ABC Group:The Saga of Expansion

ABC Private Limited, a manufacturer of auto parts was supplying majority of its products to well-known Indian original equipment manufacturers (OEMs) including Ashok Leyland, Swaraj Mazda, Escorts, Bharat Gears, and Mahindra and Mahindra. In FY 2012-13, ABC Private Limited intended to acquire majority state in Devki Enterprises Limited (DEL). The management of the company scouted for alternative sources of funds for clinching the deal as bank financing was not permissible for takeover in accordance with Reserve Bank of India (RBI) norms and the equity market not easily accessible. The company already had private equity investment, therefore decided to raise further resources from short term & long term borrowings and by selling some fixed assets for this acquisition. After the successful takeover of DEL, the higher increase in the current liabilities as compared to the current assets caused liquidity issues for ABC Ltd. The problem was aggravated further by reduced profits by the end of FY 2014-15. Now the company wanted to offer exit route to private equity fund and was looking for various alternative sources of finance for resolving the impending liquidity issues and further technical upgradation of the plant.