Olam International Case Study Solution

2296 Words10 Pages

Introduction Olam International Limited is a worldwide incorporated supply chain manager, processor and trader of soft commodities, supplying items over 16 platforms to 13,800 clients around the world. Olam was situated up in 1989 by an Indian Group, Kewalram Chanrai (KC), as the group 's non-oil based export division in Nigeria. Following several year of expansion and growth, the division had made an incredible accomplishment on export business. (Jian and Chen, 2014) In July 1995, Olam rebuilt its worldwide agricultural business and set up its headquarters in Singapore. Olam was listed at the Singapore Exchange on 11 February 2005 to quicken the pace of development. After being listed, Olam prepares its financial reports as per Singapore Financial …show more content…

However, Olam responded quickly by applying for temporary suspension of shares, filing petition against MW and Block with the high court of Singapore and also by issuing rebuttal reports. This was to prevent the share prices from further decreasing and to restore confidence in the investors. Olam had to improve the share prices, as it would affect the amount of equity that the company has. If the equity amount had continued to fall, it may violate its debt covenant and result in huge loses for its shareholders as well as the employees who hold the company’s shares. Moreover, if the situation had worsened, the investors may perceive the business as risky and demand higher returns. Thus, Olam had to react quickly and reduce the impact of MW allegations and assure the investors that the business is stable. However, Olam’s efforts were not able to fully restore the company to its original state. Moreover, since Olam was reluctant to get its credit risk valuation done, it raised even more suspicion among the investors. (3) What did Olam do to address the concerns and restore investor confidence? How do you evaluate the role of controlling shareholders and institutional shareholders in this …show more content…

Another major strength in its communication is that it comes up with solutions to those negative news, which helps to reduce the impact of the bad news. When MW doubted Olam’s ability to raise funds through debt, Olam proved itself by taking the first set by announcing that it is going to issue additional shares and bonds. Verghese mentioned in a press release that they were not doing this for liquidity and that they already have liquidity. He added that this was to demonstrate that Olam could access debt and capital markets and that Olam has a significant shareholder who is willing to backstop them and support them not with words but with action. (Agence France-Presse, 2012) This sent an indirect signal to the investors that Olam was capable of running it business without going into solvency and that it had backing from strong financial institutions such as Temasek Holdings. Such reassurance instilled confidence among the investors and helped to raise the share

More about Olam International Case Study Solution

Open Document