INSTITUTE OF MANAGEMENT TECHNOLOGY

CENTRE FOR DISTANCE LEARNING

GHAZIABAD
End-Term Examinations – June 2009
Subject Code : IMT-41 Time Allowed : 3 Hours
Subject Name: Indian Financial Services Max. Marks : 50

Notes: (a) Answer any FOUR questions from SECTION-A and CASE STUDY as given in SECTION-B.
Each Question (SECTION-A) carries 9 MARKS and (SECTION-B) Case Study carries 14 MARKS.
(b) No doubts/clarifications shall be entertained. In case of doubts/clarifications, make reasonable assumptions and proceed.
(c) For students enrolled in January 2008, July 2008 and January 2009 batches, the Question Paper would be treated for
70 marks instead of 50 marks.

SECTION-A MARKS : 36

Q.1 Define the term financial services and explain its role in development of a financial system?
Q.2 “Discuss the framework of NBFCs under the RBI Guidelines ? what are the prudential norms applicable to NBFCs?
Q.3 What are the pre and post issue obligations of lead Merchant Banker in respect of fresh issue?
Q.4 Define Venture capital financing ? what are the main features of venture capital ?
Q.5 Write short notes on any three of the following:
(a) Bought out deals
(b) Commercial paper
(c) Conglomerate Merger
(d) Multiple Banking Arrangement
(e) Open ended and close ended funds
Q.6 What are the similarities and difference between Lease financing and Debt financing? In what cases lease may be
preferred?
Q.7 RSS ltd. is planning to acquires BXY ltd. The position before take over was as under:

Company RSS Ltd Company BXY Ltd

No. of Shares Outstanding 100000 50000
Total Earnings Rs. 50,00,000 Rs. 25,00,000
Market Price of share Rs 80 Rs 60
Authorised Capital Rs. 100 Lacs Rs. 50 Lacs

The shareholders of the company BXY ltd are offered 75 shares of Company RSS for 100 Shares Company BXY ltd.
You are required to calculate the EPS of the amalgamated company vis-à-vis before take over position, of the two
companies and gain/loss of the share holders of both the firms consequent to amalgamation.

SECTION-B (Case Study) MARKS : 14

Hemant pharma Ltd is in the business of manufacturing bearings. Some more product lines are being planned to be added to
the existing system. The machinery required may be bought or may be taken on lease. The cost of machine is Rs.40,00,000
having a useful life of 5 years with the salvage value of Rs.8,00,000. The full purchase value of machine can be financed by 20
percent loan repayable in five equal installments falling due at the end of each year. Alternatively, the machine can be procured
on a 5-year lease, year-end lease rentals being Rs.12,00,000 per annum. The company follows the written down value method
of depreciation at the rate of 25 percent. Its tax rate is 35 percent and cost of capital is 16 percent.

1. Advise the company which option it should choose lease or borrow.

2. Assess the proposal from the lessor’s point of view examining whether leasing the machine is financially viable at 14
percent cost of capital( Detailed working notes should be given.)
Year 1 2 3 4 5 6
PV Factor at 13% 0.885 0.783 0.693 0.613 0.543 0.480
PV Factor at 14% 0.877 0.769 0.675 0.592 0.519 0.456
PV Factor at 20% 0.833 0.694 0.579 0.482 0.402 0.335

29-6-2009 (M) Page 1 of 1 IMT-41