Module 03 · Exercises

Warm-up

E03.01 For each question, name the document and the section: (a) Who are the company's lenders and what security do they hold? (b) How much did the company buy from promoter entities? (c) What did management guide for next year? (d) What does a rating agency think of the company's liquidity? (e) At what price did pre-IPO investors buy? (f) Which US risk factors does a company disclose?

E03.02 List the types of audit opinion and what each means for an investor.

E03.03 What is a Key Audit Matter, and why is a KAM on revenue recognition not by itself a red flag?

E03.04 Define: Emphasis of Matter; CARO; AOC-1; AOC-2; BRSR; MR-3.

E03.05 What must a listed company file under LODR Regulation 33, by when, and what is a "limited review"?

E03.06 Distinguish YoY, QoQ and YTD comparisons and say when each is misleading.

E03.07 What are the three parts of a DRHP that an analyst reads first, and why?

E03.08 Name four differences between a US 10-K and an Indian annual report that matter to an analyst.

Core

E03.09 Write the "2-hour annual-report read" as a timed checklist (section, minutes, what to extract), using 03.2.

E03.10 From the Kaveri running-example notes (§8): list the items you would classify as (a) a contingent liability, (b) a related-party disclosure, (c) an ageing disclosure, (d) a SAST disclosure — and for each, say what question it raises for the concall.

E03.11 Kaveri's FY26 auditor's report includes a KAM on "recoverability of trade receivables from government agencies". Write the three questions you would want the KAM's "how the matter was addressed" paragraph to answer, and what wording would worry you.

E03.12 Build a say-do table for Kaveri from the guidance in the running example (May-2025 and May-2026 calls, Q1 FY27 outcome): columns for date, claim, outcome, score.

E03.13 Kaveri's Q1 FY27 investor presentation shows a receivables bar chart without numbers, where earlier presentations gave receivable days. Draft the exact question you would ask on the call, and two follow-ups if management deflects.

E03.14 Translate each management phrase into what it usually means and the number that would confirm or refute it: "calibrated growth"; "one-off in nature"; "we remain cautiously optimistic"; "receivables are fully recoverable"; "we are being selective on states".

E03.15 A rating rationale for Nirmal Finance says: "Liquidity: adequate. Cash and liquid investments of ₹560 Cr and undrawn bank lines of ₹400 Cr against scheduled repayments of ₹1,100 Cr over the next 12 months; positive cumulative ALM mismatches in all buckets up to one year." Compute the liquidity coverage (sources ÷ 12-month repayments) with and without expected collections from the loan book, and state what would change the rating.

E03.16 From a broker report's target-price construction — "we value Kaveri at 30x FY28E EPS of ₹18 = ₹540" — list the assumptions hidden in the sentence and the questions to ask before using it.

E03.17 A DRHP shows: fresh issue ₹800 Cr, OFS ₹1,200 Cr by the PE investor; pre-IPO placement six months earlier at ₹350 per share; IPO price band ₹600–630; "basis for offer price" cites EV/Sales vs global peers. Write five lines of analysis.

E03.18 Which of these belong in "other operating revenue" vs "other income", and why it matters for growth analysis: export incentives; scrap sales; interest on fixed deposits; profit on sale of land; job-work charges; dividend from a subsidiary (standalone).

Stretch

E03.19 Write a 150-word fictional MD&A paragraph on Kaveri's FY26 receivables that is accurate but flattering, then annotate it with what a sceptical reader would note.

E03.20 Compare the information content of three sources on the same fact — Kaveri's solar receivables — as you would find it in (a) the annual report ageing note, (b) the concall, (c) a competitor's concall, (d) a rating rationale. Rank them by reliability and explain.

E03.21 Design a monitoring "document calendar" for a holding: which document, when it arrives, what you extract, how long it takes — for a full year.

Real-world task

E03.22 Pick a Nifty 500 company. Download the latest annual report and (a) classify the audit opinion and list the KAMs; (b) extract the RPT note into a table (party, nature, amount, % of revenue/costs); (c) extract the receivables ageing and compute the >6-month share; (d) find the borrowings note and list lenders, rates, security and the maturity ladder; (e) list contingent liabilities as a % of net worth.

E03.23 For the same company, read the last four concall transcripts and build a say-do table with at least six rows.

E03.24 Find the company's latest credit-rating rationale and summarise, in five lines, the rating, the liquidity assessment and the key rating sensitivities. Compare with your own reading of the borrowings note.

E03.25 If the company listed within the last five years, download its DRHP and compare the KPIs disclosed then with what the company discloses now. List the KPIs that were dropped.