This article coming from our CEO’s desk is a provocative topic on valuation fundamentals that tries to highlight the importance of capital structure of a firm and its role in determining value.
When a capital structure is altered – whether in a tax or no tax condition – it does impact the value creation for the shareholders of its firm. This is in contrary to the classic M-M Model that says “the value of a firm is independent of its capital structure. In other words, the value of the firm that is levered will be equal to the value of the unlevered firm in a no-tax situation”. So when a capital structure is altered, it changes the risk profile of the firm, and that impacts the value. The deployment of profits, from the operating level through the net income level, between servicing the debt holders and attributing profits to the equity holders would be the key in determining the value creation for its stakeholders whether it’s a tax or a no-tax world.
With the aim of writing provocative topics on valuation fundamentals, this article from the CEO’s desk emphasizes on the need of reporting the fair value of assets within EPS for investors to take conscious decisions.
EPS – that determines an investor’s share in a company’s earnings for every unit held by it – is an important indicator to the investment decision making process, since it reflects not just the core operations but also material impacts from business decisions taken by the management, and, therefore, puts a lot of emphasis on its true reflection.
The article that was published on one of the knowledge portals talks in detail on why it's so important to reflect the fair value of assets in EPS, and what opportunity does it provide to the existing and the potential new investors in terms of staying invested and entry / exit strategies.
Our CEO’s article - on the relationship between corruption, inflation and interest rates – that was published in July 2017 tries to answer if raising interest rates is the only solution to contain inflation. It also emphasizes that for an economy like India, creating a framework to improve supplies will go a long way to keep inflation under control, thereby leading to a favorable interest rate regime and an era of economic progress.
After having spoken in the Euromoney Asia panel in January 2018 on the needs to strengthen the due diligence process, our CEO wrote this article for the larger interest of the readers and highlighted the gaps in the due diligence mechanism based on the current process practiced in an IPO; how does it compare to the due diligence process in a PE transaction; what are the current best practices globally, and what are the learning; and how we can transform this into a mechanism that instills significant confidence among investors and also ensures inclusive participation in the capital markets – a win-win situation for both the issuer and the market participants.
Fund raising may sound fascinating and interesting, but, in reality, it’s complex and tedious, and requires experts to work on it and steer it towards a successful closure. A company keen on raising funds should completely delegate this to experts, and should co-ordinate with them as a team to ensure success in the shortest possible time. This article reflects our CEO's views on how to embark on a fund raising journey as a team.
During our CEO's recent field visits to Jharkhand and Odisha, he made very interesting and important observations on how the small scale industries are placed in the metals sector, and that these players can do wonders if they are able to access the right mix of funds. But the challenge continues despite the small scale sector being the backbone of Indian economy.