PFMT: Large Firm Evaluation

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Case
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This case was written by Ashish Varma (Institute of Management Technology, Ghaziabad (IMT)). It is intended
to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a
management situation. The case was compiled from published sources.

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 322-0263-1

Professor Ashish Varma wrote this case solely to provide material for class discussion. The author does
not intend to illustrate either effective or ineffective handling of a managerial situation. The author may
have disguised certain names and other identifying information to protect confidentiality.

PFMT: Large Firm Evaluation

Master copies are for author use within the copyright holding school. For usage outside this, please order copies at www.thecasecentre.org.
It was early March 2022, when two final year MBA students, Girish and
Jitendra were sipping their well-deserved coffee after what was a very long day
of offline lectures and class discussions in their New Delhi based business
school. They were really glad that they both were well placed in large firms and

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were nearing the completion of their programme, the assignment topic given to
them by their Professor had got them both, excited and curious.
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Their professor had given a unique assignment to “develop a template to

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evaluate large companies with a final goal of establishing a ball park value of
the intrinsic value of the share”. The Professor had explicitly asked them to use
only secondary sources which were freely available. Upon asked how to go
about it the Professor had remarked “Apply what you have learned in the last
semesters and use your professional judgement. As long as you can
scientifically and rigorously justify your template ( applicable to the largest 100
firms by market capitalization in the economy) and based on your assessment,
be ready to invest your own money in its shares, I will accept it for evaluation
purposes”.

Initially, both Girish and Jitendra had many questions in their mind such as:

1. What could be the profile characteristics of large firms?

This case has been written on the basis of publicly available information from secondary sources and
published sources only. Consequently, the interpretation and perspectives presented in this case are not
necessarily those of any company (s) or any of their employees or consultants. Also, this case does not
include the opinion of any individual, any company or their management, any appointed consultant or
any company official. The case has been developed solely for classroom discussion.
 322-0263-1

Professor Ashish Varma wrote this case solely to provide material for class discussion. The author does
not intend to illustrate either effective or ineffective handling of a managerial situation. The author may
have disguised certain names and other identifying information to protect confidentiality.

2. What could be a few common financial traits among such large market
capitalization firms?
3. How would they measure the intrinsic value of a share? Although they

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had read classic bestsellers such as “The Intelligent Investor” and
“Common stocks and Uncommon Profits”, but they did not know how to
apply that wisdom into a live setting yet.
4. Finally, how would they test whether their template could give, a ball

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park estimate of the intrinsic value of the share?

By using authentic sources of information for the “Profile of the company” the
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duo, had enlisted the following discussion points to be included in their

template:

1. Is the company Big, Old and Established? (Yes/ No)

2. When was it Incorporated? (At least 20-year-old firm; Gone through
various business seasons/ cycles / phases).
3. Are they in Top 3 in the Indian Industry? (In a position to influence
policy at all levels).
4. What is this company’s latest Market Share? (High)
5. What is the Industry’s growth Projection? (High)
6. What were the
 Revenues (Amount and Segmental share) Domestic/ Export
 Costs (Main Categories) eg Any imported raw material
 Risks (Business risks) (Source?)

This case has been written on the basis of publicly available information from secondary sources and
published sources only. Consequently, the interpretation and perspectives presented in this case are not
necessarily those of any company (s) or any of their employees or consultants. Also, this case does not
include the opinion of any individual, any company or their management, any appointed consultant or
any company official. The case has been developed solely for classroom discussion.
 322-0263-1

Professor Ashish Varma wrote this case solely to provide material for class discussion. The author does
not intend to illustrate either effective or ineffective handling of a managerial situation. The author may
have disguised certain names and other identifying information to protect confidentiality.

7. Who are the Promoters and their stake holding? Prominent business
houses
8. Rate the Promoters / Top Management on a scale of 1 to 10;

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On Talent (Your score =…….)
On Integrity (Your Score = ……………)
(Overall score on “Quality of management” and reasons
thereof.…………………………………………………………

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9. Major news in the last 5 years regarding Acquisitions, Debt, Top
Management etc? (What are analysts talking about?)
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10.Are there any Institutional Investors as owners? What is their holding?

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(Due Diligence by experts)

11.What is the long term competitive advantage of this firm? Why do you
think it is long term? (Brands/ Market acceptance etc)
12.Key points of last 2 years Management Discussion and Analysis (MDA)
(after reading it very carefully).

As they sat sipping their coffee, they knew the submission date was fast
approaching and they needed to move fast. Girish and Jitendra knew that they
could call it, “PFMT: Large Firm Evaluation” template, an acronym for
Profile, Financials, Measurement and Testing. Now they had their task cut out
for finalizing the template with firm’s common financial characteristics, metrics
for the measurement of intrinsic value and testing their template for accuracy.

This case has been written on the basis of publicly available information from secondary sources and
published sources only. Consequently, the interpretation and perspectives presented in this case are not
necessarily those of any company (s) or any of their employees or consultants. Also, this case does not
include the opinion of any individual, any company or their management, any appointed consultant or
any company official. The case has been developed solely for classroom discussion.
 322-0263-1

Professor Ashish Varma wrote this case solely to provide material for class discussion. The author does
not intend to illustrate either effective or ineffective handling of a managerial situation. The author may
have disguised certain names and other identifying information to protect confidentiality.

References:

 Graham, B. (1965). The intelligent investor. Harper Collins, NY.

Master copies are for author use within the copyright holding school. For usage outside this, please order copies at www.thecasecentre.org.
 Fisher, P. A. (2003). Common stocks and uncommon profits and other
writings (Vol. 40). John Wiley & Sons.

Personal author copy for Ashish Varma. Downloaded on 14-Sep-2022.

Educational material supplied by The Case Centre
Copyright encoded A76HM-JUJ9K-PJMN9I

This case has been written on the basis of publicly available information from secondary sources and
published sources only. Consequently, the interpretation and perspectives presented in this case are not
necessarily those of any company (s) or any of their employees or consultants. Also, this case does not
include the opinion of any individual, any company or their management, any appointed consultant or
any company official. The case has been developed solely for classroom discussion.