CASE STUDY

DARSHAN.N
PES1202202698

INTRODUCTION

This case study explores the difficulties BBC Pvt. Ltd., an Indian chemical
manufacturing company, encountered with working capital. The investigation
starts in January 2012, when BBC Pvt. Ltd. managing director Arpit Agarwal
finds himself in a precarious situation. The company has a deal from "Indian
Railways (IR)", though completing this contract will be very difficult due to a
shortage of working capital.

Reliable bleaching powder, a dangerous chemical product, is a speciality of BBC

Pvt. Ltd., a company founded in 2004. By giving consumers cost advantages,
BBC had been managing to maintain a favourable market share despite using
an adsorption technology that results in a lower quality product than rivals.

This case study offers insights into the difficulties of handling finance in a
challenging company environment by analysing the intricate working capital
issues faced by BBC Pvt. Ltd. In order to provide financial stability and effective
contract execution, it emphasises the significance of optimising revenues,
supplies, and credit policies. The case study clarifies strategic thinking and the
potential effects of various strategies, providing useful lessons for corporate
decision-makers, finance managers, and business owners coping with
comparable working capital problems.
PROBLEM STATEMENT

BBC Pvt. Ltd.'s "managing director," Arpit Agarwal, must make a crucial choice
regarding the company's desire to enter into an accord for "Indian Railways
(IR)". BBC is having trouble with its absence of working capital even holding an
advance acceptance agreement confirming the contract. This is because it gives
consumers a lot of credit and pays off debts too rapidly. The future steps for
the business must be determined by Agarwal.

ALTERNATIVES

 Find outside funding: BBC can look at opportunities for finding outside
funding to pay for the improvement necessary for its deal in Indian
Railways (IR)". Inquiring about an industrial lending or line of debt with
banks or other financial organisations may fall under this category. To
entice potential lenders, they can portray their deal with IR as a
compelling business opportunity.

 Engage with vendors Since BBC's rivals are also its liquid chlorine
suppliers, they can work out better deals with them to lower the price of
raw materials. By doing this, BBC may be able to increase its working
capital and pay for the necessary improvements.

 Enhance working capital governance: BBC can evaluate its liquidity

management procedures and pinpoint opportunities for improvement.
For instance, to reduce waste and optimise quantities of raw materials,
completed goods, and packing materials, they should evaluate their
inventory management approach. To increase cash flow, they might also
assess their credit practises and think about shortening the credit time
for clients.
BEST ALTERNATIVE

Approach banks or other financial institutions to obtain an enterprise loan -

port of credit specifically for paying for the upgrade required for a deal with
Indian Railways (IR). This is an alternative to seeking external financing.

 Advantages:

o Gives quick access to the money required for the upgrade.

o enables BBC to carry out its IR contract and perhaps increase their
commercial chances.
o maintains the working capital and current cash reserves of BBC for daily
operations.
o can possibly bargain for advantageous prices and repayment conditions.

 Disadvantages:

o Requires a careful evaluation of BBC's stability and ability to offer

security or guarantees.
o involves additional monetary expenses in the form of prospective fees
and interest payments.

ANSWERS

1. Working capital management at “BBC Private Limited” was successful.

The company's ability to maintain a deposit and a currency point to main
"Union Bank of India" with the range of 2,500,000 rupees is one of the
causes. The contract arrangement to this Indian Railways was impassable
since the credit ceiling had been surpassed. Another factor is that the
company has been cautious in how it manages its operating capital and
hasn't for a very long time thought about revamping. Additionally, the
 assets of the enterprise, such as its inventories and receivables, are
higher than its liabilities, which restricts its capacity to recover. It
privately held office building will include a centre for shipping items, an
operating office, and a workshop in accordance with a contract with the
Indian Railways. As official charges climb, it is anticipated that the IR
office will cost 200,000 INR and the storage would cost 500,000 INR. The
revamp will cost an entire of almost one million Indian rupees "(Kapoor
& Goel, 2012)". This sum created a lot of strain on Agarwal because the
credit limit was exceeded and what could be recovered was frozen.
Agarwal came to the conclusion that the company's inability to offer no-
interest loans to its customers was due to restrictions, as well as the
timetable for repaying loans had been shorter than the needs of the
firm.

2.
3.
They "BBC Private Limited" has been in business for a very long time.
However, the company cannot be seen as expanding. This is due to the
problems with cash shortages it encounters, which causes a sharp
reduction in its expenditures and activities "(Kapoor & Goel, 2012)". The
company's primary area of concentration should be on reducing the
length of the loan periods it extends to end customers in order to spur
future growth. Ahead to the term to grow after all payments will be done
in installments, the corporation must also be taking good care to the
loan boss. For the organisation to be able to fulfil its long-term
obligations, inventory management needs to be improved.
CONCLUSION

Agarwal must thoroughly assess BBC's financial standing,

creditworthiness, and business expansion prospects related to the IR
contract. He needs to think about how various options may affect the
enterprise's finances, earnings, and long-term viability. Making an
informed decision may benefit from seeking advice from financial
advisors or subject-matter specialists.

The conclusion emphasises that BBC must deal with its working capital
issues and raise the required finances for the upgrade. To choose the
best course of action for the company's success, Agarwal should carefully
consider the various options and their repercussions.