T.A.

PAI MANAGEMENT INSTITUTE (TAPMI), MANIPAL

BUSINESS ANALYSIS AND VALUATION

Programme: PGDM - BKFS

Batch: 2019-2021
Term: 4
Course ID: Business Analysis and Valuation – BFS 6332
Credits: 3 (30 Hours)
Course Instructor: Prof. Aditya Mohan Jadhav (Core)

PART 1

INTRODUCTION 
The ability to value any asset is an essential skill for any finance manager. Proper estimate of asset
value helps managers to take investment decisions in wide ranging areas of corporate finance to
portfolio management. Even though the utility of asset value varies under different settings the
fundamental precepts underlying valuation remain similar across these settings making the techniques
of valuation invaluable. This course intends to acclimatize the students with the concept of firm value
and various valuation techniques. The course predominantly focuses on fundamental analysis and
valuation of firm’s equity. Students will primarily study the discounted valuation and relative valuation
techniques and their application under different settings.

COURSE OBJECTIVES (CO)

1. Understanding the concept of firm value.
2. Applying key valuation techniques viz., discounted valuation and relative valuation.
3. Analyzing the impact of economic conditions and industry structure on firm value.
4. Applying valuation techniques in different managerial and industrial settings.

COURSE LEARNING OUTCOMES (CLO)

By the end of this course students will be able to;
CLO 1: Apply appropriate valuation technique in a given context. (PLG 1)
CLO 2: Analyze the impact of external environmental and industrial factors on the value of a
firm. (PLG 3)
CLO 3: Effectively communicate valuation analysis and investment decision. (PLG 4)

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COURSE CONTENT
 Introduction
 Cost of Capital
 Forecasting Financial Statements and Free cash-flows
 Discounted Techniques
 Relative Valuation
 Residual Income Valuation
 Valuing Financial Services Firm
 Valuing Technology Firm

PRESCRIBED TEXTBOOK

Aswath Damodaran (2013), Investment Valuation: Tools and Techniques for Determining the Value of
any Asset (3rd edition), New Delhi: Wiley India (P) Ltd.

OTHER READINGS AND REFERENCES

Reference Books:
a. Jerald E. Pinto CFA, Elaine Henry CFA, Thomas R. Robinson CFA, John D. Stowe CFA with Stephen E.
Wilcox CFA, Equity Asset Valuation (3rd Edition), New Delhi: Wiley India (P) Ltd.
b. Aswath Damodaran, Damodaran on Valuation: Security Analysis for Investment and Corporate
Finance (2nd edition), Wiley India ltd.
c. Benjamin Graham and David L. Dodd, Security Analysis (6th edition), Tata McGraw Hill.
d. Aswath Damodaran, The Dark Side of Valuation: Valuing Old Tech, New Tech and New Economy
Companies, Pearson.
e. Ziv Bodie, Alex Kane, Alan Marcus and Pitabas Mohanty, Investments (8th edition), Tata McGraw Hill
f. Stephen H Penman, Financial Statement Analysis and Security Valuation (3rd edition), Tata McGraw
Hill
g. Aswath Damodaran, The Little Book of Valuation – How to Value a Company, Pick a Stock and Profit,
Wiley India Pvt. Ltd.
h. Aswath Damodaran, Investment Fables: Exposing the Myth of Cant Miss Investment Strategies,
Pearson India
i. Dun and Bradstreet, Equity Research and Valuation (1st edition), Mcgraw Hill Education
j. Prasanna Chandra, Corporate Valuation and Value Creation (1st edition), Tata McGraw Hill
k. John J. Wild, K. R. Subramanyam and Robert F. Halsey “Financial Statement Analysis” (9th Edition),
Tata McGraw Hill.
l. Krishna G. Palepu, Paul M. Healy and Victor L. Bernard, “Business Analysis and Valuation: Using
Financial Statements: Text and Cases”, Cengage Learning.

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POLICY ON PLAGIARISM:

Plagiarism in project reports and other class submissions will not be tolerated. Student will be
penalized by being allotted ‘0’ marks in case the project report or the class submissions are found to
be plagiarized. The students should follow the American Psychological Association referencing style.
https://apastyle.apa.org/

VERY IMPORTANT - POLICY ON DRESSCODE & ONLINE ETIQUETTE:

Even though the course in online, please ensure the following policies and etiquettes without fail:

a. The attendance will be taken 10 minutes prior to the commencement of the class to ensure
that the allocated 60 minutes can be used for discussion. Please ensure that all students join 10
minutes prior to the class. Attendance will be taken by Ms. Pooja and students who join late
will be marked absent. Student has to switch on the Video and Audio at the time of attendance
and your attendance will be marked only if you are seen on the video and heard on the audio.
b. You have been at your locations for last few months and by now are well aware of the net
connectivity issues at this location. Please understand that this course is important for your
program and you will be the one at a loss if you are unable to follow the discussion online. Even
though the class recordings will be available online, they do not replace actual discussions.
Hence please upgrade your net connectivity to ensure that you follow all class discussions.
c. Class participation will be held throughout the term but mainly focused during case discussion.
Hence, please ensure that your video is preferably on during the sessions and is compulsorily
on during case discussions.
d. Cases will be provided three days in advance vis Moodle.
e. The course has 13 quizzes planned over the term with quizzes conducted during the session.
The syllabus for the quiz will contain topic discussed in the previous week (60% to 70%) and
topics to be discussed in the next two session, inclusive of the quiz session(30% to 40%).
Students will be evaluated based on the top 10 scores for the quiz (to accommodate missing of
quizzes due to net connectivity). Please do not miss the quiz. The mode for quiz will be updated
shortly.
f. Never forget that you are a B-School student. No student will attend the session in round-neck
t-shirts, pajamas or shorts. Even though you may not be pointed out for the same, you will be
marked absent by the AA if found to be unsuitably attired.
g. All PGP Handbook rules apply to online classes as well unless changes are specified by the PGP
Office.

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ASSESSMENT SCHEME AND WEIGHTAGE:

(a) END-TERM

Duration (in
Evaluation Weightage (%) Open/Close Book CLO Tested
minutes)

End-Term 35 180 Closed Book CLO1 & CLO 2

{b} OTHER ASSESSMENTS

Unit of
Sl.No. Evaluation Type Weight Time CLO
Evaluation

Class Participation and ----

1 Individual 10% Throughout the term
Case Discussion
Economic and Industry
analysis for Sales ----
Group of 2 th
2 Growth Forecasts 10% After July 20
students
(report of max 3 pages
and presentation)
Pitch Report Group of 2 ----
3 10% By August 10th
(maximum 5 pages) students

Group of 2 CLO 3
4 Pitch Presentation 15% 15th to 31st August
students

Quizzes (10 quizzes of ----

5 Individual 20% Throughout the term
2 marks each)

 Project evaluation will involve students valuing a mid-cap, single industry company and will be
conducted in groups of 2 students. No group in the class will repeat the company and only two
groups are allowed to repeat an industry. Students should send their three company choices to
Ms. Pooja by Saturday. Each choice will be of a company from separate industry. Financial
companies and non-listed companies to be strictly avoided.
 It will be evaluated in three components viz., Sales Growth Forecasts, Pitch Report and Pitch
Presentation.
 Growth Forecasts will be evaluated in form of presentation and reports. Page limit for reports
already specified. It excludes the title page and reference page.
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 PART 2: SESSION PLAN
Session Module Content Pedagogy Reading
Value v/s Price, Approaches to
1 Discussion
Valuation, Methods of Valuation
Introduction TB Ch. 1 & Ch. 2
2 The Valuation Plan Discussion

3 Cost of Debt Capital Discussion

Cost of Equity Capital – Levering TB Ch. 7 & Ch. 8

Cost of
4 and Unlevering of Beta, Discussion  Business Valuation
Capital
Forecasted WACC and Cost of Capital
Case: Midland Energy Resources
5 Case
– Cost of Capital (HBS)
6 Financial Forecasting Process Discussion
7 Free Cashflow to Equity Discussion
DCF – Free
TB Ch. 9, Ch. 10, Ch. 13 &
8 Cashflow Free Cashflow to Firm Discussion Ch. 14
Method
Case: The Valuation and
9 Financing of Lady M Confections Case
(HBS)
Economic Analysis for Sales TB Ch. 11
10 Discussion  What is Strategy?
Forecast
Sales  The Five Competitive
Growth Industry Analysis for Sales
11 Discussion Forces that Shape
Analysis Forecast Strategy
12 MDA & Sales Growth Estimation Discussion  Building your
company’s vision
13 Terminal Value Estimation Discussion TB Ch. 12
Estimating Equity Value per TB Ch. 16
14-15 Share Value Discussion
Share TB Ch. 15 is for Self-study
Case: Landmark Facility
16-17 Case
Solutions (HBS)
Basis and multiples, Earnings
18 Multiples - (P/E, PEG and other Discussion
variants) TB Ch. 17, Ch. 18, Ch. 19
Earnings Multiples - (Enterprise & Ch. 20
19 Discussion
Relative value to EBITDA multiple),  Introduction to
Valuation Book multiples (price to book, Valuation Multiples;
20 value to book, Tobin's Q) and Discussion  Corporate Valuation
Revenue Multiples and Market Multiples
Case: Valuation Ratios in Airline
21 Case
Industry (HBS)
22 Residual Residual Income Valuation - Discussion
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 Session Module Content Pedagogy Reading
Equity
Income and Residual Income Valuation –
23 Discussion
Valuation Firm
24 Case: Coco-Cola (HBS) Case
Valuing
Valuing Financial Firms (Industry
25-26 Financial Discussion TB Ch. 21
Guest)
Firms
Valuing Valuing New Age Tech
27-28 Technology Companies & Start-ups (Industry TB Ch. 23
Companies Guest)
29-30 Review

*Quizzes (20%) and Case Discussion (10%) – Throughout the term.

 TB - textbook

PLG MAPPING FOR THE COURSE

Addressed CLO
by No.
PLG# Program Level Learning Goal
Course?
(Yes / No)
Application of Fundamentals
PLG1 Traits: Demonstrate application of functional / conceptual Yes CLO 1
knowledge to business situations
Problem Identification and Solution
Traits: Demonstrate ability to identify a problem, critically assess No NA
PLG2
various alternatives and suggest appropriate solution

Integrative Thinking
Traits: Demonstrate ability to identify inter-linkages among
PLG3 Yes CLO 2
functional areas within an enterprise and assess the impact of
external environment on its performance
Effective Communication
PLG4 Yes CLO 3
Traits: Demonstrate proficiency in Oral and Written Communication
Ethical Responsibility
PLG5 Traits: Demonstrate awareness and assess impact of ethical No NA
behaviour on business
Leadership
PLG6 Traits: Demonstrate capability to take leadership role in a business No NA
situation

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 PART 3: SUPPLEMENTARY INFORMATION

Pre – class activity

As a part of pre-class activity students are expected to watch the Aswath Damodaran’s Videos on
Valuation. The Video links are provided. The Quizzes will constitute questions based on his videos
along with the concepts/ application discussed in class and additional readings.

The link of the first video is provided. You can find the remaining series on YouTube

https://www.youtube.com/watch?v=znmQ7oMiQrM&list=PLUkh9m2BorqnKWu0g5ZUps_CbQ-
JGtbI9

Topic Module Aswath Damodaran’s Video Series Sessions

1 Introduction
2 Cost of Capital
3 DCF – Free Cashflow Method
4 Sales Growth Analysis
5 Share Value
6 Relative Valuation
7 Residual Income Valuation
8 Valuing Financial Firms
9 Valuing Technology Companies
10 Review
Video 1: Introduction to Valuation
Video 2: Intrinsic Value – Foundation
Video 3: The risk free rate
Video 4: Equity risk premiums
Video 5: Betas (relative risk measures)
Video 6: Cost of Debt and Capital
Video 7: Estimating Cash Flows
Video 8: Estimating Growth
Video 9: Terminal Value
Video 10: Value Enhancement
Video 11: Loose Ends in Valuation
Video 14 to 18 – Relative Valuation