Financial Management & Corporate Finance Case Study

Indage Vintners Limited: Debt Hangover!

OR

Abstract:
The objective of the case study is to introduce the students to the concept of Leverage. It focuses on the debt management of a Wine company – Indage Vintners Ltd. (Indage). Indage is the largest and the leading wine manufacturer and exporter of ‘Sparkling’ wine in India with a market share of 75%. The case study focuses on how the once profit churning company became a debt burdened company within few months. It details on its methods to raise funds to reduce its debt, to fund its long-term working capital and existing operations in the backdrop of economic slowdown (2008) and its shrinking share prices. The case study projects the risk and return analysis of the company’s share from investor’s perspective as the company plans to raise money from the market. Towards the end, the case study poses the following questions for classroom discussion – At the current level of financial leverage, is it advisable for the company to raise further debt and if advisable what would be the best option to raise funds to reduce debt? How will an investor perceive the company’s share for investment purposes in case of right’s issue, fresh equity issue or a combination of debt and equity?

Pedagogical Objectives:

• To discuss and understand the concept of leverage in capital structure decisions
• To analyse the degree of leverage associated with the capital structure of Indage Vintner Ltd.,and compute the best option for raising funds for the company.

Keywords : Indian Wine Industry, Breweries and Distilleries Industry, Debt Burden, Equity and preference Shares, Rights Issue, EBIT & EPS Analysis, Risk & Return, Analysis, Indage Vintners Ltd. Acquisitions, Foreign bonds