Kirana Connect: Profits Down Despite Flat Revenue

Consulting

medium45 min0 submissions

Morgan Stanley

Scenario

Kirana Connect is a retail tech business in India. The CEO has asked for help understanding a sharp fall in profitability.

Revenue moved from ₹954 Cr to ₹925 Cr over the past year, while operating margin fell from 16% to 13% — a drop of 3 percentage points and roughly ₹32 Cr of operating profit.

What the finance team has established so far:

Sales volume changed by +6%
Average realised price changed by +3%
Input costs per unit rose 16%
Fixed overhead rose 2%

The COO believes the problem is "the sales team discounting too aggressively". The Head of Sales believes it is "procurement failing to control input costs". The CEO wants an evidence-based answer, not an argument.

Supporting data

drivers

volume change pct: 6
fixed overhead change pct: 2
realised price change pct: 3
input cost per unit change pct: 16

profit bridge

revenue last year cr: 954
revenue this year cr: 925
operating margin last pct: 16
operating margin this pct: 13

Your task

Diagnose the profit decline and recommend a response. Provide:

Analysis — structure the problem and isolate what actually drove the margin fall.
Risks — what your recommendation depends on.
Recommendation — prioritised actions with expected impact.

Show the arithmetic behind your conclusion.

Ready to move forward? Up next: Solstice Travel: Plenty of Demand, Nothing to BuyNext question

How you'll be graded

100 points, 60% to pass.

root cause25
recommendation25
problem structuring25
quantitative analysis25

Hint

Reveal suggested structure

Profit = (Price × Volume) − (Variable cost × Volume) − Fixed cost

Decompose the change: how much of the margin fall is price, how much volume, how much unit cost, how much overhead?
Size each driver before forming a hypothesis.
Test the two stakeholder claims against the numbers.
Prioritise by size of impact and speed of fix.