It is fascinating to read success stories of companies which
grow and become very large companies in a short period of time. While these
companies certainly have a potential to grow even further, at times this speed
of growth becomes unmanageable and leads to their downfall.
Wockhardt Ltd. is a peculiar case. It was founded by Dr. Habil
Khorakiwala in early 1960’s and was incorporated in 1999 as Wockhardt Ltd. The
company is a pharmaceutical and biotechnology company headquartered in Mumbai,
India. The company has 12 manufacturing plants spread across India, UK,
Ireland, France and US. It produces formulations, biopharmaceuticals, vaccines
and active pharmaceutical ingredients (APIs).
Mr. HABIL KHORAKIWALA
From 1997 to 2007, the company acquired 7 companies:-
Wallis Laboratory, UK
Merind, India (1998)
CP Pharmaceuticals, UK
Espharma GmbH, Germany
Negma, France (2007)
These acquisitions required funds and due to easy availability
of funds at low interest rates, the company resorted to debt financing for
these acquisitions. The net debt increased from Rs. 1559.41 mn in 2004 to Rs.
40,229.64 mn which is around 25.8 times over a period of just 4 years. This
meant increased finance costs and high risk. Debt was raised as a mix of
secured loans and unsecured loans including the FCCBs.
These loans were not a problem till 2008 as the company
witnessed a CAGR of 30% in sales from 2004 to 2008. The company was expanding
at an unprecedented rate generating large revenues and high value for its
shareholders. With most of the acquisitions turning successful, the company
entered into complex currency transactions to make quick gains and supplement
its profits from daily operations. Everything worked as the management planned
but like most of the corporates, even it could not see the 2008-financial
crisis coming and were caught off guard. The company incurred a loss of Rs. 600
crores on forex transactions which wiped off profits of number of years. Even
after incurring this huge loss, the company had the potential (because of
robust operations) to storm out of the losses without doing much damage to
itself, but the problems became unmanageable when the FCCBs (Foreign Currency
Convertible Bondholders) refused to convert their bonds into equity shares and
demanded repayment in cash. The quantum of their demand being US$110mn. The
management was caught from all sides as it had no bandwidth to raise more debt
to honour FCCBs as the company was already reeling under high debt and neither
any scope to issue equity shares as the stock markets were badly hurt due to
financial crisis. The loss on forex has dried up its reserves and the company
was under serious liquidity problems. It was already becoming hard for the
company to honour its rising interest charges on high debt due to drop in
topline due to fall in demand from European and US markets. Debt service and
that too of US 110$ mn was the last thing the company was prepared for.
Ultimately the company defaulted on its payment to FCCBs and went in for
Corporate Debt Restructuring led by ICICI Bank. Most of the creditors agreed to
the CDR plan but FCCBs argued that CDR was favouring domestic banks and was
structured against FCCB holders. Thus, they filed a winding up petition in
Bombay High Court and asked the court to appoint a liquidator. The court
admitted the winding up plea in an unprecedented decision. The promoters got a
stay on this plea from the court and promised to increase promoter shareholding
to payback the FCCBs.
plan, post 2008 financial crisis, was to sell some of its assets and repay debt
by 2015. It sold its losing German subsidiary, Esparma, to Mova GmbH and the
animal health division to Vétoquinol, a French veterinary care company, for an
undisclosed amount in Jun, 2009. In Aug 2009, Wockhardt Ltd, sold 10 of the 17
hospitals it owned to New Delhi-based Fortis Healthcare for Rs 9090 mn. In
July, 2012 Wockhardt entered into an agreement with Danone for divestment of
its Nutrition Business for a consideration of Rs. 12800 mn, including its
wholly owned subsidiary.
Source: Company Annual Reports
The net debt decreased substantially and by the end of FY
2012-2013, the company had Net Debt of Rs. 19,654.69 mn and had repaid the
entire amount of US 110$ mn to FCCBs. It had also exited CDR process in this
FY. Thus, the company raised the required fund which was used to repay the debt
and put back business on the right track. The company clocked sales of more
than $1 billion in FY 2013 which resulted in diluted EPS of Rs. 143.34, highest
in its lifetime.
Courtesy - livemint.com
the analysts were amazed by the speed at which things took place right from exponential
growth of wockhardt from 1999 to 2008 to the 2008 financial
crisis where company was almost bankrupt followed by recovery when company
clocked more than $1bn sales; a letter arrived at the Wockhardt Corporate
HQ from USFDA signalling that the problems at Wockhardt were far from being
The online prelims of Marketing Mayhem-Vanijya Utsav's flagship marketing event have started. The team leaders will be emailed a questionnaire on 17th february,2014 at 12 noon. The teams need to submit the solution by 18th February,2014,11:59 p.m. However, the registrations for the round will continue till 17th February,2014 - Midnight.
The winner of the round gets an assured entry into the on campus final round. However, the round will not be an elimination round for the other teams and they can still participate in the on campus event on 21st February,2014 at 11:00 a.m.
Further instructions have been included in the PDF. You can also access this file directly from Google drive: http://goo.gl/hV7fVS IMPORTANT NOTE: Teams have to submit there solutions by 11:59 PM on 18th February 2014 and not by 11:59 AM as incorrectly mentioned in the attached PDF file. We are sorry for the inconvenience caused.
The online prelims of Chase The Case- Vanijya Utsav 2014's flagship case study competition, have begun! The last date of submission is 18th February 11:59 a.m., and registration will remain open throughout the event. One
winning team from this round will win a direct entry into the finals
that would be held on 22nd February, along with prizes in kind. Note
that other teams are still qualified to participate in the on-campus
prelims on 21st February, 12:00 pm.
Further instructions have been included in the PDF. You can also access this file directly from Google drive: http://goo.gl/CLKrMT
For any queries, feel free to get in touch with Shriya (+91-9891201311) or Radhika (+91-9650028793)
2) A page will open with the details about the event and a play button. Click on that play button.
3) You will be asked to login using your Facebook ID or Gmail ID. Log in using either of the two portals.
4) You should be redirected to the last page. Click on the play button again.
5) The final page containing the case study will open. Please fill in the details of your time.
Please submit your case study in the DOC or PDF format. The team is required to make a business plan around the given case study. The case study given to you will contain real time figures, so it is going to be a mind blogging task to prove your business skills. You are supposed to upload your business plan last by 18th February 11:59 p.m
2013, Pepsodent, a leading toothpaste brand from HUL came up with an advertisement
that directly attacked its competitor P&G’s toothpaste Colgate with a claim
that Pepsodent Germicheck is 130% better in fighting germs than Colgate. This
ad was only a glimpse of the extent to which corporate biggies in the world of
consumer space can go to in order to provide a longer shelf life to their
products and influence consumer choice. This type of aggressive marketing,
however, is not a new phenomenon in India and has been used actively used in
the corporate world to grab attention and project one’s product better than the
advertising like this is basically a sales promotion technique that compares
the products/services of one undertaking with those of its competitors in order
to generate attention. It makes certain claims to show that their product is
better and that the claims of the rival company are not sensible. Famously
known as ‘BRAND WARS’, these advertisements became notoriously common after
they were used by popular soft drink brands Pepsi and Coca Cola followed by
leading detergent brands Rin and Tide.
The corporate industry is divided when it comes to giving
opinions on such type of marketing. Experts claim that it’s the mad competition
that makes companies use such tactics to prove their products as the best and
these are often harmless. However the past has also witnessed cases where brand
wars have ruffled quite a few feathers and the companies have resorted to legal
interference in this matter.
A famous example is that of Wipro
Consumer Care and Lighting and Godrej Consumer
Products Ltd, both leading consumer products companies, filed suits against
each other in the courts alleging wrongful advertising on each other’s part.
First, Wipro Ltd got an injunction from a Hyderabad court on an ad by Godrej,
which claimed its soap brand Godrej No. 1’s leadership over rivals such as
Santoor soap, a Wipro brand. Wipro cried foul citing the ad to be “unfair,
unethical, incorrect and misleading”. A week later, Godrej challenged Wipro for
advertising its liquid detergent brand Wipro SafeWash, which claimed supremacy
over Godrej’s own brand Ezee. The Punjab court, where the company filed the
case, passed an interim injunction restraining Wipro from continuing the
advertising is a double edged sword which can prove to be extremely harmful for
a company’s image as well as its products. Unless used in the right competitive
spirit, it can end up hurting not the rival company but one’s own brand value.
Thus for those resorting to such a forceful tactic, it is important to make
sure that the claims it makes is truthful and will do the company more good
than harm. Considering that the competition is only growing fiercer day by day
one thing is for sure and that is that BRAND WARS are here to stay.