Managing the Investment

Governance and Oversight

Company should increase the investment in the machineries by introducing the PET bottle machine and
optimizing the current distribution chain to increase the efficiency of network. As the future of the company is
dependent on this investment strategy the MD Deepankar Agarwal should form a committee and constantly
monitoring the progress in the investment and make sure there is no deviations init.
Project Management Strategy
Ajanta packaging will grow at a faster rate if it expands its product line by venturing into pet bottles
production. This will reduce its over dependence on a single product for profitability.
The company can use its existing plant to produce the Pet bottles. The cost of machinery for producing the
PET bottles is estimated to be Rs 2.5 crores including land. As the Company is already producing the PET
bottles for the pharmaceutical companies it can upgrade the plant to produce the PET bottles for the soft drinks
industry. It can use the existing labour force and recruit few more to operate the machinery and use the
existing distribution channels to supply the products.
Contracting and Procurement
In order to offset the fluctuating demand from the buyers the company can enter into contracts with the current
customers so that the company doesnt get affected by the fluctuations. Procurement of raw materials can be
achieved from the local producers of polyethylene terephthalate which can be converted into PET bottles. It can
also leverage its glass recycling network to include the plastic containers recycling which will reduce the raw
material cost and it can also have a least environmental impact.
Implementation Plan
The implementation should be taken care in two phase. In the first phase it should conduct an extensive
research on consumer preferences in the beverages sector. It should also carry out the preliminary designing of
the products and the feasibility study. For funding the project the company can either use bank loan or its own
funds carried over from the previous year earnings. If the company is wants to reduce the tax expenses in the
upcoming years it can take a bank loan.
Schedule and Approach
The company should implement the plan of producing the PET bottles in a larger scale. If they do not adapt
quickly, it will lose customers as the existing customer will shift to the producers who also produces the plastic
so that they can deal at a same place which will simplify their trade process. It should expand the PET bottle
manufacturing plant as soon as possible.

 Project Review Strategy

The project should be critically analysed based on the value of the project and the future cash flows and its net
present value. Analysis should also be made on market share before and after expansion. This will help the
company to find out the effect of implementation of PET bottles.
Investment in Marketing:
The other investment option is increasing its marketing expenditure. By doing so the company can increase its
market share. The current market size of the glass bottle industry is 11% out of the 84 Billion $ which turns
out to be 9.24 billion $ but the company is having a business of 100 million $. This implies that the company
has lot of potential for growth within the glass bottle manufacturing space. By diversifying the company
products and marketing it can increase its current revenue and also increase its profit.
Risk Management Strategy
Risk Summary
The main risk for the company is loss in investment made in the plastic bottling plant. As the company is
operating in both glass and plastic bottles quality is of high importance. So the company should have significant
quality risk management policy in order to effectively manage unforeseen events in the quality front. The
companys operations in the plastic will have sufficient impact on the environment, so it should have risk
framework to handle environmental protests against the company. There is also a risk that the marketing expenses
are made out of the target segment
Risk Management Approach
Business loss can be avoided by making sure the company runs at an optimal cost and the products produced are
bought by the customers as soon as it is produces. So that it can reduce the inventory holding costs. The
environmental risk can be handled by keeping necessary checks and balances around the plant to find out the
environmental impact and find the problems in the early stage to take corrective measures. The marketing
expense can be effectively monitored by measuring the Return on marketing expenses.
The Main reason for the dilemma in choosing the appropriate growth strategy for Ajanta Packaging is the
ever changing market place for packaging methods, which is leaning towards the new effective and attractive
packaging techniques like tetra-pak, aluminum cans and paper containers. From the decision criteria analysis of
multiple options, it can be inferred that addition of new lines to the product portfolio will increase the revenue of
Ajanta Packaging by over 80% (exhibit 1) but due to increased expense in marketing and developing new sales
frameworks results in slow growth rate of (20%). This action is in-line with the evolving needs of the market place
and will lead to increased
APPENDICES
Cost-Benefit Appendix
Sources of funding
Capital for machinery:
It has been given in the case that the company is operating with a substantial profit but it will suffer loss in
market share if it does not enter the PET bottles. It can use its own capital for the purchase of machinery or it can
get a loan from a bank to acquire machinery.

Working Capital:
It is always advisable to get working capital from a financial institution so that it can give necessary credit period
for its customers.
Costs:
Cost of Glass bottle manufacturing plant is taken from the exhibit 1
Total Expenses in operating the plant
108.1 crores INR
Operating Profit in Glass bottles
25.9 Crores INR
Exhibit 1: Pro-Forma Income Statement Diversifying the Product Portfolio
REVENUE
Gross sales
Less credit Sales and returns
Net Sales
COST OF SALES
Beginning inventory
INR 120.00
Total Goods Available
INR 360.00
Total Cost of Goods Sold

2012
INR 650.00
INR 200.00
INR 450.00

2013
INR 700.00
INR 230.00
INR 470.00

2014
INR 850.00
INR 310.00
INR 440.00

2015
INR 900.00
INR 320.00
INR 580.00

INR 350.00
INR 120.00
INR 470.00
INR 388.00
INR 110.00

INR 360.00
INR 165.00
INR 525.00
INR 420.00
INR 105.00

INR 420.00
INR 385.00
INR 605.00
INR 435.00
INR 170.00

INR 435.00
INR 490.00
INR 625.00
INR 440.00
INR 185.00

INR 140.00
INR 265.00
In crores
In crores
Out of 11% of the 84 billion $Packaging industry the company

INR 370.00
In crores

INR 395.00
In crores

Gross Profit (Loss)

Exhibit 2: Pro-Forma Income Statement Increased Cost of Production

Description

UOM

Bottles

Units

Bottle Caps
Bottle Paintings

References:

Selling
Price

Product
Cost

Gross
Profit

5,500.00

4,130.88

1,369.12

6,000.00

4,968.16

1,031.84

4,500.00

3,621.31

878.69

Units
Units

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accessed March 5, 2013.
Indiapack 2013: Packaging - Emerging trends and challenges ahead, Printweek India,
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Mihir Dahal, Tetra Pak emerging as preferred packing for alcohol in Karnataka, Live Mint,
January 2, 2013.
Company profile, India Mart, www.indiamart.com/ajantabottle/profile.html, accessed May 3,
2013.
Glass Returns to Growth: The Outlook in Food and Beverages, Euromonitor International,
November 2011, www.euromonitor.com/glass-returns-to-growth-the-outlook-in-food-andbeverages/report, accessed March 3, 2013.