Narayana Hrudayalaya: Investment Decision

In February 2023, a prominent retail investor was contemplating selling his investment in Narayana Hrudayalya Limited, one of India’s leading health care companies, when the stock price reached an all-time high of ₹800. The investor had initially bought the shares in 2017, when the price was ₹350 per share. On February 6, 2023, he came across an article about the company that discussed its future prospects, which prompted him to investigate the company’s financials and other key aspects more closely. As he delved deeper into the company’s financial details, the investor discovered various diverse opinions in various reports. To gain some clarity on the company’s financial situation, he asked for the professional advice of his nephew, who was an investment analyst at a prominent stockbroker firm. The analyst knew the importance of conducting a thorough analysis of a company before offering an informed conclusion and investment recommendation to his uncle. He also saw his analysis as an opportunity to provide valuable insight to his own current and prospective clients.

This case is suitable for courses on valuation, strategic financial management, investment analysis, and portfolio management at the undergraduate and graduate levels. The case can also be used for training programs on valuation for middle and senior professionals. After completion of this case, students will be able to<br><br><ul><li>learn about India’s health care industry and how it is classified for analysis and investment purposes;</li><li>evaluate the uniqueness and strategic aspects of a company and comment on its financial performance;</li><li>discuss the application of the Hamada equation in calculating the forward-looking equity beta for a company and calculate the cost of capital using the target capital structure;</li><li>forecast free cash flows to the firm and determine the fair value of equity using the discounted cash flow method; and</li><li>apply relative valuation techniques such as the P/E ratio and thePEG ratio in valuation of investments.</li></ul>

• healthcare, Hamada Equation, DCF, P/E, PEG, cost of capital