NMIMS Case Discussion Topic 4 – Rina's research at Finterest

This topic contains 12 replies, has 4 voices, and was last updated by  Siddharth Jain 3 years, 6 months ago.

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  • #2736
     Abhirup Bhattacharya 
    Keymaster

    Rina Tandon works as a junior research analyst at Finterest Research, one of the leading credit rating agencies. As part of her role, she has been tracking the Oil and gas sector and has to rate the forthcoming IPO of Lily Refineries, one of the strategic clients of Finterest. Lily Refineries is primarily an Oil Marketing Company based in India and its business is split into drilling (15%) and distribution activities(35%), Oil Futures(20%), Forex trading (10%) and Surface transport(20%).

    Rina finds the following information useful in preparing her report.

    [caption id="" align="alignnone" width="574"]Exhibit 1- Oil Revenue Forecast Exhibit 1- Oil Revenue Forecast[/caption]

    (Source: EIA)

     

    Atul, Rina’s supervisor, has already instructed Rina to give a favorable rating to the IPO regardless of her findings. So far, Rina is trying hard to find any other factors that will guide her in the analysis. Can you help her in preparing the report?

    Founder , Ideasmakemarket.com
    MBA Finance, NMIMS, Mumbai 2011-13

    #2880
     Nikhil Bahrani 
    Participant

    Main problem is shortage of information. As Rina tandon is working for finterest which is one of leading credit rating agency so she needs to do a thorough analysis as if investment of people who  invested due to good report turns negative then it can have a disastrous long term effect on co. reputation. She needs various data like past year profits, management ideas, growth, customer relations etc. for proper analysis. As OPEC exports are decreasing oil market is not on a rise so it might be a dangerous investment. If rita thinks rating is not good so she shoukd explain the reasons to her senior and also the effect that wrong rating can have on co. Reputation

     

    #2883
     Arpa Mitra 
    Participant

    The problem here lies in the fact that Rina has already been instructed to prepare a biased report and she is confined to very limited source of information to prepare her report. Before anything else, Rina must make an effort to gather more data such as the sales report of the company, operating margin, net profit of the company. Based on those facts and a comparative analysis with data from previous years can help Rina to arrive at a conclusion on what the proper rating she must assign. Next comes her limited authority in rating legitimately because she has been pre instructed to be biased. Rina must take a stand on this, and try to make her supervisor understand the fact that doing so will impact on the goodwill of Finterest research largely. Customer and other clients if they found out the misguiding reports would definitely not opt for their service anymore. Also it may be risky for investors and others who take an interest in the oil company. thinking on values like retaining customer and goodwill these being longterm and fixed assets of the company, Rina must prepare an authentic report for the client.

    #2884
     Abhirup Bhattacharya 
    Keymaster

    Main problem is shortage of information.

    Problem statement is not framed correctly. This can be devastating as an opening remark as others are bound to object.

    As Rina tandon is working for finterest which is one of leading credit rating agency so she needs to do a thorough analysis as if investment of people who invested due to good report turns negative then it can have a disastrous long term effect on co. reputation.

    Agreed +2… but we could have added a bit on the sector.

    She needs various data like past year profits, management ideas, growth, customer relations etc. for proper analysis.

    Agreed +1.

    As OPEC exports are decreasing oil market is not on a rise so it might be a dangerous investment.

    -2 :negative:   Wrong interpretation

    If rita thinks rating is not good so she shoukd explain the reasons to her senior and also the effect that wrong rating can have on co. Reputation

    Not quite…

    Founder , Ideasmakemarket.com
    MBA Finance, NMIMS, Mumbai 2011-13

    #2885
     Abhirup Bhattacharya 
    Keymaster

    The problem here lies in the fact that Rina has already been instructed to prepare a biased report and she is confined to very limited source of information to prepare her report. Before anything else, Rina must make an effort to gather more data such as the sales report of the company, operating margin, net profit of the company.

    Superb start ! Loved how you formulated it :good:   +2

    Based on those facts and a comparative analysis with data from previous years can help Rina to arrive at a conclusion on what the proper rating she must assign. Next comes her limited authority in rating legitimately because she has been pre instructed to be biased. Rina must take a stand on this, and try to make her supervisor understand the fact that doing so will impact on the goodwill of Finterest research largely.

    Logical approach +1

    Customer and other clients if they found out the misguiding reports would definitely not opt for their service anymore. Also it may be risky for investors and others who take an interest in the oil company. thinking on values like retaining customer and goodwill these being longterm and fixed assets of the company, Rina must prepare an authentic report for the client.

    There is a dimension that Fin professionals should always advocate – Ethics. You missed out on naming the word.

    Founder , Ideasmakemarket.com
    MBA Finance, NMIMS, Mumbai 2011-13

    #2889
     Nikhil Bahrani 
    Participant

    @abhirup bhattacharya what is wrong in interpretation that opec revenues are decresing so oil industry is down

    #2890
     Abhirup Bhattacharya 
    Keymaster

    @abhirup bhattacharya what is wrong in interpretation that opec revenues are decresing so oil industry is down

    Read your earlier response “As OPEC exports are decreasing oil market is not on a rise so it might be a dangerous investment.” – Exports and revenues are not the same.

    Founder , Ideasmakemarket.com
    MBA Finance, NMIMS, Mumbai 2011-13

    #2892
     Nikhil Bahrani 
    Participant

    @abhirup bhattacharya thanx a lot for the help. Yes i agree exports is in physical unit terms and revenue is different. Will take care of it next time

    #2895
     Siddharth Jain 
    Participant

    She needs more information ie expansion plans , investment , future takeovers . Global market conditions , conditions prevailing in oil sector in india and international market . She must find the reasons for the decrease in revenue in exports . She must bot favour the company in anyway and prepare t a honest and  unbiased report

    #2896
     Abhirup Bhattacharya 
    Keymaster

    She needs more information ie expansion plans , investment , future takeovers . Global market conditions , conditions prevailing in oil sector in india and international market .

    Yes, but are you not missing something?

    She must find the reasons for the decrease in revenue in exports . She must bot favour the company in anyway and prepare t a honest and unbiased report

    Not the right way. :negative:

    Founder , Ideasmakemarket.com
    MBA Finance, NMIMS, Mumbai 2011-13

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