A Case Study on Moser Baer

By: Aabhas & Shubham

Main Issues:-

Overview of Moser Baer:

Headquartered in New Delhi Established in 1983 by Deepak Puri One of the world's largest manufacturers of Optical Storage media like CDs and DVDs Presence in over 100 countries

Divisions
Moser Baer

Storage

Entertainment

Solar

Optical Storage

Solid State Media

Photo Voltaic Cells

Solar EPC Business

Causes of Failure
Storage Industry
Trouble began somewhere in 2004-05. Moser Baer was still growing in volumes but the profit on each CD started declining. The price of a CD fell from about $1.20 to about 20 cents in just three years. To maintain its volume leadership, Moser Baer needed money to invest in large manufacturing facilities. It raised money from Warburg Pincus and International Finance Corp (IFC). The company invested almost $900 million in expanding capacity in 1999-2007. The idea was to build massive, global scale and destroy the competitors.

Solar Industry

Moser Baer in 2005 thought that Solar market is soaring one and it diversified. Moser Baer made several financing arrangements. First, it issued FCCBs of about $150 million (Rs. 825 crore) in 2007. In October 2007, the company raised another $100 million and Rs. 411 crore in September 2008. When Moser Baer was just about getting ready for its solar play, the world was hit by a severe financial downturn. And, the solar business changed completely. As the supply of polysillicon increased, its prices began to fell, while at the same time the economic crisis resulted in cutbacks in solar subsidies across Europe which accounted for more than 60% of solar panel demand in the world. Also, Moser Baer completely underestimated Chinas manufacturing potential, which is now the cheapest and largest manufacture of solar panel.

Growth Perspective of Various Divisions

Storage Industry
Optical Storage Declining Market Company is one of the largest manufacturer of Optical Storage Company is operating with huge unutilized capacity Major Driver in this industry could be popularity of Blu-Ray Disk Flash Storage Growing Market Company is in operation but profit is very low So, insignificant contribution to companys revenue

Entertainment Division
In 2011, The Indian Media & Entertainment (M&E) industry witnessed growth of 12% y-o-y to reach INR 728 billion Division is almost over Company doesnt have fund to buy licenses of new movies Still selling on old collection of movies & cds

Solar Industry
Photovoltaic Cells Highly Growing market Company is unable to compete with cheap Chinese solar panels and so this division is not successful Solar EPC Business Growing Market Company is operating but with a very small portfolio So, not a big cash generator But, can give a boost to photo voltaic segment as well

Strategies to Overcome Crisis:1. Debt Restructuring: Reducing the Principal amount resulting in lower interest payment liability. Part payment of loan in equity shares and other part in cash. Similar pattern of payment shall be followed for creditors. 2. Labour Cost Cuts: Retrenchment of workers in inefficient sector like entertainment. Initial salary cuts. Instead of bonus-in-cash sweat equity shall be used to retain and appreciate employees. 3. Capital Infusion by Promoters: Puri family holds 15% stake in the business which has to be increased. Since it would be utilized for expansion in Solar Sector. Boost the morale of stakeholders as well as debt holders for safety of their money.

4. Dilution of Equity : o Issuing more equity shares of MBSL shall be considered as a plausible option. Since cost of oil products is on high rise. Significant growth in India. 5. Tie-ups with different Production Houses:o Rather than purchasing the rights of new movies tie-ups with various production houses shall be made o This will result in utilising in unutilised capacity of Storage Department