Module 08 · Solutions

Warm-up

E08.01 Banks: credit cost / slippages (investor presentations; RBI FSR for the system). IT: constant-currency growth and deal TCV (results releases). FMCG: underlying volume growth (presentations; NIQ). Pharma US: price erosion and FDA plant status (concalls; FDA databases). Defence: order book and execution rate (presentations). Autos: retail volumes (FADA/VAHAN). Cement: EBITDA per tonne (presentations). OMCs: marketing margin per litre (PPAC/brokers). Real estate: pre-sales (presentations). Telecom: ARPU (results; TRAI). Life insurance: VNB and margin (EV disclosures).

E08.02 NBFCs: RBI (scale-based regulation, risk weights). AMCs: SEBI (TER slabs). Exchanges: SEBI (product rules, fees). Power generation: CERC/SERC tariffs. City gas: PNGRB (GA authorisation, APM allocation via MoPNG). Telecom: DoT/TRAI (spectrum, AGR, tariffs). Hospitals: state/central price regulation proposals; NPPA for devices. Solar modules: MNRE (ALMM), customs duties.

E08.03 Private bank: justified P/B and residual income. Life insurer: P/EV / appraisal value. Cement at a trough: EV/tonne vs replacement cost and normalised EBITDA. Platform: unit-economics DCF and implied terminal multiple. REIT: distribution yield and P/NAV. Transmission utility: regulated equity × justified P/B. EPC: order-book conversion DCF and normalised P/E. IT major: P/E vs growth with FCF-yield and reverse-DCF checks.

E08.04 Retail/QSR: Ind AS 116 (EBITDA inflated). Developers: completion-method revenue (P&L lags). Insurers: statutory profit vs embedded value. EPC: POC revenue and unbilled/retention balances. Upstream: successful-efforts vs full-cost and depletion. NBFCs: ECL overlays and off-book AUM. Autos: consolidated finance subsidiaries (leverage and cash).

E08.05 CASA: current + savings deposits. CC growth: constant-currency revenue growth. SSSG: same-store sales growth. ANDA: abbreviated new drug application (US generics approval). Book-to-bill: order inflow ÷ revenue. VAHAN: government vehicle-registration database. EBITDA/tonne: cement/steel unit profit. GRM: gross refining margin ($/bbl). Pre-sales: value of units booked. ARPU: average revenue per user per month. APE: annualised premium equivalent.

Core

E08.06 Credit costs are cyclical and mean-revert; a trough in NPAs means provisions are minimal and future slippages are drawn from an unseasoned, fast-grown book. Through-cycle: large private bank ~0.7–1.0%; PSU bank ~1.0–1.5%; MFI ~2.5–4% with event spikes — versus FY26 actuals well below these.

E08.07 Revenue per employee ≈ 1.03/0.96 = +7.3%. Interpretations: (a) AI-driven productivity — the company delivers the same work with fewer people and keeps the margin; (b) AI deflation — pricing falls with headcount and the productivity accrues to clients. The settling numbers: revenue per employee and EBIT margin over the next four quarters; if margins hold as headcount falls, (a); if revenue growth turns negative on existing contracts, (b).

E08.08 Track: decorative volume growth vs industry; market share (independent, quarterly); gross margin vs input basket; A&P and dealer incentives as % of sales; dealer count and tinting-machine adds vs Birla Opus's; price realisation. Breach threshold: two consecutive years of share loss > 2 pp with gross-margin compression

200 bps not explained by inputs — share being defended with margin, i.e. the pricing-power test failing.

E08.09 Plant supplies 60% of US EBITDA = 27% of total EBITDA. Existing products erode ~8%/yr → after two years ~85% of that stream remains (−4 pp of total); launches lost (say 10–15% of US growth) → a further 3–5 pp. EBITDA at risk ~7–9% over two years, more if import alert follows. Demand: the FDA letter's observations, remediation timeline, share of pending ANDAs filed from the plant, and alternate-site transfer plans.

E08.10 Visibility ≈ 2,50,000/35,000 ≈ 7 years. A backlog converts at the pace of engines, components and skilled assembly (Tejas Mk1A slipped on GE engine supply); large contracts have staggered deliveries starting years out (Prachand from FY29); and MoD payment and acceptance cycles lag. The constraint is execution capacity, not orders.

E08.11 Retail > wholesale means dealer inventory is falling (a healthy sign after a build-up) — OEMs will restock, so wholesale growth should follow. Pull next: FADA's dealer-inventory days by segment and the discount levels reported by dealers/brokers.

E08.12 Demand: 650 × 0.72 = 468 MT → × 1.07³ = 573 MT in FY28; capacity 650 + 165 = 815 MT → utilisation ~70%, down slightly — prices soften in regions where additions concentrate (South, East), leaders push volumes, EBITDA/tonne compresses, and the weaker players become acquisition targets.

E08.13 OMC: marketing losses on diesel/petrol (negative margins per litre) offset partly by refining gains and inventory gains; PAT falls sharply. Upstream: realisation rises but the windfall/special excise duty caps the net gain; PAT rises moderately. CGD: higher spot-LNG share in gas cost with CNG prices sticky → margin per scm compresses; volume growth slows if CNG loses its price advantage.

E08.14 The business is growing (pre-sales up); revenue reflects old projects completing. Replace with pre-sales (value and area), collections, and operating cash flow / net debt.

E08.15 Per 100 mn subscribers: Airtel: 264 × 15% × 12 × 100 mn × 0.9 = ₹4,277 Cr EBITDA; Vi: 177 × 15% × 12 × 100 mn × 0.9 = ₹2,867 Cr. Vi's equity is a deep out-of-the-money call on the enterprise (liabilities ≫ EV): a rupee of EBITDA raises asset value against a fixed strike, so the percentage change in equity is far larger than for Airtel, whose equity is well in the money.

E08.16 Lines: cash-equity transaction fees; equity-derivative transaction fees (index options and futures, stock derivatives); currency/commodity/other segments; clearing and margin float income; listing, data, index licensing and co-location. Scenarios: SEBI fee caps or product curbs on derivatives; volume regime shifts; interoperability/competition (BSE); technology incidents. Cross-check: global exchange EV/EBITDA and P/E (e.g., CME, ICE, HKEX, B3 — verify) adjusted for growth and regulatory risk.

E08.17 Agri: monsoon and rural incomes (consumer/autos playbooks — IMD, VAHAN tractors); industrial: private capex and PMI/IIP (industrials playbook); solar: PM-KUSUM budget allocations, state DISCOM/agency finances and ALMM/module prices (energy playbook).

Stretch

E08.18 Rubric: ten questions in the module's pattern (economics/KPIs, cycle, regulation, counterparties, capital, accounting, governance, valuation, what the price implies) specific to the chosen sector.

E08.19 Rubric: two common-size P&Ls with five ratios (gross margin, opex %, D&A %, inventory days, receivable days, CFO/PAT, leverage); the giveaway named (e.g., 65% employee cost = IT services; 35-day inventory and negative NWC = FMCG; 14% gross margin and high asset turnover = grocery retail).

E08.20 Rubric: three facts checked against primary sources with dates and any corrections noted.

Real-world task

E08.21–22 Rubric: dashboards with sector-specific KPIs and sources; checklist answers with evidence; the chart of the regulator's series vs company numbers, with the correlation and any divergence explained.