Prodigy 2021

Problem Statement

Mr. Kishore is the managing partner of the construction company - Tesla Constructions. The
market outlook and the financial condition of the company are making him increasingly
worried. In the last two years, the decrease in government spending on infrastructure has
severely affected the company's balance sheet. Also, the disruptions due to the pandemic have
caused the existing projects to delay, which increased the costs significantly. With almost no
income in 2020, the company struggled in financing the machinery and paying the staff. Due
to this, the company has reduced its workforce by almost 40%. Now, Mr. Kishore is in a
precarious situation, and he is confused about how to proceed with the cash reserves to take
the company forward.

Mr. Kishore has started this business about two decades ago with almost nothing in his hands
and has turned into a reputed company with an annual turnover of INR 500 million. Tesla's
business is mainly from state and central government projects of roads and buildings. As the
company specializes in the construction of bitumen roads, most of its projects are of roads. The
company operates mainly in three districts of Andhra Pradesh. As this industry is equipment
intensive, the company has significant assets in machinery, which are financed through loans.
The profit margin in this industry is about 8% of the total revenues.

Over the last few years, the company's turnover increased gradually; however, the company's
profit margins have gone down to 6% due to the increase in operational costs. The cost of raw
materials and labor cost have gone up by 20%. Also, the new regulations of the state
government have forced the company to invest in new bitumen manufacturing plants of about
INR 70 million. These new plants have been mostly idle, and the asset utilization has been low.
So, this investment has put additional stress on the company's liquidity to meet the operational
needs.

The company is unsure of the strategy it should follow to come out of this crisis. So, Mr.
Kishore approaches a consultant i.e. you to address the company’s financial problems. Please
help him address the following issues.

1. What should be the company's next steps to increase its profits? Should he take up new
projects from the government? If yes, what are the risks involved? How can he mitigate
those risks?
2. How should he choose to invest company's current cash reserves? Should he continue
to expand his current business, or should he try to diversify his business? (E.g., taking
up projects of construction of buildings) Why or why not?

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Submission Details

1. The submissions should be done only on the D2C platform.

2. The solution of the case can be a maximum of three pages excluding the title and thank
you slides.
3. The submission should be in PPT or PDF format only.
4. The font should be Times New Roman and minimum font size should be 12.
5. Mention your name, email ID and phone number in the title slide.
6. The solutions will be judged based on the following parameters
a. Clarity and structure of thought
b. Comprehensiveness
c. Feasibility
d. Ingenuity

www.iimb-vista.com
In case of any queries, contact: vistas@iimb.ernet.in | Prudhvi: +91-9004143060