Pranay Pharmaceuticals Private Limited: Capital Rationing and Inflation Dilemmas
This caselet aims to introduce the participants/students the concept of capital rationing and the impact of inflation on evaluation of capital investment decisions. Pranay Reddy (Pranay) after completing his Post Graduation in M.Pharm and acquiring relevant industry as well as academic experience, ventured to start his own pharmaceutical firm. Although the business started yielding revenues, he was worried about the inflation rate, which could dampen the profit margins. Besides, Pranay had planned to expand his product portfolio. He has shortlisted nine pharmaceutical projects. However, he had a capital constraint of `45,00,000. Given the limitation of funds, he wanted to start the projects, which would yield better returns. Nevertheless, he was clueless how to go about resolving his dilemmas. So, he took the help of one of his friends Srinath Dasari (Srinath), a financial consultant to get him out of this puzzled state.
Case Positioning and Setting
This caselet can be used in the following course in an MBA Program:
- • Financial Management – To understand the concept of capital rationing and impact of inflation on capital investment decisions
- I. What do you understand by capital rationing? What are the various types of capital rationing?
- II. How do capital rationing methods help firms in taking the right capital investment decisions?
- III. ..................
Preamble to the Case Analysis
This caselet is meant for a 60-minute session. The caselet is meant to introduce the students/participants to the concept of capital rationing. The caselet lets the participants know about various types of capital rationing, decision making under capital rationing situations and impact of inflation on the profit margins of the projects. In total, capital rationing techniques and inflation effects are highlighted in the caselet. Accordingly, the caselet was analyzed in the following suggested way................