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AAYAM DURABLES

LTD
Scenario II
ByRohan Sachdeva 231118
Kirti Ramesh. Obhan 231076
Kshitij Sethi 231088
Rahul Sharma 231112
Rohit Malhotra 231082
Jayant Adlakha 231070

Introduction
Aayam Durables is a public
company which deals in consumer
durable selling
Flat

panel display (LED/LCD)

Refrigerators
Washing

&

Machine

The company is facing tough time


due to shortage of funds to invest in
product innovation and marketing.

DETAILS OF THE CASE.

Expected
Growth

Net
Revenue

Losses

Expected Growth Rate in 2015 is 15%.


Net revenue for the company is targeted to increase
from 842cr. (2014) to 900cr. (2015).

Losses have to be reduced from 5.5% to 2.5%.

Manpower cost has to be reduced from 21.5% i.e Rs.


Manpower 181.03 cr to 19.5% i.e Rs. 164.19 cr. Thus a total saving
Cost
of 16.84 cr.

Company

ADL saw a loss in all three products and an overall loss of


46 cr.

Scenario II

It was felt that the industry will grow in 2015 by 15% over
2014. As penetration level in the industry was low in India
and there might be global stagnation in economy.

In the circumstances, it was felt that revenue growth for ADL


was important. The strategic objective of ADL was to achieve
a revenue of Rs 900 crores in 2015 & reduce the loss from
-5.5% (2014) to -2.5% 2015). To achieve this objective, it was
decided to reduce manpower cost from 21.5% to 19.5% (of
2014 revenue level).

Solution

Attrition of employees

Layoff due to underperformance

Reduction in hiring

Reduction in the % of salary increase

Increased manpower in R & D Department

Increased manpower in sales Department

Reduction due to
Attrition
Manpower cost reduction due to attrition

Band 4 :
10% of 12 = 1 (approx)
1* 1.2= Rs 1.2 cr

Band 3
10% of 83 = 8 (approx)
8* 0.75 = Rs 6 cr

Band 2
15% of 158 = 23 (approx)
23*0.35 = Rs 8.05 cr

Band 1
25% of 327 = 81 (approx)
81* 0.15= Rs 12.15 cr
Total Cost Reduction is Rs 27.7 crores

HR Department
Firing of 1 General Affairs HR Band 3
Band 3 has average CTC of 0.75 Crore.
Cost Saving = 1 * 0.75 = 0.75 appendix 7

Firing of 1 Regional HR Band 3


appendix 7
Band 3 has average CTC of 0.75 Crore.
Cost Saving = 1 * 0.75 = 0.75
Total Cost Saving = 0.75 + 0.75 = 1.5 cr

Finance Department

Firing of 2 Corporate CFO Band 3

Band 3 has average CTC of 0.75 Crore


Cost Saving = 2 * 0.75 = 1.5

Firing of 3 Corporate CFO Band 2

Band 2 has average CTC of 0.35 Crore


Cost Saving = 3 * 0.35 = 1.05
Total Cost Saving = 1.5 + 1.05 = 2.55 Cr

R & D Electronics

Firing of 3 persons band 2


Band 2 has average CTC of 0.35 Crore
Cost Saving = 3 * 0.35 = 1.05 crore

Supply Chain

Firing of 1 person Band 3


Band 3 has average CTC of 0.75 Crore
1 person Band 2
Band 2 has average CTC of 0.35 Crore
Total Cost Saving = 0.75 + 0.35 = 1.1 Crore

Marketing Department

Firing of 1 person Band 3

Band 3 has average CTC of 0.75 Cr.


Total Cost Saving = 1 * 0.75 = 0.75 Crores

Thus the total saving due to manpower reduction


(crores) = 1.5 (HR) + 2.55 (Finance) +1.05 (R n D) +
1.1 (Sales) + 0.75 (Marketing) = 6.95 Crores

Attrition
Recruitments
The recruitment schedule is as follows:
Bands\D
ept.

Customer
Service

R&D

CorpHR

S&M

CTC (in
cr)

Band 4

Band 3

1.5

Band 2

3.5

Band 1

15

10

15

Total cost incurred = Rs 11crores

Calculations

Total amount invested in the company in 2014

= Revenue - Profit
= 842 - (-46) = 888

(Appendix 8)

Expected amount to be invested in 2015

= Expected Revenue + provision for loss + Increment in salary


= 900 + 2.5% of expected revenue+ 24.39 cr
= Rs 946.89 cr

Therefore extra fund for investment for year 2015

= 946.89 888
= Rs 58.89 cr

Continued

Total funds after cost reduction in manpower (Attrition


+ employee lay off recruitment)
= 27.7 + 6.95 11
= Rs 23.6 crore

So extra funds that the company needs in order to


meet expenses :
= 58.89 -23.6 = Rs 35.29 crores

THANK YOU