Seat No.: Enrolment No.
GUJARAT TECHNOLOGICAL UNIVERSITY
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MBA - SEMESTER 4 - EXAMINATION - SUMMER 2018
Subject Code: 2840601 Date:01/06/2018
Subject Name: INVESTMENT BANKING
Time:02:30 PM To 05:30 PM Total Marks: 70
Instructions:
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- Attempt all questions.
- Make suitable assumptions wherever necessary.
- Figures to the right indicate full marks.
Q.1 (a) 6
- No offer of buy-back shall be made within a period of _ from the date of the closure of the preceding offer of buy-back
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A 1 Year B 6 Month
C 2 Year D 1.5 Year - Which of the following are not the constituents of capital market?
A Issuers, Investors B Intermediaries
C Instruments, Infrastructure D None - A Rs100 par value bond carries a coupon rate of 12% and maturity period of 8 years. Interest is payable semi annually. Value of bond __if required rate of return is 14%.
A 955 B 905
C 805 D 855 - Broad statement of deal structure that investor, proposes to make with the company for given offering in response to offer made by company is known as
A Private equity B Term sheet--- Content provided by FirstRanker.com ---
C Credit Rating D ESOP - A bank offers 8% nominal rate of interest with quarterly compounding. What is effective rate of interest?
A &% B 8.24%
C 9% D 9.24% - Business of floating-and managing pools of public funds or private funds for profits from capital market investment is known as
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A Assets Management B Security Business
C AMCC D CRISIL
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Q.1 (b) Write short note on (any three) 06
- Private Equity
- Assets Reconstruction Companies. (ARC)
- HNI
- QIB
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Q.1 (c) Discuss the “Lock in of Shares” as preventive tool used by regulator 04
Q.2 (a) Discuss conditions for buyback of shares as per Companies Act,2013 07
(b) If Current EPS is 5 per share and current P.E multiple is 8, the current market price would be Rs40. If Present return on net worth is 10%, then compute premium can be paid at the time of buyback and also calculate buy back price. 07
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OR
(b) The following are the balance sheet of D Itd and G Itd as on 31.3.2016 07
| Particulars | D Itd | G Itd |
|---|---|---|
| Liabilities: | ||
| Equity share capital of Rs.10 each | 400000 | 180000 |
| General Reserve | 500000 | 100000 |
| P&L a/c | 300000 | 80000 |
| Debentures | 350000 | |
| Creditors | 200000 | 100000 |
| Bills Payable | 50000 | 40000 |
| 1800000 | 500000 | |
| Assets: | ||
| Fixed assets | 700000 | 300000 |
| Investment | 500000 | |
| Current Assets | 600000 | 200000 |
| 1800000 | 500000 |
The Board of Directors D Itd approved to-takeover G ltd as on 3oth Sept, 2016. Find out the ratio of exchange ‘of shares on the basis of book values.
Q.3 (a) What are the segments of security market? Difference between primary market and secondary market. 07
(b) M co Itd is studying possible acquisition of N co Itd by way of merger. The following data are available in respect of following companies. 07
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| Particulars | M co. Itd | N co. Itd |
|---|---|---|
| Earnings After Tax | 8000000 | 2400000 |
| No of equity shares | 1600000 | 400000 |
| Market price per share | 200 | 160 |
- If merger goes through by exchange of equity and the exchange ratio is based on current market price what is new EPS of M co. Itd.
- Compute number shares to be issued by M co Itd to N co Itd if exchange ratio is calculated based on EPS.
OR
Q.3 (a) Discuss the role of investment banking in primary market. 07
(b) X Itd makes an issue of 10000 shares of Rs10 each at par aggregating to Rs100000. The issue has been underwritten fully by X and Y underwriter to the extent of Rs50000 each. Issue has been closed and following information is available. 07
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Valid subscription received 76500
Received through underwriter X 27500
Received through underwriter Y 34800
Q.4 (a) Examine underwriters devolvement. 07
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(b) Discuss delisting types, process and requirements. 07
Q.5 (a) If the Free Cash Flow to Firm of 8th Year cash flow projection is Rs525 lakh, which is expected to maintain 5% constant growth thereafter and subject to weighted average cost of capital is 12.5%. What is terminal value of Free Cash Flow to Firm. 14
OR
(b) As Government of India has initiated scheme “Start Up India”, “Make In India”, “Digital India”. Discuss how private placement and venture capital can play role for these schemes. 14
Q.5 (a) Justin Itd agrees to acquire Bibers Itd. Based on capitalization of last 3 years profit of Bibbers Itd at an earnings yield of 21%. Calculate value of business on earning yield basis. 07
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| Profit for the year | Rs.in lakhs |
|---|---|
| 2008 | 75 |
| 2009 | 89 |
| 2010 | 82 |
(b) Peperboard Itd is targeting Newsborad Itd. Following details are here. 07
| Particulars | Peperboard Itd | Newsboard Itd |
|---|---|---|
| No of shares | 32000 | 16000 |
| Current Market Price | Rs140 | Rs120 |
| Market Capitalization | 4480000 | 1920000 |
You are required to compute Cost of Merger and Net gain if Peperboard Itd is ready to pay cash of Rs125 per share to Newsboard Itd assuming Zero synergy gain.
OR
Bapa Itd wants to acquire Aapa Itd and has offered swap ratio of 1:2 (0.5 shares for every one share of Aapa ltd). Bapa ltd has profit available to shareholder would be Rs1800000 having six lakh shares outstanding. Bapa Itd somehow managed ‘to_yield price earning multiple 10 time in very cut throat competition-in the market. While on the other hand, Aapa Itd, who is suffering from financial crisis and liquidity crunch and having over burden of interest payment and with high trading on equity co., had earning available to shareholder would only just Rs360000 having one lakh eighty thousand shares outstanding. Because of its non reputation in the market, Aapa Itd incurred price earnings multiple of just 7 times which is-not considered as per industry standard. After considering various avenues for corporate reorganization, Bapa ltd decided to acquire Aapa Itd and restructure entire company and establish itself from saturation point to Introduction-Growth stage of Company life cycle.
Required:
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- The number shares to be issued by Bapa ltd to Aapa Itd for such acquisition.
- Earnings available to Bapa Itd after acquisition. Has Bapa took right decision for acquiring Aapa ltd.
- Determine equivalent EPS of Aapa Itd.
- Determine market capitalization after acquisition.(i.e. Merged Co.)
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