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There are two basic issues before Kumar and his team.

The first is a reduction in the debt burden, which is preventing Peekay from leveraging its low-cost advantage. The second is the dilemma over whether to retain portfolio diversity or become more focused. This is ordinarily an independent issue. But in Peekay's case, the two issues are inter-related because the promoters could decide to reduce the debt burden by reducing their stake in one of the subsidiary businesses. Let me, however, deal with the issues separately. First, the debt. The key assumption here is that the business is viable only at the EBIDTA (Earning Before Interest, Taxes, Depreciation, and Amortisation) level. If the current trend continues, the business will eventually turn sick. All stakeholders-promoters, FIs, and the minority shareholders-will stand to lose. Theoretically, it is true that debt providers, like the FIs, are more secure than equity providers. But, in reality, when companies turn sick, FIs stand to lose as much as shareholders. Further, FIs typically hold significant equity in Indian companies. The key here is to work out a debt-restructuring plan with the FIs wherein all stakeholders take an equal share of the losses. The focus of restructuring must be to reduce debt, thereby improving cash flows, EPS, and, finally, the share price. The increase in the share price will eventually compensate the stakeholders for the losses arising from debt restructuring. While there is no single formula for restructuring Peekay's debt, several options are available and need to be explored: a write down of equity, conversion of debt by FIs to equity (maybe at a premium), a reduction in interest rates, or linking interest rates to steel prices. Now, let us come to the issue of diversification. Current thinking seems to favour focus-let the markets play the portfolio role. Ultimately, it boils down to the management's ability to successfully run the conglomerate. As long as each business in the conglomerate is being profitably run, I doubt the markets would bother. But most management teams at conglomerates fail to add value to each of the businesses. Rarely is the total value of the conglomerate more than the sum of its parts. I would suggest Peekay take a hard look at its portfolio and prune it. The choice of businesses to exit would be driven by a number of criteria: the value creation potential, timeframe for cash breakeven, ability of Peekay's management to significantly add value to the business, the corresponding management intervention it would need, the price at which it would be possible to cash out, availability of partners, and the quantum of capital that could be released. Peekay could then use the capital released to restructure the debts of the steel business.

Social audit A social audit is a systematic study and the evaluation of an organizations social performance, as distinguished from its economic performance. It is concerned with the possible influence on the social quality of life instead of the economic quality of life. Social audit leads to a report on the social performance of a business unit. Benefits of social audit The benefits of social audit are as follows: Social audit enables the company to take close look at itself and understand how far the company has lived up to its social objectives. Related to the first benefit is the fact that social audit encourages greater concern for social performance throughout the organization. Social audit provides data for comparing effectiveness of the different types of programs. Social audit provides cost data on social programs so that management can relate the data to budgets, available resources, company objectives and projected benefits of programs. Social audit provides information for affective response to external claimants that make demands on the organization. News reporters, welfare organizations and variety of others want to know what a business is doing in areas of their special interest, and a business needs to respond as effectively as possible. The social audit shows a business where it is vulnerable to public pressure and where its strengths lie.