Black & White - Why Growing Business Failed overnight ? (સ્ટાર કંપનીઓ રાતોરાત ઊંધા માથે કેમ પટકાય છે)

Why Growing Business Failed overnight ?                                                          (સ્ટાર કંપનીઓ રાતોરાત ઊંધા માથે કેમ પટકાય છે) 

Interpol arrested a Business Tycoon from Monrovia – a Liberian city near Atlantic Coast. A man booked under Prevention of Money Laundering Act (PMLA) by ED and CBI, Labor Courts were behind him.

Sunil Kakkad was born in Tharad Village (Gujarat) started IT hardware business in 1992 taking Rs.5 lac loan from his father, as he was a computer engineer. He was a high dreamer and his ambition created Sai Info System Ltd (SIS) dealing in ICT Business, in 2012-13 SIS has 1300+ Staff, Rs. 2,000 Cr Revenue, Rs. 145 Cr Profit, Rs. 2,500 Cr order book and Rs. 1,500 Cr Loan.

How it Grows overnight ?

SIS major revenues comes from Mega Projects specially from governments through Lowest Bidding.  Orders Like, (1) Rs. 200 Cr BSNL  Billing & VOiP System. (2) Rs. 1,500 Cr Pan India Postal Department IT Hardware up gradation (3)  Rs.700 Cr Mumbai CCTV Project , etc. Basically, these are Big & Complex projects where Major ICT player like  WIPRO, ESSAR participated and still SIS won the tender by L1 !!! further, SIS has opened offices in USA, Canada, Delhi, Mumbai, etc. to fuel its growth ambitions and planning to have Rs. 15,000 Cr IPO. Company has a major credit sales, service not cash sale, so it took bank loans to meet it’s working capital and capital expansion requirement at high rate and by window dressing of books of account, showing higher valuation.

How it Collapsed overnight ?   (હારેલો જુગારી બમણું રમે)

 One day SIS did not able to pay even salary to it’s employee and goes out of business by not able to meet tender  terms & condition of key projects. Severe cash crunch !!!  I personally knows how government project  and banking system works. so, they keep on pumping money through debt to run operation (staff, inventory) and start diverting money to related parties. At the end, supplier’s and bank’s started claiming money as money circulation from project gets over stretched and tender got cancelled.

 What is the take away from these management  blunder  ?

(1) Over expansion kills  when your Revenue flow is poor. So, have proper Revenue Management system.

(2) Have customer diversification strategy to avoid dependency  on few customer.

(3) Develop Corporate Governance System & Sound Business Policies to mitigate risk internal & external.

(4) Lower the debt to minimize cost of capital and create contingency fund.

(5) Have Professional’s in your team who can guide & draw your attention for wrongful action’s .

(6) Don’t be hurry to grab the project, asses your capability to deliver goods, Services and customer ability to honor timely payment then only decide for the sale.

Mistakes happens but blunder is not acceptable as it puts yours, your employees and overall societies health & wealth at high risk.    

                      ‘’  ટહુકો - બધા ઈંડા એક જ બાસ્કેટ મા ના મુકાય ! ‘’

Management Advisory                           Siddharth bhatt                                          Issue/Star Fail/5