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Shiv Nadar University

Learning outcomes: The primary teaching objective is to discuss the capital raising efforts of a firm under financial distress. It also provides supporting data to calculate cost of capital, DuPont/modified DuPont values and Altman’s Z-Score that can appropriately be incorporated into the discussion. Case-B provides information and data of the company’s recent performance and to changes in bankruptcy law in India. Overall, this case study provides ample scope to discuss, understand and provide the solution to the following key corporate finance themes as follows: 1. Analyzing accounting statements and examine potential earnings quality issue. 2. Predicting default and bankruptcy using qualitative analysis, financial ratios, traditional and modified DuPont models and Altman’s Z score model. 3. Examining the capital raising efforts of a distressed firm, which has already defaulted on borrowings. 4. To explore the impact of changes in regulation on the turnaround efforts of the firm as well as on the promoters of the firm. Case overview/synopsis: Since 2005, Amtek Auto moved at a breathtaking speed with the goal of reaching $10bn in sales, from the current level of about $1.2bn. The group had acquired more than a dozen companies spending about Rs.5,000cr. ($850m) during this period primarily through borrowed funds. However, the market and business expansion was not happening as expected. The company’s capacity utilization was just about 40% (approx.) during much of this period. The mounting fixed costs of operation and debt servicing grew to the level of unsustainability, led the firm to default on its borrowing. Now the company had to quickly recapitalize itself to run its operations and retain the premier position in auto component industry. The company and its promoters were considering various methods of debt restructuring, asset sale and further equity infusion. Complexity academic level: Introductory and elective level corporate finance. Supplementary materials: Teaching notes are available for educators only. Subject code: CSS 1: Accounting and Finance. © 2021, Emerald Publishing Limited.

Finance, Accounting and Control

(SME) School of Management and Entrepreneurship

Emerald Emerging Markets Case Studies

Amtek Auto – financing under distress

As financial investors in portfolio companies, venture capital (VC) firms are expected to add value through continuous monitoring and sustained involvement. Such an effort is expected to give VC-backed IPO firms (VC IPOs) an edge over those IPO firms not backed by VCs. We examine such value additions use a comparative analysis of operating and stock performance data of VC IPOs against three groups of non-VC POs. We identified a set of 92 VC IPOs and 182 non VC IPOs. The 182 non-VC IPOs were further subdivided into industry and size groups. While Wilcoxon tests were used to compare the medians of operating and stock performance, panel data regression models were used to establish the impact of VC on those differential performances. We find that the medians of VC IPOs on most operating performance parameters are better than non-VC IPO groups. But the relational tests could not attribute the better performance to VC influence. We conclude that this could be indicative of VCs' superior ability to identify promising ventures and push them toward their maximum potential. This study is one of the pioneering efforts in exploring VC value creation in the Indian context. We also extend the capital market research in accounting to a VC context. © 2015, Institutional Investor, Inc. All rights reserved.

World University root node

Journal of Private Equity

Financial value creation: A comparative study of VC-backed IPOs and non-VC-backed IPOs in India

Finance India

Recent Equity Offerings in Indian Capital Markets: An Analysis

Initial Public Offering (IPO) is a milestone in a corporation's financial strategy. Studies probing this cardinal activity are diverse. While, post–issue stock performance dominates the IPO literature, valuation and pricing and ownership and structuring issues follow later in that order. IPO research found a firm ground in some of the well-established finance theories like signaling theory and capital structure theory. The effect of institutional investors in various aspects of the IPO process is the theme of a relatively new stream of research on public offerings. While most of the studies are done in the context of US, an equally rich set of publications can be found in other contexts too. Unlike who provides the review based on IPO process, this study reviews the literature on ‘IPO as a financial strategy' by integrating the factors like, underwriter selection involving venture capitalist, reducing informational asymmetries and reducing ownership without loosing control.