EDITORIAL Hola IMTians,
SUSWETA BANIK
FinNiche is back with a new edition of FinXpress and new team of enthusiasts to carry the tradition forward. We welcome the new batch of aspiring managers to
CONTENTS :
IMT Ghaziabad. Baptized by the fire and rigor of PDP
FINSHORTS
3-4
sessions and the committee recruitment processes,
NATIONAL
5-6
and turning a term old now, you must be really living it
INTERNATIONAL
7-8
up to our unofficial motto of “IMT Never Sleeps”.
MARKET
Along with the regular grind of assignments and
FINHUMOUR
11
IND AS
12
quizzes, there are a number of inter and intra college events such as
Zest, Survivor, HUL Lime 9,
Mahindra War room lined up making the students burn their midnight oil.
9-10
CLASS TALKS
13-16
SCAMS,SCANDALS,STORIES
17-18
BY-A-PIC
19
WIZARDS
20-21
There is an age old adage, that “Change is the only
START UP TRACKER
constant in life”, and keeping with this philosophy, we
INSTRUMENTALLY SPEAKING 23-25
endeavor to bring a creative change to this
LOCK THE STOCK
26-29
committee. With the change of guard, there is a
FINQUIZ
30-32
change in our magazine FinXpress, as we embark on
INSIDE INTEL
33-34
yet another yearlong journey of association with our
GLOSSARY
22
35
beloved readers. We have tried to create a blend of the old and new, that
delicate balance that is so
Feel free to share your bouquets and brickbats.
crucial for the realization of any effort. In this new edition, from our creative stables, we bring you, Class
So Happy reading and Welcome to IMT!!!
Talks, Biggest Financial Scams of India, By-A-Pic, Inside
Intel,
Lock
your
Stock,
Instrumentally
Speaking, FinShorts, and we start off with the
The Editorial Team. Facebook: https://www.facebook.com/FinNiche/
Wizards series. While Finshorts and By-A-Pic gives your dose of business news, Lock your Stock provides you with
financial health analysis of a
particular company. Class Talks is your guide to the happenings in class and Inside Intel brings you “internship gyaan” directly from your seniors. 2
2
FINSHORTS -
ATUL RANJAN
GST comes into effect with a special midnight session.
The Goods and Services Tax (GST) came into effect from 1 st July 2017. It is a 4 tier tax system which aims to remove many bottlenecks from the Indian economy. The GDP is expected to
receive a major boost as
GST enables single flow of goods throughout India. After Air India, govt. prepares to divest stakes in other loss making entities.
The cabinet is considering a proposal to divest upto 100 percent stake in Ennore Port, Dredging Corp of India and others as it aims to generate about Rs. 15,ooo crores from divesting stakes in PSU’s during FY 17-18.
Inflation, IIP data cause of concern for Indian economy.
The CPI inflation rate fell down to 1.54% in the month of June’17 as compared to 5.8% in June’16. This was caused mainly due to drop in food prices(5.7% decrease on yoy basis). The WPI inflation stood at a paltry 0.9%. The IIP on the other hand slowed down to 1.7% ( a 6.3% decrease on an yoy basis). The coal and fertilizer industry showed a negative growth while the steel sector also slowed down drastically. This has again led to a clamour for RBI to decrease the interest rates and provide a much needed stimulus to the economy. The central bank has religiously followed its policy of containing inflation in the first place by means of higher rates of interest. This puts focus on the third bi-monthly policy review meeting of the RBI scheduled to take place on 2nd August.
Another disruption anticipated as Reliance Jio plunges in the feature phone market.
With launch of 4G enabled feature phones at a throwaway price bundled with free calls and data, Jio has again rattled the already unstable telecom sector companies. It is expected that low cost handset manufacturers will be the hardest hit segment. With this announcement, the already strained industry will have to devise new ways to penetrate into the low end customer market.
Further push to digital banking as SBI reduces transaction rates.
The SBI has reduced gateway charges on internet and mobile banking transactions by upto 75
percent
in a push to popularize the digital banking system. Earlier this month, it also waived off the IMPS charges on transactions below Rs.1000. With decreasing effect of demonetization and easily available cash in the market, cash transactions have seen an upward trend in the past few months.
3
3
IMF growth predictions: India, China bright spots.
The IMF in its World Economic Review has predicted GDP growth rate for India and China as 7.2% and 6.7% for respectively for FY 2017. The world economy is also projected to gain some
momentum
and grow at 3.5%. The report suggests that advanced countries need to continue fiscal support to maintain growth while cautioning from adopting protectionist policies. HPCL -ONGC merger gets CCEA approval.
The CCEA (Cabinet committee on Economic affairs) has approved the sale of 51.11% of
government
stake in HPCL to ONGC. This is a major step in creating an oil behemoth which the government is aiming to create. In accordance with past international practices of mergers in oil sector companies, the merger is expected to create economies of scale. Government plans to enter into the app based taxi aggregator sector.
Union minister Mr. Nitin Gadkari has spelled out intention of government to launch an app based taxi hailing service which is at present dominated by Ola and Uber. The government sees it as a huge employment opportunity for the small cab providers and vehicle owners.
Meanwhile….
India- China continue stand-off in Doka La sector.
Change of political guard in Bihar, as JD(U)- RJD break their alliance.
44
NATIONAL -
GAURAV SHARMA
~SARVE BHAVANTU SUKHEENAHA SAYS RAM NATH KOVIND
On the evening of 20th July 2017, the law makers
of the Indian Armed Forces. He
of India elected a new face of the Indian
Rajya Sabha MP in 1994 and served there as a
Constitution, Mr. Ram Nath Kovind. won the
legitimate Minister for 12 years. During his tenure,
presidential elections with a majority of 65.6% to
he played his role as a Cabinet Minister of
become the 14 President of India succeeding Mr.
Parliamentary Committee on welfare of Scheduled
Pranab Mukherjee and the 2nd Dalit President after
Tribe/Caste, Parliamentary Committee on Home
Late Shri K.R Narayanan.
Affairs and Parliamentary Committee on Petroleum
th
The voting for the Presidential post was held on 17th July 2017, wherein two promising candidates, Mr. Ram Nath Kovind backed by NDA and Ms. Meira Kumar supported by UPA, came head to head with each other. A total of 4774 valid votes were cast on the
voting day with Mr. Kovind
earning majority votes of 2930 and Ms. Kumar
became the
and Gas. In 2002, Mr. Kovind addressed UN as a member of Indian Delegation and from 2015 to 2017 he was at a coveted position as the Governor of Bihar before standing up for elections. Such active involvement by him in Indian Politics has what led to his stupendous victory with a vision of promising future.
getting 1844 or 34% share of votes. Uttar Pradesh,
Belonging to a Dalit community of Koris, his father
the native state of the newly elected President
fed a family with 9 children by running a small
gave him the highest share of votes i.e 335, on the
grocery store. Mr.
other hand, Ms. Kumar had her maximum share of
Messiah for Dalit's, who rose from the community
votes of 273 from West Bengal.
of downtrodden headed the BJP’s Dalit Morcha
The former BJP leader, Mr. Kovind, took the office
on
25th
July
after
the
oath
of
the
President and accepted the responsibility as the ‘Head of State’ of India and ‘Commander in Chief’
Kovind, known to be the
during his service in the Party. Now as President, it is expected from him to not only be the tenacious face of the community but also further strengthen his stand against the violence faced by the ‘Dalit’s of India’.
5
5
INTERNATIONAL ~G20 HAMBURG SUMMIT
-
RITU RAJAN
-
CHETANYA SINGH
The G20 is a forum for international cooperation on financial and economic questions. These meetings, have been held annually since 2008. Members of G20
Global economic growth
are Argentina, Australia, Brazil, Canada, France,
Achieving strong, sustainable and balanced global
Germany, India, Indonesia, Italy, Japan, Mexico,
economic growth has always been one of the primary
Russia, Saudi Arabia, South Korea, Turkey, United
concerns addressed in the summit. The G20 has been
Kingdom, United States of
regularly issuing statements opposing
America, China, South
and supporting multilateral trading and fair terms of
Africa and the European Union. This year we saw Hamburg hosting the twelfth G20 Summit on the 7th and 8th of July, 2017. More than twenty Heads of State or Government, as well as representatives of international organizations, met at the Messehallen Convention Centre to discuss issues relating to world economic growth,
international
trade, regulation of financial markets and other issues of global importance. Terrorism, free trade and the
United
States'
withdrawal
protectionism
from
Agreement were special on the agenda.
the
Paris
competition. Irrespective of this, according to EU Trade Commissioner, Cecilia Malmström “G20
countries are
maintaining the highest number of trade barriers”. Recently with Trump's views towards
protectionism
and imposing import tariffs on steel these issues have resurfaced. With the growth in the digital market, for the first time, a Digital Affairs
Ministers conference will be
organized in the G20 framework. A package of measures has also been adopted, to tackle the
aggressive tax
policies adopted by international firms.
6 6
Terrorism
FOCUS ON AFRICA
The theme for this year’s G20 summit was
G20 leaders discussed and agreed on various
Terrorism. The leaders unanimously agree to the
developmental issues that will benefit Africa. The
point that terrorism is the biggest challenge today
launch of G20 Africa Partnership was the highlight. It
and needs to be fought together. India indirectly
is
targeted Pakistan by mentioning the terrorist
sustainable infrastructure, and employment in Africa.
groups based out of Pakistan and urged all the
It recognizes goals of United Nations Social
member states to unite to fight against terrorism.
Development
launched
to
support
Agenda
private
2030.
investment,
Besides
this,
sustainable development, climate, and energy issues
Women Empowerment
were also taken into account.
These countries’ heads have been aiming to help female entrepreneurs’ access capital, financing
INDIA – JAPAN BILATERAL TIES
developing world.
Prime Minister Narendra Modi and his Japanese
Entrepreneurs Finance
counterpart Shinzo Abe met on the sidelines of the
Initiative Fund” has so far raised $325 million from
G20 summit 2017 to discuss bilateral ties. Modi last
various governments.
met Abe during his visit to Japan in November 2016.
and managerial support in the World Bank’s “Women
CLIMATE POLICY
The main topic of discussion was Malabar Naval Exercise 2017. The Malabar Naval Exercise 2017,
G20 has expressed its commitment to adopting an
involving
ambitious world climate agreement in order to limit
July 2017 in the Bay of Bengal. It was aimed at
global warming and addressing other climatic
achieving
issues. President Trump declaration that the USA
interoperability between the three nations. Narendra
will withdraw from the Paris Agreement and cease
Modi said he is looking forward to Abe’s visit to India
its contributions to the UN’s Green Climate Fund
for the next annual summit and hopes that it would
didn’t quite go well with the other members.
further strengthen their cooperation.
India, Japan, and the US, started on 10 deeper
military
ties
and
greater
7 7
MARKET -
PARV SURANA
BSE SENSEX Top Gainers (28th July, 2017)
BSE SENSEX Top Losers (28th July, 2017)
With
the
implementation
of
Goods
and
Idea
Cellular BSE -3.11% (down 6.64%)
Services tax (GST) in India earlier this month,
which gained momentum and reached BSE
it had created widespread headaches for small
+2.90% (up 5.08%), Bharti Airtel BSE -2.05%
entrepreneurs and many other vendors. It had
(down 3.16%) has now reached BSE -2.65%
affected the market as a whole because of the
(down 4.85%)and Reliance Communications
array of documentation involved and the
BSE -0.82% (down 1.64%) has now reached
change in tax rate slabs.
BSE +0.80% (up 1.11%).
The overall market after the 3rd and 4th week of
The other major affected Indian company
implementation of GST was pretty satisfying
during the 3rd week is ITC (Indian Tobacco
with BSE SENSEX closing with 32,309.88 with
Company Limited) BSE -0.43% which alone
a
decrease).
took a hit of Rs58,902.54 crore. This fall was
However, with the announcement of Reliance
followed by a week’s downfall. On Tuesday
Jio’s much-awaited 4G feature phone last
itself, the stocks of the company plunged by
week, the shares of telecom companies
13% due to an increase in cess on cigarettes.
change
of
-73.42
(-0.23%
dropped on 3 Friday. The BSE Telecom rd
in-
dex fell over 2% to hit the intraday low at 1,407.60 which has now reached 1444.79. The
On the other hand, TCS (Tata Consultancy Services) BSE 1.87% added Rs17,630.59 in its m-cap. 8
8
Source: http://www.bseindia.com/sensexview/indexview_new.aspx?index_Code=16&iname=BSE30
After a very long while, Nifty hit the mark of 10,000
mark led by HDFC and Infosys. HDFC ended at
earlier this Wednesday. This came a day ahead of
record breaking high of Rs1783.80 (up 3.2%). Yes
the expiry of July futures and this was the first time
Bank also retained the momentum by closing at
when Nifty closed at 10,000 on Wednesday. The
surging 3.2%. Infosys gained 2.6% followed by ITC,
market was moderately lower but coped up in the last
Kotak Mahindra bank and Maruti Suzuki.
hours of Friday, with
Nifty closing above 10,000
Source: https://www.nseindia.com/products/content/equities/indices/historical_index_data.htm
9
9
FINHUMOUR -
ARCHIT BASER
10 10
Indian Accounting Standard (Ind AS) 2 - akshit goyal Inventories shall be measured at cost or net realizable value
Objective The objective of this Standard is to prescribe the accounting treatment for inventories. A primary issue in accounting for inventories is the amount of cost to be recognized as an asset and carried forward until the related revenues are recognized. Scope
whichever is less. Cost of inventories The cost of inventories includes costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The costs of purchase
This Standard applies to all inventories, except:
of inventories
comprise of the purchase price, import duties,
other taxes, transport, handling and other costs directly
(a) work in progress arising under construction contracts,
attributable to the acquisition of finished goods, materials and
including directly related service contracts (see Ind AS11,
services. Trade discounts, rebates and other similar items are
Construction Contracts;
deducted in determining the costs of purchase.
(b) financial instruments (see Ind AS 39, Financial Instruments:
First in first out (FIFO)
Recognition and Measurement and Ind AS 32, Financial Instruments: Presentation); and
First in first out (FIFO) or weighted average method should be used for calculating cost of inventories. An entity shall use the
(c) biological assets (i.e., living animals or plants) related to
same cost formula for all inventories having a similar nature
agricultural activity and agricultural produce at the point of
and use to the entity. For inventories with a different nature or
harvest (see Ind AS 41, Agriculture1)
use, different cost formulas may be justified.
This Standard does not apply to the measurement of inventories
Net realizable value
held by:
Net realizable value refers to the net amount that an entity
Producers of agricultural and forest products, agricultural
expects to realize from the sale of inventory in the ordinary
produce after harvest, and minerals and mineral products to the
course of business. Inventories are written at net realizable
extent that they are measured at net realizable value in
value so that the value of the assets is not overwritten in
accordance with
well-established practices in those industries
books of accounts. Business exists in highly uncertain envi-
commodity broker-traders who measure their inventories at fair
ronment and over the course of time value of inventories may
value less costs to sell.
fall below the cost at which they were acquired.
WHAT ARE INVENTORIES?
Net realizable value
Inventories are assets:
 It is based on most reliable evidence available at the time of
(a) held for sale in the ordinary course of business; (b) in the process of production for such sale; or (c) in the form of materials or supplies to be consumed in the
evaluation
 It takes into consideration the purpose for which
inventory
is held
production process or in the rendering of services. Net realizable
If the sales contracts are for less than the inventory quantities
value is the estimated selling price in the ordinary course of
held, the net realizable value of the excess is based on gen-
business less the estimated costs of completion and the
eral selling prices
estimated costs necessary to make the sale. Fair value is the
Bibliography
amount for which an asset could be exchanged, or a liability
Committee for Capacity Building of Members in Practice , The
settled, between knowledgeable, willing parties in an arm’s
Institute of Chartered Accountants of India. (n.d.). Retrieved
length transaction.
from www.icai.org.in.
Measurement of inventories
11
11
CLASS TALKS -
ANIRUDH MITTAL
-
ASHWIN BANSAL
Hey folks…. If you are an IMTian, burning the midnight oil, pouring yourself over caffeine, trying to live by the phrase “IMT Never Sleeps”, your days of sitting in the library halls crying over the basics of the finance are going to vanish.
Disclaimer: - By the end of this article we will surely not be able to make your life any easier.
Sorry!!!
If you give us 10 minutes of your time we can guarantee you little marks and provide you with the luxury of a 100 minute bedtime dream of playing for Indian Cricket Team / walking down the ramp at Paris Fashion week .
Now pay attention as we will be explaining you how a manager can manipulate operational profits to hoodwink investors. Ethics demands that we urge you to use it for the greater good.
How does Baskin & Robbins calculate cost for your Chocolate-chip Ice cream? (Assuming the figures)
Imagine Baskin & Robbins has two production centers in Ghaziabad and Noida. Each has a production capacity of 10000 scoops of chocolate-chip ice cream.
Cost Of Production : The hourly labor cost for the chocolate-chip Ice Cream is
Rs. 20/scoop.
Direct material cost of Milk/flavor is
Rs. 40/scoop.
Monthly Electricity and Maintenance Bill of Refrigerator (fixed cost)
Rs.100000
12
12
Using Absorption Costing:
Abhinav - Manager for Baskin Robbins of Ghaziabad uses absorption costing Despite of his intensive marketing efforts Abhinav was unable to sell more than 5000 scoops in the month of July. He calculates the Profit & Cost for the month of July as following:
*Note- Electricity and Maintenance Bill of our refrigerator (fixed cost) is divided by 10000 scoops the maximum capacity of the refrigerator, Average fixed cost Rs.10(Rs.100000/10000 scoops)
Scenario Analysis
13
13
Using variable costing:
Ganesh - Manager of Baskin Robbins of Noida uses variable costing.
Ganesh was also unable to sell more than 5000 scoops in the month of July .
**Note: - Ganesh considers all of Rs.100000 of Electricity and Maintenance Bill of our refrigerator (fixed cost) while calculating cost irrespective of number of units sold in the month . Scenario Analysis
14 14
“Survival of the fittest�-Herbert Spencer Suppose Baskin Robbins has a policy of incentivizing its managers by giving them 4% of operational Profits of the month
Abhinav- Operations manager at Ghaziabad is a shrewd guy. Being a manager for the past 5 years, he is aware that the average sales during the period of monsoon revolves around 5000 units. He inflates Profits using Absorption costing by producing 5000 extra scoops which remains unsold at the end of July. He reports a profit of Rs.150000 (refer table). When he sells 5000 units. Abhinav receives a bonus of Rs.6000 (4% Of Rs.150000) Ganesh avoids all these accounting tricks and reports (using variable costing approach) a Profit of Rs.100000 for 5000 units (refer table) thereby earning only Rs.4000 (4% of Rs.100000) bonus for the month of July.
Hope we were able to deliver on our promises made at the starting of this simple yet awesome concept of management accounting. If you are in any dilemma regarding financial concepts, feel free to contact FinNiche.
15
15
SCAMS, SCANDALS, STORIES -
SNIGDHA RAO
“The Big Bull” “The Con master” “The King” ……Who are they? What are their stories? In a country which wakes up every day with a dream to become rich and yet goes to bed hungry, there are always a few who refuse to be hungry even if that means stealing from the neighbor. In this upcoming series of stories, we are going to unravel some of the biggest scams that the country saw. Every scam had a mastermind, every mastermind had a motive and every motive was driven by one factor- Easy money!
Harshad Mehta- The Big Bull! July 1992, India woke up to discover that the man who was known as the “Big Bull of the stock market” was a schemer who disrupted the stock market system for his own personal gain. India’s reputation for having a vibrant stock market and established financial institutions suffered a blow in the international financial world. It was not so much the scandal itself but the way it has been handled which made the international financial market to rethink about investing in India. The scam seemed to the rest of the world as though it had entered a never -ending tailspin of politics and legal tangles. His opportunity
The existence of these two parallel markets
India had two different but parallel markets in operation. One was the corporate securities market or the stock exchange where the required returns were very high. The number of brokers who operated in this market were also high. On
the
other
hand,
there
was
the
government
securities market which had less than a dozen
created
rife opportunities for arbitrage. It was only a matter of time before someone ventured to break the glass partition between the two markets and that someone was Harshad Mehta. The Scam In a nutshell, what he did was this. He took money from banks, invested them in the stocks that he
selected
brokers
on the basis on certain parameters thereby artificially
and they had to be licensed by RBI. This was because
inflating their prices and then after the prices had
this market was an interbank market (bank-to-bank). The
reached an unusually high level, he would start selling
turnover was very high, almost 3 to 4 times larger than the securities market and the cost of funds was almost half the stock exchange.
his stocks off. His profit? The difference
between
his buying price and selling price. The price he created. So simple, so ingenious but so not legal. How?
16
16
In 1984 when BSE auctioned broker card’s, Harshad became a member of the Bombay stock exchange and opened his own brokerage
firm
called
GrowMore
research
and
Asset
Management. Because of his already established reputation, many began investing in his firm and using his services. At that time, the banks in India were strangled by Government’s very tight credit policies and were expected to make high profits. Harshad cashed in on this vulnerability of the banks. The banks were supposed to trade with the other banks only through a broker, a broker who was registered on the RBI’s approved list of
brokers which Harshad was not.
Modus Operandi
Harshad Mehta taken to a court in Bombay on Jun 5,1992
Now, Method 1- Under a ready forward deal, Banks could trade the government securities that they hold with another bank to receive a short-term loan for their requirement. This was called ready
forward
dealing.
The
bank
would
issue
the
government securities in the name of the buyer bank and the buyer bank would
issue the checks in the name of the seller
bank through a broker. Harshad, however,
convinced the
banks to issue the securities and the checks into his personal account. The transacting banks would never know each other. He would then ask for some time from both the banks and then would invest the money received into the stock
The Big Fall Then what went wrong? Well, like they say, your sins catch up with you sooner or later. In Harshad’s case they were way sooner than he expected. Due to some sudden policy changes in the market, the
prices of stocks began to fall.
The market crashed and people blamed the biggest player for this crash. Banks
started pressurizing Harshad to pay
up. He was not able to pay back the banks. He skipping
payments. His game was
started
coming to an end.
market for the
Sucheta Dalal, the financial editor of Times of India was
artificial inflation of stocks. After he receives his profit, he would
following up Harshad’s spectacular run at the market from
then sell the
the very beginning. She traced out a pattern and then did
government bonds that he holds to some other
bank and return the money to the first bank, for the second bank, he would buy government securities from another bank and sell it to them. The profit he made on the exchange from money he took would be so huge that these small transactions would hardly make a dent.
her big reveal. On 23rd April 1992, she exposed Harshad’s illegal ways in an article in Times of India. Banks started demanding their money back and then Harshad was charged with 72 criminal charges and more than 600 civil cases were filed against
Method 2- Sometimes, the banks would draw bank
receipts
him. His total misappropriation of funds was placed at close
on other banks. Bank receipts is the method of short selling for
to a staggering Rs.2.5 billion. In September 1999, yes….7
the banks where the bank does not
years later, the Bombay high court
actually hold the
sentenced him to a
securities but the transaction is confirmed to be completed. The
5-year rigorous imprisonment and a fine of $25000. On
bank would at a later point in time buy the securities from the
January 14th, 2003, the Supreme Court confirmed the High
market and give it to the buying bank or could return the mon-
court’s order.
ey that it borrowed. Harshad partnered with a few banks and started drawing up fake bank receipts on the basis on which he could receive a lot of money. He invested this money in his stock market scheme, multiplied his profits then returned the money to the bank.
However, by then “The Big Bull”, “The Pied Piper” had breathed his last. Harshad Mehta, at the age of 47, died following a heart ailment on 31st December 2001. As on that date, Harshad still had 28 cases registered against him and several cases are still
running in courts across India even
today.
17
17
BY-A-PIC
-
SUSWETA BANIK
18
18
WIZARDS -
SUNIL KUMAR BEHERA
BENJAMIN GRAHAM “In the short run, the market is a voting machine but in the long run, it is a weighing machine.” ― Benjamin Graham
Before getting started, let me ask you a question: “Who is the most successful investor in the world in
Wall Street. He was earning nearly $500,000 annually by the age of 25!!
our generation?” Most of us will agreed with the name
He formed an investment partnership with Jerome
“Warren Buffet”. He has started from nothing and
Newman in 1926 which lasted till his retirement in
reached to one of the wealthiest person on the planet
1956. But it was not always sunshine for him in Wall
by following the concept or philosophy called ‘Value Investing.” Now the question is “What is value investing
philosophy?”
Street. He lost almost all his investment during the stock market crash of 1929, but Graham Newman Co survived the crash with the help of close friends. This taught him some valuable lessons on investing
To find out that let’s know about the teacher of many
and also inspired him to write the book “Security
such successful investor like Warren Buffett and the
Analysis” with Donald Dodd.
father of “Value Investing”, Benjamin
Graham. An
This book introduced terms like “Intrinsic Value” and
English born American Investor who wrote two of the
“Margin of safety” and gave the foundation of value
bibles in neoclassical investing i.e. “Security Analysis
investing. The essence of value investing is that any
(1934)”and “The Intelligent Investor (1949)”.
investment should be worth substantially more than
Graham was born in 1894 in London and later moved to America with his family where they lost their savings during the bank panic 0f 1907. During his adoles-
an investor has to pay for it. The value investing philosophy promotes you to buy any stock when the market price is less than the intrinsic value of the stock. Intrinsic value is
cence, he lost his father and went through extreme
subjective in nature and can be
poverty, this scarring motivated him to earn enough
looking at both quantitative (ratios and financial
money for
statement
himself and his family. Always a bright
student, he got into Columbia University through scholarship and
graduated as salutatorian of his class at
the age of 20. After that he dived into the world of in-
analysis)
and
calculated by
qualitative
(business
model, governance and target market factors) aspect of a business. The difference between the intrinsic value and the lower market price is called as “Margin of Safety”.
vesting by joining Newburger, Henderson and Loeb on
19
19
In 1949, Graham wrote the book “The
intelligent
Buffett also approached him for a job in his
Investor” which explains the fluctuation in market
company even without pay, initially he denied but
sentiment
character
later allowed him to join Graham Newman Co. He
“Mr.Market” who represents the mechanics of
dissolved his partnership with Newman in 1956
market price. This book suggests the investor to
and retired from stock market after an amazing
do his own analysis of a stock’s worth based on
career of 42 years. He spent most of the time
the
teaching at different institutions such as University
beautifully
company’s
through
the
reports of its operation and
financial position instead of going with his
of
emotions of greed and fear. Graham has also
School
illustrated the
investment principles and philosophies that he
calculations of the intrinsic value
in his book through a quite
California, Los Angeles and also at Anderson of
Management,
New
Mexico.
The
simple formula for
enunciated are priceless. Apart from Buffet other
fair evaluation of growth stocks which is known
notable investors who studied and worked under
as The Benjamin Graham Formula.
the tutelage of Graham include Irving Kahn,
Apart from Wall Street he also joined Columbia Business School of Columbia
University as a
faculty member in 1928 where he had attracted a lot of young disciples and would-be investors.
Christopher Browne, and Walter Schloss. Although
Graham died in 1976, his legacy lives
on through his work which is
widely used by
value investors and financial analysts.
One of them was Warren Edward Buffett. In 1951,
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20
STARTUP TRACKER ~STAQU TECHNOLOGIES
-
ARUSHI BHAMBRI
Did you see a girl wearing a really pretty dress in a party recently and wondered where it was from? Such events happen really often ; a new innovative tech gadget owned by a friend which makes you want to it too but you just fail to find the exact product or don’t know its name or brand. Don’t worry , “Staqu Technologies” has got you covered. All that you need is a picture of the item that you desire to buy and your search will get as smooth as butter. With a motto of “Redefining search through Artificial Intelligence ( AI ) ” , the Gurugram based company utilises a learning technology to provide
The company is currently growing at 30% and is
precise reverse
expected to turn profitable within the next two quarters.
imaging search solutions to
minimise the Product ad catalogue cost. The process involves the following steps : An image input is given, then this image is matched from the database for various information like content, colour, shape, and texture. All these elements are fused together to provide visual search solutions
Benefits of this technology is not only limited to educated class, but also to people from uneducated background who have gaps in their knowledge as to what product is called what. Instead of doing a word search, all they have to do is upload a picture and search.
like VGrep API Suite. Their customer base
Artificial Intelligence in today’s world has its pros and
includes noted companies like Roposo, Karbonn,
cons but its advantages and uses are weighing much
Panasonic. It all started in June 2015 by Atul Rai
more here with this start-up–Staqu Technologies. It is
and
also among the top 4 start-up, selected for IBM’s Global
Abhishek Sharma. Atul Rai, a Masters University of
Entrepreneur Programme. Their idea seems fabulous, as
Manchester, has indeed put his knowledge to
well as working well already, Staqu is surely a start-up to
excellent use.
watch out for.
Degree in Artificial Intelligence from
Staqu Technologies uses AI to “Let the Images Describe Themselves”, AI being the most booming technology of 2017. The company has raised money with an Authorised capital of Rs.7,504,000 and Paid up capital of Rs. 600,000 in June 2015. Its last Annual
General Meeting was held on
September 30, 2016. 21
21
INSTRUMENTALLY SPEAKING -
ANANYA NATH
A carpenter uses instruments like a saw, hammer and
secondly, it increases the ease of transferability of
nails to make a beautiful mahogany table. A sculptor
debt thus making it more liquid and giving creditors a
uses a chisel and hammer to make a sculptor. A
means to trade it on the
painter uses paint and brushes to make a plain
date, termed maturity date. Interest may be paid semi
canvas a work of art. Similarly an investment banker
annually, annually and sometimes
uses
are highly liquid and are traded in the
instruments like stocks and bonds to make
money. You have read about Bonds in FASA and I am not going to bore you with that. But what are Bonds?
secondary market. A later
monthly. Bonds secondary
market. 
Bonds: Bond is a debt security in the form of a
Suppose Navdha lent Priya Rs. 100 today. Mona
loan or IOU where the issuer owes a debt to the
promised to pay Rs. 105 at the end of one month and
holder of the bond. He is obliged to pay the
signed a paper declaring this. This piece of paper is a
holder coupon (or interest), and the principal at a
bond where Rs. 100 is the Par value with a rate of
later date, termed maturity date. Interest may be
interest of 5% per month. The date a month from the
paid semi annually, annually and sometimes
date of lending is the maturity date i.e.; the date Priya
monthly. Bonds are highly liquid and are traded in
needs to pay Navdha the sum of Rs. 105 back.
the secondary market.
Debt Instruments: Debt instruments are electronic or paper obligations that enable the issuers to raise funds from the lenders by promising to repay the principal and any interest timely as per the contract. Debt instruments are important because of two reasons;
Features of a Bond: There are three typical features of a Bond: 
Par value: Also known as the principal is the amount which will be paid by the issuer to the bond holders at maturity to retire the bonds
firstly, it makes repayment of debt legally enforceable;
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Maturity date: The life of the bond ends on the maturity
date assuming
all
promised
payments are made. Because of the regular
the LIBOR
sold at a discount to the par value and there are
coupon payments, Bonds are considered as
no periodic payments of coupon payments.
Fixed Income assets.
There is one single payment of the par value
Coupon rate: Coupon rate is the promised interest rate on the bond. The bond contract specifies the frequency and timings of coupon payment.
Issued
by
Central
or
State
option to the bond holder to convert the bond into
Bonds are popular
investments because unlike
governments and Municipalities to raise capital
equities they provide greater certainty as to their
to support government spending
income stream and return of capital. This makes it
Corporate:
Issued
by
corporate
to
raise
mergers and acquisitions Coupon rates:
Convertible bonds: Convertible bonds give the
Bonds as investments:
financing for various reasons like expansions,
shares
The issuer: Government:
at maturity date
another type of instrument mostly ordinary
Types of Bonds: Bonds can be segregated by:
Zero coupon bonds: Zero coupon rate bonds are
popular among retirees. Bonds help in reducing the risk of a diverse portfolio giving the Investor more comfort to invest in other assets to get greater returns. Income from corporate bonds is greater than the interest paid on bank deposits. On the other
Fixed rate: Coupon rates are fixed for this type of
hand, government bonds have high liquidity and
bonds
security. Depending on the anticipated movements
Floating rate: Floating coupon rates. The floating bonds are usually linked to a reference rate like
in interest rates there is an opportunity to profit from trading them on the secondary markets.
23 23
Effects of changing interest rates on Bond prices
payment is generally done twice a year. Suppose
and yields: This is generally to do with secondary
the coupon payments are done semi annually on
market trading. All investments carry some risks.
30th June and 31st December and the bond was
Higher the perceived risk higher is the return to
sold on 31st July. The bond buyer will have to pay
compensate investors for the risk. If the coupon rate
the interest earned by the bond seller for the month
of the bond is floating it is expected to stay at par
of July. The price the buyer bought the bond at is
with the current interest rates. However, if it is fixed
called the clean price of the bond. The dirty price of
the price of the bond is
the bond is the sum of the price of the bond and the
inversely related to the
interest rate. If the bond has a coupon rate of 5% and the interest rate
given by banks is 6%, the
price of the bond would go down as the yield is low and investors would prefer to park their money in a bank. However, if the interest rate is 2%, the price of the bond would go up as the yield is higher. This risk is called Interest Risk. Government bonds are generally considered the safest.
accrued interest of that Investments: over
the
period.
Bonds can be bought through
counter
(OTC)
markets,
mutual
funds or exchange traded funds (EFTs). Individual
bonds
are
not
bought
from
exchanges in the case of OTC markets. Bonds in mutual funds are an indirect way to invest in bonds. Unlike direct investments in bonds,
Credit Risk and Liquidity Risk: Credit risk is related to the financial strength of the issuer. Greater the chances of default by the issuer i.e.; lower the credit quality of the issuer, higher the yield that is expected by the investor. Credit
ratings are given
to the bonds by credit rating agencies. Bond prices can also drop if there are large losses
incurred by
the issuing company that could affect the ability of the issuer to repay the bondholders.
stated maturity date making it difficult to determine the quality of bonds held, the general level of risk and making the size and timing of cash flow uncertain.
EFTs are Index Funds that are traded on exchanges like stocks. Some EFTs expose the investor to an entire bond market index while others try to track the benchmark of a government benchmark bond.
Liquidity risk is the risk of not being able to sell the investment quickly and easily in the
mutual funds do not have a fixed coupon rate or
secondary
market when one needs to. Government bonds are generally very liquid. Some corporate bonds which are issued in low numbers have poor liquidity.
Bonds vs. Stocks: Bonds are considered debt instruments whereas the purchase of stocks is considered an equity investment because the investor becomes a part owner of the company. If the issuing party becomes bankrupt, the bond holders have a higher claim on the assets than
Accrued Interest: Interest is earned for every day
shareholders, thus making it as a less risky
the instrument is held, although interest
investment as compared to stocks.
24
24
LOCK YOUR STOCK -
SRITAM SAMANTARAY
The insatiable desire to get big unprecedented returns in Stock Markets has acted as a magnet for investors to pour in big money. However, getting huge returns requires thorough research of the market and oodles of know-hows and patience. This article will provide insights for a company which will strengthen your portfolio to achieve handsome returns in equity investment.
ABOUT THE COMPANY ITC Ltd. is a Large Cap company having a market capitalization of ₹356301.49 Cr. It was incorporated in 1910 which operates in the Tobacco sector.
Chairman – Yogesh Chander Deveshwar
CEO - Sanjiv Puri
NSE Scrip Code : ITC
BSE Scrip Code : 500875 (BOM)
CMP: 290.35 (NSE)
STOCK PERFORMANCE OF ITC LTP*
1 Week %
1 Month %
1 Year %
291.40
2.41
-6.39
15.75
LAST YEAR PERFORMANCE
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25
ITC SHAREHOLDING PATTERN
BUSINESSES
ITC LTD. has a diversified portfolio pertaining because its management sensed there would be a chance of de-marketing of product last decade which would hamper their core products like Cigarettes & Cigars. 26 26
PERFORMANCE
The growth has been quite impressive for ITC because it withstood the cripples of Demonetization for its diversified portfolio.
FINANCIAL COMPARISIONS WITH PEERS
Management Efficiency
ITC Ltd
Peer Average
Return on Equity (%)
22.16
22.16
Return on Assets (%)
26.43
8.41
Return on Capital Employed (%) Profitability and Growth
21.66
10.41
Gross Profit Margin (%)
33.36
-1.39
Net Profit margin (%)
24.03
-18.00
Quick Ratio (x)
1.15
0.79
Current Ratio (x)
2.10
1.33
Cash Ratio (x)
0.32
0.16
Debt Equity Ratio (x)
0.00
0.00
Financial Strength
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Beta is a measure of the volatility or systematic
postures risk to cigarette volume development.
risk of a security in comparison to the market as
Developing booty market of cigarettes likewise
a
postures critical
whole.
Beta
of
1
indicates
security's price moves with the
that
the
market. A beta
business.
danger for the cigarettes
Stoppage
in
full-scale
financial
of less than 1 means that the security is
condition is a noteworthy danger to hotel chain
theoretically volatile than the market. ITC’s Beta
business.
value
is
calculated
to
be
0.5713
ITC Ltd. has a clear cut edge over its peers based on profitability and
maintains healthy
ratios much better than its peers making it eye candy in FMCG
market.
Also, ITC’s average
long term debt equity ratio over the 5 financial years has been 0.00 times which indicates that the company operates with very negligible level of
debt
and
is
placed
well
to
withstand
economic slowdowns.
News Flash - During the last week, ITC shares plunged by 14 percent on worries over a hike in cess on cigarettes. Tobacco makers faced another jolt on this Saturday, 22nd of July when the Delhi government asked Philip Morris International and other tobacco companies to remove all advertisements from tobacco shops in the city, warning them of legal action if they do not
comply. However, this may serve as an
opportunity
to
the
thirsty
investors
to
Key Risks - High rate of tax collection and strict
accumulate as much stock as possible at
administrative
current levels.
utilization
out
standards in
the
open
on and
cigarette bundling
DISCLAIMER : This research report is a written or electronic communication that includes research analysis, research recommendation or an opinion concerning securities or public offer, providing a basis for investment decisions. The views expressed therein are based solely on information available publicly/internal data/other reliable sources believed to be true. The information is provided merely as a complementary service and does not constitute an offer, solicitation for the purchase or sale of any financial instruments, inducement, promise, guarantee, warranty, or as an official confirmation of any transactions or contract of any kind.
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FINQUIZ 1)
SOUMYA RUP CHANDA
Who was promoted by PepsiCo, a billion 165$ food and beverages giant, as President of its global operations from the current head of its Europe and sub-Saharan Africa business?
2)
A.
Laxman Narasimhan
B.
Hugh Johnston
C.
Ramon Laguarta
D.
Sanjeev Chadha
Which autonomously operated ship dubbed by shipping executives the “Tesla of the Seas,” and jointly developed by agriculture firm Yara International ASA and Kongsberg Gruppen
ASA, is scheduled to start
sailing in late 2018?
3)
A.
Birkeland
B.
Chieftain
C.
Skudd
D.
Storm
Which boutique tax firm’s 10 partners and 100 professionals were acquired by KPMG in an intense race with Deloitte and PwC, where partners were given a 30% increase of salaries and a 100% increased salary as joining bonus over and above their remuneration? A.
Brewer Morris
B.
BMR Advisors
C.
Baker McKenzie
D.
Alston & Bird
4)
Which of these countries does not have a fiscal year from Apr-Mar? A.
India
B.
Iran
C.
Hong Kong
D.
Germany
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5)
6)
Which bank’s tagline reads “The World’s Local Bank”? A.
Deutsche Bank
B.
State Bank of India
C.
CITI Ban
D.
HSBC Bank
The headquarters of the shipbuilding company Harland and Wolff in Belfast is being opened as a hotel. What infamous ship did they build?
7)
A.
Costa Concordia
B.
Star Princess
C.
M/S Explorer
D.
Titanic
“Speed so high, everything will fly.” Name the brand that R Madhavan is advertising?
8)
A.
Jio 4G
B.
Hathaway Broadband
C.
Airtel 4g
D.
Vodafone SuperNet 4g
Tellson’s bank referenced in this novel is believed to be based on Child and Co., a private banking establishment on Fleet Street, which is now a part of Royal Bank of Scotland Group. Which famous novel are we talking about? A.
Pride and Prejudice
B.
Oliver Twist
C.
A Tale of Two Cities
D.
David Copperfield
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9)
Our notebooks have been tested in the most punishing of conditions and the most exotic of locations. Many of these incredible feats have become the stuff of legend. Our notebooks are the first to boot up at the top of Mount Everest. Which laptop manufacturer are we talking about?
10)
A.
HP
B.
Lenovo
C.
Asus
D.
Dell
Which American passenger and cargo airline was covertly owned by the US government in 1950 as a dummy corporation for Central Intelligence Agency (CIA) operations in China and Vietnam? A.
United Airlines
B.
Air America
C.
Alaska Airlines
D.
Delta Airlines
ANSWERS KEY : 1.C
2. A
3. B
4.D
5.D
6.D
7.B
8.C
9.D
10.B
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INSIDE INTEL -
SAHIL GAUBA
Raunaq Rathi CA, B.Com
PGDM 2yr Interned at Arcesium We caught up with Raunaq on his birthday and made him spill the beans about his big summer internship and his IMT journey thus far.
We know you love your company. We want to love it too. Tell us a bit about it. So, Arcesium was launched by DE Shaw in 2015, as an independent company. The Indian unit mainly has five verticals. Human Capital, Middle Office, Treasury, Pricing and finally the Trade Accounting and Operations department, the one I was placed in. Our Clients were usually the hedge funds which wanted middle and back office solutions.
Hedge Funds sounds interesting. What exactly was your work like? My first two weeks were spent on understanding all the products which our clients dealt in. These were often complex derivative products and I had to get into the nitty gritty of how the accounting was done for these products in our proprietary software. We were basically doing the shadow accounting. Later on, each of the intern got a separate project assigned. But we had the buddy system there and they were more than eager to help whenever we needed any.
And I am sure all this came along with great perks‌ Oh absolutely. Arcesium really spoils you and pampers you. There is amazing stipend, free housing, free food, gym, zumba and what not. Even above that is the truly amazing culture. It makes you feel responsible and empowered. There is so much flexibility that we can come to the office at any time, choose to work for as many hours and leave whenever we like. We just need to get the work done before deadline.
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But how does one get there? Best thing about Arcesium is that they shortlisted everyone for the preliminary test. The test was a basic aptitude one with some questions on economics and finance too. After the test, was the Group Discussion round. And then finally I had my 2 rounds of interview, technical and HR. People worry that they haven’t studied much of finance till the time company comes, but I think even if you clear up your FASA and MA concepts, you stand a good chance to be selected.
What’s your cheat sheet? You won the competition at IIM Ahmedabad, got into Arcesium and you were an active Acadcommer too. I really don’t have a cheat sheet but I think studying is not a difficult thing here. If you listen properly in class then 60% of the work is done. And yes, committee work is important, if you really want to learn how to work effectively in teams and be a leader. Time management, I think, is about smart choices. Second term usually goes in summer placement processes but in 3rd and 4th term you can definitely get more time for competitions. In the end, it is about doing what you love and managing your time well.
You have given us great insights, Raunaq. But it’s your birthday and we can’t let you go easily. You gotta confess something. *smiles* I really don’t know. OK, so I have sort of an OCD about being on time. I think I have never been late to my classes or any meetings. But in my defence, it has helped me stay organized.
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FIN-ALLY Yield: The yield is the income return on an investment, such as the interest or dividends received from holding a particular security. The yield is usually expressed as an annual percentage rate based on the investment’s cost, current market value or face value. LIBOR: LIBOR is administered by the ICE Benchmark Administration (IBA). LIBOR or ICE LIBOR is a benchmark rate that leading banks charge each other for short term loans. It is based on five currencies: U.S. dollar (USD), Euro (EUR), pound sterling (GBP), Japanese yen (JPY) and Swiss franc (CHF). The most commonly quoted rate is the three month US dollar rate. Credit rating agencies: These agencies access the creditworthiness of bond issuers, companies or countries. They are rated on the basis of their ability to pay back the debt in timely manner Fixed Income assets: Refers to instruments where the issuer or borrower is obliged to pay the lender fixed payments on a fixed schedule.
GDP: Monetary value of all the finished goods and services produced within a country in a specific time period.
FDI: Investment made by a company or individual in one country in business interests in another country.
CPI: Index that examines the weighted average of prices of a basket of consumer goods and services.
WPI: Index that measures the average change in the prices of commodities for bulk sale at the level of early stage of transactions.
Repo Rate: Rate at which RBI lends to its clients generally against government securities.
Reverse Repo Rate: Rate at which RBI borrows money from the commercial banks.
PMI: Indicator of the economic health of the manufacturing sector and is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.
Trade deficit: Economic measure of a negative balance of trade in which a country's imports exceeds its exports
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