ASSIGNMENT

Capital Restructuring
Capital restructuring Altering the capital structure of a firm; in reaction to the
changed business conditions, or as a means to fund the firm's growth plans. It is a type of
business operational strategy that is employed to make changes to the capital structure of
a company, usually as a way to deal with shifts in the marketplace that have impacted the
financial stability of the business. This same approach may also be used to rearrange
capital assets in order to position the business so that company owners can take
advantage of a growth opportunity. Essentially, this type of process seeks to make
changes to company finances and holdings so that the business is able to operate more
efficiently and move toward its stated goals.
A restructuring of capital can also help to enhance the function of a business and also
make it more appealing to potential investors. At the same time, wise restructuring may
also enhance the reputation of the company in the marketplace, prompting more
consumers to purchase goods and services from the business.
About the company Tata Ceramics Ltd.
Tata Ceramics produces and sells fine-bone china crockery and tableware in India and
other markets. The company was incorporated in 1991 and is an associate company of
Tata Power. Tableware crafted by Tata Cermics Ltd (TCL) adorn the dining rooms of
Rashtrapati Bhawan and are exclusively used by all Indian Embassies overseas.
TCL also makes ceramic products for some of the best brands in the world such as
Wedgwood, Royal Doulton and Churchill, apart from exporting to Australia, Canada,
Germany, Ireland, Italy, South Korea, New Zealand, the UK and the US. The company's
range includes hollow ware, flat ware and mugs in fine-bone china and fine china, in an

international range of designs. The china is sold to reputed brands such as Wedgewood,
Royal Doulton and Churchill.
Exquisite Indian craftsmanship, blended with English technology has helped Tata
Ceramics to create products of exceptional value to suit each individuals lifestyle
aspirations.
Corporate Restructuring at TCL
TCL was a loss generating firm for the past years and currently they are moving slowly
towards profits. The major reasons for poor performance in the initial years was due to
poor marketability, customer base which thereby lead to huge idle stock. Huge capital
expenditure was also required for the processes to happen. Since there was no much sales
capital expenditure did not result in profits leading to accumulated losses over the years.
Poor marketing efforts was yet another reason for failure. Moreover there was stiff
competition from China which produced equal quality products at cheaper prices.
Moreover the market forces of competition was very strong to the company and it was
not able to fight against it.
As on March 31, 2013, the companys turnover was Rs 50 crore and it had accumulated
losses of Rs 14.09 crore. Though TCL makes tableware for top brands, it was unable to
scale up. Its large plant of 10 million pieces a year saw only half of it utilised, leading to
losses. Nearly 90 per cent of the turnover used to come from European markets, Australia
and New Zealand. But that is declining given the general downturn in those markets.
All these lead to the following corporate restructuring and turnaround strategies :
Strategic Alliance with Titan
TCL entered into an alliance with the Titan group. This was to foster marketing of
their products in the domestic markets thereby achieving a 50 : 50 share (from a
75 : 25 ratio)in international as well as domestic market. With the start of the
alliance, TCL products were kept at all Titan stores like Tanishq and other lifestyle

stores thereby converting their product perception to a lifestyle product. The USP
of their product was quality and targeted the premium segment. This further
augmented their sales by a large extent thereby reducing losses. Synergies for
Titan was in getting into an unorganized sector and becoming a good player in
such and industry thereby increasing their product variants and customer base.
Accumulated Loans
Yet another burden in their financial statements was increasing accumulated loans
about 12 crores which was borrowed for kilns and other machinery. To reduce the
burden ,

the loan proportion was converted into cumulative, redeemable

preference shares at a coupon rate of 7.25 % . This lead to a better debt and equity
ratio. So they were in a position to go for further finance from the commercial
banks.
Reducing Share Capital
Another major action was of reducing share capital and thereby transferring the
difference amount to Capital Contingency Reserve. Initially TCL had a paid up
capital of Rs 10 shares and preference share capital of Rs 100 shares. After
reduction the shares of Rs 10 was converted to Rs 2 and Rs 100 to Rs 17. The
balance Rs 8 + Rs 83 = Rs 91 went to the Capital Contingency Reserve.
Asset Procurement was very costly. A simple Kiln costed 8 to 10 crores and
replacement of Kiln costs about 10- 15 crores. Huge capital expenditure was not
affordable for the firm. The company identified thrust areas through various
techniques like Payback Period, Return on Capital Employed, Return on Capital
and worked upon it , reducing the capital expenditure.
Use of cost effective fuel like LNG instead of LPG and starting factories in special
economic zones lead to reduction in raw material cost to 30 %, which accounted

for about 45 % initially. Moreover they were also able to receive taxation benefits.
Overall savings for the company was 25 %.
Process at TCL
The following are the steps involved in the production process at TCL

Creation of Mould as per the

required model

Clay produced using Bone Ash

and Ball Clay

Clay converted to Mould Design

Prototype heated at 1200 degree

celsius in Kiln

Prototype is send for Glazing

Heated in Kiln

Design Sticker Pasted and

Heated

Final Tableware ready

Value Chain Analysis

1)Inbound Logistics : Procurement of Bone Ash and Clay.

2)Production : Production Process illustrated above in the factory of TCL.( 2
weeks). Production technique made to order.
3)Outbound Logistics : Packing of tableware and dispatching to customer place. (
2 weeks)
4) Marketing and Sales : Sales both international and domestic. Domestic Sales
through outlet in Vytilla and Titan Lifestyle stores.

7 Net Value Added Measures - National Productivity Council

The seven factors as told by NPC which when reduced will lead to value addition
are listed below:
1)Over Processing : Processing more than necessary to achieve the same output.
2)Defects : Errors or mistakes causing the effort to be redone to correct the
problem. Defective material is crushed and send back for initial processing.
3)Waiting : Waiting for the material or information thus leading to increased lead
time.
4)Over Production : Producing too much material or information leading to idle
stock.
5)Inventory : Having excess material or information than needed.
6)Transportation : Moving material or information. It can be manually or
automated.
7)Motion : Moving people to access or process material or information.

********************