The exercise offers students an intriguing learning scenario, involving analysis of the financial statements of 13 anonymized but well-known companies from diverse industries and sectors using financial ratios to eventually identify them. All 13 companies in the exercise are listed on the National Stock Exchange of India and were selected using National Industrial Classification codes. Moreover, the selected companies are taken from the top three firms in terms of market capitalization within each industry sector. The exercise provides financial data from the balance sheets and income statements of the 13 anonymized companies. Students are required to first categorize the anonymized companies into broad sectors and then identify their specific industry. Last, students are asked to identify the names of the anonymized companies. The sample has been divided into two categories: a training set and a testing set. Students should use the training set to develop a blueprint (a set of procedures) to identify the companies based on the sectoral and industrial characteristics reflected in their financial statements. They should then validate the blueprint by applying it to determine the identity of the companies in the testing set.
Instacart is an online grocery delivery platform that is seeking to go public through an initial public offering (IPO). Instacart has hired an investment bank to be its lead bookrunner, and the bank is responsible for coming up with an IPO price range. Maya Martinez, an investment banking analyst at the firm, has been tasked with building financial models to come up with an appropriate share range for the firm’s managing directors to present at the IPO roadshow.
In 2021, an investment management firm analyst needed to convince his portfolio manager that technology companies such as Amazon.com Inc. (Amazon) could have a strong investment thesis since they improved upon existing business models. To make his argument, he used financial ratio analysis to compare one of the portfolio manager's favourite companies, Walmart Inc. (Walmart), with a more technologically focused competitor in the retail space, Amazon. By analyzing the two companies using ratio analysis to highlight their similarities, the analyst sought to show his portfolio manager that Amazon was not only a technology company, but a better version of Walmart.
A 19-year-old student had just started university studies and was confronted by the financial challenges that many young adults faced as they embarked on their own life away from home. Her parents provided for her education and many basic living expenses, but there were still many unexpected costs and social life expenses to plan for. After an interesting conversation about personal finances with her friends, the student decided to start her own financial plan to resolve some important questions and to set some key financial objectives for her future.
This note is about tokenization and tokenized assets. Tokenization refers to the process of creating a representation of a particular asset on a blockchain via digital tokens. Tokenized assets typically derive their value from the value of the underlying asset. This note explores the benefits and risks of tokenization, as well as use cases. Moreover, it explores Security Token Offerings, considerations for tokenized asset issuers, and the Howey Test. It concludes with a consideration of how possible future trends may affect tokenization.
In March 2022, Jack Jelinek and Mikey Woolfson, co-founders and co-owners of CRANK Lite Bev Corp (Crank), were considering whether they should sell their beer (Crank Lite Lager) at the Northern Heat Rib Series (Ribfest). As an Oakville, Ontario-based brewery startup that launched during the COVID-19 pandemic, Crank had already taken on a large amount of risk, and Jelinek and Woolfson were unsure of whether they could afford to take on additional risk. However, they wished to continue growing their business to eventually get acquired by another company. Jelinek and Woolfson wanted to determine whether the Ribfest opportunity made sense from a qualitative and quantitative perspective.
Minko Platforms Pvt. Ltd. (Minko) was a financial technology (fintech) lending startup that specialized in providing supply chain distribution financing to small retailers that sourced inventory from fast-moving consumer goods (FMCG) distributors. The company faced a dilemma in determining how to scale up. Should it continue to focus on distributor-retailer transactions, a market where it had already gained experience and penetration? Or should it target the higher value stockist-distributor transactions further up in the supply chain? The latter would be more remunerative but would also have more potential competition. The company’s situation was further complicated when the Reserve Bank of India (RBI) released new guidelines on digital lending that would significantly impact its operations. As a result, company leaders were also evaluating whether Minko should continue as a fintech company or procure a licence to operate as a non-banking finance company (NBFC).
The accounts manager at the Commercial Bank of Canada, was reviewing a loan application from Pasquale’s Pizzeria, located in Sarnia, Ontario. The business owner was ready to expand his family’s business to London, Ontario, having requested a $300,000 long-term loan to finance the renovations and equipment to begin operations in London. They also requested a $20,000 line of credit to help fund the day-to-day operations of the business. The restaurant had never requested a loan of such magnitude, nor had the business undergone an expansion in its lifetime. With COVID-19 changing the food delivery landscape, the accounts manager was confident in his ability assess whether or not Pasquale’s was ready to take on this expansion plan.
Vedanta Limited (VEDL), an Indian conglomerate, operated in natural resources business segments, including aluminum, power, steel, oil and gas, and base metals segments such as copper, zinc, lead, silver. In September 2023, the company’s market value was approximately half of its intrinsic value, as its individual business segments were estimated to be worth significantly more operating independently.<br><br>The chair of VEDL needed to take the necessary steps to enhance shareholder value by unlocking conglomerate discounts. The combined segments were perceived to generate negative synergies for the conglomerate, as indicated by the trading multiples of comparable companies. In looking for viable ways to eliminate the discount, he had to choose among the following options: (1) a share repurchase, (2) divestiture, (3) a spinoff of one or more segments, or (4) a spinoff of all segments.
On March 8, 2023, Silicon Valley Bank (SVB) disclosed its plans to raise USD 1.75 billion to seal a hole in its balance sheet from an unsuccessful sale of a fixed-income portfolio that had reportedly resulted in substantial losses. This unexpected move triggered a massive withdrawal of deposits, especially by technology and venture capital firms. The liquidity problem was expected to leave losses amounting to USD 20 billion. A fund manager intended to examine the level of financial distress in SVB and identify the possibility of recovery. His clients believed that SVB could still be a good buy at the current valuation. The fund manager examined various risks and applied the probability of financial distress model for analysis.
On April 23, 2020, Franklin Templeton India Mutual Fund (FT) shocked investors by winding up six of its debt mutual fund schemes, amounting to assets under management of INR 267.79 billion, with over 300000 investors. The decision was based on the liquidity squeeze in the financial markets as COVID-19 forced the world, including India, into lockdown. FT was facing redemption pressures it could no longer meet without making distress sales of its underlying investments. The management deemed a distress sale to be far more detrimental to investor interests than freezing their investments in the fund. The question arises if there were other compelling reasons that brought FT to this unfortunate decision.
In October 2022, The Kroger Company and Albertsons Companies Inc. announced their intention to merge their grocery businesses in the United States. By the fall of 2023, the proposed merger was facing lawsuits and protests from various stakeholders including politicians, employee labour unions, and consumers. The merger agreement required the deal to be completed by mid-January 2024, although this date could be extended if both sides agreed. This seemed an appropriate time for an analyst to take a closer look at the merger’s potential benefits, including evaluating potential synergies to be gained from the proposed merger. However, the analysis would have to consider the industry’s regulations. An analysis of the proposed merger would have to carefully consider both the qualitative and quantitative benefits that could arise from The Kroger Company and Albertsons Companies Inc. joining forces in the highly competitive US grocery market.
Braithwaite & Co. Limited (BCL) was a leading railway-engineering public sector company in India. The company was incorporated in 1930 as the first wagon manufacturing company in India. In 1976, the Government of India (GoI) nationalized the company, registering and incorporating it as a fully owned GoI undertaking to support Indian Railways by supplying railway wagons. However, following nationalization, BCL faced growth challenges and gradually accumulated significant losses during the 1990s; eventually, it was declared legally sick and referred to the Board for Industrial and Financial Reconstruction (BIFR). The reasons identified for its sickness were failure to technologically upgrade and adapt to changing market scenarios, dependence on a single customer (Indian Railways), and operational-level issues within the organization. Yatish Kumar joined BCL in 2018 and took a series of strategic and operational measures to turn the company around. These measures resulted in BCL’s improved financial performance, profitability, and a quick turnaround, and the company was awarded Miniratna Category-I status in 2021. Although BCL had been growing at a good rate, Kumar was concerned about how to sustain the turnaround and maintain that growth rate in the future.
In 2022, the manager of Hyundai Nishat Motor (Private) Limited was ambitious to expand the company in Pakistan and continue its hard-earned growth. His first step was determining whether the expansion plan was worth it. But how could he estimate the cost of equity of a privately held firm? Although the capital asset pricing model (CAPM) and dividend discount model (DDM) were most commonly used to calculate the cost of equity, neither of those models could be used with an unlisted company, which had no stock price and hence no stock returns and beta. Financial consultants thus advised the manager to research the weighted average cost of capital (WACC) and the cost of equity of Hyundai’s competitors in a comparable company analysis.