Onjus - Squeezed Out
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Case Details:
Case Code : BSTR011
Case Length : 9 Pages
Period : 1997 - 2001
Organization : Enkay Texofood Ltd
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Food, Beverages and Tobacco
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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EXCERPTS
Oranges Turn Sour
In August 1999, the DGIR filed a complaint against Onjus with the MRTPC. The DGIR accused ETL of indulging in deceptive and unfair trade practices by misleading consumers regarding the quality of oranges used in Onjus.
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The DGIR charged that ETL had declared Onjus as containing natural orange juice concentrate and water on the outer pack, which was contrary to the test reports. This followed a complaint received by the DGIR from Uma Shankar Mishra (Mishra) of Ghaziabad. According to the complaint, Mishra had purchased six packs of 250 ml Onjus juice believing that it was natural orange juice but was surprised to find it 'very sweet and different in color from that of fresh orange juice.' Mishra had the juice analyzed, which indicated that Onjus contained a high percentage of sugar and beta-carotene, a natural color. Appealing for interim relief, the DGIR said that the concealment of the ingredients included in Onjus was in violation of the Prevention of Food Adulteration Act...
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Onjus is Squeezed
With the success of Onjus, Goyal decided to concentrate more on the foods business, which meant he had to get rid of the loss-making textile division.
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In 1998-99, the textile division had made losses to the tune of Rs.220 million. The losses resulted in huge debts. ETL owed around Rs.870 million to various FIs including the IDBI, ICICI and IFCI, in the form of secured and unsecured loans. Besides, the company also owed money to commercial banks. Of the Rs. 870 million, Rs.320 million was outstanding against the textiles division and the remaining amount was outstanding against ETL as a whole. The FIs permitted Goyal to offload 20% stake in ETL and stipulated that the money received should be utilized to pay the entire debt. The FIs also insisted that the debt of the textile division be paid from the fruit processing division, but Goyal opposed the idea... |
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