Module 05 · Exercises

Warm-up

E05.01 Write the three-sentence test for (a) Nirmal Finance, (b) an Indian IT-services major, (c) a listed depository (CDSL).

E05.02 Classify by monetisation model: a toll road; a stock exchange; a pharma company with an out-licensed drug; a QSR franchisee; an EPC contractor; a SaaS company; a jewellery retailer.

E05.03 State Porter's five forces and the "sixth force" the course adds for India.

E05.04 List Helmer's seven powers and give one Indian example for any four.

E05.05 Define: capital cycle; incremental ROIC; say-do ratio; related-party transaction; UPSI.

E05.06 What are the current (Nov-2025) SEBI materiality thresholds for shareholder approval of related-party transactions, and what was the rule before?

E05.07 What does "arm's length" in an RPT note assert, and who has verified it?

Core

E05.08 Unit economics. A D2C brand has CAC ₹1,100, AOV ₹1,500, gross margin 60%, fulfilment ₹220 per order, and cohort orders of 2.0 / 1.0 / 0.6 in years 1–3. Compute contribution per order, LTV at a 15% discount rate (mid-year), LTV/CAC and payback in months.

E05.09 Store economics. A QSR store: revenue ₹280 lakh; food cost 29%; delivery commissions 7%; staff ₹62 lakh; rent ₹40 lakh; utilities ₹14 lakh (half variable); depreciation ₹20 lakh; capex ₹160 lakh plus ₹25 lakh deposit. Compute contribution margin, store EBIT, store ROIC (25% tax) and payback (EBIT + depreciation).

E05.10 Loan economics. Per ₹1,000 of loans: yield 15%, funded 78% by borrowings at 9%, fees 0.6%, opex 3.0%, credit cost 1.5%, tax 25.17%. Compute PAT per ₹1,000, RoA and RoE on the 22% equity slice; then RoE if credit cost doubles.

E05.11 HHI. An industry has shares 38, 25, 15, 10, 7, 5. Compute the HHI and classify the structure; then recompute if the top two merge.

E05.12 Five forces with evidence. For Kaveri's solar segment, name the number in the running example that reveals each force's strength.

E05.13 TAM. A presentation claims a ₹60,000 Cr "pump market". Build a bottom-up estimate of annual agricultural pump replacement demand from: 14 crore land holdings, 30% with owned pumps, 10-year life, ₹9,000 per pump — and explain the gap.

E05.14 Moat tests. Using the Kaveri ratio table (ROIC FY21–26: 10.1, 11.6, 13.4, 15.1, 13.0, 12.0% vs WACC 12.2%; gross margin 36.0 → 34.9%; incremental ROIC 4.6%), run the five moat tests of 05.3 §3 and write the verdict.

E05.15 Fade. Explain, with the value-driver formula, why the moat verdict in E05.14 should change the terminal RONIC assumption in the reference DCF (18%), and estimate the value effect using 06.3 §8.

E05.16 Capital cycle. Indian solar-module capacity announcements in 2023–25 far exceeded projected demand (verify current figures). Describe the expected sequence for prices, margins, entrants and stock prices, and name the signal that would mark the turn.

E05.17 Capital allocation. Company A (ROIC 20%, no debt) reinvests 50% of NOPAT and pays out the rest; Company B also borrows to buy a business at 25x EBIT every two years, funding half with shares at 20x earnings. Using the arithmetic in 05.5 §6, explain why B's NOPAT per share ends lower after ten years despite higher total NOPAT.

E05.18 Say-do. From the Kaveri running example, list every piece of guidance given in May-2025 and May-2026 and the outcome; compute the say-do ratio.

E05.19 Incentives. Kaveri's ESOPs vest on revenue growth; Nirmal's on RoA and GNPA. Predict two behaviours each incentive encourages, and one it discourages.

E05.20 Governance checklist. Score Kaveri on the 14-item checklist of 05.6 §7 using only the running-example pages; state the total and the valuation consequence you would apply.

E05.21 RPT arithmetic. Kaveri Castings supplied ₹89.2 Cr of castings (10.4% of materials). If castings could be bought 8% cheaper from third-party foundries, compute the annual EBITDA effect, the PAT effect and the per-share effect; then the value effect at a 20x P/E.

E05.22 Pledge. A promoter has pledged 25% of a 55% holding at a 50% loan-to-value against a stock at ₹400. At what price would the lender's margin trigger (say LTV 65%) fire, and what feedback loop follows?

E05.23 Scuttlebutt design. Write five non-leading questions for a Nirmal Finance branch manager's ex-colleague (now at another lender) that stay clear of UPSI, and two you must not ask.

E05.24 Government data. Which public datasets would you use to test each claim: "tractor demand is strong in MP"; "state solar-agency payments are improving"; "copper costs will ease"; "rural demand is recovering"?

Stretch

E05.25 Write a one-page industry map for Indian city-gas distribution (or another sector you know) in the format of 05.2 §9.

E05.26 Argue the strongest case that Kaveri does have a moat, then the strongest case that it does not, in 150 words each; end with the fade you would use.

E05.27 Design a red-team memo section for the Kaveri case: three arguments a bull would make against the course's watch/avoid conclusion, each with the evidence that would settle it.

Real-world task

E05.28 Pick a listed Indian company. Run the three-sentence test, compute one unit-economics measure from disclosed KPIs, run five forces with a number for each force, run the five moat tests over ten years of Screener data, build a say-do table from four concalls, score the governance checklist from the annual report and SAST/PIT filings, and write a scuttlebutt plan with five questions and three data checks. Deliver as a four-page note.

E05.29 Search SEBI's order database for the promoters of that company (and their other companies). Record what you find, with dates.