Kota Fibres, Ltd. is one of India textile fiber manufactures that supply nylon fiber to domestic textile mills which make saris, the traditional women's dress. Facing demand of India's female population of 500 million, the saris industry consumes 12 billion yards of fabric, and the market keeps a steady 15% annual growth. Kota Fibres has been run as a family business by Ms. Pundir and her family since 1962. In the year of 2000, Kota Fibres outperform market average by growing sales revenue of 18% and achieved INR 2.6 million in net profit.
Despite healthy growth of Kota Fibres' revenue, Pundir found out that the company was facing a serious cash flow issue. The company was virtually stopped operation due to another overdraw from its bank account. Pundir must get additional loans from Bank to keep the company operating. In this paper, we will assist Pundir to figure out the issues Kota Fibres is confronting, and to workout a plan to deal with the issues by cutting inventories, reducing account payable, gaining new sales revenue, and the most important of all, to work out a reasonable cash receipts and disbursements schedule and balance sheet to convince the bank to grand additional loan.
The biggest issue is that Kota Fibres is out of cash on early January. Ms. Pundir has questioned her bookkeeper and us how could a profitable and growing firm face such critical cash flow issue. We need to look into several areas on natures of how nylon fiber business operates in India. The yarn manufactures like Kota Fibres are in very upstream in India's textile industry and is the essential financial source to issue credits to keep downstream businesses running. Kota Fibres has to keep an average of 45 days credit for its customers in...