個案總覽

The application of technology in the area of finance has fostered a slew of innovative financial technology ("fin-tech") based firms. Wealth management and personal financial advisory is one of the industry segments that is witnessing a technology-led transformation across the globe with the advent of a wave of robo-advisors. The case presents an overview of the financial planning and advisory (FP&A) segment in the country prior to the onset of robo-advisors and the impact of robo-advisors on the industry dynamics. It traces the journey of Arthayantra ("the Company"), a leading Indian robo-advisory firm, as it seeks to change the way personal finance is perceived and delivered. It showcases the evolution of Arthayantra in its initial years as it develops its value proposition, puts in place its organizational structure and establishes a customer base in the backdrop of a changing macroeconomic environment. The case closes at a point where Arthayantra is evaluating a strategic pivot from a sole advisory model to an advisory-cum-execution model, encouraging students to analyze the strategic choices that lay before the firm.

The case analyses an opportunity of risk arbitrage associated with stock buy-backs (repurchases) available to retail shareholders in India. The opportunity arises from a differential treatment of small (retail) and large shareholders by Indian stock buy-back regulations. There has been strong anecdotal evidence of individuals taking advantage of this opportunity to make significant returns. The case illustrates the mechanics of the transaction, explores various sources of risks that differentiate it from a pure arbitrage play and the impact of these risks on the profitability of the transaction. The case also analyses the systemic checks that prevent arbitrageurs from making large abnormal profits using this opportunity. Finally, the case touches upon the motivation underlying this regulation and the regulatory considerations involved in remedying the risk arbitrage opportunity.

In the aftermath of the financial crisis of 2008, Fullerton India Credit Company Limited, a non-banking finance company, faced a dismal future. Weak credit issuance standards had exposed the company to significant risk and led its parent Temasek to inject new capital into the company to keep it afloat. The new CEO, Shantanu Mitra, embarked on a major restructuring exercise. First, he initiated a new credit appraisal system that centralized the credit underwriting process and simultaneously implemented significant cost reduction policies. Second, he recognized that the highly competitive nature of the Indian consumer and commercial loan markets compelled Fullerton to identify under-served segments with acceptable risk-return characteristics. He targeted the niche market segment of newly-emerging middle-class consumers who were being neglected by the formal banking system (because they found it difficult to accurately assess their credit risk) and also by microfinance institutions that mainly focused on the poorer sections of society. To achieve his goals, Mitra embraced a risk analytics framework to ensure that the credit underwriting process was not only compliant with Basel regulations but also consistent with the risk appetite articulated by the governing board. The case requires the student to discuss how the risk analytics framework can be used to drive strategic decisions about the composition of the lending portfolio (portfolio shape), the product-mix and the geographical-mix, without compromising on the risk appetite guidelines laid down by the board. Finally, the case also brings into focus issues related to organizational design, incentive mechanisms, and performance measurement.

This case examines the delisting choice of Saint Gobain Sekurit India Limited ("SGSI"), a French-owned Indian company, listed on the BSE Limited ("BSE"). On June 4, 2010, and August 19, 2010, the Indian central government enacted legal amendments, increasing the minimum public shareholding required to be maintained by listed companies to 25%. Companies that were listed on any stock exchange in India as on June 4, 2010 were given until June 3, 2013 to increase their public shareholding to 25%. The French promoters of SGSI, who held 85.77% of the company, faced a difficult choice - should they dilute their own shareholding in the company to maintain SGSI's listing on the BSE (a legacy from the previous owners of the company) or voluntarily delist from the BSE? On the face of it, continued listing does not provide SGSI with meaningful benefits - they had rarely raised money from the public, and their global profile does not substantially benefit from being listed on an Indian exchange. Further, continued listing meant that Saint Gobain would face dilution costs. On the other hand, delisting transactions could be expensive predominantly owing to the fact that the delisting price is determined by a reverse book-building process that vests significant bargaining power with ordinary shareholders. Further, delisting transactions have been known to be particularly unpredictable for foreign promoted companies in India. The promoters of Saint Gobain had to make an informed decision - whether to dilute (to be) or delist (not to be).

This case exposes students to financial decision-making in government enterprises and the concepts of financial and economic rates of return. It is based on actual electrification projects being undertaken by Indian Railways, one of the largest government organizations in the world. Electrification projects require large capital outlays with significant financial and welfare implications. The case analysis involves (i) estimating incremental cash flows under alternative scenarios, (ii) calculating the financial rate of return, and (iii) conducting a sensitivity analysis to identify the key value drivers. It also provides opportunities to discuss nominal vs. real cash flows, differences between internal rate of return and net present value, and the choice of different discount rates. The case is suitable for a course on Corporate Finance and Valuation.

Spreadsheet for case IMB395