The Finance and Investment Cell, Hindu College Presents,

DECRYPT 2014
Sitting in his 4000 sq. ft office in Janpath, it was the 6th cup of coffee that
Mr. Ram Gupta was sipping. Staring at his laptop screen, he was not shocked to
see a 7% dip in his company's share prices-A sight he had grown accustomed
to. His company, StoreMore Ltd. had continued its loss making spree-taking the
tally to a total of 5 consecutive quarters. Low reserves, sky mounting debts and
poor brand value-such was the situation of StoreMore Ltd.-A company which
manufactured Compact Discs and Floppy Discs from its founding days.
-----------------------------------------------------------------------------------HistoryStoreMore Pvt. Ltd. was the first company to recognize the need of CDs and
Floppy Discs in India in late 1970s. It was founded by Mr. Harikishan Gupta
(father of Mr. Ram Gupta), who always had a thing for technology and
innovation. Getting the first mover advantage in the pre-1991s India, it was this
golden time when StoreMore ltd. enjoyed complete monopoly and the
company boasted of double digit growths for several years. The advent of
cheap personal computers only accelerated the growth further. The company
bagged several national awards for more than a decade and Mr. Harikishan was
awarded the "Best Entrepreneur Award for Excellence in the Field of
Technology". The company focused on its mainstream business since inception.
There were a few horizontal mergers and acquisitions by StoreMore Ltd, but Mr.
Harikishan was never interested in Conglomerates due to obvious reasons that
his core business was doing so well.
Problems did not really begin in the early 1990's during the time of opening up
of the economy under the VP Singh government when companies like Protezt,
Tony and Poserbear entered the market. Store Mores brand value and the
swadeshi wave among customers to an Indian brand, StoreMore Pvt. Ltd lost
only around 10% of his market share, and growth rates slightly decreased to
stay stable at around 8-9%. Sensing a need to diversify, StoreMore Ltd. went

public, (Mr. Harikishan retaining 76% of the shares) and invested the money
raised from this exercise (around Rs.50 crores) into the music cassette business.
Sales were high since commencement as music players were now a common
site in every music lovers abode. Huge profit margins, combined with rapid
turnovers reflected in high share prices. Mr. Harikishans wealth grew
exponentially and soon, he became one of the richest in the country.

TragedyMr. Harikishan now decided to expand his business outside India. He decided to
export his goods to several European nations, where personal computers were
very common. Mr.Harikishan chose to open a manufacturing unit in
Bangladesh, where labor was abundant and cheap to cater to the demands of
this new market. Indias good relations with Bangladesh prevented any political
barriers and hence, it was easy for StoreMore Ltd. to get the required permits
and begin work for the setting up of a factory in Sarail, Chittagong
(Bangladesh). On June 24, 1998, during one of his regular trips to Bangladesh to
examine the project site, the private jet in which Mr.Harikishan was travelling
struck with an accident. Mr. Harikishan died on the spot. Inheriting his fathers
property, Mr. Ram Gupta was declared the new CEO of StoreMore Ltd as he
now owned 76% of the shares. Though, he lacked experience in working for
StoreMore Ltd., with the degrees from IIT-Delhi in electronics and MBA from
IIM-B, everyone expected him to continue the legacy equally well as Mr.
Harikishan did.
The Era of Pen Drives and Downfall of StoreMoreMr. Ram Gupta took over as the CEO of the company in early 1999. During the
same time, Pen drives started replacing CDs and Floppy drives all over the
world. With Pen drives being easy to carry and re-writable, people preferred
them over CDs. Though pen drives were costly, they were only one-time
investment. From 2000, other companies like Tony and Protezt started
producing pendrives and ate a considerable market share of StoreMore. Seeing
revenues fall, StoreMore Ltd. decided to collaborate with Transparent Ltd, a

leading manufacturer of pendrives in US. Both the companies benefitted from

this venture. Profits were reverting back to normal levels, but Transparent Ltd.
and all its subsidiaries were banned because of their proved connections with
the Underworld. Later, it was also found that their method of production
violated labor and human rights laws and thus, they could no more produce
pendrives using this technology. StoreMore ltd. was hit badly due to this.
What to do next?
Mr. Ram Gupta was left handicapped due to the abrupt end to the successful
collaboration. He had to find new investment options. His wealth had eroded
over Rs.100 crores in the last 5 years. Finally, he collaborated with F-series, a
leading music company in India and launched Music CDs and cassettes. At the
same time, the personal computer and the internet were becoming a
household necessity, rather than a luxury. People could download music over
the internet for free due to weak anti-piracy laws. The StoreMore Ltd. and Fseries wedding lasted only till the honeymoon. Mr. Ram was in a dilemma. His
brand was fast losing its brand value.
Step into the shoes of Mr. Ram. The following options have been suggested
which must be selected with a proper thought process. All options have their
own pros and cons. Select the one you feel suits the circumstances. You can
also provide your own solutions to the problem.
1) Mr. Ram was always interested in Robotics. It was one of his dreams to make
a Maid Robot who could help you in every possible way in your household
chores. But if he wants to pursue this option, he will have to pack up his
ancestral StoreMore ltd and see his fathers dream to make StoreMore a
household name and to see Everyone StoreMore die off a natural death. Also,
being a high risk-high return project, the model finds few lenders ready to lend
the required investment of Rs.100 crores at 19%. Raising further equity will only
depress the share prices further. The chances of the product being successful
and being accepted by the small customer base restricted to millionaires and
billionaires is very also low. But, the high gross profit margins of 400% makes
the project very desirable.

2) Mr. Renly Stark from Malaysia has offered to StoreMore Ltd., the exclusive
rights to produce pendrives and external hard disks using his patented UPRT
technology. The benefit of producing using this technology is that the cost of
production will fall by 30%. Against this, Mr. Stark demands Rs.10 crore for using
his patented technology. Not only this, he demands a stake of 7% in StoreMore
Ltd. out of Mr. Rams shares. The patent is expected to have a useful life of 5
years. But, Ram has his own apprehensions. StoreMore Ltd has a very tarnished
image when it comes to Pendrives after its unsuccessful venture with
Transparent Ltd. The gross profit margins are 60%, taking into consideration the
30% reduction in cost of production. The pendrives and hard disks Industry
stands at Rs.1000 crores and it will take efforts penetrating the market
dominated by Tony (34%), Protezt (30%), Poserbear (22%) and others (14%).

3) IIM-B students have developed a device which they have named

SHODH which can store information on your fingertips. It attaches a sensor on
your fingertips which can make a virtual PC anywhere you like. They have
applied for a Patent for this technique and also approached Mr. Ram to buy it.
But, the cost of buying the patent is Rs.75 crores, although the cost of
production in later stages becomes minimal. Gross Profit margins are 200%. A
very affordable and a convenient tool, the patent if approved (probability=65%)
will have a useful life of 8 years. There is a major drawback in this project is that
huge funds will be required, which both banks and public have denied. Also, the
IIM-B students have asked Mr. Ram to use their name SHODH instead of
StoreMore Ltd., which Mr. Ram is strictly against. Students feel that now the
name StoreMore does not really convey the purpose of the device and that it
has lost the brand image that it had once enjoyed. Other companies like
Macrohard, Googirl and AppPearl have also shown keen interest and have
approached the students to buy SHODH.
4) ANY SOLUTION that the participant proposes, given it is based on facts and
hints from the case study. Any new solution will require justification and
reasoning. Excerpts can be quoted from the case study if needed.

Following is some numerical information that you can use while formulating
your case study:From the Balance Sheet (incomplete) of StoreMore Ltd.
Particulars
Amt(in crores)
Factory, Machinery, Land
90
Janpath Office
100
Patents
7
Bank Balance
8
Accumulated Profits over the years(Less the amount of
50
profit distributed as dividends, reinvested)
10.5% Bank Loan
30
Share Capital
200
Taxes due
10

Mr. Ram Guptas Personal Wealth

Particular
Private Residence near Patel Chowk, New Delhi
Farm House in Aurangabad, Maharashtra
5% Stake in Calcutta Night Raiders, a domestic cricket team
Investments in Shares, Trusts, Mutual Funds at Market Value
RGs Favs!- a Mexican restaurant and bar(100% owned)
Personal Loan
Market Value of Shares in StoreMore Ltd

Amt (in crores)

150
27
20
30
2
30
170

Solution must contain:

1) Option opted for.
2) Theoretical backing for the option so opted.
3) Numerical analysis of the option so opted including sources of funds,
revenues and profits.
4) Anything supplementary depending on the personal discretion of the
participant.

Analysis which is backed by numbers, can be used from the data in the case
study or the table. Any estimates used should be backed by proper facts,
explanations and logic. The details in the case study cannot be questioned or
contradicted.
A heavy weight is allotted to the numerical backing than the theoretical backing.
Propose a solution to the problem stated above.
The solution prepared must be in a Word file and must be saved by name in
the following format Decrypt_<Participant 1 Name>_<Participant 2 Name (if
any)>_<Participant 3 Name (if any)>
All entries to be mailed to decrypt2014@gmail.com and fichindu@gmail.com

All the Best

Regards,
The Finance and Investment Cell, Hindu College.
In case of any problem with the case study, contactKrushna Bhala +91 8447246178
Any other AssistanceSejal Gandhi +91 9958833829
Maulik Shrivastava +91 9650817404
Anushree Shrivastava +91 9953048201