Motilal Oswal Financial Services Ltd Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Motilal Oswal Financial Services Ltd Case Solution

MOFSL has raised capital through VCs. Explain the role of VCs in the company. The case mentions that the VC had the option of putting back their shares to the company at a pre-specified IRR. Explain this feature and explain the role of the IRR assumed. What is an acceptable IRR on this put feature?

The venture capitalists are the small institutions, which buy company’s share at the start of business to support through equity finance, but they do not have access to markets. By giving cash they took position in board and participated in the company’s operations. Normally their expectation is of higher risk because of taking higher risk. Venture capitalists have a history of success; they bring expertise and knowledge in the company. Venture capitalists invest in the company with high potential where they are able to exit through IPO. By money from venture capitalists, the gearing ratio will be low because this will be shown in equity.

IRR is the tool to measure the profitability of the investment. IRR makes the NPV to zero, in simple words when the IRR is greater than cost of capital, the project is profitable. IRR can be compared with other related measure such as bank interest rate and security markets. IRR is the discount rate used to discount the project, as a result, the project gives a NPV of zero. The only difference in NPV and IRR is that NPV gives answers in numbers and IRR gives the answer in percentage. One of the disadvantages of IRR is that it assumes that all cash flows are re-invested at same rate but real world the rates are fluctuating. Another IRR can be used in the calculation of portfolio and stock returns.

Venture capitalists take higher risk than as they expect higher return so the IRR should be more than the market rate, then it will be acceptable to the venture capitalists.

b) Carefully explain the value drivers for MOFSL.State and defend your assumptions about the future of brokerage in India and the value implications for MOFSL?

Value drivers are those activities, which improve the quality or services of the products which the organization is offering; this will give the company a competitive edge. According to the porter’s value chain model, the value driver activities can also be considered as value-added activities. MOFSL offers the research and analytical tools for clients, which includes portfolio planning, idea generating, research reports, as well as account opening online.

Another offering of theirs is multiple delivery options such as mobile app, online desktop trading, and by doing this the customers can easily buy or sell shares easily. Moreover, they offer regular updates regarding the future expected price across the products. They also offer Indian strategy reports and regular updates of the industry to the customers. Another secondary value adding activity of the MOFSL is the social programmes, as over here this action will attract more customers, which would result in increased profits and reputation.

Nowadays, every brokerage firm has adopted the new technologies which MOFSL has adopted in future, I think that the competition will be on the price charged by brokerage firms and quality of services offered. The implications for MOFSL in future are that they have to decide either whether to go for cost reduction or to improve the quality of services, because if MOFSL will improve its services, then it will increase its cost.

They can overcome by launching new technology, which the competitors do not have, due to which this will attract new customers and would be able to pay commission more than their compotators...............

This is just a sample partial case solution. Please place the order on the website to order your own originally done case solution.