Arjun
sat down at his seat and looked around. He felt proud about the plush
environment.
“What
a change of scene compared to office of Tridevpur Auto to DI; but then it is a production house unlike
DI which is a multinational consulting firm. I wonder what will be the future
of Tridevpur Auto. It seemed to be frozen in past with no strategies to survive
in future. May be DI could help them in formulating an innovative strategy for
future” He mused
“Hi
Praveen” Arjun called softly to catch Praveen’s attention.
“Yes
my friend” Praveen replied and rolled his chair towards Arjun.
“I
thought I could get to know you a bit if you are free” Arjun said hesitantly
with a smile.
“Cool.
I have been at this since morning and I don’t mind a break” Praveen replied
“What
are you working on?” Arjun asked
“DI
has been engaged by a consortium of bankers to develop a rehabilitation package
for a cement company. I am a part of the team.”
“OH.
But that would require engineering expertise too. Isn’t it?” Arjun asked
“Yes
you are correct. We are working on it as a consortium with an engineering
consulting firm. We are handling the financial and legal restructuring. I am
handling the finance side and we have Lekha Kurup handling the legal side. I
will introduce her one of these days. She also lives in the guest house.”
Praveen replied
“How
about you? Where do you stay?” Arjun asked
“I
stay at the guest house too. All unmarried officers without a family here in
Indrapuram are free to live in the guest house as long as they want” Praveen
replied
“Oh
that is great. I did not know about this. I thought this will be only a temp arrangement
for newcomers like me.”
“Now
you know.” Praveen smiled with a wink
“OH
coming back to your assignment, tell me more.”
“Coming
back to One of my assignments!” He stressed the word “One” in his reply
“Do
you handle multiple assignments at a time”
Arjun asked
“That
is the beauty of consulting. In our business we sell our time and what we do in
this time is the output that our client buys. If I look at it cynically we are
like whores and our bosses ie partners are like pimps selling our time.”
Praveen said with a laugh
“We
have to ensure that at our levels at least 85% of our time is in billable
assignments. That means we are not supposed to have free time! Therefore we
could be booked in multiple assignments and we could be spending 12 to 14 hours
in office or client site.” Praveen continued
“But
if you are expected to do 85% utilisation then why are you working 150% time.”
Arjun asked
“”To
finish the work you are supposed to finish with 85% utilisation often we will
need twice the time.”
“This
means that you are either working on poor efficiency or you have underestimated
effort”
“Now
you are learning. To be competitive you have to quote your prices
competitively. We manage this by underestimating numbers instead of discounting
our rates. This means that you have to sweat it out extra in the evening and on
holidays to finish you work. We are in the business of making money. When we
are paying you a nice salary, we own you my dear son”
“I
think you are being cynical”
“You
have just started out. When you complete six months we will discuss this again”
“Ok.
Now come back to your rehabilitation story. Why is this company sick? Most cement
companies are making money; especially with the government policy of
controlling cement production and sale. I still remember the pains I had to go
through to get cement few years ago when we were building a small house. We had
to jump through multiple hoops of approvals and had to visit the government
office a number of times to get our allocation. Finally when our allocated
cement was over and we had to get few more sacks to finish our work, we had to
buy from the black market at three times the stated price ” Arjun remarked with
surprise.
“You
are right. But many promoters have multiple tricks to make more money which is
a standard operating procedure in case of most of the industrial investments in
Indraprasta where everything is controlled by the Government. The promoter as
in the case of most industrial investments, first managed to get his license
through his political connections. Then he approached banks for project
funding. As per the project report he submitted to the banks the project cost
was five billion Indraprasta Rups whereas the real cost is only 4 billion Rups.
Again with the right connections he managed a loan of 70%.This means that in
reality he had to contribute only 0.5 billion. Later when the goods were sold
he used to skim a certain part of the sales value as cash in his name. So he
recovered more than he spent.” Praveen explained
“Oh
that is smart. But how come the company is in a loss”
“The
implementation and running of the plant was also not efficient because he used
to divert significant funds and let the real expenditure needed in the plant to
suffer. Eventually losses mounted and he is out of funds for the day-to-day
running of the company. Now he has approached the lending banks with a request
to reschedule the loan. He wants to bankroll his inefficiency by bank loans. He
has already managed to get an unsecured loan for working capital from the banks.
The bankers are in a soup. They now want to figure out how bring this company
back in track so that they recover their money. For this they will have to save
the company from the clutches of the promoter and get some semblance of
professional management with proper financial controls in place”
“What
will happen to the founder?”
“He
will enjoy the funds he has diverted. He has a tidy sum that he has squirrelled
away in Switzerland through over invoicing of imports. He is trying hard not to
get caught in a bind which will force him to return the monies he has siphoned
off”
“How
come the bank gave un-secured loans?”
“If
you borrow from the bank money to buy a bike and you delay payment, they will
come after you and confiscate your bike. But if you are a big businessman borrowing
5 billion and you mess up they will come begging to you”
“What
are we doing in this case?”
“We,
in consortium with an Engineering Consulting firm, are developing the total
rehab package. The engineering consulting firm will recommend the modifications
and additions to extract the full efficiency of the plant. We will suggest
changes required in the management processes and the financial controls
required that need to be established” Praveen explained
“Brilliant.
I hope that the new government that has come in will do something about
reforming the economy; like bringing more competition and better discipline in
corporate governance”
“I
hope so too”
