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CASES IN CORPORATE FINANCE

Cases in Corporate Finance includes 60 unique case studies that illustrate

the application of finance theories, models, and frameworks to real-life
business situations. The topics cover a wide range of sectors and different
life cycle stages of firms. The book bridges a crucial gap in topical emerging
market case coverage by presenting industry-relevant case studies in the
Indian context and on themes pertinent to the current business environment.
Through the case studies included in the book, the authors offer insights
into the essential areas of corporate finance, including risk and return,
working capital management, capital budgeting and structure, dividend
decisions, business valuation, and long-term financing. Cases included in the
book are decision-focused and provide opportunities to carefully analyse
risk-return trade-offs and apply tools to evaluate critical financial decisions.
The book will be helpful for students, researchers, and instructors of
business management, commerce, and economics.

Mayank Joshipura is a Professor of Finance, Associate Dean-Research, and

Chairperson of the Ph.D. programme at the School of Business Management,
NMIMS Deemed to be University, Mumbai. He holds a Ph.D. and an MBA
in Finance and a Bachelor of Engineering degree in Power Electronics.
He attended and completed a certificate programme on “Creating Value
through Financial Management” from the Wharton Business School, USA,
and the Glocoll progamme from Harvard Business School, USA. He has
two and half decades of experience in management education, research, and
consulting.

Sachin Mathur is Associate Professor, Finance, at the School of Business

Management, NMIMS Deemed to be University, Mumbai. He holds
an MMS degree and a Ph.D. from NMIMS, Mumbai and a Bachelor of
Technology degree in Chemical Engineering from Institute of Technology,
BHU, Varanasi. He has over 15 years of industry experience including as
Head of Research at CRISIL Ltd. He is a CFA charter holder.
CASES IN CORPORATE
FINANCE

Mayank Joshipura and Sachin Mathur

Designed cover image: © Getty Images
First published 2024
by Routledge
4 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
and by Routledge
605 Third Avenue, New York, NY 10158
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2024 Mayank Joshipura and Sachin Mathur
The right of Mayank Joshipura and Sachin Mathur to be identified as authors of this work
has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and
Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced or utilised in any
form or by any electronic, mechanical, or other means, now known or hereafter invented,
including photocopying and recording, or in any information storage or retrieval system,
without permission in writing from the publishers.
Trademark notice: Product or corporate names may be trademarks or registered trademarks,
and are used only for identification and explanation without intent to infringe.
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
ISBN: 978-1-032-60115-1 (hbk)
ISBN: 978-1-032-72448-5 (pbk)
ISBN: 978-1-032-72447-8 (ebk)
DOI: 10.4324/9781032724478
Typeset in Sabon
by Deanta Global Publishing Services, Chennai, India
CONTENTS

List of Exhibits x
Acknowledgements xix
Abbreviations xx

Introduction 1

PART I
Financial Planning and Working Capital Management 9

1 Monark Building Materials: Estimating Working Capital

Fund Requirements 11

2 Amber Enterprises: Working Capital Assessment for

Seasonal Business 15

3 ValueBuy Retail: Working Capital Requirement for High

Growth Business 24

4 Ashok Leyland: Managing Liquidity through the Cycles 30

5 Shoppers Stop: The Covid-19 Halt 41

6 Cash Budgeting at Parishkar Cleantech 47

7 Spark Electricals: Reviewing FMEG Business Credit Policy 51


vi Contents

8 Break-Even Analysis of Sri Krishna Restaurant 55

9 Ikon Paints: Long-Term Financial Plan 59

10 Credit Rating of Dinesh Organics 65

11 Tata International 70

PART II
Capital Budgeting Decisions 87

12 Ranjit’s Delivery Vans: Making the Replacement Decision 89

13 Moody Singh’s Food Truck: Scaling up the Business 92

14 DBS Auto’s Electric Two-Wheelers: Cash Flow Projections 96

15 Evaluating Investment Choices for “The Oriental”

Restaurant 102

16 BreathFresh: Evaluating Launch of Ayurvedic Toothpaste 108

17 AMEX: Evaluating New Business Opportunity 112

18 Safewheels: Evaluating Investment in Electric Vehicles

(EV) Fleet 117

19 PVR Cinema: Should it Take OTT Plunge? 122

20 Neogene Tyres: Capital Budgeting Under Uncertainty 130

21 Ashian Biotech: The AntiCov Vaccine Project 139

PART III
Risk and Return, and Cost of Capital 145

22 InvestmentWaves (A): Assessing Client’s Life Insurance

Requirement 147

23 InvestmentWaves (B): Assessing LIC’s New Jeevan Shanti 152

 Contents vii

24 WealthFrog: Risk-Return Trade-off of Individual Assets

vs Portfolio of Assets 158

25 Kirtan’s Dilemma: How to Use Risk-Return Analysis to

Build a Superior Portfolio? 163

26 BlueStar AMC: Assessing Impact of New Valuation

Norms on Debt Funds 168

27 Apex Frozen Foods: The Cost of Capital 177

28 Huarache India Ltd: The Cost of Capital 183

29 Balaji Wafers Pvt Ltd: The Cost of Capital 189

30 ITC Ltd: The Divisional Cost of Capital 194

31 DBS Auto’s Electric Two-Wheelers: Cost of Capital 200

32 Bhagyodya Stampings Pvt Ltd: Hedge or not to Hedge? 206

33 Great Eastern Shipping: Risk Management 209

PART IV
Capital Structure and Dividend Decisions 219

34 The Hotel Industry’s Leverage at Play 221

35 Avenue Supermarts’ Capital Structure 229

36 Reliance Industries Limited: Capital Structure Decision 241

37 Yes Bank: The AT-1 Bonds Saga 250

38 InvestmentWaves (C): Evaluating Cash Dividend vs

Homemade Dividend 258

39 Dividend Payout at Mahindra and Mahindra 264

40 Investor Payouts at Wipro 272

viii Contents

PART V
Business Valuation 279

41 The Valuation of KrissKross Hotels 281

42 Kotak Mahindra Bank Ltd: Challenges in Valuation of

Financial Services Firm 292

43 Ashian Biotech: Acquisition of Myanti Biopharma 298

44 Valuation of 212 Degrees Fahrenheit 305

45 PVR’s Acquisition for SPI Cinema: An Expensive

Southern Excursion? 310

46 Reliance Industries Limited (A): Valuation of RIL’s O2C

Business 317

47 Reliance Industries Limited (B): Valuation of Jio Platforms 323

48 Reliance Industries Limited (C): Valuation of

Reliance Retail 329

49 Swift Communications: Valuing Synergy Gains in an

Acquisition 336

50 ITC Ltd: EVA Analysis of FMCG and Hotel Divisions 339

51 Venu’s ESOP Choices (A): ESOPs of a Listed Company 346

52 Venu’s ESOP Choices (B): ESOPs of a Start-Up 349

PART VI
Long-Term Financing 355

53 Rossari BioTech: An IPO in the Indian Stock Market 357

54 Reliance Industries Ltd: The Tale of India’s Largest

Rights Issue 366
 Contents ix

55 Bharti Airtel’s FCCB 372

56 BPL Limited: In Search of Innovative Financing Options 378

57 Financing Joyzz Nutrixx 385

58 Nirma’s Acquisition of Lafarge India 391

59 Financing Decision at BlackGold Petroleum Company

Ltd: Corporate Finance vs Project Finance 402

60 PowerGrid InvIT: What Is in It for the Issuer and Investors? 410

Index417
EXHIBITS

1.1 MBM’s Profit and Loss Statement 12

1.2 MBM’s Balance Sheet 13
1.3 Assumptions for FY21 14
2.1 RAC Business Value Chain 17
2.2 Seasonal Variations in Financial Performance 18
2.3 Amber Enterprises: Statement of Profit and Loss 19
2.4 Amber Enterprises: Balance Sheet 20
2.5 Assumptions for Proforma Forecasting 23
3.1 Growth and Category-wise Penetration of Organised
Retailing in India 25
3.2 Profit and Loss Statement of ValueBuy Retail 27
3.3 Balance Sheet of ValueBuy Retail 28
4.1 Commercial Vehicle Sales: Industry and Ashok Leyland 31
4.2 The Trend in Outside Liabilities 33
4.3 Credit Indicators 34
4.4 Altman Z-Score and Credit Rating 35
4.5 Trends in Profit and Loss and Balance Sheets of
Ashok Leyland 36
4.6 Trends in Cash Flow Statements of Ashok Leyland 38
5.1 Shoppers Stop: Share Price Trend 42
5.2 Trend in Financial Performance 44
5.3 Performance Trend Across Peers 45
6.1 Projected Monthly Sales of Physical and Online Business 49
6.2 Business Assumptions for 2021–22 50
7.1 Pallavi’s Email to Krish 52


 E xhibits xi

8.1 Staff Details 56

8.2 Other Operating Expenses 56
8.3 Fixed Assets 57
9.1 Trend in Net Sales of Leading Paint Companies 60
9.2 Assumptions for Revenue and Operating Expenses 62
9.3 Assumptions for Capital Costs and Financing 63
10.1 Specialty Chemicals Industry Median Performance (2018–19) 66
10.2 Credit Comparison with Similar Size Specialty
Chemical Companies (2018–19) 67
10.3 Financial Trends of Dinesh Organics 68
10.4 Navbharat Bank’s Internal Rating Framework 69
11.1 Profile of Group Companies 71
11.2 Profile of Key Tata Group Companies 75
11.3 Trend in Revenues and Operating Profits 76
11.4 Tata International: Consolidated Financial Statements
(Abridged)78
11.5 Profile of Key Segments 79
11.6 Dividends, Finance Costs, and Lease Rentals 79
11.7 Sources of Finance for TIL: Standalone and Group 80
11.8 Details of Financing for TIL Group (Consolidated) 81
12.1 Estimates of Cash Flows by Proposal (February 2020) 90
12.2 Estimates of Cash Flows by Proposal (November 2020) 91
13.1 Forecasted Financial Performance of Food Van 94
13.2 Forecasted Financial Performance of Food Truck 94
14.1 DBS Auto’s Financial Summary 97
14.2 Previous Workings of Net Present Value of EL-2 Project 98
14.3 EL-2 Project’s NPV Estimate by Danish Merchant 99
14.4 Danish Merchant’s Analysis of EL-2 Project’s Cash Flows 101
15.1 Profit and Loss Statement of The Oriental 105
15.2 Forecasts for The Oriental 106
15.3 Basis of Expenses for Jay’s Art Café 106
15.4 Customer Response to Questions Related to the Lounge 106
16.1 Ayurshakti’ Sales and EBITDA Margin Forecasts 109
17.1 Auto Components: Major Segments and Sub-segments 113
17.2 One-time Investments and Running Cost Estimates for
a Public Charging Station in Delhi 114
17.3 Minimum Charger Requirement and Cost Estimates for
a Public Charging Station 115
18.1 Incentives under Delhi Government EV Policy 2020 (in INR) 119
18.2 RTO Tax and Vehicle Registration Charges in Delhi as
of Jan 2021 120
xii Exhibits

18.3 Nexon XZA Plus DT Roof (O) Diesel AMT vs Nexon

EV XZ Plus LUX 120
19.1 World’s Top Multiplex Chains 123
19.2 PVR Cinemas: 5-Year Financial Highlights 124
19.3 Cash Flow Projections for Proposed OTT Platform (In
Rs crore) 127
19.4 Additional Assumptions for PVR’s OTT Business 128
20.1 Trend in Crude Oil and Natural Rubber Prices 131
20.2 Assumptions for the New Project 133
20.3 Financial Projections for the New Project 135
20.4 Range of Assumptions for Scenario Analysis 136
20.5 Range of Assumptions for Sensitivity Analysis and
Monte Carlo Simulations 138
21.1 AntiCov Vaccine R&D Phase Outcomes 141
21.2 Vaccine Manufacturing Phase Outcomes 142
22.1 Types of Life Insurance Policies 149
22.2 Mehul’s Personal Balance Sheet (INR 000s) 150
22.3 Mehul’s Summary Income-Expense Statement for the
Calendar Year 2021 (INR 000s) 150
22.4 Funds Requirement for Mehul’s Financial Goals at Jan
2021 Price (INR 000s) 150
23.1 2 Illustration New Jeevan Shanti Plan 153
23.2 3 Further Incentives Are Available under this Plan – the
Incentive for Higher Purchase Prices by Increasing the
Annuity Rate as Below 154
23.3 Products Offerings by Life and General Insurance
Companies in India 154
23.4 Life Insurance Growth in India 154
23.5 Life Insurance Companies Market Share in India (new
business in FY2019) 155
23.6 Nisarg’s Email Content 156
24.1 Stylised Example of Portfolio Effect in Stocks with a
Perfect Inverse Correlation 159
24.2 Portfolio Mathematics for Two Assets and n Assets 160
24.3 Berkshire Hathaway vs Gold: Performance Comparison
over 1st Two Decades of Twenty-First Century 161
24.4 Correlation Matrix of Short-Listed Asset Classes
Returns161
24.5 Expected returns and variability of short-listed asset classes 161
25.1 Performance of Shortlisted Stocks and Nifty Index 165
25.2 Monthly Total Returns for Shortlisted Stocks and Nifty TRI 166
 E xhibits xiii

26.1 AT-1 and Tier-2 Bonds Owned under BlueStar Short-

Term Debt Fund 169
26.2 SEBI’s Amended Circular on Valuation of AT-1 and
Tier-2 Bonds (March 22, 2021) 172
26.3 Outstanding AT-1 Bonds of Major Banks with a Call
Option in FY22 (Rs. in Crore) 172
26.4 SEBI Debt Fund Classification 2018 (Select Fund Types) 173
26.5 G-Sec Yields Estimates Based on Traded Bonds and
ZCYC Model Rates 174
27.1 Market Performance of Listed Select Aquaculture Firms
in India 178
27.2 Value Chain of an Integrated Aquaculture Business 178
27.3 Apex Frozen Foods: Income Statement 180
27.4 Apex Frozen Foods Balance Sheet (Rs. in Million) 180
27.5 Historical T-Bill and 10-Year G-sec Yields 181
27.6 Market Risk Premium, Yield Spreads and
Unlevered Beta 182
28.1 HIL Income Statements (Rs in million) 184
28.2 HIL Balance Sheets (Rs in million) 185
28.3 Historical T-Bill and 10-Year G-sec Yields 187
28.4 Market Risk Premium, Yield Spreads and Levered Beta
in Aug 2019 (Radha’s estimates) 187
29.1 Market Share of Significant Players in the Organised
Snack Market (at the End of FY 2018) 190
29.2 Revenue Growth for Major Players in the Organised
Snack Market (2013–18) 191
29.3 Balaji’s Wafers Estimated Income Statement and
Balance Sheet* (Rs Crore) 191
29.4 PE Investments in Indian Snacks Market (2014–2019) 193
29.5 Listed Peers’ Data as of December 2019 193
30.1(a) ITC vs Nifty – One-Year Price Movement 195
30.1(b) ITC Ltd: Performance Scorecard 195
30.2 ITC Ltd: Major Business Segments Data 196
30.3 Financial Data for ITC Ltd and Selected Listed Hotel
Companies in India at the End of September 2019 (Rs Crore) 198
30.4 Yield Spread, Risk-free Rate, and Market Risk Premium
Estimates199
31.1 DBS Auto’s Financial Summary 201
31.2 Previous Workings of Net Present Value of EL-2
Project202
31.3 Data to Estimate Cost of Capital 203
xiv Exhibits

31.4 Lakshmi Nadar’s Estimate of EL-2 Project’s Cost of Capital 204

32.1 USD?INR Spot Price Movement from Aug 2018 to Dec 2018 207
32.2 Forward, Future, and Options Rate as of December 5, 2018 208
33.1 Fleet Profile of Shipping Business (7 May 2021) 211
33.2 Financial Trends 211
33.3 Share Price Trend 212
33.4 Risk Comparison 212
33.5 Illustration of Range Forward to Hedge Currency Risk 214
33.6 Illustration of Currency Swap to Convert INR Liability
to USD 214
33.7 Currency and Commodity Risk 215
33.8 Volatility in Freight Rates 215
33.9 Share of Tonnage Days on Time Charter vs Spot 216
34.1 Comparative Profit and Loss Statements of Two Hotel
Companies222
34.2 Degree of Leverage Estimation Formulas 222
34.3 Comparison of Hotel Companies on Share of Asset-
Light Business, Margins, and Leverage 224
34.4 Financial Trends of The Indian Hotels Company 225
34.5 Cost Structure of Select Hotel Companies in India
(2019–20)225
34.6 Change in Operating and Finance Costs of Indian Hotel
Companies226
34.7 Effect of Leverage on Hotel Bottom-lines during Covid-
19 Pandemic 227
35.1 Avenue Supermarts Ltd: Consolidated Balance Sheet 232
35.2 Avenue Supermarts Ltd: Statement of Consolidated
Cash Flows 233
35.3 Avenue Supermarts Ltd: Statement of Consolidated
Profit and Loss 235
35.5 Avenue Supermarts Ltd: Debt Structure 236
35.4 Historical Capital Structure 236
35.6 Key Debt and Valuation Metrics of Key Listed Peers 237
35.7 Avenue Supermarts Ltd: Valuation Ratios 238
35.8 Shareholding Pattern 238
36.1 RIL’s Stock Price and Sensex Movement During FY11 243
36.2 RIL Balance Sheet 245
36.3 RIL Income Statement 246
36.4 RIL Cash Flow Statement 246
36.5 RIL’s Cash Balance and Loans and Advances 247
36.6 RIL’s Dividend History 247
 E xhibits xv

36.7 RIL’s Capex History 248

37.1 Yes Bank vs Sensex and Bankex 251
37.2 Yes Bank’s Income Statement 253
37.3 Yes Bank’s Balance Sheet (Rs in Crore) 254
37.4 Yes Bank’s Asset Quality (Rs in Crore) 255
37.5 Yes Bank – Key Ratios 255
37.6 Basel II vs Basel III norms 256
38.1 Dividend Policy and Firm Value: Models and Propositions 260
38.2 Personal Income Tax Slabs in India for FY
2020–21 (Old Regime) 261
38.3 Equity Taxation in India 261
39.1 M&M’s Dividend Trends 265
39.2 Trend in Share Price 266
39.3 Trends in Profit and Loss and Balance Sheets 266
39.4 Free Cash Flows and Dividends 268
39.5 Segmental Trends 269
39.6 Profile of Significant Non-Current Investments
(as of March 31, 2020) 270
39.7 Comparison of Payouts and Financials of Automobile
(4-wheeler) Companies 271
40.1 Revenues, Margins, and Dividends 273
40.2 Asset Composition and Returns 274
40.3 Outflows: Payouts versus Investments 274
40.4 Outflows: Dividends and Repurchases 275
40.5 Share Price and Corporate Actions 275
40.6 Shareholding Pattern 276
41.1 City-wise Room Revenues of KrissKross Hotels
(FY 2018–19) 282
41.2 Segment-wise Break-up of FY 2018–19 Revenues of
KrissKross Hotels 282
41.3 Trend in Hotel Industry Occupancy Rates 282
41.4 KrissKross Hotels: Historical Financial Statements (Rs
million)283
41.5 Peer Valuations (at the end of FY 2018–19) 284
41.6 KrissKross Hotels: Financial Projections for Business-
as-Usual Scenario (Rs million) 286
41.7 KrissKross Hotels: Financial Projections for With-WPP
Scenario (Rs million) 288
41.8 Cost of Capital and Terminal Growth 290
42.1 Comparison of Various DCF Valuation Approaches 293
42.2 KMBL Income Statements 295
xvi Exhibits

42.3 KMBL Balance Sheets (Rs in Crore) 295

42.4 Financial Highlights KMBL (Rs in Crore) 296
43.1 Financial Forecasts of Myanti Biopharma Ltd 300
43.2 Stock Price Trend of Ashian Biotech vs S&P BSE
SmallCap Index 301
43.3 Changes in Ashian Biotech’s Cost of Debt with
Leverage301
43.4 Assumptions for Ashian Biotech’s Equity Returns 301
43.5 Balance Sheet of Ashian Biotech 302
43.6 Income Statement of Ashian Biotech 303
44.2 Valuation Assumptions (Public Company Inputs) 306
44.1 Seller’s Forecasts 306
44.3 Forecasts Revised by Private Buyer (First Cut) 307
44.4 Valuation Assumptions of Private Buyer 308
45.1 Trends in Indian and Global Multiplex Industry CY 2017 311
45.2 PVR’s Income Statement, Balance Sheet, and Key Metrics 313
45.3 SPI Key Metrics FY18 and Q3FY19 Projections 314
45.4 Transaction Details and Funding Plan (amount in INR mn) 315
45.5 Kathy’s Inputs for SPI’s Valuation 316
46.1 Reliance Industries Fund Raising in FY21 318
46.2 Proforma Standalone O2C Business as of January 1, 2021 319
46.3b Refining EV/EBDITA for Comparable Global Peers 320
46.3a Petrochemical EV/EBITDA for Comparable
Global Peers 320
46.4 Financial Projections and Assumptions for RIL’s O2C
Business321
47.1 Reliance Jio’s Total Debt FY 2017–2020 324
47.2 Investments in Jio Platforms 325
47.3 RIL vs Nifty from March 2020 to March 2021 325
47.4 Market Share of Indian Telecom Players 326
47.5 Jio Subscribers and ARPU Estimates and Key Assumptions 327
48.1 Investments in Reliance Retail in 2020 330
48.2 RIL vs Nifty from March 2020 to March 2021 331
48.3 Reliance Retail Stores in Comparison to Peers 332
48.4 Reliance Retail FY19 and FY20 Core and Non-Core
Retail Revenues and Margin Breakup 333
48.5 Trading Multiples of Indian Retailers and Global
Grocery Retailers 334
49.1 QSCL and SCTCL Financial Information 337
50.1 ITC’s Long-Term Financial and Market Performance
(Rs Crore) 340
50.2 ITC Ltd: Major Business Segments Data 341
 E xhibits xvii

50.3 Financial Data for ITC Ltd and Selected Listed Hotel
Companies in India at the End of March-2019 (Rs Crore) 343
50.4 Financial Data for ITC Ltd and Select FMCG
Companies in India at the end of March 2019
(Rs Crore) 344
50.5 Yield Spread, Risk-free Rate, and Market Risk Premium
Estimates345
53.1 Pros and Cons of IPO for Issuing Firm 358
53.2 Key Steps in IPO Process in India 359
53.3 IPO Application Process in India 360
53.4 Rossari Biotech IPO Terms 361
53.5 SWOT Analysis of Rossari Biotech 362
53.6 Rossari Biotech with Select Listed Peers: Financial
Comparison (as of July 2020) 363
54.1 Terms of RIL’s Rights Issue 369
55.1 Bharti Airtel (Consolidated): Key Financial
Information373
55.2 Bharti Airtel’s Stock Price History 374
55.3 Terms of Bharti Airtel’s FCCB. 375
55.4 Key Valuation Information & Assumptions
(Jan 8, 2020) 375
56.1 Criteria for Credit Rating Agencies for Assigning Equity
Credit to a Hybrid Issue 379
56.2 Issue of Foreign Currency Denominated Hybrid and
Perpetual Securities by Select Non-Banking Indian
Issuers between 2011 and 2020 381
56.3 3-Month LIBOR, based on US$ 382
56.4 BPL Investments Hybrid Issue Terms 383
57.1 Start-up Financing Alternatives: Forms of Capital 386
57.2 Start-up Financing Alternatives: Investor Categories 387
57.3 Illustration of Venture Capital Valuation Method 389
58.1 Cement Industry Capacity and Production Trends 392
58.2 Regional Capacity, Consumption, and Consolidation (2015) 393
58.3 Lafarge India’s Cement Business Overview (FY16) 395
58.4 Valuation of Recent Cement Deals 397
58.5 Financial Profile of Nirma and Lafarge India 397
58.6 Acquisition Financing 398
58.7 Terms of the Non-Convertible Debentures Issued by
Nirchem Cement 400
59.1 Post-Merger Organisational Chart for BPCL’s Finance
Function403
xviii Exhibits

59.2 Corporate Finance Model 405

59.3 Project Finance Model 1: Project Uses Project Finance
(Project Incorporated) 406
59.4 Project Finance Model 2: BPCL’s Subsidiary Uses
Project Finance (Not Incorporated) 406
60.1 Performance of Listed InvITs in India 411
60.2 Financial Overview of PGCIL and SPV Group 413
60.3 Post IPO Structure and InvIT Structure 415
60.4 Yield Calculation for the InvIT 415
60.5 PGCIL InvIT IPO Offer Terms and Timelines 416
ACKNOWLEDGEMENTS

We owe our gratitude to many people for enabling us to write and enrich
this book. Indeed, this work would not have been possible without their
contribution and support. Many of the cases were developed while teaching
our courses along with our colleagues, and we would like to acknowledge
the intellectual inputs and feedback received from them. We also thank the
NMIMS University for allowing us to use the library and its other resources
to complete our work. Several academicians from other institutions and
other professionals too helped us with their valuable suggestions.
More specifically, we would like to thank the following persons for their
inputs, suggestions, feedback, and support: Dr Ramesh Bhat, Dr Chandan
Dasgupta, Dr Smita Mazumdar, Dr Sangeeta Wats, Dr Sudhanshu Pani, Dr
Anupam Rastogi, Dr Paritosh Basu, Dr Ranjan Chakravarty, Dr Samveg
Patel, Dr Durgesh Tinaikar, Dr Nehal Joshipura, Dr Tanushree Mazumdar,
Dr Vasant Sivaraman, Dr Suresh Lalwani, and Prof. Prem Chandrani.
We are thankful to the entire team at Routledge for the timely completion
of this project. We take this opportunity to acknowledge the contributions
of our students in shaping our thought process over the years and in having
inspired us to write this book to share our thoughts with the learners.
Finally, we thank our family members for their unconditional support,
constant encouragement, and allowing us spare time to use productively
during the challenging Covid-19 lockdowns.

Mayank Joshipura
Sachin Mathur


ABBREVIATIONS

AC Asbestos cement
ACES Autonomous vehicles, connected vehicles, electrification,
and shared mobility
ACMA Automobile Component Manufacturers Association
AGM Annual general body meeting
AGR Adjusted gross revenue
ARPU Average revenue per user
ARR Average revenue per room
ASBA Application supported by blocked amount
ASL Avenue Supermarts Ltd
AT1 Additional Tier-1
BAL Bharti Airtel Ltd
BCBS Basel Committee on Banking Supervision
BCG Boston Consulting Group
BEV Battery-operated vehicle
BRLM Book running lead managers
C&W Cables and wires
CAGR Compounded annual growth rate
CAPM Capital asset pricing model
CAR Capital adequacy ratio
CCI Competition Commission of India
CEO Chief executive officer
CFO Chief financial officer
CFROI Cash flow return on investment
CMO Chief marketing officer


 Abbreviations xxi

COCO Company-owned company-operated

CoCos Contingent convertible capital instruments
COGS Cost of goods sold
CR Conversion ratio
CUF Capacity utilisation factor
CVA Cash value added
CY Calendar year
DCF Discounted cash flow
DDM Dividend discount model
DDT Dividend distribution tax
DMA Definitive merger agreement
DoT Department of Telecommunications
E&P Exploration and production
EBOs Exclusive brands outlets
ECB External commercial borrowings
EDLC/EDLP Everyday low cost/everyday low price
EPS Earnings per share
ESG Environment, social, and governance
ETF Exchange-traded fund
EVA Economic value added
EVs Electric vehicles
F&B Food and beverage
FAME Faster Adoption and Manufacturing of Electric Vehicles
FCCB Foreign currency convertible bonds
FMEG Fast-moving electrical goods
FPO Follow-on-public offer
FTA Foreign tourist arrivals
GDP Gross domestic product
GDRs Global depository receipts
GESCO Great Eastern Shipping Company
GFC Global financial crisis
GFS Governance-for-Stakeholders
GMP Grey market premium
GMV Gross merchandise value
GNP Gross non-performing assets
GoI Government of India
GRM Gross refining margin
GST Goods and services tax
HPY Holding period yield
ICEVs Integral combustion engine vehicles
InvIT Infrastructure investment trusts
IPL Indian Premier League
IPO Initial public offer
xxii Abbreviations

IRR Internal rate of return

IT Information technology
ITSL IDBI Trusteeship Services Ltd
KMBL Kotak Mahindra Bank Ltd
KMFL Kotak Mahindra Finance Ltd
LCVs Light commercial vehicles
LIBOR London Interbank Offer Rate
LIC Life Insurance Corporation
LTCG Long-term capital gains
M&M Mahindra and Mahindra Ltd
MDP Management development programme
MHCVs Medium and heavy commercial vehicles
MM Modigliani and Miller
MMDR Mines and Minerals (Development and Regulation) Act
MPT Modern portfolio theory
MTPA Million tonnes per annum
NAVs Net asset values
NBFC Non-banking finance company
NCDs Non-convertible debentures
NII Non-institutional investor
NIM Net interest margin
NPV Net present value
NSE National Stock Exchange
NSM National sales manager
O2C Oil-to-chemicals
ODI Overseas direct investments
OEMs Original equipment manufacturers
OFS Offer for sale
OTT Over-the-top
PE Private equity
PGCIL Power Grid Corporation Ltd
PIPE Private equity in public enterprise
PONV Point of non-viability
PSB Public sector bank
PUTL Power Grid Unchahar Transmission Ltd
QARP Quality at a reasonable price
QIB Qualified institutional bidder
QIP Qualified institutional placement
R&D Research and development
R&M Refining and marketing
RACs Room air conditioners
RBI Reserve Bank of India
RE Rights entitlements
 Abbreviations xxiii

REVPaR Revenue-per-available-room
RIA Registered Investment Advisor
RII Retail individual investor
RIL Reliance Industries Ltd
ROCE Return on capital employed
ROE Return on equity
ROIC Return on invested capital
RTA Registrar and transfer agent
RTO Regional Transport Office
RWN Rating watch negative
SC Supreme Court
SEBI Securities and Exchange Board of India
SEZs Special economic zones
SOTP Sum-of-the-parts
SSSG Same-store sales growth
TIL Tata International Limited
UPI Unified payment interface
VC Venture capital
WACC Weighted average cost of capital
WDV Written-down value
YTC Yield-to-call
YTM Yield-to-maturity
INTRODUCTION

Participant-centered learning has emerged as a superior method of teaching–

learning over conventional teaching. 360-degree active learning, where par-
ticipants learn from the instructor and fellow participants, enhances their
learning experience. The instructor’s role in such a learning approach is that
of facilitator. Participant-centered learning emphasises the process of discov-
ery rather than the dissemination of knowledge. It focuses on skill building
(How to do?) rather than simply imparting knowledge (What to do?). The
use of cases in management education, especially with a decision focus pio-
neered by Harvard Business School in the early 20th century, has become
the focus of management education. A case with a decision focus in which
the protagonist faces the dilemma of choosing between alternative courses
of action, with limited information and time on hand, is considered a potent
learning instrument. The case discussion forces participants into the protag-
onist’s shoes, who can be entrepreneurs, managers, analysts, investors, etc.
Case discussion has emerged as a powerful tool for learning concepts, theo-
ries, and frameworks and applying them to solve real-life business problems.
Top business schools offering MBA or PGDM in India have adopted
case-based teaching over several decades. However, most business schools
and undergraduate management and commerce colleges have not adopted a
participant-centered learning model and continue to follow the conventional
method of lecturing to impart knowledge. This deprives participants of the
joy of active learning and participation in discovering and building skills to
apply models and frameworks in solving real-life problems.
We have taught in MBA and Executive Education programmes at leading
business schools in India and have used various case studies over the years.

DOI: 10.4324/9781032724478-1
2 Introduction

We noticed that good case studies written in the Indian context and relevant
in the present times are short in supply. Some cases are too long, dated, and
not written in the Indian context, while others are mere discussion cases. In
addition, management cases from best-case publishing houses are costly and
beyond the budget of most colleges offering programmes in management
and commerce. This book bridges this gap by providing a wide variety of
right-sized, decision-focused finance cases written in the most recent setting.
These cases can be used in various courses such as Financial Management,
Corporate Finance, Strategic Financial Management, Advanced Financial
Management, and Business Valuation.
Since the dawn of the 21st century, the finance function has gained stra-
tegic significance and has emerged from the accounting shadow. The role of
finance in creating value for stakeholders is well-known. Raising, deploying,
and managing funds offers opportunities to create value for stakeholders at
each stage. Critical financial decisions, such as working capital management,
capital budgeting, capital structure, and dividend payout, require careful
analysis of risk-return trade-offs and far-reaching consequences. While deci-
sions are tagged as good or bad with the benefit of hindsight, using the right
frameworks and models helps connect the dots between seemingly unrelated
pieces of information, facilitating informed and better decision-making.
Given the VUCA world and the globalised nature of businesses, financial
risk management has become central to the success of any business organi-
sation. To cover all dimensions of financial decision-making, we divided the
books’ cases into six parts. These cases cover a full spectrum of industries
and the life cycle of firms.
The first part illustrates working capital management decisions. Most
companies find it essential to manage their working capital well because it
affects returns, growth, and risk. Efficient management of stocks and trade
receivables can lead to a shorter operating cycle, faster asset turnover, and
higher return on capital. However, a lack of working capital funds can affect
business growth. An aggressive financing policy may increase the liquidity
risk.
A company’s working capital need depends on the nature of its busi-
ness and the business conditions. A high-growth company requires more
working capital than a stable-growth company. A company facing seasonal
demand requires variable working capital throughout the year. Receivables
and stocks may build up rapidly when a company encounters an unexpected
slowdown in sales.
Companies use suppliers’ credit and other current liabilities to fund their
working capital needs. They can bridge the remaining working capital gap
with retained profits and external sources such as cash credit, overdraft
facilities, working capital demand loans, commercial papers, factoring, and
letters of credit. Companies may also fund a part of the working capital gap
 Introduction 3

using long-term sources, such as term loans or equity capital. Companies

must also manage the various market and credit risks associated with work-
ing capital.
Working capital policy decisions, operating, and financing can affect
funding needs. They may also impact the trade-off between returns and
growth or between returns and risk. Liberal credit terms, for example, can
accelerate sales growth but lengthen operating cycles. Similarly, excessive
reliance on short-term loans may temporarily reduce the cost of funds but
increase liquidity risk.
Working capital decisions affect a company’s financial health. Managers
use financial ratios to compare the performance of their companies with
past trends and peers. They usually prepare forecasts for financial plan-
ning and cash budgets to estimate the required short-term funds. They also
use scenarios to assess the impact of policy decisions on operating cycles,
returns, financing, and liquidity. The first 11 cases cover the main aspects
of working capital management in various business situations. They explain
companies’ challenges with high growth, cyclical or seasonal demand, and
demand shocks. These cases discuss various financing alternatives for work-
ing capital and trade finance. They provide opportunities to assess working
capital requirements, prepare cash budgets, recommend credit policy deci-
sions, analyse financial ratios, prepare long-term forecasts, and evaluate the
creditworthiness of companies.
In the second part, we include cases that address long-term investment
decisions. Long-term investment is essential for business growth. Through
proper evaluation, managers can select projects that enhance the value of
the company. Conversely, poorly selected projects may fail to recover the
opportunity costs of investment. Constraints and risks play significant roles
in such decisions.
Companies tend to use various investment criteria when choosing pro-
jects. Net present value (NPV) is the preferred method for project selection.
The NPV method involves discounting relevant cash flows at an appropriate
rate, covering the opportunity costs of money and risk. This is also con-
sistent with the maximisation of shareholder wealth. However, despite the
known limitations of these techniques, companies often use the internal rate
of return, payback period, and even book rates of return.
Cases 12–21 cover a variety of investment situations. The cases allow the
application of proper criteria and estimates of cash flows and discount rates.
Managers must choose the correct technique and discount rate, evaluate a
replacement project considering only incremental cash flows, and choose a
suitable evaluation criterion when comparing mutually exclusive projects,
particularly for projects that differ in size and duration. Managers often
make capital budget decisions under uncertainty. Tools to handle uncer-
tainty include sensitivity analysis, scenario analysis, simulation, decision-tree
4 Introduction

analysis, and real options. Some cases have covered the application of such
tools.
In the third part, we cover risk and return, and cost of capital. The two
pillars of corporate finance decisions are the time value of money, risk, and
returns. We know that Rs 100 now is not worth the same tomorrow due to
inflation; hence, we must make the necessary adjustments to nominal cash
flows to account for the time value of money. In addition, there are instances
where we need to forecast future cash flows to arrive at a decision, and in
the absence of a crystal ball, we need to account for the rise in cash flows.
Therefore, the concept of the time value of money and adjusting cash flows
to account for inflation and riskiness is central to corporate finance. It is the
foundation of stock and bond valuation, the evaluation of capital budgeting
proposals, and business valuation. Making personal finance decisions, such
as calculating life value and buying a life insurance policy annuity for retire-
ment, is equally important.
While most of us may associate risk with adverse outcomes and tend to
avoid them, that is not true. Risk has two dimensions. On the one hand,
it offers opportunities; on the other, it may lead to adverse outcomes.
Therefore, strategic risk-taking and identifying, measuring, and mitigat-
ing undesirable risks are critical for a business’s success. We know that all
decisions are about risk-return trade-offs, and one would expect a posi-
tive reward for assuming greater risk. The relationship between risk and
expected returns should be positive to this extent. However, the portion of
the total risk is diversifiable, called unsystematic risk; hence, no reward is
attached. Therefore, one should expect a reward for assuming a non-diver-
sifiable component and systematic risk.
As they say, do not keep all the eggs in one basket. The identification and
measurement of risk is the first step in managing it. Risk is measured using
the variance of the standard deviation of cash flows or returns and calculated
using the beta that measures the sensitivity of a firm’s or its stock’s return
to a well-diversified benchmark portfolio. The higher the systematic risk,
the higher the required return. From the investors’ perspective, the required
return rate is the capital cost. Why? Because a firm primarily uses two
sources of funds, debt and equity (or some hybrid variant), investors provid-
ing money to a firm take a risk and hence seek a reward commensurate with
the risk they take. The higher the business and financial risks, the higher the
return investors require. Most businesses differ in multiple aspects: indus-
try, industry life cycle, capital intensity, competitive position, etc. They are
financed differently; hence, investors require different returns from differ-
ent firms, and each firm has a different cost of capital. Similarly, if a firm
has multiple businesses within a given firm, different divisions have different
costs, and even different projects may have different degrees of risk. Hence,
the cost of capital for such a project will differ from that of the firm itself.
Another random document with
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 The old man left the place accordingly, and Arthur, seizing the
opportunity, retired to one corner with Edith, where the nature of
their conversation could be only guessed from the animated looks
and gestures of the affectionate pair.
The stranger in the meantime strode up and down the place,
regardless of the affrighted servants, singing to himself—
“O whaur will I get a bonny boy,
That will win hose and shoon;
That will rin to Lord Barnard’s yett,
And bid his ladye come?”

“What say you, my little man?” he continued, addressing a boy of

twelve or thirteen years, who sat before the fire, sharing, with a
shaggy collie, the contents of an ample cog, altogether unheeding the
agitation which reigned around him; “will you run to Wemyss Castle
with a message to Sir David?”
“I’ the noo!” said the boy, looking up with an air expressive of the
sense of the unparalleled oppression proposed in interrupting him
during the sacred ceremony of supper.
The stranger laughed, and drawing from his bosom the purse we
have so often spoken of, he displayed a Jacobus, and offered it to the
boy. “Na, I’ll no gang for the yellow bawbee,” said the urchin; “but if
ye’ll gie me the braw whittle, I’ll rin.” The stranger immediately put
into his hand the dagger he coveted, and drawing him aside,
conveyed to him in whispers the message he was to deliver.
Walter Colville now re-entered, and informed them that he had
reconnoitred the Egyptians, who, including women and children,
seemed to amount to above a hundred.
“Could I but get this younker beyond their clutches,” said the
stranger, “a short half hour would disperse them like the leaves in
autumn.”
Colville stared at this avowal, but was silent. The conviction of
Arthur, that the speaker was not what he seemed, now seized on his
mind also, but it appeared to inspire him with no pleasant feeling; on
the contrary, anxiety deepened on his countenance the more and
more he gazed on the handsome features of his guest, and the wild
shouts of the Egyptians, which he had previously heard with
comparative indifference, now evidently inspired him with the
deepest terror.
It was agreed at length that the boy should make the attempt. To
get him out of the house, without endangering the inmates, was
comparatively easy, as the Egyptians as yet stood at some distance
from the door. Once out, they had only his own ready wit and speed
of foot to trust to. While Colville and Arthur therefore undid with due
caution the massive bars and bolts which protected the oaken door,
the stranger, anxious to witness the success of his messenger,
ascended to the upper storey, and stood at the open casement. He
was immediately observed by the Egyptians, who set up a yell of
savage impatience at the sight, the men brandishing their weapons,
and the women waving their arms, as if threatening vengeance
against him.
Their attention was now, however, directed from him to the
youthful messenger, who approached towards them undauntedly.
They went forward to meet him.
“The master sent me to see what ye’re a’ here for,” said the boy.
“Tell him,” said one of the Egyptians harshly, “we are come to
demand the two strangers who have just entered his dwelling. Let
him give them to our vengeance, and we will depart peaceably—not a
feather or a rag of his shall be scathed by us.”
“And what if he shouldna just agree to this?” said the boy, edging
towards the west, covering the manœuvre, as if retiring towards the
house.
“If he refuse us, woe unto him. We will leave him neither corn nor
cattle, kith nor kin; burn his house with fire, and his own red blood
shall lapper on his cold hearth-stone.”
“Haith, carle, you maun tell him that yoursel,” said the boy, as with
one wild bound he sprung from the group, and, with the speed of a
grayhound, made for the wood.
There was a cry of disappointment burst forth from the Egyptians
as they perceived his intention, and many set out in pursuit. The
chase was viewed with deep interest by the inmates of the house—for
Colville, Edith, and Arthur Winton had now joined the stranger. The
wood was not far distant; the boy was famous for his swiftness of
foot; and they could see that his pursuers were falling fast behind. To
their dismay, however, they perceived at length that there was a
powerful dog among the number, who continued the chase after all
his human competitors had abandoned it in despair. He gained fast
upon the boy. “He is lost!” said Edith, piteously; “that villanous dog
will tear him to pieces.” But the event belied the maiden’s fear. Just
as the ferocious animal seemed about to seize him, the boy was seen
to turn upon his pursuer. The dog gave a loud howl, and fell to the
ground, and the stranger could perceive his own dagger gleaming in
the stripling’s hand, as he waved it in triumph o’er his head ere he
disappeared among the trees.
“I could stake an earldom,” said the stranger exultingly, “on that
boy’s proving a noble soldier! By the soul of Bruce, he can both fight
and flee.”
Colville’s terror, as he listened to these words, fairly mastered the
composure which he had hitherto affected. He took off his bonnet,
and bending lowly to the stranger, said in a tremulous voice—
“In Heaven’s name, say, oh! say, sir, you are not the king!”
“Even so, good Walter, James of Scotland stands before you. Are
you sorry to see me? By Saint Andrew, I had hoped I should be
welcome to every honest house,—ay, and every honest heart, in my
dominions.”
Walter had dropped on his knee as the truth, which he had for
some time suspected, was confirmed to him, and, looking up to his
royal guest, while tears stood in his eyes—“Welcome, my noble
prince; what is it of Walter Colville’s, from the bodle in his purse to
the last drop of his heart’s blood, that the king’s not welcome to? I
and mine, my liege, have fought, and bled, and died for the royal
house. But to see your grace here in peril, surrounded by so many
villains, and this old arm alone left to assist you! Oh! for the six braw
fellows that I have seen prancing on yonder lea,—they would have
cleared a way for your highness through them all!”
“Never fear for me, Walter Colville; I am not doomed to fall by a
brawl of this kind, or in mine own land;—so runs the rede.”
The king now turned round, and perceived Arthur and Edith, who
had retired to a little distance. When they saw they were observed,
they advanced and would have kneeled; but the prince prevented
this. He took them both by the hand, and imprinted on the lips of
Edith a kiss, savouring as much of warm affection as of kingly
courtesy.
Their attention was now directed to the operations of the
Egyptians. They perceived, with some surprise, that a considerable
number of them left the rest, and made for the wood, and that those
who remained ceased the yelling manifestations of sorrow and
revenge which had so affrighted Edith.
“They are meditating a retreat, methinks,” said the king.
“I fear, my liege,” said Colville, “they are rather planning some
mode of successful assault;” and the return of the Egyptians too soon
verified the apprehension. They bore with them the trunk of a fallen
tree, and the besieged at once saw the use for which this powerful
engine was intended.
“My door can never withstand the shock of a ram like this,” cried
Walter; “they will force a passage, and out and alas! your highness
will be murdered—murdered in the house of Balmeny!”
James was proverbially brave, but it cannot be denied that he
looked a little grave as he perceived the ponderous engine borne
along, which in all probability would, in a few minutes, lay open the
passage to a band of miscreants thirsting for his blood, and against
whose rage the bravery of himself and his friends seemed a poor
defence.
“Let the worst come to the worst,” said he at length, “we three will
make good this staircase for a stricken hour at least; before then the
rescue must arrive.”
The king, Colville, and Arthur now sought the floor below; Edith,
with the serving-maidens, being stationed above, to be, in case of the
Egyptians forcing an entry, still within the defence of the stair.
The door was of massive oak, studded with iron nails, and
supported by three iron bolts of considerable thickness. An
additional defence was now added in the shape of planks placed
diagonally under these bolts, and for a few moments the besieged
imagined it might withstand the efforts of the assailants. But a few
strokes of the tree soon showed the fallacy of this hope. The door
shook under the first blow, and ere a score had been given, the
yielding hinges showed that the Egyptians had well calculated the
force of their instrument.
 “It must be cold steel that saves us after all,” said the king,
retreating to the staircase.
“Oh, that I and all my kin were stark dead on this floor, and your
highness safe on Falkland green!” exclaimed Colville, wringing his
wrinkled hands, and following.
They had scarcely gained their intended position at the upper
landing of the staircase, when, yielding to a desperate stroke, the
door flew open, and the infuriated Egyptians, shouting, made their
way to the interior. Not finding those they sought below, they next
proceeded to ascend the stair. This, however, was an ascent fatal to
all who attempted it. Corpse after corpse fell backward among the
enraged ruffians under the blows of the king and Arthur, until no one
could be found daring enough to attempt the passage.
“Let us smeek them in their hive,” at length cried a hoarse voice,
“and so let them either roast or come forth.”
A shout of approbation followed this advice, and, while a chosen
few remained to guard the stair, the remainder roamed about the
house collecting together everything which could assist their
diabolical design.
The king’s heart, and that of his brave companions, sunk as they
heard this resistless plan of destruction proposed and set about. It
was for a moment only, however, for suddenly they heard the clear
sweet voice of Edith exclaiming, “We are saved, we are saved! yonder
comes the Lord of Wemyss and his gallant followers!” and
immediately after the maiden herself appeared to reiterate the
tidings.
“Are you sure of what you say, Edith?” asked the king eagerly.
“How do the horsemen ride?”
“As if their coursers were winged,” replied Edith, “all of them; but
one who backs a gray steed of surpassing power, is far before the
rest, and ever and anon turns round, as if upbraidingly, to his
followers.”
“My trusty David!” exclaimed the king, with emotion, “well wert
thou worthy of the gallant gray!”
There was now heard a peculiar shout from among the Egyptians
without, which was rightly interpreted as a signal of retreat; for it
was immediately followed by the evacuation of the house; and so
speedy and simultaneous was their flight, that the king could only
perceive the latest of the tribe as they made for the wood, leaving to
Wemyss and his companions a deserted field and an open entrance.
“Thanks, David, for this timely rescue,” said the king, as the knight
bended the knee before him. “By my crown, the spurs were well
bestowed on one who can so fairly use them!”
James, followed by Sir David, Walter, Arthur, and the rest, now led
the way to the upper chamber where the immoderate joy and
hospitality of the old man displayed itself in the most substantial
form. When they had caroused for some time, the king, turning to
Colville, said,—
“Mine host, did I hear rightly when you said there was nothing
beneath this roof-tree to which I was not welcome?”
“Your highness heard rightly.”
“Give me then this fair maiden. We kings, you know, seldom
choose the least valuable of our subjects’ chattels.”
“Your grace may command me,” said Colville, though somewhat
hesitatingly, for he saw the turn which things were taking.
“And you too, sweet Edith?” said the king, again saluting the
blushing girl; and then, without waiting for an answer, continued,
“that you may all know, my lieges, that we accept your benevolences
merely for your own benefits, I give away this treasure, tempting as it
is, to one who has well deserved the favour at our hand. Take her,
Arthur, and confess that I have found a way to repay the debt I owed
you. Receive his hand, fair maiden, and if it will add anything to its
value in your eyes, know that it has this day saved a king’s life.”
The old man’s sentiments in regard to Arthur Winton had been
undergoing a change imperceptible even to himself, from the
moment he had perceived him the companion and probable
favourite of the king; but the revolution was completed when he was
made acquainted with the particulars of his interference in the royal
behalf,—a merit which in his eyes would have outweighed a thousand
faults in his intended son-in-law.
King James shortly afterwards left the house of Balmeny amid the
blessings of its inmates; and to close our tale, we have only to add,
that the gift of the monarch was shortly after confirmed at the altar,
where Edith became the happy bride of Arthur Winton; and that the
royal gratitude flowed freely on the wedded pair, as any who chooses
to pursue the time-worn records of the Great Seal may satisfy
himself.
 HELEN WATERS:
A TRADITIONARY TALE OF THE ORKNEYS.

By John Malcolm.
The lost, the castaway on desert isles,
Or rocks of ocean, where no human aid
Can reach them more.

The mountains of Hoy, the highest of the Orkney Islands, rise

abruptly out of the ocean to an elevation of fifteen hundred feet, and
terminate on one side in a cliff, sheer and stupendous, as if the
mountain had been cut down through the middle, and the severed
portion of it buried in the sea. Immediately on the landward side of
this precipice lies a soft green valley, embosomed among huge black
cliffs, where the sound of the human voice, or the report of a gun, is
reverberated among the rocks, where it gradually dies away into faint
and fainter echoes.
The hills are intersected by deep and dreary glens, where the hum
of the world is never heard, and the only voices of life are the bleat of
the lamb and the shriek of the eagle;—even the sounds of inanimate
nature are of the most doleful kind. The breeze wafts not on its wings
the whisper of the woodland; for there are no trees in the island, and
the roar of the torrent-stream and the sea’s eternal moan for ever
sadden these solitudes of the world.
The ascent of the mountains is in some parts almost
perpendicular, and in all exceedingly steep; but the admirer of nature
in her grandest and most striking aspects will be amply compensated
for his toil, upon reaching their summits, by the magnificent
prospect which they afford. Towards the north and east, the vast
expanse of ocean, and the islands, with their dark heath-clad hills,
their green vales, and gigantic cliffs, expand below as far as the eye
can reach. The view towards the south is bounded by the lofty
mountains of Scarabin and Morven, and by the wild hills of
Strathnaver and Cape Wrath, stretching towards the west. In the
direction of the latter, and far away in mid-ocean, may be seen,
during clear weather, a barren rock, called Sule Skerry, which
superstition in former days had peopled with mermaids and
monsters of the deep. This solitary spot had been long known to the
Orcadians as the haunt of seafowl and seals, and was the scene of
their frequent shooting excursions, though such perilous adventures
have been long since abandoned. It is associated in my mind with a
wild tale, which I have heard in my youth, though I am uncertain
whether or not the circumstances which it narrates are yet in the
memory of living men.
On the opposite side of the mountainous island of which I speak,
and divided from it by a frith of several miles in breadth, lie the flat
serpentine shores of the principal island or mainland, where, upon a
gentle slope, at a short distance from the sea-beach, may still be
traced the site of a cottage, once the dwelling of a humble couple of
the name of Waters, belonging to that class of small proprietors
which forms the connecting link betwixt the gentry and the
peasantry.
Their only child Helen, at the time to which my narrative refers,
was just budding into womanhood; and though uninitiated into what
would now be considered the indispensable requisites of female
education, was yet not altogether unaccomplished for the simple
times in which she lived; and, though a child of nature, had a grace
beyond the reach of art, untaught and unteachable. There was a
softness and delicacy in her whole demeanour, never looked for and
seldom found in the humble sphere of life to which she belonged. Yet
her beauty did not startle or surprise, but stole over the heart almost
insensibly, like the gentle fall of the summer evenings of her own
native isles, and, like that, produced in the beholder an emotion
almost allied to sadness.
Such a being was not likely to be appreciated by the rude and
commonplace minds by whom she was surrounded, and with whom
a rosy cheek and a laughing eye constitute the beau-ideal of woman;
but she awakened a world of romance in one young heart, with which
her own gentle bosom shared the feelings she inspired.
Henry Graham, the lover of Helen Waters, was the son of a small
proprietor in the neighbourhood; and being of the same humble rank
with herself, and, though not rich, removed from poverty, their views
were undisturbed by the dotage of avarice or the fears of want, and
the smiles of approving friends seemed to await their approaching
union.
The days of courtship were drawing towards a close, and the
period of their marriage was at last condescended upon by the bride.
Among the middling and lower classes of society in the Orkneys, it is
customary for the bridegroom to invite the wedding-guests in
person; for which purpose, a few days previous to the marriage,
young Graham, accompanied by his friend, took a boat and
proceeded to the island of Hoy, to request the attendance of a family
residing there; which done, on the following day they joined a party
of young men upon a shooting excursion to Rackwick, a village
romantically situated on the opposite side of the island. They left the
house of their friends on a bright, calm, autumnal morning, and
began to traverse the wild and savage glens which intersect the hills,
where their progress might be guessed at by the reports of their guns,
which gradually became faint and fainter among the mountains, and
at last died away altogether in the distance.
That night and the following day passed, and they did not return to
the house of their friends; but the weather being extremely fine, it
was supposed they had extended their excursion to the opposite
coast of Caithness, or to some of the neighbouring islands, so that
their absence created no alarm whatever.
The same conjectures also quieted the anxieties of the bride, until
the morning previous to that of the marriage, when her alarm could
no longer be suppressed. A boat was manned in all haste, and
dispatched to Hoy in quest of them, but did not return during that
day nor the succeeding night.
The morning of the wedding-day dawned at last, bright and
beautiful, but still no intelligence arrived of the bridegroom and his
party; and the hope which lingered to the last, that they would still
make their appearance in time, had prevented the invitations from
being postponed, so that the marriage party began to assemble about
mid-day.
While the friends were all in amazement, and the bride in a most
pitiable state, a boat was seen crossing from Hoy, and hope once
more began to revive; but, upon landing her passengers, they turned
out to be the members of the family invited from that island, whose
surprise at finding how matters stood was equal to that of the other
friends.
Meantime all parties united in their endeavours to cheer the poor
bride; for which purpose it was agreed that the company should
remain, and that the festivities should go on,—an arrangement to
which the guests the more willingly consented, from a lingering hope
that the absentees would still make their appearance, and partly with
a view to divert in some measure the intense and painful attention of
the bride from the untoward circumstance; while she, on the other
hand, from feelings of hospitality, exerted herself, though with a
heavy heart, to make her guests as comfortable as possible; and, by
the very endeavour to put on an appearance of tranquillity, acquired
so much of the reality as to prevent her from sinking altogether
under the weight of her fears.
Meantime the day advanced, the festivities went on, and the glass
began to circulate so freely, that the absence of the principal actor of
the scene was so far forgotten, that at length the music struck up, and
dancing commenced with all the animation which that exercise
inspires among the natives of Scotland.
Things were going on in this way, when, towards night, and during
one of the pauses of the dance, a loud rap was heard at the door, and
a gleam of hope was seen to lighten every face, when there entered,
not the bridegroom and his party, but a wandering lunatic, named
Annie Fae, well known and not a little feared in all that country-side.
Her garments were little else than a collection of fantastic and party-
coloured rags, bound close around her waist with a girdle of straw,
and her head had no other covering than the dark tangled locks that
hung, snake-like, over her wild and weather-beaten face, from which
peered forth her small, deep-sunk eyes, gleaming with the baleful
light of insanity.
Before the surprise and dismay excited by her sudden and
unwelcome appearance had subsided, she addressed the company in
the following wild and incoherent manner:—
“Hech, sirs, but here’s a merry meeting indeed,—a fine company,
by my faith; plenty o’ gude meat and drink here, and nae expense
spared! Aweel, it’s no a’ lost neither; this blithe bridal will mak a
braw burial, and the same feast will do for baith. But what’s the folk
a’ glowering at? I’se warrant now ye’re cursing Annie Fae for spoiling
your sport. But ye ken I maun just say my say, and that being done,
I’ll no detain you langer, but jog on my journey; only I wad just hint,
that, for decency’s sake, ye suld stop that fine fiddling and dancing;
for ye may weel believe that thae kind o’ things gie nae great pleasure
to the dead!”
Having thus delivered herself, she made a low curtsey, and
brushed out of the house, leaving the company in that state of painful
excitement which, in such circumstances, even the ravings of a poor
deranged wanderer could not fail to produce.
In this state we, too, will leave them for the present, and proceed
with the party who set off on the preceding day in search of the
bridegroom and his friends. The latter were traced to Rackwick; but
there no intelligence could be gained, except that, some days
previous, a boat, having on board several sportsmen, had been seen
putting off from the shore, and sailing away in the direction of Sule
Skerry.
The weather continuing fine, the searching party hired a large
boat, and proceeded to that remote and solitary rock, upon which, as
they neared it, they could discover nothing, except swarms of seals,
which immediately began to flounder towards the water-edge. Upon
landing, a large flock of sea-fowl arose from the centre of the rock
with a deafening scream; and upon approaching the spot, they
beheld, with dumb amazement and horror, the dead bodies of the
party of whom they had come in search, but so mangled and
disfigured by the seals and sea-fowl, that they could barely be
recognised.
It appeared that these unfortunates, upon landing, had forgot their
guns in the boat, which had slipt from her fastenings, and left them
upon the rock, where they had at last perished of cold and hunger.
Fancy can but feebly conceive, and still less can words describe,
the feelings with which the lost men must have beheld their bark
drifting away over the face of the waters, and found themselves
abandoned in the vast solitude of the ocean. Their sensations must
have resembled his who wakens in the grave from a death-like
trance, to find himself buried alive!
With what agony must they have gazed upon the distant sails,
gliding away over the deep, but keeping far aloof from the rock of
desolation, and have heard the shrieks which they sent over the
flood, in the vain hope of their reaching some distant ship, mocked
by the doleful scream of the sea-fowl! How must their horrors have
been aggravated by the far-off view of their native hills, lifting their
lonely peaks above the wave, and awakening the dreadful
consciousness that they were still within the grasp of humanity, yet
no arm stretched forth to save them; while the sun was riding high in
the heavens, and the sea basking in his beams below, and nature
looking with reckless smiles upon their dying agonies!
As soon as the stupor of horror and amazement had subsided, the
party placed the dead bodies in their boat, and, crowding all sail,
stood for the Orkneys. They landed at night upon the beach,
immediately below the house where the wedding guests were
assembled; and there, while they were debating in what manner to
proceed, were overheard by the insane wanderer, the result of whose
visit has already been described.
She had scarcely left the house, when a low sound of voices was
heard approaching. An exclamation of joy broke from the bride. She
rushed out of the house with outstretched arms to embrace her lover,
and the next moment, with a fearful shriek, fell upon his corpse!
With that shriek reason and memory passed away for ever. She was
carried to bed delirious, and died towards morning. The bridal was
changed into a burial, and Helen Waters and her lover slept in the
same grave!
 LEGEND OF THE LARGE MOUTH.

By Robert Chambers, LL.D.

“Here’s a large mouth indeed!”

Shakspeare—King John.

Arriving one evening at an inn in Glasgow, I was shown into a

room which already contained a promiscuous assemblage of
travellers. Amongst these gentlemen—commercial gentlemen chiefly
—there was one whose features struck me as being the most ill-
favoured I had ever beheld. He was a large, pursy old man, with a
forehead “villanous low,” hair like bell-ropes, eyes the smallest and
most porkish of all possible eyes, and a nose which showed no more
prominence in a side-view than that of the moon, as exhibited in her
first quarter upon a freemason’s apron. All these monstrosities were,
however, as beauties, as absolute perfections, compared with the
mouth—the enormous mouth, which, grinning beneath, formed a
sort of rustic basement to the whole superstructure of his facial
horrors. This mouth—if mouth it could be called, which bore so little
resemblance to the mouths of mankind in general—turned full upon
me as I entered, and happening at the moment to be employed in a
yawn, actually seemed as if it would have willingly received me into
its prodigious crater, and consigned me to the fate of Empedocles,
without so much as a shoe being left to tell the tale.
The company of a traveller’s room is generally very stiff, every man
sitting by his own table in his own corner, with his back turned upon
the rest. It was not so, however, on the present occasion. The most of
the present company seemed to have been so long together in the
hotel as to have become very gracious with each other; while any
recent comers, finding themselves plumped into a society already
thawed and commingled, had naturally entered into the spirit of the
rest. Soon discovering how matters stood, I joined in the
conversation, and speedily found that the man with the large mouth
was one of the most polite and agreeable of mankind. He was one of
those old, experienced gentlemen of the road, who know everything
that is necessary to be known, and are never at a loss about anything.
His jokes, his anecdotes, his remarks, were all excellent, and kept the
rest bound, as it were, in a chain. The best of him was, that he
seemed quite at ease on the subject of his mouth.
No doubt he was conscious of his preternatural ugliness—for
whatever may be said about the blinding effect of self-love, and so
forth, I hold that the most of people know pretty nearly how they
stand as to personal attractions; but he had none of that boggling,
unsteady, uncomplacent deportment, so remarkable in the generality
of ill-looking people. On the contrary, there was an air of perfect self-
satisfaction about him, which told that he either was so familiar with
the dreadful fact as to mind it not, or that he was a thorough man of
the world, above considering so trivial a particular, or that he was
rich, and could afford to be detested. It was curious, however, that
even while he almost convulsed the rest with his jokes, he never
laughed in the least himself. He evidently dared not; the guffaw of
such a man must have produced consequences not to be calmly
contemplated. Part, indeed, of the humorous effect of his
conversation arose from the cautious way in which he managed his
mouth. A small aperture at one side, bearing the same proportion to
the whole that the wicket of a carriage-gate does to the whole gate
itself, served for the emission of his words. Anything else would have
been a mere waste of lip.
On my ordering refreshment, I was informed by the company, that
in consideration of this being the anniversary of a distinguished
historical event, they had agreed to sup together in a rather more
formal way than usual, and that they would be happy if I would join
them. Having assented to the proposal, I began to reflect with some
anxiety upon the probable conduct of the Mouth at table. How so
extraordinary a feature would behave, what it would ask for, after
what manner it would masticate, and, above all, how much it would
devour, were to me subjects of the most interesting speculation. The
wicket won’t do there (thought I to myself), or I’m much mistaken.
Yet again,—so ran my thoughts,—many large men have been known
to eat very little, while your true devourers are found to be lean,
shrivelled creatures, who do not seem to be ever the better of it. “A
large mouth,” says the Scottish proverb, “has always a good luck for
its meat.” That may be, thought I, and yet the large mouth may be
quite indifferent to what it is so sure of getting. All kinds of ideas
connected with this subject ran through my mind; but in the end I
found it all a riddle. The Mouth might prove either gluttonous or
abstemious, without exciting more surprise by the one event than by
the other.
By-and-by some one asked a waiter if supper was nearly ready, and
on an answer in the affirmative being given, I observed the Mouth
suddenly bustle up, and assume an air of eager promptitude that
almost seemed to decide the question. The man rose, and, going to a
corner of the room where his greatcoat was hanging, brought forth a
small package, which he proceeded to untie at a side-table. The only
article it contained was a spoon, which he immediately brought
forward and laid upon the table, accompanying the action with an air
that might have befitted a surgeon in arranging his instruments for
an operation. I had no longer any doubt as to the gastronomical
character of the Mouth, for here was an article that might have
served in the nursery of Glumdalclitch. It was an antique silver
implement, with a short handle, and a rim about four inches in
diameter, like an ordinary saucer. Observing the curiosity of the
company to be strongly excited, the old man showed it round with
good-natured politeness, telling us that he had been so long
accustomed at home to the use of this goodly article, that he could
now hardly discuss either soup or dessert without it, and therefore
made a point of carrying it along with him in his travels.
“But, indeed, gentlemen,” said he, “why should I make this a
matter of delicacy with you? The truth is, the spoon has a history,
and my mouth—none of the least, you see—has also a history. If you
feel any curiosity upon these points, I will give you a biographical
account of the one, and an autobiographical account of the other, to
amuse you till supper is ready.”
To this frank proposal we all cordially agreed, and the old man,
sitting down with the spoon in his hand, commenced a narrative
which I shall here give in the third person.
 His mouth was the chieftain and representative of a long ancestral
line of illustrious and most extensive mouths, which had flourished
for centuries at a place called Tullibody. According to tradition, the
mouth came into the family by marriage. An ancestor of the speaker
wooed, and was about to wed, a lady of great personal attractions,
but no fortune, when his father interfered, and induced him, by the
threat of disinheritation on the one hand, and the temptation of great
wealth on the other, to marry another dame, the heiress of a large
fortune and large mouth, both bequeathed to her by her grandfather,
one of the celebrated “kail-suppers of Fife.” When his resolution was
communicated to the tocherless lady, she was naturally very much
enraged, and wished that the mouth of her rival might descend, in all
its latitude, to the latest generation of her faithless swain’s posterity;
after which she took her bed—and married another lover, her
second-best, next week, by way of revenge.
The country people, who pay great attention to the sayings of
ladies condemned to wear the willow, waited anxiously for the
fulfilment of her malediction, and accordingly shook their heads and
had their own thoughts, when the kail-supper’s descendant brought
forth a son whose mouth, even in his swaddling-clothes, reflected
back credit on her own. The triumph of the ill-wisher was considered
complete, when the second, the third, and all the other children,
were found to be distinguished by this feature; and what gave the
triumph still more poignancy was, that the daughters were found to
be no more exempted than the sons from the family doom. In the
second generation, moreover, instead of being softened or diluted
away, the mouth rather increased, and so it had done in every
successive generation since that time. The race having been very
prolific, it was now spread so much that there was scarcely a face in
Tullibody or the neighbourhood altogether free of the contagion; so
that the person addressing us, who had his permanent residence
there, could look round him upon several hundreds of kindred
mouths, with all the patriarchal feelings of the chief of a large
Highland clan.
If there had been any disposition in the family to treat their fate ill-
humouredly, it would have been neutralised by the luck which
evidently accompanied the introduction and transmission of this
singular feature. So far, however, from entertaining any grudge or
regret upon the subject, it had been the habit of the family to treat it
as a capital joke, and to be always the first to laugh at it themselves.
So much was this the case, that a wealthy representative of the
family, about a century ago, founded, not an hospital or a school, but
a spoon, which should be handed down from mouth to mouth as a
practical and traditionary jest upon the family feature, and, though
not entailed, be regarded, he hoped, as a thing never to be parted
with for any consideration, unless fate should capriciously contract
the mouths of his descendants to such a degree as to render its use
inconvenient. This elegant symbol, after passing through the hands
of a long train of persons, who had each been more able than another
to use it effectively, came at length into the possession of the
individual now addressing us—a person evidently qualified to do full
justice to the intentions of his ancestor.
It was, therefore, with the apprehension of something awful, that
after the conclusion of the story, and the introduction of supper, I
took a place at the well-spread board. In sitting down, I cast a look at
the Mouth. It was hovering, like a prodigious rainbow, over the
horizon of the table, uncertain where to pitch itself. There was an air
of terrible resolution about it, which made me almost tremble for
what was to ensue. It was evident that we were to have “a scene.”
The Mouth—for so it might be termed par excellence—was
preferred by acclamation to the head of the table,—a distinction
awarded, as I afterwards understood, not so much on account of its
superior greatness, as in consideration of its seniority, though I am
sure it deserved the pas on both accounts. The inferior and junior
mouths all sat down at different distances from the great Mouth, like
satellites round a mighty planet. It uttered a short, gentleman-like
grace, and then began to ask its neighbours what they would have.
Some asked for one thing, some for another, and in a short time all
were served except itself. For its own part it complained of weak
appetite, and expressed a fear that it should not be able to take
anything at all. I could scarcely credit the declaration. It added, in a
singularly prim tone of voice, that, for its part, it admired the taste of
Beau Tibbs in Goldsmith—“Something nice, and a little will do. I hate
your immense loads of meat; that’s country all over.” Hereupon, I
plucked up courage, and ventured to look at it again. It was still
terrible, though placid. Its expression was that of a fresh and strong
warrior, who hesitates a moment to consider into what part of a thick
battle he shall plunge himself, or what foes he shall select as worthy
of particular attack. Its look belied its word; but again I was thrown
back by its words belying its look. It said to a neighbour of mine, that
it thought it might perhaps manage the half of the tail of one of the
herrings at his elbow, if he would be so kind as carve. Was there ever
such a puzzling mouth! I was obliged again to give credit to words;
yet again was I disappointed. My neighbour thinking it absurd to
mince such a matter as a “Glasgow magistrate,” handed up a whole
one to the chairman. The Mouth received it with a torrent of refusals
and remonstrances, in the midst of which it began to eat, and I heard
it continue to mumble forth expostulations, in a fainter and fainter
tone, at the intervals of bites, for a few seconds; till, behold, the
whole corporate substance of the burghal dignitary had melted away
to a long meagre skeleton! When done, its remonstrances changed
into a wonder how it should have got through so plump a fish; it was
perfectly astonishing; it had never eaten a whole herring in its life
before; it was an unaccountable miracle.
I did not hear the latter sentences of its wonderments; but,
towards the conclusion, heard the word “fowl” distinctly
pronounced. The fowls lying to my hand, I found myself under the
necessity of entering into conference with it, though I felt a mortal
disinclination to look it in the mouth, lest I should betray some
symptom of emotion inconsistent with good manners. Drawing down
my features into a resolute pucker, and mentally vowing I would
speak to it though it should blast me, I cast my eyes slowly and
cautiously towards it, and made inquiry as to its choice of bits. In
return for my interrogation, I received a polite convulsion, intended
for a smile, and a request, out of which I only caught the important
words, “breast” and “wing.” I made haste to execute the order; and,
on handing away the desired viands, received from the mouth
another grateful convulsion, and then, to my great relief, all was
over!
Well, thought I, at this juncture, a herring and a fragment of fowl
are no such great matters; perhaps the Mouth will prove quite a
natural mouth after all. In brief space, however, the chairman’s plate
was announced as again empty; and I heard it receive, discuss, and
answer various proposals of replenishment made to it by its more
immediate neighbours. I thought I should escape; but no—the fowl
was really so good that it thought it would trouble me for another
breast, if I would be so kind, &c. I was of course obliged to look at it
again, in order to receive its request in proper form; when neglecting
this time my former preparations of face, I had nearly committed
myself by looking it full in the mouth with my eyes wide open, and
without having screwed my facial muscles into their former resolute
astringency. However, instantly apprehending the amount of its
demands, my glance at the Mouth fortunately required to be only
momentary, and I found immediate relief from all danger in the
ensuing business of carving. Yet even that glance was in itself a
dreadful trial—it sufficed to inform me that the Mouth was now more
terrible than before—that there was a fearful vivacity about it, a
promptitude, an alacrity, and energy, which it did not formerly
exhibit. Should this increase, thought I, it will soon be truly dreadful.
I handed up a whole fowl to it, in a sort of desperation. It made no
remonstrances, as in the case of the herring, at the abundance of my
offering. So far from that, it seemed to forgive my disobedience with
the utmost goodwill; received the fowl, dispatched it with silence and
celerity, and then began to look abroad for further prey. Indeed, it
now began to crack jokes upon itself—a sportive species of suicide. It
spoke of the spoon; lamented that, after all, there should be no soups
at table whereon it might have exhibited itself; and finally vowed that
it would visit the deficiencies of the supper upon the dessert, even
unto the third and fourth dish of blancmange.
The proprietor of the mouth then laid down the spoon upon the
table, there to lie in readiness till such time as he should find knives
and forks of no farther service—as the Scottish soldiery in former
times used to lay their shields upon the ground while making use of
their spears. I now gave up all hopes of the Mouth observing any
propriety in its future transactions. Having finished my own supper,
I resolved to set myself down to observe all its sayings and doings. Its
placidity was now gone—its air of self-possession lost. New powers
seemed to be every moment developing themselves throughout its
vast form—new and more terrible powers. It was beginning to have a
wild look! It was evident that it was now fleshed—that its naturally
savage disposition, formerly dormant for want of excitement, was
now rising tumultuously within it—that it would soon perform such
deeds as would scare us all!