 "Uniply: Transformation possible")
Keshav Kantamneni, who comes from a global financial services background, is now managing a struggling Chennai plywood company.
When he acquired Uniply a year ago, the company had a large accumulated loss, product returns were high, accounts with most dealers lay unsettled, professionals were missing, the business had plateaued, and the big daddies had such an extensive grip on the sector that it was difficult to grow further.
Kantamneni did something different. Before he acquired, he researched. He worked on the shopfloor (with the erstwhile promoter's consent), comprehended the manufacturing process, spoke to employees, interacted with the trade, called customers, and examined global trends.
Gradually, the picture cleared. India was the second most populous market. The country was one of the most under-consumed for plywood. Indian interiors were pathetic (which means the moment aspirations increased, off-take would rise). India's organised manufacturers accounted for only 30 per cent of the market (India's two largest plywood brands make up for 20 per cent of the sector). India's consumption was moving from unorganised to organised (projected to accelerate following the introduction of goods and services tax). India was buying more of branded products.
Gradually, people began to whisper the positives. Uniply was a national brand. The company's dealers paid on time. Its products were considered world-class. Following the acquisition, Kantamneni restructured the product mix (towards plywood over veneers). He also widened the plywood mix, focused on value-added varieties, invested in brand-building, recruited a president to manage operations, and controlled the sales and finance functions.
Ho-hum. I mean most entrepreneurs would have done no different. Except that Uniply reduced working capital sanction by 70 per cent from Rs 155.5 crore (pre-acquisition); inspired bankers to moderate average debt cost; rationalised the 450-decorative veneer inventory to just 40 (addressing 80 per cent of pan-India projects demand); rationalised 20 per cent of the plywood manufacturing team; eliminated bad debts; repaid long-term debt down to virtually nil; graduated the plywood from E3 guidelines to the globally-respected E1 standard; and, offered to compensate dealers 300 per cent of product value in the event of product under-performance. All in the first 12 months of acquisition.
And, here is where the Uniply story gets interesting. Because, even as the company is still finding its feet, Kantamneni is seeking to buy plywood assets twice Uniply's size (effectively trebling capacity), entering adjacent business segments, automating the Chennai plant and extending from product sales to solutions delivery.
My first reaction: oh no, looks like Uniply might go bust the second time round. But wait, sales are rising based on quarterly results, the greenhorn has turned the company around and his miscellaneous growth agenda appears financially closed.
My second reaction: most entrepreneurs would have preferred to go sequentially into the turnaround - one thing patiently following another. At Uniply, the movement is Brownian; a number of things are transpiring concurrently that can radically alter scale, portfolio, margins and brand within the space of the coming year.
If he pulls it off, Uniply could well emerge one of the most celebrated corporate transformations in recent times.
The author is a stock market writer, tracking corporate earnings and investor psychology to gauge where markets are not headed
When he acquired Uniply a year ago, the company had a large accumulated loss, product returns were high, accounts with most dealers lay unsettled, professionals were missing, the business had plateaued, and the big daddies had such an extensive grip on the sector that it was difficult to grow further.
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Kantamneni did something different. Before he acquired, he researched. He worked on the shopfloor (with the erstwhile promoter's consent), comprehended the manufacturing process, spoke to employees, interacted with the trade, called customers, and examined global trends.
Gradually, the picture cleared. India was the second most populous market. The country was one of the most under-consumed for plywood. Indian interiors were pathetic (which means the moment aspirations increased, off-take would rise). India's organised manufacturers accounted for only 30 per cent of the market (India's two largest plywood brands make up for 20 per cent of the sector). India's consumption was moving from unorganised to organised (projected to accelerate following the introduction of goods and services tax). India was buying more of branded products.
Gradually, people began to whisper the positives. Uniply was a national brand. The company's dealers paid on time. Its products were considered world-class. Following the acquisition, Kantamneni restructured the product mix (towards plywood over veneers). He also widened the plywood mix, focused on value-added varieties, invested in brand-building, recruited a president to manage operations, and controlled the sales and finance functions.
Ho-hum. I mean most entrepreneurs would have done no different. Except that Uniply reduced working capital sanction by 70 per cent from Rs 155.5 crore (pre-acquisition); inspired bankers to moderate average debt cost; rationalised the 450-decorative veneer inventory to just 40 (addressing 80 per cent of pan-India projects demand); rationalised 20 per cent of the plywood manufacturing team; eliminated bad debts; repaid long-term debt down to virtually nil; graduated the plywood from E3 guidelines to the globally-respected E1 standard; and, offered to compensate dealers 300 per cent of product value in the event of product under-performance. All in the first 12 months of acquisition.
And, here is where the Uniply story gets interesting. Because, even as the company is still finding its feet, Kantamneni is seeking to buy plywood assets twice Uniply's size (effectively trebling capacity), entering adjacent business segments, automating the Chennai plant and extending from product sales to solutions delivery.
My first reaction: oh no, looks like Uniply might go bust the second time round. But wait, sales are rising based on quarterly results, the greenhorn has turned the company around and his miscellaneous growth agenda appears financially closed.
My second reaction: most entrepreneurs would have preferred to go sequentially into the turnaround - one thing patiently following another. At Uniply, the movement is Brownian; a number of things are transpiring concurrently that can radically alter scale, portfolio, margins and brand within the space of the coming year.
If he pulls it off, Uniply could well emerge one of the most celebrated corporate transformations in recent times.
The author is a stock market writer, tracking corporate earnings and investor psychology to gauge where markets are not headed