Unique Paper Code : 61017928

Name of the Paper : Business Analysis and Valuation

Name of the Course : Bachelor of Management Studies (CBCS)

Semester : V

Duration : 3 hours

Maximum Marks : 75 Marks

Instructions for Candidates

1. This is an Open Book Examination.

2. Attempt any four out of six questions.
3. All questions carry equal marks.
Q1. On the basis of following information about Nestle India Ltd for period from financial
year 2013-1to 20107, you are required to:

(a) Analyse the company’s financial results using any 3 key ratios each on the basis of
profitability and solvency.

(b) Comment on the overall financial health of the company using Du Pont Analysis and
explain the findings.

(c) “Annual Reports meet not only compliance requirements but also serve as an important
tool for qualitative analysis.” In the light of this statement, explain how Annual Report
contributes in financial analysis and valuation of a company.

Nestle - Balance
Sheet
Year Dec 17 Dec 16 Dec 15 Dec 14 Dec 13

SOURCES OF
FUNDS:
Share Capital 96.42 96.42 96.42 96.42 96.42
Reserves Total 3,324.17 3,185.91 2,721.42 2,740.79 2,272.33
Equity Share 0 0 0 0 0
Warrants
Equity Application 0 0 0 0 0
Money
Total 3,420.59 3,282.33 2,817.84 2,837.21 2,368.75
Shareholders’
Funds

Secured Loans 0 0 0.9 4.11 0.01

Unsecured Loans 35.14 33.15 16.83 15.46 1,189.48
Total Debt 35.14 33.15 17.73 19.57 1,189.49

Deferred Tax 275.46 293.29 288.96 327.1 307.22

Liability
Other Liabilities 2,292.19 1,972.89 1,597.17 1,388.66 1,193.39
Current Liabilities 1,405.25 1,312.95 1,215.34 1,138.28 1,133.29
Acceptances 0.00 0.00 0.00 0.00 0.00
Other Liabilities 0.00 0.00 0.00 0.00 0.00
Provisions 87.46 53.8 265.32 213.06 213.88
Total Current 1,492.71 1,366.75 1,480.66 1,351.34 1,347.17
Liabilities
Total Liabilities 5,747.92 5,288.37 4,432.74 4,245.44 4,751.63

APPLICATION
OF FUNDS:
Gross Block 3,358.43 3,095.12 5,117.36 5,008.98 4,903.16
Less: Accumulated 742.25 364.98 2,219.51 1,832.34 1,533.85
Depreciation
Less: Impairment 0 0 0 0 0
of Assets
Net Block 2,616.18 2,730.14 2,897.85 3,176.64 3,369.31
Lease Adjustment 0 0 0 0 0
Capital Work in 94.16 188.17 230.79 244.78 294.71
Progress
Producing 0 0 0 0 0
Properties
Investments 1,978.87 1,755.66 1,324.92 811.82 851.08
Deferred Tax Assets 153.5 137.95 116.03 104.38 91.75

Current Assets,
Loans & Advances
Inventories 902.47 940.06 820.81 844.1 735.93
Sundry Debtors 88.97 97.93 78.42 99.1 84.27
Cash and Bank 1,457.42 880 499.55 445.82 749.36
Loans and Advances 94.94 83.46 103.56 67.29 105.2
Total Current Assets 2,543.80 2,001.45 1,502.34 1,456.31 1,674.76
Total Assets 5,747.92 5,288.37 4,432.74 4,245.44 4,751.63
Nestle - Consolidated
Profit and Loss
Year Dec 17 Dec-16 Dec-15 Dec 14 Dec-13

INCOME:
Sales Turnover 10,192.18 9,474.57 8,482.48 10,178.07 9,419.02
Excise Duty 182.58 333.23 307.17 323.23 317.97
Net Sales 10,009.60 9,141.34 8,175.31 9,854.84 9,101.05
Other Income 176.92 172.12 110.09 94.32 96.9
Stock Adjustments 79.56 7.66 -11.97 67.43 -105.32
Total Income 10,266.08 9,321.12 8,273.43 10,016.59 9,092.63
EXPENDITURE:
Raw Materials 3,696.99 3,227.26 3,456.94 4,591.39 3,313.68
Power & Fuel Cost 288.44 232.79 221.99 384.33 385.38
Employee Cost 1,017.45 901.57 912.75 837.05 741.5
Other Manufacturing 897.84 850.85 170.61 197.11 895.68
Expenses
Selling and Administration 1,823.98 1,751.78 1,636.02 1,688.99 1,528.64
Expenses
Miscellaneous Expenses 267.93 366.91 710.94 191.6 183.27
Less: Pre-operative 0 0 0 0 0
Expenses Capitalized
Total Expenditure 7,992.63 7,331.16 7,109.25 7,890.47 7,048.15

Operating Profit 2,273.45 1,989.96 1,164.18 2,126.12 2,044.48

Interest 91.9 90.91 3.29 14.23 36.51
Gross Profit 2,181.55 1,899.05 1,160.89 2,111.89 2,007.97
Depreciation 342.25 353.67 347.26 337.54 329.95
Profit Before Tax 1,839.30 1,545.38 813.63 1,774.35 1,678.02
Tax 649.17 561.19 289.89 582.41 507.5
Deferred Tax -35.06 -17.17 -39.53 7.25 53.39
 Reported Net Profit 1,225.19 1,001.36 563.27 1,184.69 1,117.13
Extraordinary Items 0 -6.87 -322.39 -0.19 9.19
Adjusted Net Profit 1,225.19 1,008.23 885.66 1,184.88 1,107.94
Adjst. below Net Profit -259.49 -170 0 0 0
P & L Balance brought 2,368.93 2,101.60 1,882.52 1,532.88 1,074.55
forward
Statutory Appropriations 0 0 0 0 0
Appropriations 829.18 564.03 563.25 835.05 658.8
P & L Balance carried 2,505.45 2,368.93 1,882.54 1,882.52 1,532.88
down
Dividend 0 0 467.62 607.42 467.62
Preference Dividend 0 0 0 0 0
Equity Dividend % 860 630 485 630 485
Dividend Per Share (Rs) 86 63 48.5 63 48.5
Earnings Per Share-Unit 127.07 103.85 48.5 111.55 107.62
Curr
Earnings Per Share (Adj)- 127.07 103.85 48.5 111.55 107.62
Unit
Book Value-Unit Curr 354.76 340.42 292.25 294.26 245.67
Book Value (Adj)-Unit 354.76 340.42 292.25 294.26 245.67
Curr
Weighted Avg Number of
Equity Shares Outstanding 46 49 50 50 50

Q2. FNK Corporation is expected to grow at a higher rate for years; thereafter the growth rate
will fall and stabilize at a lower level. Calculate the value of the firm using DCF valuation
method

Base Year Information (All figures are Million)

Revenue= 320, EBIT= 90, Capex= 100, Depreciation = 60, Working Capital= 20% of
Revenue and Tax Rate – 0 Percent
High Growth Stage (Length 3 years)

Growth in Revenues, Capex, EBIT & Depreciation = 40%, Working Capital= 20% of
Revenues, D/E Ratio= 1:1, Risk free rate= 12%, Market Risk Premium=7%. Equity Beta=
1.3, Kd (Pretax)= 15% and Tax rate will increase to 30% in linear increments of 6%

Inputs for the Transition Period (Length 3 years)

Growth in Rev/Dep/EBIT and Capex will decline from 40 % in year 5 to 10% in year 10 in
linear movements of 6 % each year, Working Capital= 20% of Revenues, D/E Ratio= 0.8 :1,
Risk free rate= 11%, Market Risk Premium=6%. Equity Beta= 1.1, Kd (Pretax)= 14% and
Tax Rate = 30%

Stable Growth Period

Terminal Growth in FCFF=10%, Risk free rate= 11%, Market Risk premium=5%, Equity
Beta=1, D/E Ratio= 0.5 :1, Kd (Pretax)= 13%, Corporate Tax Rate= 30%
.

Q3. Sundaram paints is a large privately held decorative paints company which has been in
existence for nearly three decades. Founded by Shankar Sundaram, it is presently managed
by Ravi Sundaram, the only son of the founder. Ravi Sundaram wants to expand the business
and take it global. For this, the firm needs access to evaluate its worth in the market. So, Ravi
has engaged the services of Integral Capital Services, a merchant banking firm. Amit Kumar,
the CEO of Integral Capital Services, has entrusted you with the task of doing a preliminary
valuation of Sundaram paints. You have asked your analyst to gather relevant financial
information on International paints Company, Elegant paints Limited, and Modern Paints
Corporation (the three largest listed companies in the decorative paints industry) as well as on
Sundaram paints. The following information is available.

Financial International Elegant Modern Sundaram

Information (in
millions)
Revenues 19600 15400 12400 10800
EBITDA 2840 2520 1675 1890
PAT 1588 1098 791 886
Shareholders’ 8750 7540 6260 4820
Funds
Loan Funds 5060 5150 4500 2880
Total Assets 13810 12690 10760 7700
Net Profit 8.1% 7.1% 6.2% 8.2%
Margin
 Debt Equity 57.8% 68.3% 71.9% 59.8%
Ratio
Paid up Equity 2400 2000 1800 1440
Share Capital
(FV – Rs 10
each)
Expected EPS 14% 12% 10.2% 15%
growth
Market Price per 96.8 68.4 43.2
Share
Beta 1.1 1.2 1.28

Assume that the market value of debt is the same as its book value.

(a) What is the Enterprise value/EBITDA of International, Elegant, and Modern Paints
Corporation?

(b) What factors do you think explain the differences in the valuation ratios of the three
firms?

(c) Considering equal weightage for all the three firms, and using EV/EBITDA, EV/Sales
and EV/ Book Value as base, find the value of Sundaram Paints.

Q4. In April 2020, Angel Ltd announced its plan to acquire Delta Co. for Rs 4.8 cr. At the
time of the acquisition, the relevant information about the two companies was as follows:

Angel Delta
Revenues Rs. 4800 Rs. 2400
Cost of goods sold (without depreciation) 57% 75%
Depreciation Rs. 168 Rs.100
Tax rate 35% 35%
Capital spending Rs. 300 Rs. 160
Working capital (as % of revenue) 40% 30%
Beta 1.45 1.25
Expected growth rate in revenues/EBIT 25% 15%
Expected period of high growth 10 years 10years
Growth rate after high growth period 6% 6%
Beta after high growth period 1.10 1.10

Capital spending will be 115% of depreciation after the high-growth period. Neither firm has
any debt outstanding. The Treasury bond rate is 7%. Risk Premium 5.5%
 (a) Estimate the value of the combined firm, with no synergy. As a result of the merger,
the combined firm is expected to grow 24% a year for the high growth period. Estimate
the value of the combined firm with the higher growth.

(b) What is the synergy worth? What is the maximum price Angel can pay for Delta Co.?

Q5. The Risk-free rate of return is 8%, the expected rate of return on the market portfolio is
15%, and stock of Xyrong Corporation has a beta coefficient of 1.2. Xyrong pays out 40% of
its earnings in dividends, and the latest earnings announced were Rs 10per share. Dividends
were just paid and are expected to be paid annually. You expect that Xyrong will earn an ROE
of 20% per year on all reinvested earnings forever.

(a)What is the intrinsic value of a share of Xyrong?

(b) If the market price of a share is currently Rs 100, and you expect the market price to be
equal to the intrinsic value 1 year from now, what is your expected 1 -year holding – period
return on Xyrong stock?

Q6. Write a short note on the following (Any Three)

(a) Liquidity and Turnover ratios.

(b) “The discounted cash flow valuation is preferred over relative valuation in theory. But
in practice, it’s the opposite.” Compare and contrast the suitability of the two
approaches.

(c) “Option to delay can make a difference in valuing the assets or firms.” State and
explain some examples in support of the same.

(d) P/E ratio.

 OBE: OPEN BOOK EXAMINATION_A
[This question paper contains XX printed pages.]
Your Roll No: …………………..

Sr. No. of Question paper : XXXX

Unique Paper Code : 61017931
Name of the Paper : Consumer Behaviour(CBCS)
Name of the Course : Bachelor of Management Studies (BMS)
Semester : V
Duration : 3 Hours
Maximum Marks : 75

Instructions for candidates:

1. This paper contains 6 questions. Attempt ANY FOUR questions.

2. All questions carry equal marks.

Ques 1) Ayurveda is a traditional Indian system of medicine. It aims to preserve health

and wellness by keeping the mind, body, and spirit in balance and preventing disease
rather than treating it. To do so, it employs a holistic approach that combines diet,
exercise, and lifestyle changes. Ayurvedic herbs and spices are also an important
component of this approach. They are thought to protect your body from disease and
offer a variety of health benefits, including improved digestion and mental health.
Ayurvedic herbs and spices have been known to have science-backed health benefits.
Shree BaidyanathAyurvedBhawan Ltd was formed in 1917. And, since then
Baidyanath is serving excellent quality Ayurvedic products in the marketplace which
are highly reliable. Consequently, they are very popular for preparing the finest
remedial formulations made from herbs and that could help to boost better nutrients
for a healthy body.
Baidyanath Group sees these times of the pandemic as ideal to boost its sales of an
immunity boosting package- Sanjeevani consisting of tablets/pills, syrup (to be had
with warm water) and herbal tea. The package is priced at Rs.2500 for a one-month
dose for an adult.
How would the understanding of consumer motivation and consumer attitudes assist
the marketing team of Baidyanath in designing the marketing strategy for Sanjeevani?

Ques 2) Consider purchase of the following a formal shirt and property. How would
need recognition, pre-purchase search and decision making rules differ for the two?
What marketing implications do these hold for the marketers of these two products?
Explain.

Ques 3) Nykaa is an Indian retail seller of beauty, wellness, and fashion products.
FalguniNayar, a former managing director at Kotak Mahindra Capital Company,
founded Nykaa in 2012. It was launched as an ecommerce portal curating a range of
beauty and wellness products. The brand name Nykaa is derived from
 the Sanskrit word nayaka, meaning ‘one in the spotlight’. In addition to its primary
ecommerce business, it has an offline presence via 68 brick-and-mortar stores across
the country. It claims to have over 3 lakh products across 1,500 brands. In 2015,
Nykaa launched its collection of in-house beauty products. In March 2016, it
introduced private labeled products in the bath and body care category. In October
2019, it partnered with Bollywood actress Katrina Kaif to launch the brand Kay
Beauty.
Nykaa is seen primarily seen as a retailer of women beauty, wellness and fashion
products. The Multi-brand ecommerce fashion portal Nykaa Fashion, has launched its
Men’s Fashion category on its website and app. This follows the launch of the Nykaa
Man website and app in 2018 - an experience dedicated to men’s grooming. However,
the men store has not been able to penetrate the market.
Do you think branding of the men store division as Nykaa Man was the right
decision? What challenges do you think Nykaa is facing in its foray into the men
grooming and fashion product business? Base your answer on the understanding of
consumer learning, consumer perception and consumer personality.

Ques 4) A consumer research reveals that fashion trends, styles and colors suggest that
clothes are one of the most influenced purchases of a customer. Since early childhood
social approval is important for “what I wear”. While people are self-conscious of
what they wear in public, they are less fussed with clothes worn at home. Consumers
also often think that there is not much difference between quality and comfort of
expensive brands and the lesser known/unknown brands. Real difference lies in how
these brands are perceived. Many people feel that wearing expensive clothes make
others feel good just looking at the person wearing them.
Apply your knowledge of consumer behaviour to explain the above. What marketing
implication can you draw based on your understanding?

Quest 5) Neutrogena, a company known for its “dermatologist recommended” skin care
products, is introducing a line of premium luxury grooming products for men –
cleansers, moisturisers, face wash, toners, anti-ageing creams, face and body scrubs
among others. Identify the VALS segment that will be most appropriate to target. An
expert has recommended Neutrogena executives to be aware of the impact of social
class, culture, sub-culture, cross culture influences and self-images. Explain the
advice given by the expert.

Quest 6) With the Covid 19 pandemic the world is gearing up to new standards of
hygiene. The markets are flooded with brands of sanitizers, masks, face shields,
gloves etc, some known and others lesser known. Individual consumers and
companies are buying these products to ensure their own and employee safety.
How does the consumer behaviour differ from the industrial buying behaviour? Does
this cause a difference in the marketing strategy to be adopted while selling to
consumers and industrial buyers? How does this difference impact the marketing
strategy to used?