In January 2015, an investor bought 1,000 shares of Bank of India stock when the banking sector was expected to perform better over the medium to long term. On October 11, 2019, after holding the shares for nearly five years, the investor was surprised to see that the stock price had instead dropped by almost 80 per cent. He was disappointed in his investment’s performance to date, but the stock’s current low price seemed a bargain, so he was contemplating buying more shares for overall cost averaging of his investment. Before making any investment decisions, however, he carefully analyzed the bank’s annual reports for the previous five years and discovered an unusual change in the bank’s accounting policy for the provisioning of non-performing assets. After his review of the bank’s financial statements, the investor was unsure whether he should sell his shares, buy more shares to achieve overall cost averaging, or hold the number of shares he currently owned.
In 2013, United Bank of India (UBI), predominantly present in the eastern and northeastern parts of India, faces considerable difficulty in managing its swelling amounts of bad debt. A forensic enquiry by an external agency has identified some serious problems in the bank’s credit appraisal process, loan disbursement procedures, and non-performing assets (NPA) detection system. With the bank’s year-over-year growth of NPAs surpassing the growth of its credit, the management team faces the urgent task of developing an effective turnaround strategy to bring the bank back into a profit position.
Aqua Logistics Limited, one of India’s leading logistics and supply chain management companies, suffered from poor financial management and was witnessing slowing demand in the industry. The company had significant financial debt to banks and financial institutions. Owing to such difficulties in managing its operations in a largely fragmented industry, the firm — with its strong network in multimodal transport and in the third-party logistics model of delivery — was a good target for companies seeking to consolidate their position in the industry. An acquiring firm, however, would want to answer several questions. What were the possible value drivers of Aqua Logistics Limited? From where would the synergistic gains be realized through an acquisition? How much should be offered for the acquisition?