Financial Modelling

Workshop
Ronak Gala
Workshop Instructions
• Let’s make this fun and interactive… do post answers in the chatbox

• There is a 30 second lag in the stream. So bear with me.

• Instructions on how to get your certificate will be discussed at the

end, so stick around

• Let’s start the learning

My Journey

10+ Years 6+ Years Fund Manager

Experience in Stock As a professional AlphaQuest by
Markets Investment Advisor Tarrakki

5000+ 10+
Partner
Students trained in Taught at various
Pararthya Capital
FM and Valuation institutes pan India
What is the Value of any Asset?
The Future Benefits that the
Asset will give you…
This leads to concept of Cheap vs Expensive

Xiaomi Phone Apple iPhone

[Benefit > Price] [Benefit < Price]
What is the Value of any Financial
Asset?
Present Value of Future Benefit

Future Benefits
[Profits, Dividend, Cash Flows]
Value of any Financial Asset
So what is the value of CEAT?
We can compare the Price [Current Market Capitalization] to the Value and see if it
cheap or expensive
But how do you determine
Future Benefits?
To determine Future Benefits

You will have to

Forecast Future Financial Statements
Income Statement / Profit & Loss Account
Balance Sheet
Cash Flow
Where is Financial Modelling Used?

Equity Debt Investment Credit

Research Research Banking Rating

Mergers & Private Venture Project

Acquisitions Equity Capital Finance

Financial Modelling is one of the basic skills required in these profiles.

Do you aspire for such profiles?
Model making process

Understand Decide Input

Business Template Historical Data

Forecasting
Rationalizing
Valuation Financial
Assumptions
Statements
Step 1
Understanding a Business
Sources of Data for a listed company
• Annual Report – Regulatory requirement
• Available on Company Website / NSE & BSE Website / Other websites
• MD’s / Chairman’s / CEO’s speech
• Management Discussion & Analysis Segment
• Financial Statements

• Investor Presentation – Not Compulsory

• Available on Company Website / NSE & BSE Website / Other websites
• Usually put out quarterly or yearly

• Investor Concall Audio / Transcripts – Not Compulsory

• Available on Company Website / Other websites
• Usually put out quarterly or yearly
Sources of Data for a listed company
• Management Interviews – Not Compulsory
• Google Search / Youtube / Company Website

• Analyst Research Reports – Tough to get quality ones for free

• Google Search / Other websites

• Other websites list

• www.screener.in
• www.ratestar.in
• www.trendlyne.in
Step 2
Deciding a Template
Template depends on Sector and Company
Let’s look at a generic
manufacturing template
Characteristics of a Good Financial Model

• Clean – less cluttered

• User Friendly – easy to navigate

• Well Formatted – colour coded

• Consistent – proper denomination

Step 3
Input Historical Financial and
Operational Data
Taking Detailed values from Accounting
Notes
Do not rely on shortcuts like MoneyControl, Screener, etc…
Step 4
Forecasting Financial Statements
Forecasting Sales
• Identify Drivers of Sales (Volume x Pricing)
• In case of CEAT Volume is Tonnes and Pricing is Realization per tonne

• Make assumptions on volume and pricing drivers (grow them by a

particular %)

• Work backwards to determine Sales number

Forecasting Costs
• Identify Drivers of Major Cost (again volume and price)
• In case of CEAT it is COGS per tonne

• Forecast Other Cost Drivers assuming YoY % growth or % of Sales

• Work backwards to determine cost numbers

Step 5
Rationalizing Assumptions
Some Ground Rules For Assumptions
• Rely on past trends

• Be conservative

• Look for guidance numbers

• Look for major changes / disruptions / developments

Step 6
Valuation
Choice of Valuation Method
depends on the
Type of Business + End Use
This is all planned… what about
Uncertain / Unexpected events?
Nifty had a massive fall due to
Corona led Lockdown
Question is…
When was the Lockdown announced?
When did the fall happen?
When did the Lockdown led fall happen?
Forward vs Backward Looking Analysis

21 day Lockdown
was announced on
25th March 2020
Forward vs Backward Looking Analysis
Smart Money Sold
off before the
announcement 21 day Lockdown
was announced on
25th March 2020

Smart Money starts buying

anticipating recovery +
stimulus + valuations
 This is not a one-off Incident

2019 Election result

Demonetization was was announced on
announced on 23rd May 2019
8th November 2016
How do you anticipate?
Financial Models are Essential!
Run various scenarios and sensitivity quickly and easily to be prepared…
This is just the start…

End Use
Valuation
Sector Models

• Manufacturing • Cash Flow • M&A

Businesses Based Modelling
• Services • Comparable • Project
• Banks and Multiples Modelling
NBFCs • Transaction • Investment
• Technology / Multiples Pitch
Startups • Option Based • Research
Reports
Complete & Comprehensive
Financial Modelling & Valuation Course

Model 3 Sectors 3 Valuation Techniques Practical Skill Building

Technology Discounted Cash Flow Make Models from Scratch
Cement Dividend Discounting Work on Real Companies
Bank Multiples Valuation Stellar Bonus Content

Weekly Live
20+ Hours of 3 Hour Live Final 6 month course
Doubt Solving
Learning Mega Webinar access
Sessions

4 Week Course – Starts on 7th August 2021

Student Feedback
The Value Proposition
• Learning a real life finance skill

• From Experienced Finance Professionals

• Live Sessions for Doubt Solving

• Advanced Bonus Content

The Problem with Learning Modelling &
Valuation

Cost in Excess of Rs. 20,000/-

We sell it at Rs. 6,000/-
Only For You – Rs. 3,000/-
www.leapup.in/courses/fmv-discount
Only available for first 20 registrations
Learning Outcomes
• Confidence to build and showcase financial models built by you

• Learn the key concepts behind valuations

• Beyond excel, understand business analysis framework and the key drivers
behind business performance

• Linking real world situations to your model assumptions

• No Pre-requisite knowledge except understanding basic accounts

How to get your certificate?

Step 2
Step 1 • Fill out the
certificate
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All certificates will be issued in a week

Thank You!

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• Q&A