Presented by

Presented by

About Equit-I, Finance Club

Equit-I focuses on creating an enthusiasm about finance in the campus and bracing
up the student community for the industry rigor. The club strives to be an important
partner in a participant's career development by creating learning opportunities and
providing industry interface.

We assist participants in exploring financial career opportunities, by organizing

workshops and interactive sessions on various financial topics and career panels
specifically for finance roles.

We also help the participants in preparing for their summer placements by publishing
material and taking lectures on fundamentals of finance.

Club publishes a weekly newsletter Week That Was, which includes business news
on the different sectors of the economy.

Equit-I Core Team 2014-15

Profiles
Name

Designation

Description

Manjot Singh Bedi

Secretary

Previously worked with Evalueserve and UBS Verity Knowledge Solutions for
3 years as Associate in the Investment Banking space.
Undergraduate college:- B.Com(Hons.) from SRCC, Delhi University
Internship:- Indxx Capital

Trina Chowdhury

Senior
Member

Been one of the state toppers in board examinations and has earlier interned
with electrical utilities companies as well.
Undergraduate college:- B.E, Electrical Engineering, Jadavpur University
Internship:- Johnson & Johnson

Gyanesh
Phulambrikar

Senior
Member

Devang Jain

Senior
Member

Nirmal M S

Senior
Member

Previously worked with Goldman Sachs as an analyst developer for 2 years.

Undergraduate college:- B Tech(Hons) in Electronics and communication
from NIT Calicut.
Internship:- Philips India
Has worked with Oracle for 2 years and earlier interned at CEERI, Pilani and
NetApp
Undergraduate College Dual Degree in B.E.(Hons.) Computer Science
and M.Sc.(Hons.) Mathematics, BITS Pilani
Internship - Infrastructure Leasing & Financial Services
Has worked with South Indian Bank for 1 year as Prob. Assistant Manager
Undergraduate College B.Tech in Electronics and Communication from
Govt. Model Engineering College, CUSAT
Internship - Innovative Ideators, developing Crowdfunding platform

CONTENTS
1.
2.
3.
4.
5.
6.
7.

Corporate structures
Role of finance manager
Time Value of Money
Corporate Budgeting
Accounting Basics
Financial Ratios
Basics of Stock Markets (by Voyage Capital IIM Indore Mutual Fund)

Corporate Structures
Proprietorships & Partnerships: Owned and run
by one or more individual and in which there is no
legal distinction between the owner and the
business. The owner receives all profits (subject to
taxation specific to the business) and has unlimited
responsibility for all losses and debts. Every asset of
the business is owned by the proprietor, so are the
responsibility for the debts.

Corporations: Also called limited companies, here

the liability of the members or subscribers of the
company is limited to what they have invested or
guaranteed to the company. Limited companies may
be limited by shares or by guarantee. And the former
of these, a limited company limited by shares, may be
further divided into public companies and private
companies.

Proprietorships

Unlimited liability
Personal tax on profits
Partnerships

Corporations

Limited Liability
Corporate tax on profits
Personal tax on dividends

Role of a Finance Manager

Cash raised from

investors

Cash invested in
firm

Firms
operations

Cash generated
by operations

Financial
manager

Cash
reinvested

Cash returned
to investors

Financial
markets

Time Value of Money (TVM)

TVM is based on the concept that one rupee that you have today is worth more than the
promise or expectation that you will receive a rupee in the future. Money that you hold
today is worth more because you can invest it and earn interest. You are compensated by
the bank or financial institution for depositing money with them and not spending
otherwise.

For example, you can invest 1$ for one year at a 7% annual interest rate and accumulate
1.07$ at the end of the year. You can say that the future value of the rupee is 1.07$ given
a 7% interest rate and a one-year period. It follows that the present value of the 1.07$
you expect to receive in one year is only 1$. Thus, it is evident that 1$ held today is
equivalent to 1.07$ held after 1 year.

A key concept of TVM is that a single sum of money or a series of equal, evenly-spaced
payments or receipts promised in the future can be converted to an equivalent value
today (present value of the cash flows). Conversely, you can determine the value to
which a single sum or a series of future payments will grow to at some future date (future
value of the cash flows).

Time Value of Money (contd)

The basic equation for TVM is:

where,
PV is value at time t=0,
FV is value at time t=n,
i is discount rate or interest rate at which amount will
be compounded each period,
n is number of periods.

Cumulative present value of future cash flows can be calculated by summing the
contributions of FVt, the value of cash flow at time t, with the following equation:

Net Present Value(NPV)

NPV is the difference between the present value of cash inflows and the present value of
cash outflows. The NPV equation is :

Where, CFt is the expected net cash flow at Period t, r is the projects cost of capital, and
n is its life. Cash outflows (expenditures such as the cost of buying equipment or building
factories) are treated as negative cash flows.NPV is used in capital budgeting to analyse
the profitability of an investment or project. For the project to be profitable the NPV
should be positive.

While comparing two projects:

If the projects are mutually exclusive, the one with the higher NPV should be accepted
and the other rejected. Mutually exclusive means that if one project is taken on, the
other must be rejected. For example, a conveyor-belt system to move goods in a
warehouse and a fleet of forklifts for the same purpose illustrates mutually exclusive
projectsaccepting one implies rejecting the other.
If the projects are independent, then both should be accepted if both have a positive NPV
and thus add value to the firm. Independent projects are those whose cash flows are
independent of one another. If Wal-Mart were considering a new store in Boise and
another in Atlanta, those projects would be independent of one another.

Internal Rate of Return (IRR)

IRR is one of the techniques used in capital budgeting. The IRR is defined as the
discount rate that forces the NPV to equal zero:

For example, let us say you invested $1,000,000 in a factory that earned $300,000,
$400,000 and $500,000 in years one, two and three respectively. You then sold the
factory for $600,000 in year four. At a 24.89% discount rate, the NPV of this project would
be zero. Hence, the IRR of this project is 24.89%.
Generally speaking, the higher a project's internal rate of return, the more desirable it is to
undertake the project. As such, IRR can be used to rank several prospective projects a
firm is considering. Assuming all other factors are equal among the various projects, the
project with the highest IRR would probably be considered the best and undertaken first.

Accounting Outline
Introduction to Accounting
Financial Accounting
Accounting Concepts
Financial Statements 1 Balance Sheet
Financial Statements 2 Income Statement
Financial Statements 3 Cash Flow Statement

Introduction to Accounting

Formal Definition by the American Accounting Organization

The process of identifying, measuring and communicating economic information to
permit informed judgments and decisions by users of the information

Simply put, accounting is a system that provides information about an organization to

all concerned parties

Primary purpose of Accounting is to enable decision making by all stakeholders

Types of Accounting Information

Operating Information : Details of day to day operations

Management Accounting Information : Information presented for internal
usage such as planning, implementation and control
Financial Accounting Information : Used by both management as well as
external parties to evaluate the firms performance
Tax Accounting Information : Used to file tax returns with taxation authorities

Accounting Concepts

Money Measurement : Financial Accounting records only that information which can
be expressed in monetary terms. The purpose of this is to provide a common unit to
measure and operate on heterogeneous entities

Entity : An entity is any organization or activity for which accounting reports are
prepared. The entity concepts treats the accounts of businesses separately from
those of the persons running them

Going Concern : Accounting assumes that the organization is question will continue
to operate for an indefinitely long period in the future

Cost : The values of assets are generally recorded at the amount paid to acquire
them rather than at their current fair value

Accounting period : This is the time between two successive presentations of

financial statements by an organization.

Accounting Concepts

Dual Aspect : Every transaction has a dual affect and impacts at least two items. It
preserves the fundamental accounting equation
Assets = Liabilities + Owners Equity

Matching : When a given event affects both revenues and expenses, the effect on
each should be recognized in the same accounting period

Conservatism : Revenues are recognized only when they are reasonably certain and
expenses are recognized as soon as they are reasonably possible

Materiality : Accounting should involve disclosure of all important and relevant

information

Financial Accounting

Financial Accounting presents information relevant to both management as well as

external stakeholders

The end product of Financial Accounting process is a set of reports called Financial
Statements

Financial Statements
Help management evaluate the performance of the firm with respect to past
performance and take relevant decisions
Help shareholders judge how well the firm is doing and value the worth of their
investment
Help lenders evaluate the ability of the firm to repay its debt
Help prospective investors in evaluating the viability of investing in the firm
Help other interested parties such as investment advisors, media and the general
public understand the financial position of the firm

Financial Accounting

Financial Statements generally are of two types

Stock or Status reports Provide information about a firm at a specific instant
of time
Flow reports Provide information about a firm over a specified period of time

There are three main Financial Statements

Balance Sheet Stock report
Income Statement Flow report
Cash flow statement Flow report

Financial statements are prepared using a set of rules/principles

Characteristics of accounting principles relevance, objectivity and feasibility

Popular Accounting Standards Generally Accepted Accounting Principles (US),

International Financial Reporting Standards (IFRS)

The Balance Sheet

Balance Sheet gives the financial position of an accounting entity at a specified

moment in time. It is also known as statement of financial position

Components of Balance Sheet

Assets : Assets are economic resources that are owned and controlled by the
entity and whose cost is objectively measurable. Economic resources are those
that provide future benefits to the entity
Liabilities : Liabilities are obligations of the entity to transfer assets or provide
services to outside parties arising from events that have already happened
Owners Equity : This represents the amount owners have invested in the entity. It
consists of paid-in capital(amount invested directly) and retained
earnings(earnings to the firm minus dividends paid out by the firm)

Assets = Liabilities + Owners Equity

The Income Statement

The income statement summarizes the revenues earned and the expenses incurred
by the entity over a specified period of time

The primary purpose of income statement is to show whether the entity made or lost
money during the specified period

The components of income statement are

Revenues : Revenues primarily demonstrate cash inflows and enhancements in
assets from the companys ongoing operations during the period

Expenses : Expenses involve cash outflows, depreciation in the values of assets

or incurrence of liabilities from the companys ongoing operations during the
period

Revenues Expenses = Net Income

The Cash Flow Statement

The cash flow statement provides information about the cash flows associated with
the periods operations, and also about the entitys investing and financing
activities during the period

It shows the impact of balance sheet accounts and income on cash and cash
equivalents

Cash flow statements are considered objective as they are not influenced by
judgments and estimates that are made in arriving at revenues and expenses

Change in Cash flows = Cash flows from operating + investing + financing activities

The Cash Flow Statement

Uses of Cash Flow statement

Determining the liquidity and solvency of the entity
Determining how much cash was actually raised from the entitys major
operations
Determining how the expansion activities of the entity are being financed
Determining the amount, timing and probability of future cash flows

Financial Ratios
Looking at standalone figures for sales, profits, assets or anything dont make much
sense when analysing a company. A company having a profit of Rs. 50,000 on sales of
Rs. 100,000 is performing better than a company earning a profit of Rs. 100,000 on sales
of Rs. 300,000.

Hence in order to evaluate a company, and to benchmark it against its peers, it is better to
look at ratios as a financial indicator.

Liquidity Ratios Short Term Solvency

Capital structure ratios: Indicator of

financing techniques & long term solvency

Coverage Ratios

Turnover / activity / performance ratios

Profitability ratios based on sales

Profitability ratios owner's view point

Presented By

Contents
Introduction
Equity Markets in India
How to pick a stock?
Fundamental Analysis
Technical Analysis

About Voyage Capital Investment Club

Voyage Capital Investment Club is a student-run club, instituted in 2008.

Since then the club has come a long way, both in terms of investment size and
participants' involvement.

Club comprises of trading enthusiasts from both the PGP batches, with each member
specializing in particular sector(s) and trading style.

Our major exposure is towards equities. Besides trading and investing, club members
also hold knowledge-sharing sessions for the participants, wherein trading strategies
and the latest economic happenings are discussed.

We also come out with regular reports and articles for our investors, in which we
share our analysis of the companies in which we have invested and the analysis of
how the latest news affects the stock markets

Voyage Capital Core Team 2014-15

Profiles
Name

Designation

Description

Kunal Shah

Secretary

Munish Dureja

Senior
Member

Moses Raja
Ratnam

Senior
Member

Kunal is a CFA level 2 candidate and a gold medalist in his undergraduate studies.
He has been an active follower of equity markets in India for the past 7 years.
Undergraduate college:- PDPU, Gandhinagar
Internship:- Purplle.com
Munish has 5 months of experience at Exevo, research arm of Moody's, where he
worked on financial and market research projects. He has done internships with
RBI, Avantha Power & Infrastructure and GAIL
Undergraduate college:- Shaheed Sukhdev College Of Business Studies
(University of Delhi)
Internship:- Airtel (Finance)
Moses has previously worked with Cognizant Technology Solutions in the BFS
vertical for 3.5 years.
Undergraduate college:-SSN College of Engineering, Anna University
Internship:- TCS
Ashar has worked as an Associate Software Engineer at MAQ Software for 3
Months and as an Auditor at Deloitte
Undergraduate College Ramrao Adik Institute of Technology, D.Y. Patil
Internship- Innoserv Solutions Pvt. Ltd
Ankur has received several scholarships and certificates, based on academic
excellence. He has worked on projects based on Debt Markets, especially the
Indian Central Government Bonds.
Undergraduate College-Dwarkadas J. Sanghvi College of Engineering
Internship - IL&FS Securities Services Limited

Ansari Mohammed Senior

Ashar
Member

Ankur Shah

Senior
Member

Voyage Capital Core Team 2014-15

Profiles
Name

Designation

Description

Dhruv Kant
Goswami

Senior
Member

Ankita Nirola

Senior
Member

Dhruv has a number of scholarships to his credit including the prestigious OPJEMS
(2012). He had represented DCE in the Formula (student chapter) championship at
Silverstone (UK) and is currently developing business strategies for a number of SMEs
near Indore.
Undergraduate college:- Delhi College of Engineering
Internship:- JP Morgan Chase
Ankita has worked with Deloitte Touche Tohmatsu in Gurgaon as an Audit Assistant for
21 months. She has audited one of the biggest US mutual fund clients.
Undergraduate college:- SRCC, Delhi University
Internship:- RBI

Introduction

Equity Share (Stock): A type of security that signifies ownership in a corporation and
represents a claim on part of the corporation's assets and earnings.

Two types of markets exist for equity shares:

Primary Market: A market wherein fresh stocks are issued. Here the seller is the
company itself and buyer are the investors.
Secondary Market: A market of buyers and sellers who trade in securities that have
already been issued in the primary market.
Firms issue stocks to raise capital. The capital is required to:
I.
To finance business ventures
II.
To finance growth

Advantages of Equity Funding

Can raise more capital than it could borrow.

Does not have to make principal payments.

Does not have to make periodic interest payments to creditors.

Disadvantages:

Have to share their ownership with other shareholders.

Shareholders have a voice in policies that affect the company operations.

The cost of equity capital is higher than the cost of debt.

Equity Markets in India

SEBI (Securities and Exchange Board of India)
Statutory body constituted by the Government of India to protect the rights of the
investors.
It promotes the development of securities market and regulates it for matters
connected therewith.

Bombay Stock Exchange(BSE)

Oldest Stock Exchange in Asia with a rich heritage.
Around 4700 Indian companies listed with Stock Exchange.

National Stock Exchange(NSE)

It is the 11th largest stock exchange in the world by market capitalisation
More than 1600 companies are listed with NSE
It is a much bigger exchange than BSE with respect to the total value of shares
traded

How to pick the right company to invest in ?

Key points to be considered
Time horizon for investment: Equity markets tend to be volatile
and hence time horizon or the amount of time for which an investor
is willing to hold on to his investment is an important parameter
while selecting stocks.

Risk appetite: Certain stocks may give high returns but are equally
risky if the markets turn the other way. Hence, the return a stock
provides must always be seen in concert with the amount of risk
assumed .

Based of these two factors, stocks can be divided into following

categories
Income Stocks: Stocks of corporations which give money back to
share holders in the form of dividends.
Stocks that pay a regular dividend are less volatile.
Dividends reduce the loss if the stock price goes down.
Dividends are considered taxable income.
Income stocks are generally suitably if risk appetite is low and investor
wants a steady income for the long term

Value Stocks: Stocks of profitable companies that are selling at a

reasonable price compared with their true worth, or value. The time
horizon of such investments is uncertain as it may take time for the
value to unlock.
Growth Stocks: Stocks of companies that consistently earn a lot of
money and are expected to grow faster than the competition.

Analyzing a Stock

Two types of Analysis Possible

Fundamental analysis
Technical Analysis

Fundamental Analysis

Fundamental analysis of a business involves analyzing its financial statements and

health, its management and competitive advantages, and its competitors and markets.

The entire analysis must keep the over all macroeconomic sentiment into the
perspective.

Fundamental analysis maintains that markets may misprice a security in the short run
but that the "correct" price will eventually be reached.

Profits can be made by purchasing the mispriced security and then waiting for the
market to recognize its "mistake" and reprice the security

An example of Fundamental Analysis

Let us take the example of a company by the name Texmaco Rail and Engineering

Texmaco is the flagship company of the Adventz group.

The main business of Texmaco is manufacturing of Freight wagons for railways.

And the biggest client for the company is the Indian Railways. This makes the firms
business highly susceptible to government policies and tenders.

On account of the policy paralysis in the government in the past few years, orders for
the company had practically dried up.

As a result, even though it had a capacity to manufacture 10000 wagons a year, it

ended FY14 with a production of just 980 wagons (less than 10% of capacity).

This slowdown in business is also evident in its share price.

Between Jan 13 to Aug 13 its share price fell from a high of Rs. 72 per share to Rs.
27 per share

A more detailed analysis reveals that the railways in the past few months is suffering
from a huge shortage of wagons.

In fact, a major reason for the shortage of coal in India is lack of railway infrastructure
available to Coal India, the flagship coal miner of the country.

For investors expecting a pro business government in the 2014 General election, this
would have made an ideal stock to invest in.

Any government that would want to revive investments must first take care of Indias
power crisis.

This would require a rapid increase in coal output and hence investments in railway
infrastructure to transport the coal.

The stock was clearly undervalued and provided a great opportunity for investors.

Let us look at the stocks performance in the run up to the elections and after the BJP
received a thumping majority

The stock gained massively from Rs. 39 to Rs. 110 a share. A jump of nearly 200%!!!
This is how a proper analysis of fundamentals can help investors create value.

Key points for fundamental analysis

1.

You can lose money in a very short time, but it takes a long time to make money.

2.

The stock market isnt a gamble as long as you pick good companies that you think
will do well and not just because of the stock price.

3.

You have to research the company before you put money into it.

4.

When you invest in the stock market you should always diversify.

5.

You should invest in several stocks and not bet on only one at a time.

6.

Never fall in love with a stock, always have an open mind.

7.

Analysis should be extensive and well grounded in facts.

8.

Just because a stock goes down doesnt mean it cant go lower.

9.

Over the long-term it is generally better to buy stocks in small companies

10. Never buy a stock because it is cheap, but because you know a lot about it.

Technical Analysis
Technical analysts base their buy and sell decisions on the charts they prepare of
recorded financial data
1. Market value is determined by the interaction of supply and demand.
2. Supply and demand are governed by numerous factors, both rational and irrational.
3. Security prices tend to move in trends that persist for an appreciable length of time,
despite minor fluctuations in the market.
4. Changes in a trend are caused by shifts in supply and demand.
5. Shifts in supply and demand, no matter why they occur, can be detected sooner or
later in charts of market transactions

6. Some chart patterns tend to repeat themselves.

Thank you!