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Case
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Reference no. 102-030-1
Authors: Sanjib Dutta
Published by: IBS Center for Management Research
Published in: 2002
Length: 9 pages
Data source: Published sources

Abstract

The case describes Arvind Mills'' expansion strategy which resulted in the company''s poor financial health in the late 1990s. In the mid 1990s, Arvind Mills went in for massive expansion of its denim capacity in spite of the fact that other cotton fabrics were slowly replacing the demand for denim. The expansion plan was funded by loans from both Indian and overseas financial institutions. With the demand for denim slowing down, Arvind Mills found it difficult to repay the loans, and thus the interest burden on the loans shot up. In the late 1990s, Arvind Mills was into deep financial problems because of its debt burden. The case focuses on the problems faced by the company and the reasons behind the huge losses in the late 1990s. The case also discusses in detail the debt restructuring plan of the company for the long-term debts taken up in February 2001. From the case, students are expected to understand the reasons behind Arvind Mills'' poor financial health in the late 1990s. They are expected to analyse the debt restructuring plan of Arvind Mills to determine whether it would improve the financial health of the company. Students are also expected to suggest changes in the company''s product profile. At the end of the discussion, students should be able to comment critically on the following points: (1) Arvind Mills'' over dependence on denim and the expansion of denim capacity in the 1990s; (2) the expansion plan being driven by debt, which subsequently led to a huge interest burden due to the non-payment of principal and interest; (3) the debt restructuring plan initiated by Arvind Mills to get out of the debt burden; and (4) the need to change the product profile. The case is intended for MBA/PGDBM level students as a part of the finance, accounting and control curriculum.
Location:
Industry:
Size:
Large
Other setting(s):
1987-2001

About

Abstract

The case describes Arvind Mills'' expansion strategy which resulted in the company''s poor financial health in the late 1990s. In the mid 1990s, Arvind Mills went in for massive expansion of its denim capacity in spite of the fact that other cotton fabrics were slowly replacing the demand for denim. The expansion plan was funded by loans from both Indian and overseas financial institutions. With the demand for denim slowing down, Arvind Mills found it difficult to repay the loans, and thus the interest burden on the loans shot up. In the late 1990s, Arvind Mills was into deep financial problems because of its debt burden. The case focuses on the problems faced by the company and the reasons behind the huge losses in the late 1990s. The case also discusses in detail the debt restructuring plan of the company for the long-term debts taken up in February 2001. From the case, students are expected to understand the reasons behind Arvind Mills'' poor financial health in the late 1990s. They are expected to analyse the debt restructuring plan of Arvind Mills to determine whether it would improve the financial health of the company. Students are also expected to suggest changes in the company''s product profile. At the end of the discussion, students should be able to comment critically on the following points: (1) Arvind Mills'' over dependence on denim and the expansion of denim capacity in the 1990s; (2) the expansion plan being driven by debt, which subsequently led to a huge interest burden due to the non-payment of principal and interest; (3) the debt restructuring plan initiated by Arvind Mills to get out of the debt burden; and (4) the need to change the product profile. The case is intended for MBA/PGDBM level students as a part of the finance, accounting and control curriculum.

Settings

Location:
Industry:
Size:
Large
Other setting(s):
1987-2001

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