Iotal No.

of Case Study Questions -5 Total No. of Printed Pages -24

Time Allowed 4 Hours

-

Maximum Marks -100

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Answers to questions are to be given only in English except in the case of candidates who

have opted for Hindi Medium. If a candidate has not opted for Hindi Medium, his/her
answers in Hindi will not be valued.

The question paper comprises five case study questions. The candidates are required to
answer any four case study questions out of five.

Answers in respect of Multiple Choice Questions are to be marked on the OMR

Answer Sheet only.

Answers to other questions to be written in the descriptive type answer book. Answer to

MCQs, if written in the descriptive type answer book will not be evaluated.

Candidates may use calculator

Case Study No. -1 Right Isset

Marks
ABC Ltd. is a conglomerate which operates in multiple sectors such as

manufacturing, chemicals, real estate, retail & EPC. It is listed on NSE as well as
BSE. The COVID-19 pandemic has resulted in significant uncertainty in its
flagship business. It is further worsened due to elevated debt levels, although free
cash flow in pre-COVID-19 situation was sufficient to allay any concerns on the

debt servicing
Given these scenarios, the Board of Directors of ABC Ltd. in a duly constituted
meeting, has announced to raise funds through Rights Issue, primarily to repay

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Issue are as
debt and strengthen the balance sheet. The details of the Rights
below
() Record Date -
15th May, 2020
(i) Ratio -1: 10

(11) Issue opening date-20th May, 2020

two installments of 300 and 700 on
(iv) Price 7 1,000 to be paid in
application and in May 2021 respectively.
Category of Shareholders % ofshares held as No. of shares (Cr)

on the record date

Promoters 48% 240

Flls 25% 125

Dlls 12% 60

Retail shareholders 10% 50

TEPF (Investor Education 2% 10

& Protection Fund)

GDRs 3% 15

Total 100% 500

Thecurrent EPS is 7 50 and cum-rights price is 1,400.

The cost of debt is 12% and effective tax rate is 20%.
Risk free rate of 1 year T Bill is 6%.
15 out of 20 analysts covering ABC Ltd. have consensus price target of
R 1,800 in next I to 1.5 years, The remaining five have set the target price in

the range of7 1,600 to 1,750.

GDRs are not listed on the permitted jurisdictions as per SEBI guidelines

for issue of permissible instruments hence may have to be renounced by the

current holders in the market. ABC 1S also considering to invest in a

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restaurant business. The CFO has informed the Board that such business

would be a
Would require less investment as negative working capital
permanent feature.

2x5
Multiple Choice Questions: =10
G

Issue must remain open for

1.1 What is the minimum period for which a Rights
subscription ?

(A) 7 days (B) 15 days

6 months o (D) 1 year 20A

(C)

issue ?
1.2 What is the minimum level of subscription for successful rights
(A) 100% (B) 75%

(C) 80% aegi(D 90%

1.3 Calculate the theoretical ex-rights price for the above Rights Shares.
(A) 1363 (B) 1100

(C) 1063 (D) 700

restaurant business would be

14 Negative working capital in the context of a
rise in the level of operation and
(A) good as it would release fund with the
it is natural for such business.

bad it would require investment with the rise in the level of

(B) as

operation.
neutral creditors would charge extra interest
(C) as

(D) None of the above

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1.5Asume that ABC Ltd's fully paid shares is traded at 7 1,390 and Rignt

Entitlement's (RE's) closing price as on 25th May was 7 400. Which one of
the following is correct about pricing of RE ?
(A) it is traded at a discount ofR 10
(B) it is traded at a premium of R 10
(C) it is traded at a discount of 32
(D) it is traded at a premium of 7 32

1.6 The CFO of ABC Ltd. has asked you to prepare a document to be circulated
to the Project Team highlighting the temporary relaxations granted by the

SEBI in the context of COVID-19 pandemic along with the recent reforms

and new mechanism unveiled by the SEBI for Rights Entitlements (REs).
Prepare a short note with key relaxations and new mechanism for REs.

1.7. Determine number of Rights Shares to be allotted to the applicants

mentioned below based on Allotment Waterfall and preferential ranking
with appropriate justification.

(a) Mr. A holds 1500 shares as on 15th May, 2020 and has applied for
100% of his entitlement and in addition, he has applied for 100 more

Rights Entitlements (REs) as 'additional shares.

(b) Mr. B bought 200 Rights Entitlement from the market and has applied
for the same. In addition to these REs, he has also applied for 200
more REs as 'additional shares'.
Mr. C bought 800 shares from market on 16th May, 2020 and wants to
(c)
for 80 Rights Entitlement.
apply

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I.8 List various options available to raise money for a listed entity from its

equity shareholders. Explain with three reasons as to why Rights Issue is

one of the preferred modes of raising funds from equity shareholders.

1.9 You father owns 1000 shares of ABC Ltd. and has approached you to take 5

your opinion on whether he should subscribe to the Rights Issue. Evaluate

whether it is beneficial to subscribe to Rights Issue from the perspective of
EPS, market price of rights shares and analyst's views on the price.

Ofis

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Case Study No.-2
material from USA
Reliable Footwears Ltd. has imported $ 25 million worth raw

for the manufacturing of their new line of footwear. You are the Transaction

Banking Head of Sunshine Bank and Reliable is one of your key clients. The
CFO of Reliable has approached you to understand the best option to finance the

import transaction to optimise overall cost of financing. Assume that above

discussion took place on 1st October, 2019.

) Terms of credit - 30 days from the invoice date and the payment will be due

on 1s November, 2019.

(i) The operating cycle for Reliable is 6 months

111) The MCLR rates and spread for various tenor in effect are given below.

Reliable is classified as SB-5 credit rating customer as per bank's credit

policies and due diligence. It has working capital facility of R 500 crores

from the bank.

Tenor Existing MCLR(%)

Overnight 8.05

One month 8.05

Three months 8.10

Sixmonths 8,25
One year 8.50

Two years 8.80

Three years 9.00

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Credit Category Spread (%)

SB-1 1.50

SB-2 2.00
SB-3 2.50
SB-4 3.00
SB-5 4.00
SB-6 6.00

SB-7 7.00 .

rate is 68 of the discussion date i.e. 1st

iv) The spot USD-INR exchange
as

October, 2019.

(v)USD LIBOR rates for various tenor are

3 month 1 month 6 month 12 month
Period

2.5955 2.4934 2.6691 2.7300

LIBOR Rate (%)
trade credit borrower.
(vi) Bank charges spread of 150 bps for SB-5 category
are 1% p.a.on the LC
amount.
(vii) The letter of credit charges
USD-INR for 12 month period is 6%.
(viii) The prevailing forward premium
on

for non-capital goods, the

(ix) As per RBI prevalent Trade Credit Policy,
transaction is $ 50 Mn and the duration
maximum limit of Buyer's credit per
whichever is less. The All-in-Cost
can be up to 1 year or operating cycle,
for Trade Credit is 6 months
benchmark rate + 250 bps spread.
ceiling
efforts of the management it has
Reliable also has export business. Despite best
not achieved the desired level, and so far they have not made profit due to higher
to increase volume in order to register
marketing cost. The management is trying
finance are being
profit in export business. The pre-shipment and post-shipment
a purchase order
optimize cost, Recently, Reliable has received
managed well to

and the customer is ready to give a Red Clause Letter of Credit (L/C).
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Further, the CFO of Reliable wants to protect the credit risk of an investment
made in BB rated bond of P Ltd. Due to
sudden change in macro-economic
conditions, the CFO expects that P Ltd. may default. But considering high coupon
rate, the CFO does not want to dispose of the investment made in the bond of P
Ltd. The CFO is considering credit default swap an instrument to achieve the
objective of protection of credit risk.
Multiple Choice Questions: 2x5
2.1 Post-shipment finance is considered =10
(A) more risky than pre-shipment finance
(B) less risky than pre-shipment finance
(C) just as risky as pre-shipment finance
(D) risk-free borrowing instrument in export finance

2.2 Determine which of the following is not a Bank

Financing Facility
(A) Overdraft
(B) Bill discounting
(C) Packing credit
o
D Corporate bonds

2.3 Which one of the following is incorrect with

respect to credit default swap?
(A) CDS is more like an option.
(B) CDS does not allow the protection
buyer to move credit risk off-
balance sheet without actually
disposing off the asset.
(C) Total Return Swap (TRS) transfers both credit and
market risk but the
CDS only transfers credit risk.
(D) Multiple default baskets provide protection against the default of
all of
the reference assets in the basket and do
not terminate after
the first
default.

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2.4 Factoring is mainly relevant for management of

(A) Inventory
(B) Accounts receivables

(C) Vendor payables

(D) Cash management

2.5 Which of the following risk is not managed by bank treasury ?

(A) Credit risk

(B) Liquidity risk

(C) Market risk

D) Sovereign risk

2.6 (A) Based on the information given, evaluate working capital finance in 6

INR and buyer's credit in USD. Suggest to the CFO, which option is

better and why ?

(B) What would be the impact on debt equity ratio if buyers credit option 1

is selected by Reliable?

2.7 The CFO has asked you to illustrate the Credit Default Swap by way of a 6

diagram. Also, explain three parties and two types of assets that are

involved in a Credit Default Swap

2.8 Illustrate a transaction involving a Red clause Letter of Credit (L/C) by way 2

of a diagram ?

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Case Study No. 3
sartup Fundig
-

Genius 1s the education technology start-up on a mission to

democratise the
access to quality education
of school going students in India
by building an online
education platform.
India has 250 mn school going students in K12 segment in India. There are
1.5 mn schools in India out of which government runs 70% of these schools
while the
remaining are run by private bodies. 85% of the schools are in rural area
as against only 15% in urban cities. 10% of these
K12 segment uses some or the
other form of technology products/solutions which will eventually grow
120 mn by 2023 end as per report of a renowned consulting agency. Overall
spend on school education by all stakeholders is $ 40 bn out of which in-school
and out-of school expenditure ratio is 40 60 which will become
equal by 2023
after growing by 100%.
Average per student spend on technology i.e. out-of
school expenditure is $ 200 p.a. as of now afid
expected to grow to $ 250 p.a. by
2023. Average per school spend on technology products and solutions is $ 4000
and $ 16000 per school p.a. in Government and
private school respectively, and is
expected to grow by 100% and 50% respectively by 2023. t sd biec
Genius has built the interactive and animated content
in 3D for entire K12
segment across 22 state boards, CBSE, ICSE & 15
languages as well. It has
strong 250
people team to build and curate the content which is aligned to the
school syllabus. They have gamified the education
learning process with peer-to-
peer contest, leader-board on Pan India basis and prizes for weekly contest
winners. This approach has resulted in higher
engagement on the Genius App of
80 minutes per day with 1 mn students
using the app on a daily basis. They have
almost 20 mn question bank with personalized algorithm to
provide individual
feedback and learning path suitable for each student.

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Their business model relies on viral marketing based on word of mouth, social

media and other electronic medium. Typical conversion rate is 2% for every
registered users to paid users. The average price of Genius package is S 150 p.a.

each user is average $ 90 p.a. It expects to grow at

Cost of conversion for
50% p.a. until 2023. Their monthly expenses are $ 75,000 out of which $ 60,000
and direct expenses related to operations. It will increase
is for content creation
50% p.a. balance 15,000 are towards corporate overheads and will increase

by 40% p.a.
Genius also attempts to sell combined package for multiple years in one go i.e. 8t

to 10th standard content is sold as a package. This is driven by the zero cost

lending by empanelled NBFCs. Such package sales constitute 40% of total

revenue and have average duration of 3 years. Genius has experienced default
rates of 10% p.a. in this segment. Genius accounts for entire package revenue in

the year of sales.

The COVID-19 pandemic has accelerated adoption of technology products and
solutions by schools, coaching classes, teachers, parents and students. The

schools mainly were not convinced with the idea of content on such technology
based platforms but now have been forced to adopt and adapt quickly. Genius has

identified this opportunity and has been working on a platform named 'School
Management' as a one-stop solution for all needs to run a school online. It aims to

target schools with this platform and compete with existing large players in this
space. They will build a freemium model here as well and pricing is yet

finalized but will be based on feedback from schools.

There are few start-ups operating in the similar space and have received massive
funding. The top 3 players alone have garnered $ 800 mn of funding out of total
$ 1.2 bn funding received till date across 100 + start-ups in technology space. In

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shut down
based education space
the last 3 years, 500 start-ups in technology
have 20 mn

due to extreme competition and lack of funding. The top 3 players

Annual Run
users out of 25 mn users. The highest funded player has
registered
at 2 bn
break even and has secured last funding
Rate (ARR) of S 100 Mn, yet to

the sector and have

valuation. Investors across segment are very bullish about
chain.
been pumping money in the entire value
seed round 1 year back of $ 1 mn at pre-money valuation of
Genius has raised a

belong to school
from two renowned angel investors. Both of them
S 10 mn

education sector and are well networked in the fraternity.

with pre-money
Genius is looking to raise $ 10 mn in pre-series A round now

valuation of $ 100 mn. Genius plans to spend $ 10 mn on development &

marketing of School Management Platform expansion (40%), growth (30%) and

balance for 30% on improvement in the content and tech platform.

IIT alumnus with 10 years of experience at

Founder of Genius, Gaurav is an

in
investment bank. Another co-founder, Mr. Shashank Rane is
a veteran
global
known Education Software
education technology space and has worked with well
Company for 15 years.

2x5
Multiple Choice Questions
=10
3.1 Please find one method to raise funds which is inconsistent out of the

options given below

(A) Private Equity

(B) Venture Capital

(C) IPO
(D) Management Buyout

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3.2 What is the hurdle rate ?

(A) Maximum rate which a PE should achieve

(B) Cost of Capital

C Minimum rate which PE should achieve for LPs before sharing of

profits
(D) Return on investment

10,000 of share capital of 1000 shares. VC wants to invest

3.3 Start-up has

4,000 with 400 shares. What is the post-money valuation ?

(A) 1400

(B) 10000
(C 14000
(D) 400

from:
3.4 Early stage firm will most likely to receive funding
A VC Firm
(B) PE Firm

(C) Sovereign Wealth Fund

(D) Bank

3.5 The which majority of shareholders shall bind the minority

right by
shareholders in the event of sale or transfer of shares is known as

(A) Oppressive
(B) Anti-dilution
(C)Dragalong
(D) Domination

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3.6 You are an analyst at Unicorn Venture Partners who is evaluatin8 an

opportunity to invest in Genius's pre-series A round. Your firm typicaly

make investment upto $ 1 mn as an initial investment and expects a

minimum 10 x returns on exit with 2-3 years of investment

holding period.
Prepare an investment Memo for the meeting with partners which would
cover all aspects given below:
(A) Problem, Solution and Market sizing
4
(B) Financial projections & key
operational metrics
(C) Valuation and Exit opportunity
3
(D) Recommendation including key risks

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Case Study No. -

4
Mulual Fuv
You are a Financial Advisor. Mr. Suyash, 25 years old, is your client and he has
investedR 10 lakhs across multiple equity stocks in the anticipation of making
In the recent month, there has been wide spread panic in the market
quick returns.
With this correction, Suyash is staring at
leading to 10% correction in the NIFTY.
a loss of R 3 lakhs.
Investment Plan (SIP) from his
He has found out about
Mutual Fund Systematic

friends and has approached you for your opinion.

Multiple Choice Questions 2x5

not exceed =10
4.1 In case of Index Fund Scheme of ETF, total expense ratio shall
ofthe daily net assets

A 1%

(B) 1.25 %
(C) 1.5%
(D) 0.5%

mutual fund scheme includes

4.2 Real estate asset as per real estate

(A) Vacant land

(B) Agriculture land

C) Deserted property
with no encumbrances
(DIdentified immovable property

4.3 Sharpe ratio measures and Treynor ratio measures

risk
A T Total risk, Systematic
Credit risk
(B) Unsystematic risk,
risk
(C) Total risk, Unsystematic
Credit risk
(D) Liquidity risk,
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4.4 A mutual fund in India is constituted in the form of
(A) A public trust formed under the Principles of Mutuality

(6) An investment company according to special amendment to the

Banking Regulation Act, 1949.

A public trust created under the Indian Trusts Act, 1882
(D) A public company incorporated under the Companies Act, 1956

4.5 Mahesh invested 4 lakhs on 20th Feb, 2018 in an equity mutual fund
scheme at NAV of T 28.25 per unit. The scheme declared dividend of 7 5

per unit, the record date being 31st September, 2018. The
prevailing NAV at
the end of October 2019 of the scheme is 22.35 per unit. If he sells all the
units of the scheme today, what would be the total
gains?
A ) Loss of 7 12,744
(B) Gain of R 25,785
(C) Gain of T 70,796
(D) Loss of 83,540

4.6 Explain the benefits of investing in Mutual funds.

Additionally, explain the 4
concept of SIP and its benefits.

4.7 Mr. Suyash has prepared following data of 4 open ended mutual
funds based A
on internet research. Review the
following information and correct
wherever required.

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Sr. Parameterss Emergingg Nifty ETF Liquid Gilt Fund
No. Equity Fund Fund
Benchmarks Nifty 50 Nifty Mid Nifty Nifty Liquid
Cap 100 Gilt fund Index
Ideal 5 years and 3 years and 1 year 1-15 days
Investment above above and
Horizon above
3 Investment Tracks Nifty Invests in Invests Invests in
Philosophy 50 Stocks Mid Cap on G-Sec Money Market
Stocks Instruments
Risk Low Risk Moderately Moderate High Risk
Category High Risk Risk

4.8 Suyash has shortlisted funds listed below for SIP and has shared additional 7
information on the same.
Ra fa Rhm
Parameters Equity Blue Chip Fund Equity Infra Fund
Expense ratio 2.26% 1.5%
Annualized Alpha (5 year) 6.40% 5%
Returns (1 year) 12% 20%
Benchmark Returns 5% 13%
Standard Deviation 12 % 27%
Beta 0.5 0.8
Portfolio Turnover Ratio (PTR) | 53% 30%
Fund Manager Experience in 20 years 5 years
MF Industry
Fund Inception 10 years 6 years

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Risk free returns are 6%. Please advise him based on the evaluation of the

performances of these funds with help of parameters given above :

(1) Fund performance against a Benchmark
(2) Fund history
(3) Fund Expense Ratio
(4) Risk Adjusted Returns
(5) Average Maturity and Duration
(6) Fud's Alpha and Beta
(7) Portfolio Turnover Ratio (PTR)

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Case Study No. - 5 Capibl Budoelms NPV
in
You Group Treasurer of Tesla Star Ltd., a leading infrastructure player
are a

India with interests in EPC, roads, airports and ports construction projects.
The group is in expansion mode and details of next project are as below:
1. Capital Assets -R1,000 crores

the
The suggested scheme of financing by the project consultant appointed by'
Board committee is as below:

1. Long term debt @ 12% fixed rate -

750 cror

2 Rights issue of 250 crores

demand loan facility @ 10% fixed rate -

3 Short term working capital

150 crores
is 5 years. This financing schemeis
The expected duration of the project
recommended by the consultant and you need to validate the same and propose

alternative structure based on additional information given below

As per the lending bank, the equity contribution stipulation for such projects is
minimum 10% of the capital cost. The debt covenants have stipulated the cap of
standards.
2:1 on equity ratio which is similar to industry
debt

Projects financials are as below (7 in crores)

Year 1 Year 2 Year 3 Year 4 Year 5
Particulars
1,400 1,500 1,600
Sales 1,100 1,250
150 200 250 300 400
Other income
1,450 1,650 1,800 2,000
Total income 1,250
750 775 800 850
Materials 700

100 150 200 250 300

Labour
50 75 90 100 150
Other expenses
Total expenses 850 975 1,065 1,150 1,300

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400 475 585 650 700
Depreciation 150 150 150 150 150
PBIT
250 325 435 500 550
Interest on long term debt
45 81 63 45 27
Interest on short term debt
8 13 8 3
PBT
197 231 364 452 523
TAX @35% (approx.)
69 81 128 158 183
PAT
128 150 237 294 340
10% sales p.a.
going to be denominated in USD.do
are

Long Term Debt Year 1 Year 2

Year 3 Year 4 Year 5
Opening 750 600 450 300
Additions 750
Repayment* 150 e 150 150 150
Closing l 750 600 450 300 150
Interest @ 12% on average
outstanding 45 81 63 45 27

Short Term Debt Year 1 Year 2 Year 3 Year 4 Year 5

Opening 150 100 50
Additions 150
Repayment" 50 50 50
Closing 150 100 50
Interest @ 10% on average
outstanding (approx.) 13 3
*Above repayments are indicative and may vary as per alternative chosen
by the student.

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The risk-free return on 365 days T-Bill, 5 years GOI Bonds and 10 years
GOI bonds are 7%, 7.5% and 8% respectively, The companies in the
infrastructure space have been earning~13% return on such projects since
last one year. The relevant company assets beta is estimated to be 1.8.
The financials of Tesla Star as on 31st March, 2020 and the last 2 years are

given below:
Particulars 31 March, 31 March, 31st March,
2020 crores) 2019 ( crores) 2018 ( crores)
Liabilities
Equity capital 100 100 100

Reserves 1,200 1,000 950

Long term loan (12) 1,000 800 500
Short 500 300 100
term
loan (9%)
Other liabilities 200 150 50

Total 3,000 2,350 1,700

Assets

Non-Current Assets 1,500 1,200 1,000

Cash & Bank 300 200 100

Investments 500 300 200

Other Current Assets 700 650 400
Total 3,000 2,350 1,700

The Long-Term Funds under the External Commercial Borrowing (ECB) route
is available in foreign currency across tenors as per extant RBI policy for
infrastructure projects. The yield curvefor USD denominated debt is as below:
2 Year Treasury Yield-1.5%

3 Year Treasury Yield -

1.55%

10 Year Treasury Yield

-

1.45%%

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the relevant tenor treasury
n c Dankers have been quoting a spread of 2% on

yield.
Ihe approximate hedging cost for one year in USD-INR is 5,45% p.a.

Market for various debt

The last quoted yields in Indian Fixed Income
instruments are as below:
Duration Instrument Yield for respective Credit rating
credit ratings (%)
6 months CP 7.5% - 7.7% AAA, AA

1 year CP 8%- 8.20% AAA, AA

1 year Corporate Bond 9% -9.20% AAA, AA

3 years Corporate Bond 9.4%-9.55% AAA, AA

5 years Corporate Bond 9.75 %-9.9% AAA, AA

3 years Bank Term Loan 11%- 11.25% AAA, AA

5 years Bank Term Loan 12%- 12.25% AAA, AA

1 year Short Term Credit 10%-11% (fixed) AAA, AA

Last time CRA has given rating of AAA for short and long term facilities of

Tesla Star Ltd.

Multiple Choice Questions:

2x5
5.1 Eligibility requirements for an IPO mandates assessment of following
=10
parameters.
(A) Net worth, Operating profits and Net tangible assets
(B) Share capital, Profit after tax and Net monetary assets
(C) Net worth and Gross debt
(D) Net profit and Net fixed assets

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5.2 In which of the technique, time value of money is not considered ?
(A) Payback period
(B) Net present value
(C) Internal Rate of return

(D) Accounting Rate of return

5.3 Normal structure of treasury operations does not involve

(A) Front office
(B) Back office
(C) Mid office
D) Central office

5.4 Which one of the below is not an interest rate risk ? egodb o u
(A) Yield curve risk -

(B) Repricing risk

(C) Basis risk
D Translation risk

5.5 Reverse Repo and Repo are defined as

(A)Reverse repo is the rate at which commercial banks lend to RBI and

Repo is the rate at which RBI lends to Commercial Banks.

(B) Reverse repo is the rate at which commercial banks borrow from RBI
and Repo is the rate at which RBI borrows from Commercial Banks.

(C) Reverse repo is the rate at which commercial banks lend to other

commercial banks and Repo is the rate at which RBI lends to

Government.
(D) Repo is the rate at which commercial banks lend to government and
reverse repo is the rate at which RBI lends to Commercial Banks.
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5.6 Calculate the 'Base NPV of the project without capital structure

suggestions by the consultant.

5.7 Calculate cost of equity and recommend whether to go ahead with suggested 2
capital structure by the consultant along with reasons.

5.8 Suggest various sources of funds along with duration of such funding based
5
on the information given, which be tapped by Company for this
can
project
to optimise the overall cost of capital. Also, explain relevant conditions

precedent for suggested funding sources and eligibility of company for the
same.

5.9 Calculate the Adjusted NPV° based on your recommendations.R

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