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MARKS: 80
COURSE
Q1. Case 1 : MRPL and RPL
Introduction
Mangalore Refinery and Petrochemicals Limited (MRPL) and Reliance
Petroleum Limited (RPL) were the first two refineries established by the
private sector in India. In March 1992, MRPL brought out a public issue
of shares, and in September 1993, RPL did the same. Both these
refineries were established at a time when the administered pricing
mechanism (APM)1 was in force. APM involved full government control
over the oil and natural gas sector, where only four major government
owned oil companies (IOC, HPCL, BPCL and IBP) had the right to directly
market petroleum products (Refer Exhibit 1). The government refineries
were rot able to meet the increasing demand for petroleum products.
Hence, opening up of the oil and natural gas sector to private
companies and dismantling APM were considered as methods for
reducing the demand-supply gap of petroleum products When the
Government of India (GOl) approved private sector participation in the
oil refining and petroleum industry, a new investment opportunity was
made available to Indian investors.
Those who invested in MRPL and RPL were optimistic about the returns
on shares of both these companies since reputed leading business
houses such as the Aditya Birla Group (ABG) 2 and the Reliance Group3
promoted these refinery projects. Due to the dearth of oil company
stocks promoted by the private sector, the shares of both public
investors and financial institutions lapped up these companies. Both the
public issues were heavily oversubscribed. However, few investment
analysts expressed their reservations about investing in stand-alone
refineries like MRPL and RPL since they felt that the financial
performance of companies in the refining industry was completely
dependant on the crude oil prices.
Background Note
MRPL
MRPL was the first grass root refinery set up by the private sector in
India. The company, which was incorporated in March 1988, had
received government approval in April 1991 for setting up a refinery in
Mangalore in tie state of Karnataka.
MRPL was set up as a joint venture between Hindustan Petroleum
Corporation Limited(HPCL) and Indian Rayon and Industries Limited
(IRIL), a part of the ABG. HPCL and IRIL each held a 37.8% equity stake in
the joint venture while the rest was offered to the public The MRPL
project was planned to be set up in 1992 with a refining capacity of three
million (mn) metric tonnes per annum (MMTPA) at an estimated cost of
Rs.11.62 billion (bn). The project was partly financed through a public
issue of 16°/b secured redeemable partly convertible debentures (PCDs)
of Rs135 amounting to Rs.5.82 bn and 17.5% secured redeemable nonconvertible
debentures of Rs.200 (with detachable equity warrants)
amounting to Rs.5.60 bn.
The project ran into cost escalations and the plant was finally
commissioned in March 1996 at a revised cost of Rs. 25.93 bn. In
September 1999, MRPL increased the refining capacity of the plant to
nine MMTPA.
The capacity expansion involved an additional cost of Rs. 37 bn. To
ensure the continuous supply of crude for the refinery, MRPL entered
into contracts with domestic as well as international crude oil producers.
Initially, the sole rights for marketing MRPLs products were with
HPCL,but in 2001, MRPL started direct marketing of its products by
exporting fuel oil, aviation turbine fuel, motor spirit and naphtha.
RPL
RPL was the second grassroot refinery set up by the private sector in
India after MRPL. RPL’s plant was set up at Jamnagar in the state of
Gujarat. It was promoted by the Reliance Group and was completely
privately owned...
Financial Performance
MRPL
MRPL completed its first full year of operations in the financial year
1996-1997. The refinery operated at a capacity utilization of 93.5%
during this period.
The company earned a net profit of Rs. 905 mn in the very first year of
its operations. However, during the financial years 1999-2000, 2000-
2001 and 2001-2002, MRPL suffered significant losses. The company’s
debt to net worth ratio rose from 5.61 in the financial year 1999-00 to
7.88 in 2000-01, to as high as 16.13 in 2001-02. MRPL also witnessed an
increase in the expenditure on raw materials mainly due to the increase
in crude oil prices. This increase in cost resulted in a reduction in the
company’s margins. According to analysts, the dismantling of
administered pricing mechanism was also expected to affect MRPL
adversely, since its average cost of production was higher than that of
other refineries...
The Stock Market Perspective
According to stock market analysts, the share price of a company
usually provided a true reflection of the company’s present and
expected financial performance.
The stock price usually reflected various risks associated with the
company, which could be broadly categorized as systematic and
unsystematic risks.
An analysis of the stock price performance of MRPL and RPL would
help investors analyze the quantum of returns offered to them and
identify the extent of risks associated with these companies over a
specified period of time.
The quarterly share prices of MRPL and RPL between 1996 and 2002 are
provided in Table III to help measure the risks and returns of these two
companies...
The Future Prospects
In August 2002, ABG announced that it would exit MRPL by selling its
entire stake to the Oil and Natural Gas Corporation (ONGC) at a price of
Rs. 2 per share.
According to Kumara Mangalam Birla, the chairman of ABG, one of the
main reasons for exiting the joint venture was the poor financial
performance of MRPL. According to analysts, purchasing an equity stake
in MRPL would be a forward integration move for ONGC, which was in the
business of oil exploration and production.
They also felt that by investing in the lucrative oil refining and marketing
sector, ONGC would diversify risks in the oil exploration sector.
Moreover, by investing Rs. 6 bn as equity as part of the financial
restructuring of MRPL, ONGC would reduce its tax liability. In early 2002,
RPL announced plans to merge with Reliance groups flagship company
Reliance Industries Limited (RI)...
Issues:
1. Study the financial performance of MRPL and RPL with a view to
study the reasons behind the contrasting financial results
2. Analyze the average returns and risk on the shares of MRPL and RPL
during the period 1996-2002
Q2. Case -2 Derivatives Trading in India
Introducti on
On June 9, 2000, the Bombay Stock Exchange (BSE) introduced India’s
first derivative instrument - the BSE-30(Sensex) index futures. It was
introduced with three month trading cycle - the near month (one), the
next month (two) and the far month (three).
The National Stock Exchange (NSE) followed a few days later, by
launching the S&P CNX Nifty3 index futures on June 12, 2000. The plan to
introduce derivatives in India was initiaIly mooted by the National Stock
Exchange (NSE) in 1995. The main purpose of this plan was to encourage
greater participation of foreign institutional investors (FIIs) in the Indian
stock exchanges. Their involvement had been very low due to the
absence of derivatives for hedging risk. However, there was no
consensus of opinion on the issue among industry analysts and the
media, The pros and cons of introducing derivatives trading were
debated intensely. The lack of transparency and inadequate
infrastructure of the Indian stock markets were cited as reasons to avoid
derivatives trading.
Derivatives were also considered risky for retail investors because of
their poor knowledge about their operation. In spite of the opposition,
the path for derivatives trading was cleared with the introduction of
Securities Laws (Amendment) Bill in Parliament in 1998.
The introduction of derivatives was delayed for some more time as the
infrastructure for it had to be set up. Derivatives trading required a
computer-based trading system, a depository4 and a clearing house5
facility. In addition, problems such as low market capitalization of the
Indian stock markets, the small number of institutional players and the
absence of a regulatory framework caused further delays. Derivatives
trading eventually started in June 2000. The introduction of derivatives
was well received by stock market players. Trading in derivatives gained
substantial popularity, and soon the turnover of the NSE and BSE
derivatives markets exceeded the turnover of the NSE and BSE cash
markets...
For instance, in the month of January 2004, the value of the NSE and BSE
derivatives markets was Rs.3278.5 billion (bn) whereas the value of the
NSE and BSE cash markets was only Rs.1998.89 bn. In spite of these
encouraging developments, industry analysts felt that the derivatives
market had not yet realized its full potential. Analysts pointed out that
the equity derivative markets on the BSE and NSE had been limited to
only four products - index futures, index options and individual stock
futures and options which were limited to certain select stocks...
Background Note
The initial steps to launch derivatives were taken in 1995 with the
introduction of the Securities Laws (Amendment) Ordinance, 1995 that
withdrew the prohibition on trading in options on securities in the Indian
stock market.
In November 1996, a 24-member committee was set up by the
Securities Exchange Board of India (SEBI) under the chairmanship of LC
Gupta to develop an appropriate regulatory framework for derivatives
trading.
The committee recommended that the regulatory framework applicable
to the trading of securities would also govern the trading of derivatives.
Following the committee’s recommendations, the Securities Contract
Regulation Act (SCRA) was amended in 1999 to include derivatives
within the scope of securities, and a regulatory framework for
administering derivatives trading was laid out.
The act granted legality to exchange-traded derivatives, but not OTC
(over the counter) derivatives. It allowed derivatives trading either on a
separate and independent derivatives exchange or on a separate
segment of an existing stock exchange. The derivatives exchange had
to function as a self-regulatory organization (SRO) and SEBI acted as its
regulator.
The responsibility of clearing and settlement of all trades on the
exchange was given to the clearinghouse, which was to be governed
independently. Derivatives were introduced in a phased manner, Initially,
trading was restricted to index futures contracts based on the S&P CNX
Nifty Index and BSE-30 (Sensex) Index...
The Debate and The Result
Those who opposed the introduction of derivatives argued that
these instruments would significantly increase speculation in the
market.
They said that derivatives could be used for speculation by investors
by taking large price positions in the stock market while committing
only a small amount of capital as margin.
For instance, instead of an investor buying stocks worth Rs.1 million
(mn), he could buy futures contracts on Rs.1 mn of stocks by investing a
few thousand rupees as margin. Thus, trading in derivatives encouraged
investors to speculate - taking on more risk while putting forward less
investment. They were quick to point out some of the disasters of the
past that had occurred due to the mismanagement of trading in
derivatives.
A Few Issues Remain
By January 2004, more than three and a half years of derivatives trading
had been completed. However, according to several analysts and
media reports, SEBI, NSE and BSE had still to resolve many issues so
that the derivatives market could realize its full potential.
For instance, the issue of imposing taxes on income arising from
derivatives trading still remained to be sorted out. The income Tax Act of
India did not have any specific provision regarding taxability of
derivatives income. The tax authorities were still undecided on the issue,
and in the absence of any provision, derivatives transactions were held
on par with transactions of a speculative nature (in particular, the index
futures/options which were essentially cash settled, were treated this
way). Therefore, the loss, if any, arising from derivatives transactions,
was treated as a speculative loss and was eligible to be set off only
against speculative income upto a maximum period of eight years...
The New Initiatives
As of early 2004, derivatives trading in India had been restricted to
a limited range of products including index futures, index options
and individual stock futures and options limited to certain select
stocks.
Analysts felt that index futures/options could be extended to other
popular indices such as the CNX Nifty Junior. Similarly, stock
futures/options could be extended to all active securities. Efforts were
also on to encourage participation from domestic institutional investors.
SEBI had authorized mutual funds to trade in derivatives, subject to
appropriate disclosures. A broader product rollout for institutional
investors was also on the cards. Steps were taken to strengthen the
financial infrastructure. These included developing adequate trading
mechanisms and systems, and establishing proper clearing and
settlement procedures. Regulations hampering the growth of derivative
markets were being reviewed.
Issues
1 Discuss on the main objectives and reasons for the introduction
of derivatives trading in India
2. Identify the factors that can accelerate/suppress the growth of
the derivatives market in a country and comment on them.
Q 3. Case 3 - The Apple ITV Project
Apple Computer has had a very good run, both in terms of accounting
profits and stock prices. Based largely on the success of the iPod, the
company has reported double digit growth in revenues and earnings
over the last four years (see exhibit 1) and its stock price have reflected
this success (see exhibit 2). It has a substantial cash balance and a
strong balance sheet (see exhibit 3 for balance sheet information).
However. Steve Jobs, CEO of Apple. is concerned that the halcyon days
of the iPod are past and that potential challengers loom on the horizon
(Sony, Zune etc.).
Apple is considering entering the television market with an innovatively
designed and technologically state-of-the art LCD television, called the
iTV, aimed at the upper end of the market. You have been asked to
collect the data to make the assessment and have come back with the
following information:
1. R&D Expenses: Apple has already spent (and expensed) $ 200 million
on research on the television technology and development of the
commercial design. None of that money can be recouped at this stage, if
Apple decides not to go ahead with the TV.
2. Introductory Costs; If Apple decides to go ahead with the iTV, it will
have to spend S 2 billion up front (right now) to tie up suppliers,
distributors and retailers and as investment in infrastructure. The cost
is depreciable over 10 years down to a salvage value of $ 200 million,
and Apple expects to use straight-line depreciation.
3. Market Potential and Share: There were 30 million televisions sold in
the United States in the most recent year and the market is expected to
grow approximately 4% a year in the long term. Apple expects to gain a
2.5% market share next year if the iTV is introduced and increase that
market share by 0.5% a year (3% in the second year, 3.5% in the third
year etc.) to reach a target market share of 5% of the overall market by
the sixth year. It expects to maintain that market share beyond year 6.
4. Pricing and Unit Costs: Apple expects to price its displays at $ 1,000 a
unit next year and the price will keep pace with inflation after that.
Based upon the costs of the material used in the ITV currently, Apple
expects the production cost per unit to be $ 400 next year and grow at
the inflation rate thereafter.
5. Marketing Options and Costs: Apple plans to use two different retailing
options. In the first, it will sell the iTV through electronic retailers such as
Best Buy and pay the 3 retailers a commission of 10% of the price per
unit sold (The retailers will have to follow Apple’s fixed price schedule —
no discounting allowed). In the second. it will sell the iTV through the
Apple Stores around the country. To do the latter, it will have to spend
$200 million up front in expanding and remodeling the stores: this
expense will be depreciated straight line over the next 10 years to a
salvage value of zero. It also will pay its sales people a commission of 5%
of the price per unit for every unit sold at the Apple Stores. Apple
expects to generate 80% of its revenues from specialty retailers and 20%
from Apple Store sales over the next 10 years.
6. Production Facilities and Costs: Apple currently uses a manufacturing
facility in Singapore to make computer displays. This facility has
production capacity of 2 million units but it is under utilized, since Apple
produced only 600,000 computer displays in the most .recent year.
While the computer display market is expected to grow 15% a year for
the next
10 years, Apple plans to use the excess capacity in the facility to
produce the iTV. If the capacity limit is reached, Apple will have to invest
a substantial amount to create a new facility of equivalent capacity (2
million units). The current estimate of the cost of expansion is $ 500
million, but this cost will grow at the inflation rate.
7. G&A expenses: Apple will allocate 10% of its existing general and
administrative costs to the new division. These costs now total $ 500
million for the entire firm and are expected to grow 5% a year for the
next 10 years. In addition, it is expected that Apple will have an increase
of $ 50 million in general and administrative costs next year when Apple
iTV is introduced, and this amount will grow with the new division’s
dollar revenues after that. The latter cost is directly related to the new
iTV division and will be charged to them fully unlike the corporate G&A
costs.
10 Advertising Expenses: Apple spent $ 1 billion on advertising in
the most recent year and expects this cost to increase 5% a year for
the next 10 years. even if it does not invest in iTV. If the iTV is
introduced, total advertising expenses are expected to be 12% higher
than they would have been without the iTV division, each year from
year I to year 10.
9. The iTV will create working capital needs, which you have estimated
as follows:
The sale of iTVs to retailers will create accounts receivable amounting to
5% of revenues each year.
Inventory (of both the input material and finished iTVs) will be
approximately 10% of the variable production cost (not including
depreciation, marketing costs. allocations or advertising
expenses).
The credit offered by suppliers will be 6% of the variable
production cost (not including
depreciation, marketing costs, allocations or advertising expenses).
All of these working capital investments will have to be made at the
beginning of each year in which goods are sold. Thus, the working
capital investment for the first year will have to be made at the
beginning of the first year.
10. The beta for Apple is 1.63, calculated using monthly returns over the
last 5 years and against the S&P 500 Index. Apple currently gets about
70% of its revenues from computers and 30% from electronics. The
details of the beta calculation are included in Exhibit 4. Apple is currently
rated A+, and A+ rated bonds trade at a default spread of 1% over the
long-term treasury bond rate. The current stock price for the firm is $ 90
and there are 900 million shares outstanding.
11. Apple expects to finance this apparel division using the same mix of
debt and equity (in market value terms) as it is using currently in the
rest of its business. Apple’s has no interest bearing debt but it has lease
commitments for the future.
Year Lease commitment
2007 $ 134 million
2008 $ 134 million
2009 $ 134 million
2010 $ 132 million
2011 $ l22million
Beyond $ 498 million
The lease payment for the current year is $138 million.
12. Apples effective tax rate is 29%. but its marginal tax rate is 40%.
13. The current long-term bond rate is 4.7%, and the expected
inflation rate is 2%. You can use the historical risk premium of 4.9% as
your equity risk premium.
14. You have collected information on other companies that are primarily
or only in electronics in Exhibit 5. The data includes the betas of these
companies and relevant information on both market values of debt and
equity. You can assume a 40% tax rate for these firms, as well. (You can
also assume that the debt includes the present value of operating
leases).
Questions
1. Estimate the operating income from the proposed iTV investment
to Apple over the next 10 years.
2. Estimate the after-tax return on capital for the investment over the
10-year period.
3.Based upon the after-tax return on capital, would you accept or
reject this project?
(This will require you to make some assumptions about allocation and
expensing. Make your assumptions as consistent as you can and
estimate the return on capital.)
4. Estimate the after-tax incremental cash flows from the proposed iTV
investment to Apple over the next 10 years.
5. If the project is terminated at the end of the 10th year, and both
working capital and investment in other assets can be sold for book
value at the end of that year, estimate the net present value of this
project to Apple. Develop a net present value profile and estimate the
internal rate of return for this project.
FOR Q3 CASE
Exhibit 1 : Apple’s Income Statements
Exhibit 5: Electronics Firms
Company Name
Ticker Market Total
Cash Beta
Symbol cap Debt
M-WAVE Inc MWAVD $3.90 $3.60 $0.20 0.25
Solitron Devices inc. SODI $4.10 $0.00 $3.20 0.25
Merrimac Inds Inc. MRM $31.50 $3.00 $4.10 0.35
Affinity Tech Group AFFI $8.10 $1.30 $0.00 0.35
Espey Mfg. &
ESP $38.30 $0.00 $11.00 0.4
Electronics Corp.
Bogcn
Communications Intl BOGN $30.70 $4.60 $6.40 0.4
Sense 1-loldings Inc SEHO $4.00 $0.60 $0.00 0.4
c.Digital Corp EDIG $34.50 $1.40 $1.10 0.45
True Product ID Inc TPDI $30.60 $0.00 $0.00 0.45
Trans Lux Corp. TLX $9.90 $62.50 $14.00 0.5
TB Woods Corp TBWC $64.10 $29.90 $3.40 0.5
QSound Labs Inc. QSND $40.70 $0.00 $1.30 0.5
TransAct Tech Inc TACT $77.50 $0.00 $4.60 0.5
Servotronics Inc SVT $19.70 $5A0 $4.60 0.55
VOS International
VOSI $3.80 $0.80 $0. 10 0.55
Inc
Rockford
ROFO $23.40 $15.30 $0.00 0.6
Corporation
LOUD Technologies LTEC $68.50 $53.80 $0.50 0.6
Inc
Bairnco Corp. BZ $88.40 $9.50 $5.30 0.6
Quahnark Corp QMRK $13.10 $4.20 $0.50 0.6
Simclar Inc SIMC $40.40 $9.20 $0.80 0.6
lnPlav Technologies NPLA $16.70 $0.20 $4.00 0.6
Inc
Bell Inds. BI $31.70 $0.10 $7.30 0.65
Cobra Electronics COBR $64.50 $0.00 $6.70 0.65
Spatializer Audio
SPAZ $1.00 $0.00 $0.60 0.65
Labs Inc
Hickok Inc HICKA $9.10 $0.80 $2.30 0.65
Giga-Tronics Inc. GIGA $9.70 $0.00 $3.40 0.65
Synergx Systems Inc SYNX $9.20 $1.50 $0.60 0.65
Transcat Inc. TRNS $38.00 $4.40 $0.10 0.7
Trans-Industries Inc TRNIQ $0.20 $7.80 $0.00 0.7
Vicon Inds Inc VII $16.40 $2.50 $5.90 0.75
SRS Labs Inc SRSL $158.20 $0.00 $8.80 0.75
VERSUSTECHNOL VSTI $4.10 $3.00 $1.70 0.75
Valpey Fisher Corp. VPF $14.50 $0.00 $7.90 0.8
LaBarge Inc. LB $205.70 $41.70 $0.90 0.8
DAC Technologies
DAAT $14.70 $0.20 $0. 10 0.8
Group Interna
Universal
UEIC $298.70 $0.00 $43.60 0.85
Electronics
Spectrum Control
SPEC $127.30 $1.70 $8.40 0.85
Inc.
Nortech Systems Inc NSYS $20.50 $9.30 $0.80 0.85
Wells-Gardner
WGA $31.30 $8.20 $0.30 0.85
Electronics Corp
Hauppaguc Digital HAUP $72.00 $0.00 $7.60 0.85
Nani Iai
NTE $665.60 $12.20 $227.20 0.9
EleCtroniCS Inc.
Plantronics Inc.
PLT $1,039.20 $0.00 $76.70 0.9
PLT
American
ATCO $95.50 $1.60 $10.40 0.9
Technology
Microncttcs Inc. NOIZ $35.60 $6.70 $5.80 0.95
Emerson Radio Corp MSN $85.30 $2.50 $17.50 0.95
White Electronic —
$136.50 — $0.00 $55.80 0.95
Designs Corp WEDC
Herley Inds. FIRLY $232.20 $6i0 $22.30 0.95
Creative Technology CREAF $543.80 $196.70 — 0.95
Ltd. $214.00
Richardson Elec. RELL $163.40 $126.80 $1 7.00 0.95
ValcnceTechnology VLNC $170.10 $57.10 $0.60 0.95
MDI Inc MDII $9.30 $0.00 $2.10 0.95
Arotech Corporation ARTX $23.50 $22.70 $6.20 I
NLI Horizons
NUHC $183.50 $50.60 $10.90 I
Electronics Corp.
HarrisCorp. HRS $6,212.30 $701.10 $293.90 I
Interlink Electronics LINK $41.50 $0.40 $13.90 I
Inc
LaserCard Corp. LCRD $130.30 $0.00 $23.50 I
Technoloc’. Resh TRCI $24.60 $3.00 $3.10 I
Ampes Corp. AMPX $80.10 $25.80 $13.10 I
PaxarCor:. PXR $947.10 $i00:70 $420 1.05
Intl Electronics Inc I EIB $4.30 $0.80 $0.90 1.05
Agilysvs Inc. AGYS $512.50 $59.70 $147.90 .05
MiIIcnniu: Cell Inc MCEL $43.90 $2.40 $11 .‘O .05
HEI Inc HEll — $14.70 $9.80 — $0.70 1.05
Thrcc-D S stems TDSC $292.30 $26.30 $24. 10 1. 1
Daktronics Inc DAKT $1,455.40 $0.20 $35.20 1.1
RF Monohthics Inc RFMI $35.80 $0.00 $5.80 1.1
Methode Elec. METH $408.50 $0.00 $81.60 1.15
Rogers Corp. ROG $1,018.70 $0.00 $4c40 1.15
SyprisSolutions SYPR $127.60 $80.00 $12.10 1.2
ParkerVision Inc PRKR $270.60 $0.00 $10.60 I .2
NT Media Corp of
NTMM $0.60 $1.60 $0.00 1.2
California
ExarCorp. EXAR $480.40 $0.00 $329.50 1.25
Molex Inc A MOLXA
$5.1
14.80 $12.10 $485.50 1.25
SMTC Corp SMTX $34.40 $30.10 $0.00 1.3
Molexinc. MOLX $5,891.80 $15.80 $497.60 1.3
Teclmitrol Inc. TNL $976.10 $86.70 $173.70 1.35
phenol Corp A New APH
$5.48
$781.00 $38.70 1.35
1.60
Pemsiar Inc PMTR $175.40 $103.70 $17.90 1.35
EMS Technolocics
ELMG $3 11.30 $43.40 $13.00 1.35
Inc
Planar S stems Inc PLNR $161.90 $1.50 $48.30 1.35
Anaren mo. ANEN $315.90 $0.00 $82.50 1.35
Arrow Electronics ARW $3,915.20 $1,407.70 $580.70 1.4
Diodes Inc. DIOD $929.80 $9.60 $113.60 1.45
Aclriuni Inc ATRM $35.20 $0.10 $4.10 1.45
vnet Inc. AVT $3,813.30 $1,244.50 $637.90 1.45
Cohu inc. COHU $455.70 $0.00 $138.90 1.45
JDS
.JDSU $3,546.20 $900.00 $ .222.20 1.45
Uniphase________
Jabil Circuit JBL $5,162.80 $327.30 $796.10 1.5
AVX Corp. AVX $2,543.80 $0.00 $664.30 1.5
CTS Corp. CTS $576.50 $81.80 $12.00 1.55
Sonic Solutions SNIC $438.20 $30.00 $61.10 1.55
IEC Electrs Corp. IECE $12.40 $4.20 $0.00 1.79
Microscrni
MSCC $1,395.70 $4.00 $165.40 2.75
Corporation
Sanmina-SCI Corp. SANM $1,855.30 $1,646.10 $1,125.30 3.19
Plexus Corp. PLXS $1,130.00 $26.70 $l94.9() 1.86
Flextronics Intl FLEX $6,661.60 $1,595.10 $942.90 2.1
‘PPM Tcchno1ooe’
TIMI $476.70 $0.00 $82.40 2.13
Inc
KEMET Corp. KEM $637.90 $100.00
—
3.77
$I68.70
MEMC Electr Math
WFR $8,709.90 $53.10 $153.60 3.26
Inc
Celestica Inc. CLS $1,764.40 $751.40 $969.00 1.52
Solectron Corp. SLR $2,943.90 $708.90 $1,126.00 2.78
Vishay 1ntcrtechncv \SH $2,525.20 $756.60 $632.50 3.18
Genesis Microch::
GNSS $373.60 $0.00 $185.40 2.8
Inc
Micrelinc. MCRL $857.00 $0.10 5I36.60 2.43
Microtimc Inc. TUNE $252.10 $0.00 — $82.20
4.1-
I
Ivanced ID Cerp. AIDO $10.80 $0.10 $(L20 4.25
Q4. Read the Problem and answer the questions provided below.
M/s Champak Chemical Company is taking over M/s Grewal
Petrochemical company. The share holders of Grewal would receive 0.8
shares of Champak for each share held by them. The merger is not
expected to yield in economics of scale and operating synergy. The
relevant data for the two companies is as follows:
Nomenclature
M/s
M/s Grewal
Champak
Net Sales (Rs Crore) 335 118
Profit after Tax (Rs Crore) 58 12
Number of Shares (Crore) 12 03
Earning per share (Rs) — 4.83 4.00
Market Value per Share 30 20
Price earning Ratio 6.21 5.00
You are required to calculate
(a) EPS
(b) P/E Ratio
(c) Market value per share
(d) Number of Share
(e) Total Market Capitalisation for the combined company after
Merger.
