CASE 3.octet-stream_Essay - NBA 593: International...

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NBA 593: International Entrepreneurship Saraf Foods Case ` Summarize the situation today from GVFL’s point of view. Discuss the options
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available to GVFL (put in the requested money, write-off the investment, find other sources of capital, etc). What should you do? GVFL has been very patient with Saraf so far and has been pouring capital into the company while realizing a small return. The request for more funding comes at a time of great difficulty for the company leaving GVFL with few choices. The fact that Saraf has a significant amount of money invested in this company presents a compelling argument for why GVFL should be willing to take the risk and further invest in the company. The company has been showing steady improvements excluding the few occasional setbacks. Yet, the constant inability of the Saraf Foods to increase profitability can be a reason why GVFL should write-off the investment. There seems to be a reoccurring need to reschedule payments, as well as instability in the market. GVFL could also find other sources of capital, but that would present the problem of a new party trying to change the companies operations. This would be unfavorable since the VC firms seem to have much influence in the way a company is run at this time in India. The most favorable of options for GVFL would be to write off the investment. They have spent too much time on the account with not much result. Also, GVFL realizes that if the company gets through the current crisis, it would take many more years before they would be able to exit. This realization alone could be enough to prompt GVFL to write off the investment. Summarize the situation as you see it today from Suresh Saraf and family members’ point of view. Discuss your options. What should be their approach? Saraf Foods had a poor previous year in 1998 seeing an increased price of raw materials and increased costs as well as limited access to the customer brought about by restrictions on exports. Low forecasted sales volume for 1999 seemingly entail serious liquidity issues for Saraf Foods. The company is in real need of additional funding. The company has the potential to do very well, and had strong relationships with its buyers. The issue at current is the regulation on exports and also the increased costs due to raw material prices. The company has suffered due to the fact that there was little equity investment and most
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CASE 3.octet-stream_Essay - NBA 593: International...

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