27 Apr

Industry Analysis – The Telecom Sector Story – Part 1

The Telecom Sector Analysis
The telecom sector has been in news off late, for a variety of reasons, either the entry of a large player disrupting the current competition scenario, or the merger to two other major players in the markets to create the largest telecom entity in India. It’s a sector which has been evaluated a bit, and let us note down all that is not so good with the sector.

The sector is hypercompetitive – thereby always creating a pricing pressure on players.

02 Mar

Budget 2017 – A Short Review

We recently conducted a short webinar (30 minutes) on the major announcements in Budget 2017, and its implications. The webinar discusses about what was good and what was not in this budget, and where was the major focus of this budget.

21 Dec

Demonetization – A boon or bane – Video

We recently conducted a webinar covering the topic -Demonetization – A Boon or Bane? In this webinar, we took an objective look at what are the costs and benefits of the demonetization exercise. What can we expect with respect to the economy and sectors in the near future, and how will the economy shape itself in the next year or so.

25 Aug

Valuation – Where NPV fails

Most valuation techniques use some form of present value calculations, and are extensions of the NPV analysis. For example, both DCF and DDM draw from the NPV philosophy. However, there are some areas, where this may not work.
One of the major issues with NPV analysis is that the decision point is “Now or Never”. So if you are evaluating a project, and the NPV is negative, we are taught to discard the project, or not invest in it.

31 Jul

Interest Coverage Ratio – and mistakes we make while using it

Interest coverage ratio is a ratio that analysts use in order to evaluate the capability of a firm to repay debts and service the interest associated with those debts. It is calculated by dividing your EBIT by the Interest paid by the firms. Usually a ratio of 3 or more is considered comfortable, since your pre interest profits cover your interest liability by 3 times or more.

28 Jun

What is wrong with the argument in this article?

This note reviews an article that appeared in the ET a few days ago.
Refer to the mentioned article here. Try and find out if there is something wrong with the argument in this article?
We outline what is wrong with the argument this article uses about the overvaluation on Indian markets. This is a classic case of incorrect usage of real and nominal numbers.

11 Jun

Is increasing profitability always to be considered good?

In Financial Statement Analysis, one of the first parameters gauged for firms is whether or not their profitability is increasing? Most media reports tend to focus on improving profitability. Is increasing profitability always good? To understand this, the question we need to also address is whether improving profitability is an end goal for the business in itself?
Common sense would say that a business that is increasing profitability should do well over time.

15 Sep

Introduction to Normal Distribution

FinShiksha conducted a webinar on Introduction to Normal Distribution and its Applications in Financial Risk Management.

27 Apr

Industry Analysis – The Telecom Sector Story – Part 1

The Telecom Sector Analysis
The telecom sector has been in news off late, for a variety of reasons, either the entry of a large player disrupting the current competition scenario, or the merger to two other major players in the markets to create the largest telecom entity in India. It’s a sector which has been evaluated a bit, and let us note down all that is not so good with the sector.

The sector is hypercompetitive – thereby always creating a pricing pressure on players.

05 Sep

Corporate Governance and Analysis: Lessons from the Welspun fiasco

We are reviewing an article on the web for this discussion. For more details, please read this
Recently, Welspun India was involved in a controversy, as one of their customers, Target, broke ties with them citing that they were being supplied inferior quality terry towels by Welspun, instead of those made by premium Egyptian cotton. Apparently, the towels were being labelled as being made with Egyptian cotton, but were using inferior grades of cotton.

25 Aug

Valuation – Where NPV fails

Most valuation techniques use some form of present value calculations, and are extensions of the NPV analysis. For example, both DCF and DDM draw from the NPV philosophy. However, there are some areas, where this may not work.
One of the major issues with NPV analysis is that the decision point is “Now or Never”. So if you are evaluating a project, and the NPV is negative, we are taught to discard the project, or not invest in it.

31 Jul

Interest Coverage Ratio – and mistakes we make while using it

Interest coverage ratio is a ratio that analysts use in order to evaluate the capability of a firm to repay debts and service the interest associated with those debts. It is calculated by dividing your EBIT by the Interest paid by the firms. Usually a ratio of 3 or more is considered comfortable, since your pre interest profits cover your interest liability by 3 times or more.

27 Jul

The effect of Operating Leverage

The term leverage means being able to derive a magnified impact on earnings given a certain change in sales. Operating leverage comes out due to a bigger impact on the basis of fixed cost structures of firms. So how does it work? Assume the sales of a company are Rs 100 crore, and fixed costs are Rs 80 crore, while variable costs are 10 crores. When sales increase by 20%, this would result in variable costs increasing 20% as well. Fixed costs however would remain the same.

28 Jun

What is wrong with the argument in this article?

This note reviews an article that appeared in the ET a few days ago.
Refer to the mentioned article here. Try and find out if there is something wrong with the argument in this article?
We outline what is wrong with the argument this article uses about the overvaluation on Indian markets. This is a classic case of incorrect usage of real and nominal numbers.

26 May

Analysis of Debt – Why certain industries are at higher risk?

Why does analysis of debt become so important for both company analysis and valuations? More so with companies in certain sectors? To understand this, and how debt impacts the survival of the firm, we pick up some data from a few really good articles, talking about debt of companies in India. The following articles are picked up, and we recommend you read them to get a gist of the overall problem that high debt creates, and why analysts should be careful in the analysis.

17 Feb

Common Errors in DCF Modeling – Using Historical Growth Rates

Over the course of the next few weeks, we are posting videos on common errors that analysts commit while building DCF Valuation Models. The first in the series is assuming historical growth rates to continue in future, which is incorrect for 2 reasons. Firstly, conditions may not be the same, so growth rates need to come from business drivers and not history. Secondly, mathematically it is a problem, since the company will keep becoming bigger, and that will mean lower growth rates in future.

09 Sep

Sources of Competitive Advantage – Jubilant Foodworks

What do you think are the business drivers for Jubilant Foodworks in India? They own two brands, Domino’s pizza and Dunkin’ Donuts. Some of the data in this post is based on a discussion on our FB page, and from comments of some of our users and students.
Let us first think about major sources of competitive strength that Jubilant Foodworks enjoys.

03 Aug

Financial Statement Analysis of Hindalco

We conducted an exercise on the financial statement analysis of Hindalco, under our Knowledge Series Sessions. The video of that could be accessed from here.

02 Mar

How to make Effective use of Summer Internship in Finance

We conducted a short webinar discussing what are the things that students could do in order to maximize the value they get from their summer internship in Finance. The video of the webinar can be found here.

20 Jun

Webinar on What Financial Services Companies Expect from students

We conducted a webinar on the topic of  “What does the Financial Services Industry Expect from students“. This was attended by students from IIM Sambalpur, Vizag, Sirmaur, and Bodhgaya. You can access the video here.

19 Feb

Session on How to use Summer Internships Effectively – at JBIMS

FinShiksha recently conducted a short talk on “How to use the Summer Internships effectively” for the students of Jamnalal Bajaj Institute of Management Studies. The session outlined the importance of how students can maximize the learning during their summer internships. We thank students at JBIMS for hosting us. These sessions are also being planned in other institutes.

14 Nov

Financial Modeling vs Equity Valuation – The difference

How do we differentiate between financial modeling and valuation? Under common parlance, both these terms are used interchangeably, but a careful analysis would show the difference. It is necessary for someone trying to learn the two to understand the difference between the two.
Valuation of a company is a way to find out its intrinsic value. There are various ways we can analyse a firm, and we usually end up using Excel to speed up the process.

26 Dec

Investment Banks – What do they do?

One of the most coveted areas that students want to work for in the financial services domain is Investment Banking, or I-Banking as it is popularly known as. So what all does an I-Bank really do?
In this post we take a brief look at the major segments in an I-Bank. 
Not all investment banks conduct all the tasks highlighted on the right. A boutique investment bank may just assist in a few of the tasks. A full service investment bank on the other hand would deal with all the tasks.

02 Mar

Budget 2017 – A Short Review

We recently conducted a short webinar (30 minutes) on the major announcements in Budget 2017, and its implications. The webinar discusses about what was good and what was not in this budget, and where was the major focus of this budget.

21 Dec

Demonetization – A boon or bane – Video

We recently conducted a webinar covering the topic -Demonetization – A Boon or Bane? In this webinar, we took an objective look at what are the costs and benefits of the demonetization exercise. What can we expect with respect to the economy and sectors in the near future, and how will the economy shape itself in the next year or so.

28 Jun

What is wrong with the argument in this article?

This note reviews an article that appeared in the ET a few days ago.
Refer to the mentioned article here. Try and find out if there is something wrong with the argument in this article?
We outline what is wrong with the argument this article uses about the overvaluation on Indian markets. This is a classic case of incorrect usage of real and nominal numbers.

25 Jun

Balance of Payments Scenario – India

We conducted a session on the Balance of Payments Scenario in India, and points to watch out for in the near future. The video can be accessed here.

24 Jun

India’s total trade with Euro Region in 2015-16

A chart to show trade India does with EU. The top 10 countries we import from and export to are shown. Looks like currency impact may not be huge.

22 Jun

Why India should focus on boosting manufacturing of electronic goods?

We all love the latest versions of electronic goods. For long, India has been an importer of electronic goods. Most of the manufacturing that happens in electronic goods such as televisions, refrigerators, washing machines and others is largely assembling. Major companies selling in India usually import most components. In fact, electronics imports in India are the 3rd largest import in terms of bill value.

24 May

Should we blame Raghuram Rajan for his stance on interest rates?

Off late there has been a lot of clamour around Raghuram Rajan, and the extension of his term as the RBI governor. Now the broad charge that has been led against him is that he has allowed interest rates to remain too high for too long. He should have focused on WPI and not on CPI, and reduced interest rates since all global economies have done so.
Such simplistic analysis very obviously misses the macro factors that affect the decision making of any central bank.

24 May

Book Review – Fault lines by Raghuram Rajan

Raghuram Rajan starts this book with an incident where he was asked to present a paper in front of the US Federal Reserve Board. He presented a paper on “Has financial development made the world riskier?” and goes on to mention that, no one in the room liked the findings as they didn’t boast the working of the then Federal Reserve Chairman Alan Greenspan; rather it criticized the complexity of the financial system created by the policies.

29 Feb

Union Budget 2016 – FAQ and The Budget Speech

As you grasp the events of the Union Budget, here is a place where you can find answers to some of the most common questions around Budgets.
http://pib.nic.in/eventsite/budget2016/BudgetFAQ.pdf
The entire budget speech is available here
http://indiabudget.nic.in/ub2016-17/bs/bs.

27 Feb

Negative Interest Rates – Implications

In the environment where we see negative interest rates regime is being followed by many central banks, we wonder what exactly do negative interest rates mean? What is the objective of these policy measures? Are they effective? What are the implications? This article will try to evaluate the basics and then in subsequent articles we will touch upon some implications of this policy.