ For Hindalco. ‡ Hindalco should have before acquiring the company seen whether the operations of the other company is going in the feasible direction. costeffective manpower and ready market will help rationalize the cost structures and balance the pressure on the bottom lines .Recommendation ‡ Growth of M & A activity in the commodities sector was due to some factors.

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