Crompton Greaves: Debt-laden Loss-making Company to a Successful Global Company
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Case Code: BSTR379 Case Length: 25 Pages Period: 2000-2010 Pub Date: 2010 Teaching Note: Not Available |
Price: Rs.500 Organization: Crompton Greaves Ltd. Industry: Electrical Equipment and Engineering Countries: India; Global Themes: Turnaround, Restructuring, Globalization |
Abstract Case Intro 1 Case Intro 2 Excerpts
"A leadership position in India is satisfying. But in this business, you have no option but to become a global player."
- Sudhir Mohan Trehan, Managing Director, Crompton Greaves Ltd, in 2010.
"We don't want to be in any business in which we are not one of the top three players- Crompton Greaves was a 'clear leader' in three of its four main businesses -- electric fans, electric motors, and HT switchgears -- beating some MNCs such as ABB, Siemens, and Alstom"
- Sudhir Mohan Trehan, Managing Director, Crompton Greaves Ltd, in 2000.
Electrifying Growth
Crompton Greaves Ltd (CGL), a leading player in the electrical equipment and engineering industry, announced a strong performance in early 2010. CGL had grown to become a Rs. 90 billion company. It was growing at a compounded annual growth rate of over 25%. Its net profit had been growing at over 35% annually since 2005. Experts noted that the company had registered a growth six times that of the levels achieved in 2005.
The growth was largely attributed to some prudent business decisions that the company had taken since the dawn of the new millennium. The company had also expanded rapidly into international markets and this had contributed to its growth.
Analysts felt that this was like a reversal of fortunes for CGL, which had incurred huge losses in the late 1990s and early 2000s. For the first time in its history, CGL reported a loss of Rs. 1.47 billion for the financial year 1999-2000. In the next year - 2000-2001, it recorded a loss of Rs. 0.7 billion, taking its total loss to Rs.2.2 billion in two consecutive years.6 As a result, its share prices hit the lowest levels. The company had never before faced such a disastrous situation. Many analysts and shareholders were doubtful whether the company would survive. The stock market too was abuzz with rumors of the company's closure on account of accumulated losses.
Faced with continuous losses for two years, CGL initiated various measures and these, according to analysts, led to the company achieving a spectacular turnaround within a span of two years. In 2002-2003, it registered a small profit after initiating various restructuring measures. After a successful turnaround, the company focused on growing globally, adopting the inorganic route. Through its acquisition strategy, it not only increased its global presence but also improved its product portfolio. As of April 2010, it was one of the top ten companies in the global power equipment industry.
Analysts felt that the management at CGL had not only orchestrated a remarkable turnaround but had also transformed CGL from a domestic company to a leading global company in its industry...
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