Marlow Chemicals: Which Businesses Deserve the Next Rupee?
Marlow Chemicals is a specialty chemicals group operating in India. The board has asked for a portfolio review before setting next year's capital plan.
Three business units:
| Unit | Revenue | Growth | Operating margin | Capital employed | Market share |
|---|---|---|---|---|---|
| Core | ₹680 Cr | +1% | 15% | ₹640 Cr | 22% |
| Adjacency | ₹303 Cr | +28% | 6% | ₹352 Cr | 5% |
| Legacy | ₹334 Cr | -7% | 12% | ₹391 Cr | 17% |
The group's weighted average cost of capital is 10%.
The CEO is instinctively drawn to the Adjacency business — it is growing fastest and gets the most attention internally. The CFO points out that Legacy still throws off cash. A board member has asked, bluntly, whether the group should own all three at all.
There is capital for one major investment next year, or for none if the right answer is to return it.
units
| unit | revenue | growth pct | capital employed | market share pct | operating margin pct |
|---|---|---|---|---|---|
| Core | 680 | 1 | 640 | 22 | 15 |
| Adjacency | 303 | 28 | 352 | 5 | 6 |
| Legacy | 334 | -7 | 391 | 17 | 12 |
derived hints
- roce pct
- 15.9,5.2,10.3
Advise the board. Your answer should provide:
- Analysis — assess each unit on the economics and on the group's right to win. Compute returns on capital employed rather than describing them.
- Risks — what your recommendation depends on, and what would change it.
- Recommendation — a keep, fix or exit call for each unit, and where the capital goes.
State any assumptions you make.
100 points, 60% to pass.
- strategic fit25
- recommendation20
- portfolio logic30
- quantitative analysis25
Reveal suggested structure
Attractiveness vs right-to-win per unit; ROCE vs WACC; shared capabilities test; capital allocation decision