Case

Case Study – Investment Analysis
Buffett acquired a stake in Coca Cola in 1988 when the

company was experiencing some temporary problems that led
to the stock becoming highly undervalued and underpriced.
But Buffett believed that Coca Cola possessed a huge

competitive advantage due to its strong brand and the way
people related to the brand.
In addition, he fell in love with the economics of the

business and the sustainability of its profit-making
capacity... and hence bought a huge stake in the company by
investing a large part of Berkshire Hathaway's funds in it.
After 23 years, the market value of Buffett's holding in

Coca Cola is 19 times what it cost him to acquire those
shares.
Every 100 dollars he invested in 1988 now stands at nearly

1,900 dollars!
Data Source: Yahoo Finance
And this wasn't a one-off case either...
Washington Post, the newspaper company that he started

buying into in 1973, has till date multiplied his money a
thumping 76 times!
And this too was chosen primarily because it was a good

business selling for less than its real worth.
Data Source: Yahoo Finance
1. Analyse and bring out how he was successful in his investment decision.
Case Study – Merchant Banking
Facts:
A Mumbai based leading Merchant Banker was carrying on the

business through the two legal entities A Pvt. Ltd. (A) and
B Pvt. Ltd. (B)
A was primarily involved into business of Stock Broking and

Primary issue marketing
Whereas, B was carrying on the business of Merchant Banking.
In addition to above, over the period both the companies

invested the surplus fund into listed securities that has
now become a sizable part of Net worth of the companies.
Both A and B were being managed by its two promoters –

directors only.
Objectives:
In order to synergize the Capital Market operations, enhance

the quality of service and reduce the cost of operations
both the promoters intend to consolidate the service
oriented activities under one roof
Separating the Investment activities and core service

activities to have clear management focus; that would also
facilitates inviting a strategic partner into core service
business;
To reward some key senior employees
In a manner that meets all the regulatory requirements -

SEBI, Stock Exchange, RBI, Company Law, etc. such as: “Net
worth” Criteria:
As per the requirement of SEBI, post restructuring the
entity must have minimum net worth of Rs.4000 Lacs
Shareholding Criteria:
Clause 4 of Schedule III of SEBI (Stock-brokers and
Sub-brokers) Regulation, 1992 provides as under:
“Where a corporate entity has been formed by converting the
individual or partnership membership card of the exchange,
such corporate entity shall be exempted from payment of fee
for the period for which the erstwhile individual or
partnership member, as the case may be, has already paid the
fees subject to the condition that the erstwhile individual or
partner shall be the whole time Director of the corporate
member so converted and such Director will continue to hold
minimum 40% shares of the paid-up equity capital of the
corporate entity for a period of at least three years from the
date of such conversion”
In a manner that involves least transaction cost and minimal

time leg
To have the name of entity comprising of the service

oriented activities – same as A Pvt. Ltd.
Various points considered while executing assignment:
1) The Way of structuring

Alternative: I Demerger of “Merchant Banking Division” of B
into A and simultaneously demerging the “Investment Division”
of A into B
Alternative: II Demerger of “Stock Broking Division” and

“Primary Issues Marketing Division” of A into B and
simultaneously demerging the “Investment Division” of B into A
Alternative: III Demerger of “Stock Broking Division” and

“Primary Issues Marketing Division” of A into C (a newly
formed company) and “Merchant Banking Division” of B into C
Alternative: IV Slump Sale of “Stock Broking Division” and

“Primary Issues Marketing Division” of A into C (a newly
formed company) and “Merchant Banking Division” of B into C
Alternative: V Demerger of “Investment Divisions” of both A

and B into C (a newly formed company) and subsequent merger of
A into B or vice - a –versa
Alternative: VI Slump Sale of “Investment Divisions” of both A

and B into C (a newly formed company) and subsequent merger of
A into B or vice - a –versa
Case study on Merger
The beleaguered Satyam Computer Services has finally found a new owner, after its
founder chairman, B. Ramalinga Raju left it in the lurch with his confession of
corporate fraud in January this year.
Tech Mahindra pipped Larsen & Toubro and Wilbur Ross to the post and is set to
initiate the takeover process pending the approval of the Company Law Board
which should happen in a week.
The final act of the Satyam saga played out on Monday with the government-
appointed board of directors selecting Venturbay Consultants Private Ltd., a
subsidiary controlled by Tech Mahindra, as the highest bidder to acquire a
controlling stake in the IT services company.
Share subscription
Upon being declared the highest bidder, Tech Mahindra and Satyam executed an
agreement whereby Tech Mahindra agreed to subscribe to and acquire 30.28 crore
shares of Satyam, representing 31 per cent of its share capital, at Rs. 58 a share.
This will infuse Satyam with Rs. 1,756 crore. The subsequent open offer for 20 per
cent, amounting to Rs. 1,132 crore, will result in a total of Rs. 2,889 crore coming
into the company for the 51 per cent stake.
Discuss the reasons for this takeover and the problems thereafter.
Case Study-Security Analysis
The BSE benchmark Sensex shot up by over 135 points to regain the magical
20,000-level in the opening trade on September 21st 2010 for the first time since
January 17, 2008, on spurt in buying of oil and gas, capital goods and banking
sector stocks.
The 30-share index of the Bombay Stock Exchange surged by 135.42 points to
20,041.52 in the opening trade, for the first time since January 17, 2008. All the
sectoral indices were trading with gains up to 1.30 per cent.
Similarly, the wide-based National Stock Exchange also crossed the crucial 6,000
points to trade 36.40 points higher at 6,016.85 points.
Both indices have regained these levels after almost 32 months. Analysts said
sustained inflows of overseas funds, bolstered by fast expanding economy, helped
indices to touch the 32-month high.
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Case Study – Investment Analysis

Buffett acquired a stake in Coca Cola in 1988 when the

But Buffett believed that Coca Cola possessed a huge

In addition, he fell in love with the economics of the

After 23 years, the market value of Buffett's holding in

Every 100 dollars he invested in 1988 now stands at nearly

Data Source: Yahoo Finance

And this wasn't a one-off case either...

Washington Post, the newspaper company that he started

And this too was chosen primarily because it was a good

A Mumbai based leading Merchant Banker was carrying on the

A was primarily involved into business of Stock Broking and

Whereas, B was carrying on the business of Merchant Banking.

In addition to above, over the period both the companies

Both A and B were being managed by its two promoters –

In order to synergize the Capital Market operations, enhance

Separating the Investment activities and core service

To reward some key senior employees

In a manner that meets all the regulatory requirements -

In a manner that involves least transaction cost and minimal

To have the name of entity comprising of the service

1) The Way of structuring

Alternative: II Demerger of “Stock Broking Division” and

Alternative: III Demerger of “Stock Broking Division” and

Alternative: IV Slump Sale of “Stock Broking Division” and

Alternative: V Demerger of “Investment Divisions” of both A

Alternative: VI Slump Sale of “Investment Divisions” of both A

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