Session on “Angel Investing: Why, Who, and How to Angel Invest” by Ms. Padmaja Ruparel

Speaker: Padmaja Ruparel – Co-founder of Indian Angel Network (IAN), Founding Partner of IAN Fund and Co-chair of Global Business Angel Network (GBAN)

Moderator: Deepak Mundra, CFA – Valuation Services Manager at KP Synergies

Contributed by: Srividhya Venkatesan, CFA

India is at the forefront of the start-up boom, with homegrown brands like Flipkart, Byju’s, Paytm, Ola, etc. competing head-on with their global counterparts. One of the most crucial factors that have helped the start-ups succeed is the backing of investors at the right time –especially the Angel Investors.

This fascinating ecosystem of Angel Investing was covered in a very engaging webinar by Padmaja, who has been at the forefront of the entire start-up ecosystem evolution in India through Indian Angel Network(IAN). In this webinar, she covered the three critical aspects of Angel Investing – the Why, Who, and How.

Evolution of start-ups and their impact

Innovation could be the real engine for creating employment and economic growth in a country. Start-ups challenge the existing setup with innovations, fill in the market gaps, solve customer’s main pain points and create jobs.Furthermore, these start-ups deliver this value rather quickly, with lower capital and in lesser time.

Often when established corporations find innovation and R&D expensive, niche start-ups exhibit better capital efficiency with sharper minds with innovative technologies, with a speed which is unimaginable at large organizations due to bureaucracy. A case in point being,multiple start-ups that are working today on developing in-need solutions like manufacturing economic ventilators for tackling the current pandemic. These start-ups by young entrepreneurs are challenging the established large players and catering to the new challenges of this new world.

India: The booming start-up ecosystem

India is one of the fastest-growing start-up nation. From about 1,000 start-ups in 2004, the count grew to around 7,000 in 2008 and from there to approximately 50,000 by 2019.Some of these start-ups have managed to establish a niche place in their segment and command a billion-dollar valuation.A total of approximately $39 billion in funding has been injected by investors in the Indian start-up ecosystem since 2014.

Besides India, innovation is most prevalent in countries like Luxembourg, Chile, and the US. India is estimated to have around 125 unicorns by 2025 (pre-Covid19 estimate).

So, what makes India one of the fastest-growing start-up hubs in the world?

  • Young country with a median age of 31 for founders (vis-à-vis the late 30s in the US and 40s in Europe)
  • Diverse and large population with varied customer preferences (creating demand for a variety of products and services)
  • Different price points
  • Growing talent base of knowledge workers
  • Opening up of new sectors, demanding innovations like electric vehicles, clean-tech, consumer IoT, biotech to name a few

For these start-ups, success is synergistically linked to capital availability.With initial funding from family-friends and own savings; start-ups look for financial capital for their survival and growth. And that’s where the Angel Investors step in. 

Why do start-ups need Angel Investing?

Angel Investing is the financial kick-start that most start-ups need to begin production or fund their marketing strategy. With limited operational history, they often find it difficult to get traditional bank lending.

With only a prototype ready or limited revenue, Angel Investment is their only viable source of funding. Angel Investors bet their money on the entrepreneur, market size, and the viability of the product while making an investment call.

Angel Investors also provide critical hand-holding, strategic inputs, operational guidance, team mentoring,and global network access that is extremely useful for the start-ups in their initial stages of growth.

Who does Angel Investing?

Angel Investment is an investment in start-ups by strangers, who are betting on the investment proposition and the founder(s)

  • They are very similar to venture capital investment, but typically come in at seed stage
  • Its typically an equity investment done with a significant minority stake
  • It’s a high risk – high return investment
  • Investors look for capital gains and not dividend returns, with a typical Internal Rate of Return (“IRR”) expectation of around 30-40% (there is no standard IRR, it may vary on a case-to-case basis)
  • Typical sweet spot of INR 25 Lac – INR 3 Crore (there is no standard rule on investment size)
  • Done professionally, with proper due diligence, research, and legal documentation

How is Angel Investing done and what structures are used?

Along with the traditional investment classes like real estate, fixed deposits, or public equity, most high net worth individual’s portfolios have started featuring a new asset class – Angel Investment, due to the high return potential. These investors have dispensable capital and a high risk-taking ability.

Angel Investment is the highest risk asset class.On an average 4 out of 10 investments fail, 4 breakeven, and only 1-2 give bumper returns. Hence, investors often follow a risk mitigation and diversification strategy to protect their interests.

They often diversify their portfolio across multiple start-ups operating in varied sectors, geographies, etc. and co-invest with peers,to leverage on the domain expertise of fellow angels and not just the founders.

Angel Investors do proper diligence on the investment proposition before taking an investment call. In evaluating the start-ups, they look for answers to some of the key aspects of the business like:

  • How large is the addressable market?
  • Is it rapidly growing?
  • Who are the key competitors?
  • Is the opportunity arising from market fragmentation or a greenfield opportunity?
  • What is the need for the customer to pay for the product/service?
  • What are the alternative products in use?
  • Execution strategy of the firm
  • Track record of the founder and his/her team
  • Coverage of skills among team members
  • Team retention strategy
  • Customer acquisition cost
  • Risks mitigation strategy
  • Financial performance – historical and projected (both top-line and bottom-line are key)

In evaluating projected financials, they look at aspects like:

  • Have all revenue possibilities been covered in the model?
  • Has there been enough sound and deep research on the business proposition?
  • What is the amount of funding required?
  • What is the valuation expectation?
  • How can the investment be monetized (exit strategy)?
  • What would be the expected term of investment?

There is usually one Lead Angel Investor who leads the due diligence, sits on the Board of the company, and keeps an eye on all critical activities of the start-up, keeping the point of interface alive between the investors and the start-up.

Angel investors eventually make their return when either next-round investors give them an exit or the investee company gets acquired by a strategic investor.

Key Takeaway

Angel Investing is a high-risk, high-return investment route that’s here to stay as (a) risk-taking investors look at alternative medium to multiply their returns; and (b) the start-up ecosystem look at non-traditional funding to scale up their revenue and growth.


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Session on “Practitioners’ Insights: Valuation in Stressed Times “By Ms. Nimisha Pandit, CFA

Speaker : Nimisha Pandit, CFA, Associate Director and Head of Equity Research at Multi-Act Trade & Investments Pvt. Ltd

Moderator: Anil Ghelani, CFA, Vice Chairman, CFA Society India (IAIP) and Senior Vice President, DSP Mutual Fund

Contributed By : Shivani Chopra, CFA

Webinar notes-

Valuation Methods-

  • Conventions of valuation (Market based)
    • Historical valuation- Use of company’s past price multiples
    • Relative valuation – Can be used when historical valuation is not available or relevant. Also, when market participants want to assess the relative expensiveness or cheapness of a company as compared to its peers
  • Normative valuation (Absolute)
    • Discounted Cash Flow (DCF) – Used to estimate company’s true intrinsic value.
    • Net assets valuation – Methods like Replacement cost of assets (RCA), Book value (BV), NAV, etc. are used
  • Which method to choose during distressed times- Use normative /absolute valuation methods:
    • In a trend market either bull or bear market, the historical prices/multiples reflect the current or recent sentiment. So, as long as the market continues to hold that sentiment, historical valuation might be right but once the attitude of investors changes, the historical reference point also changes. The market sentiment has indeed changed post the outbreak of Covid-19, hence its prudent to employ absolute valuation models

Valuation Tools- One size doesn’t fit all

  • Valuation methodology of a company should be chosen given the unique dynamics of that firm. Focus on quality of a company and nature of business-
    • Pay close attention to quality of earnings, cash flows, strong or weak balance sheet, sustainable company advantage, barriers to entry, etc.
    • Check if the company can survive during economic downturn

Classification of companies based on three quality buckets

Companies can be classified as low quality, average quality or high quality.

  • Bucket #1 (Low quality) – Companies suspected to have engaged in accounting manipulations or having untrustworthy management. Red flags could be lack of Free Cash Flows(FCF), poor returns, excessive leverage, suspicious related party transactions and complex structures like lot of subsidiaries, cross holdings, etc. Read more about the quality of earnings – (a) Book titled “Financial Shenanigans” by Howard M. Schilit or (b) Blogs available on CFA institute website and Multi-Act website

All other companies can be placed in remaining two buckets depending upon sustainable competitive advantage like “Economic moat”

  • How to determine if a company has an economic moat or not- seek an answer to the below:
    • “Can a competent and well financed entity enter into this business and compete effectively with the existing players ?”. If the answer is “yes”, then it is a non moat business else it is a moat business
    • Read more about this topic by going through, (a) Warren Buffet’s letters to shareholders, (b) Pat Dorsey’s “The Little Book That Builds Wealth” or (c) Blogs available on Multi-Act website
  • Bucket #2 (Average quality) – Place all non-moat businesses here. They will generate long-term returns less than or equal to cost of capital.
  • Bucket #3 (High quality) – Place all moat businesses here. They will generate long-term returns more than the cost of capital

Valuation and Quality Buckets

The idea behind classifying companies in these buckets is to identify the valuation methods appropriate for each set of companies. One should avoid low quality companies and hence there is no need to conduct a valuation exercise. Use asset based methods to value average quality businesses and income statement based methods to value high quality firms

  • Bucket #1 – Stay away from such companies. If the quality of earnings is poor, no amount of margin of safety is sufficient enough to protect yourself from permanent loss of capital. A case example of Gitanjali Gems was presented. Using a net net valuation method (an approach advocated by Benjamin Graham), we get a value of INR 305 as of 2013. Net net value is computed by deducting all liabilities from current assets and provides a floor value to the equity of the company (since fixed assets and other long term assets are not even considered). At that time, market value of Gitanjali Gems reflected a 25% discount to net net and after one month fell to 75% discount.
  • Bucket #2 – It’s prudent to value non-moat firms based on the assets which they employ. Valuation methods such as Historical P/B, P/ Net net, Adjusted PB, Replacement cost of assets (RCA), Net asset value (NAV), Asset based valuation (ABA), etc
  • Bucket #3 – For high quality businesses, earnings will add value to shareholders, so we should use income statement based valuation methods like DCF, historical multiples such as P/E, P/S, EV/EBIT, etc.
  • Valuation tools- Rather than using fancy elaborative valuation models, one can focus more on quality of business and company dynamics. Also, the principle of mean reversion is used which assumes that a company’s historical performance is a good indicator of its future performance. In other words, future will mirror company’s long term average historical performance
    • The same mean reversion principle is used while deciding cost of capital and a constant discount rate is used over a market cycle. Also, a country wise cost of capital is used. E.g. for India, a 14% nominal rate and a 8% real rate of cost of equity is assumed

Chart1 (1)

Asset Based Normative Valuation methods

  1. Net- net: As discussed before, formula is Current assets – (All ST + LT liabilities). Be extra cautious if a company is available at a discount to its net net value. Probably, the market knows something which you may not. Look through all line items of current assets carefully- Account receivables may be of low quality or inventories may be obsolete
  2. Book value:
    1. Tangible Book value (TBV)= Net wortth- Intangibles
    2. For Banks and NBFCs , we can employ a bearish view by adjusting the formula as Adjusted Book Value = TBV- ( Gross NPAs – Provision for NPAs).In uncertain times, even the assets under the watch list can be deducted
  1. Justified P/B multiple = Normalized ROCE vs Cost of Debt. E.g.

Co A: Avg ROCE = 11%, Cost of Debt = 11%, Justified P/B = 1x

Co B: Avg ROCE = 9%,   Cost of Debt = 11%, Justified P/B = 0.8x (A lower P/B multiple since Avg ROCE< Cost of Debt)

  1. Replacement cost of assets (RCA): This method can be used where capacities of plant & machinery of companies in a sector is standard. Below are the key steps-
    1. Check existing capacity either in annual report or any other source
    2. Get data of latest capital expenditure by companies in the industry
    3. Estimate replacement cost of company’s capacity

CASE STUDY of a sugar company was presented- The firm has a plant with cane crushing capacity of 76,500 tons per day and industry capex data indicates a cost of INR 450,000 per ton. This converts into a value of INR 34,425 million. Using this replacement cost of the primary asset – sugar, we can get total enterprise value (TEV) and equity value. In this instance, the RCA method gives INR 165 as against a book value of INR 66. However, during stressed times, one should be conservative and consider the book value of INR 66 and RCA value of INR 165 can be more appropriate in an optimistic market as some other entity might buy this company rather than setting its own. During normal times, one can also consider market multiples based EV/RCA valuation. Using this approach, we get a range of INR 78 to INR 156 (-1SD to + 1SD)

Earnings Based Absolute Valuation

DCF technique

  • CASE STUDY of an adhesive company having an economic moat was presented. For key points and assumptions, refer to the data below-


  • Focus should be on organic growth while building projections
  • Use of real growth rate and real discount rate
  • DCF model yields a value of INR 455
  • During normal times, a valuation based on P/DCF can also be considered which gives a range of INR 342 to INR 862 (-1SD to + 1SD). But during distressed times, a naïve DCF approach will work best
  • Stress test of DCF value can be performed as well. Considering today’s situation, impact on near time earnings (loss of revenue and supply side constraints) and long term business (change in business practices, impact on competitors and government regulations) should be analyzed
  • The subject company has a defensive business and hence even during a volatile market situation, the overall impact of stress test will not be that severe. As a worst case scenario consider zero FCF generation for the next one year (e.g. for 2021FY due to Covid-19 outbreak) and run the model to check the result. You will notice that the value doesn’t fall significantly. So when the long term growth story of a company is intact, DCF value will just show a minor drop.
  • It’s worth noting that in this case example, ~75% of the value is coming from the terminal value and one may question the effectiveness of the model. In such cases, we can probe the quality of terminal value by using 3TV approach

3TV Approach

Depending upon the valuation drivers of a business, we can have three tranches:

  • Tranche 1 (Asset value): Tranche 1 is the value of the tangible assets( or the value of the regular assets of the company)
  • Tranche 2 (No growth value): Tranche 2 is the value of current earning power (or franchise value from current competitive advantage )
  • Tranche 3 (Total value): Tranche 3 is the value of growth (or ability to protect and grow firm’s competitive advantage)

Going back to our Adhesives company example, Tranche 1 is INR 58, Tranche 2 is INR 109 and Tranche 3 is INR 455 (DCF value). The moot question now is whether you feel comfortable paying a premium of ~ INR 346(Tranche 3- Tranche 2) for sustainable growth value and invest accordingly.

Link to complete video –

Link to session presentation-




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Session on “Corona Financial Crisis – Is This Time Different?” by Dr. Duvvuri Subbarao

Speaker- Dr. Duvvuri Subbarao, Hon. Ex- RBI Governor 

Moderator- Dr. Samiran Chakraborty, Managing Director and Chief Economist, India- Citigroup

Contributed by : CA Mansi Soman, Equity Research Analyst at Alpha Invesco Research

Recently, the CFA Society India organised a webinar wherein they invited Hon. Ex- RBI Governor Dr. Duvvuri Subbarao, to share his views on the coronavirus financial crisis. In this webinar, Dr. Subbarao compared the coronavirus financial crisis with the global financial crisis of 2008-09 and highlighted his views on the impact and response to COVID-19 at the India level.

The key points highlighted by Dr. Subbarao in the video were:

Part A:

Comparison between the Coronavirus Financial Crisis and the Global Financial Crisis

  • The origin of the global financial crisis was a consequence of excessive risk taking in the financial sector i.e. reckless financial engineering that transmitted into the real sector whereas, the Coronavirus financial crisis originated as a consequence of reticence about the pandemic in the real sector which then transmitted to the financial sector.
  • During the global financial crisis, there were financial constraints to work, whereas under the coronavirus financial crisis, the confidence is broken in the real sector thereby, creating constraints to work.
  • Under the global financial crisis, the demand collapsed and eventually dragged down supply whereas in the coronavirus financial crisis, supply chains collapsed and subsequently, independently the demand collapsed.
  • During the global financial crisis, trust of the solution was to inspire confidence in the financial sector whereas in the coronavirus financial crisis, the trust of the solution must be in the real sector that the pandemic will break, subsequent to which the demand will revive.
  • During the global financial crisis, it was very important that financial stability was first restored in the systematically important countries such as US and Europe, which would then transmit to the rest of the world. However, for the coronavirus financial crisis, each country has to deal with the crisis on its own within its borders. However, having said that, no country in the world is safe until every country in the world is.
  • During the global financial crisis, there was a lot of uncertainty about the risk in the financial sector whereas, in the coronavirus financial crisis, there is lot of uncertainty in the real sector. The quantum and level of uncertainty is much deeper and there are too many known unknowns.
  • During the global financial crisis, solution for real and financial sector were in tandem and reinforced each other whereas, the solutions to the coronavirus financial crisis, may have conflicting results in the real and financial sector. For instance, lockdowns may help contain the pandemic but negatively affects the financial sector.
  • During the global financial crisis, the hallmark was the cooperation among the countries and their unity in fighting the crisis. Whereas, today, there is a lot of bitterness amongst countries. In fact, there was some bitterness even prior to the crisis as a result of trade war. However, even though there is probably no global cooperation at the political level, there is significant cooperation between scientific institutions for research in order to find a cure for the pandemic.
  • The recovery from the crisis could be V-shaped or U-shaped, as was the case with other crisis in the past 25 years. However, he also highlighted that the recovery could be W-shaped, if the pandemic spreads further.

Part B:

India level comparison between the Coronavirus Financial Crisis and the Global Financial Crisis

  • Dr. Subbarao highlighted that India entered the coronavirus financial crisis with weaker macroeconomic variables as compared to the global financial crisis considering that there was an economic slowdown. The financial sector was stressed. However, before the global financial crisis, the macroeconomic factors were stronger with India growing at 8-9% before the crisis and the financial sector was safe and sound.
  • During the global financial crisis, there was enough fiscal room for stimulus whereas, today, during the coronavirus financial crisis, the fiscal deficit is already stretched.
  • The only advantage in the current crisis vis-à-vis the coronavirus financial crisis, is that the external sector is better and robust.

Part C:

Response and Lessons from the crisis

  • There has been a lot of debate lately on whether the economy stimulus package announced by the government is enough or not. Today, all governments are facing the conflict of choosing between lives and livelihood. In any case, whatever the decision is, the governments would have to spend more on medical infrastructure, livelihood support and stimulating the economy. As much as we learn from other countries, every country would have to tailor its own response as per their circumstances and strike their own balance between lives and livelihood.
  • The exit from the crisis has to be carefully planned.
  • Communication is of utmost importance. It is important that the governments are transparent while reporting about the situation and at the same time, convey reassurance and confidence.
  • Even as there is restructuring for recovery after the crisis, only the illiquid institutions must be supported and insolvent institutions should be allowed to die so that stronger institutions emerge out of this crisis.

Subsequently, Dr. Subbarao answered some questions about the presentation on various issues such as de-globalisation, chances of inflation or deflation, sovereign ratings etc. On the subject of de-globalisation, he said that while cross-border events and movement would be checked as was the case post the 9/11 attacks, a complete reversal of the globalisation trend is highly improbable.

He mentioned that it is unlikely that a situation of stagflation or deflation would arise. However, inflation is always a concern. He mentioned that even during 2008-09, there was disinflation for sometime but it wasn’t prolonged. His thoughts on the current crisis were that we might most probably encounter an inflation situation.

On the question of sovereign ratings, he said that sovereign debt countries running huge fiscal deficit, must be very careful since investment houses might pull out their investments and create an exodus of capital.

Watch video at –

About the author: Mansi Soman is an Equity Research Analyst at Alpha Invesco Research, Pune. She is a Chartered Accountant and a CFA- Level II Candidate. Prior to working with Alpha Invesco, she was a tax intern with Ernst and Young LLP, Pune. The summary was originally published at





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Session on “Career Insights: Treasury Management” by Ms. Jayna Gandhi, CFA

Speaker: Jayna Gandhi, CFA, Co-founder and Director, Quantmac Capital Solutions Pvt. Ltd

Moderator: Biharilal Deora, CFA, Director, CFA Society India

Contributed By: Vikrant Warudkar, CFA

Webinar notes for session “Career Insights: Treasury Management”

Treasury management is a specialized and coveted role in corporate and financial institutions which gives opportunity to manage huge amounts of money. This type of role gives you job satisfaction with high responsibility and also uplifts one’s esteem. Business model of the organisation, economic environment and below average risk tolerance sets the backdrop for treasury operations.  Treasury structures are dependent on roles like forex and interest rate operations. Role in treasury management rests on the tripod of macroeconomy, capital market structure of the country and industry structure of the organisation. 

Treasuries in India:

Barring a few cash rich debt free companies, mostly there are cash starved companies in India, given the developing nature of the country and the requirement towards huge investment in infrastructure. Hence, majority of treasuries are shouldering responsibilities of fundraising too. Borrowing programs of sovereign government and state governments set benchmark rates for the corporates to borrow from the open market which is difficult for lower rated companies. For cash rich companies, skills of investment and portfolio management are more important.

Treasury Types:

A higher number of opportunities are present in treasuries engaged in both the activities of borrowing and investing (lending) usually prevalent in financial, manufacturing and infrastructure sectors.  Being cash rich, sectors like FMCGs, IT, Pharma, Stock Exchanges, EPFO/Pension and insurance sector offer fewer opportunities, as their treasuries predominantly operate for the investment of surplus funds. Size of Treasuries for cash rich companies ranges from few thousand crores to ~ INR 40,000 crores (TCS). Banks, insurance, oil and gas sector companies also run large amounts of treasuries. In such treasuries, skill set of forex management is also required. In banks, sales side treasury team exists, which try to sell proprietary portfolios in the market to book profit. Bank treasuries offer most of the roles, so the freshers should target bank treasury first.

 Principles and Objectives:

Treasury management stands on principles of safety, liquidity and return. Funds need to be safe, should be available on the specified date and bring in returns. So the manager has to scout for the appropriate investment avenues which satisfy these constraints. This is where the contacts and networking skills are required.

Measurable KRA’s:

Operations in treasury are governed by KRA’s which look for minimisation of the borrowing cost and maximisation of the returns with constraints of liquidity i.e. liability funding and policy framework to have a clean audit report. The operations of the treasury directly impact the return on investment and valuation of the Company. Consistency in the performance is always desired.

The core functions of the treasury unit is to raise funds, currency management, risk management and hedging, and corporate finance by managing cash flows and budgets.

 Currency, Commodity and Forex Management:

Managing the currency risk of an organisation having foreign currency exposure to maximise the return governs the strategy. Moreover, any tactical strategy to take an advantage of the market situation gives edge over competitors. This requires skill sets of choosing the correct hedging/exposure tool (e.g. forwards/future/option/swap) and in-depth understanding of international finance and currency markets. One should have a tab on the factors affecting the currency markets.In companies involved in manufacturing or having exposure to commodities like Reliance and companies financing against gold, commodity hedging is a role of treasury.

 Exposure area:

Fundraising and resource mobilization predominantly operates in three buckets depending on the tenure of the instrument 1) Money market funds up to one year in the form of commercial papers and limits from banks, 2) Short/Medium/Long term funds in the form of bonds ranging from 1 year to 30 years or even perpetual bonds, and 3) Capital in the form of equity.Different regulations are applicable for these different instruments which require compliances. To carry out the operations smoothly the treasury team shall have a very good rapo with financial intermediaries like brokers and investment bankers. The objective is to minimise the cost of the funds being raised. Fundraising from banks requires the data to be arranged in the formats prescribed by banks. For debt market operations credit ratings are important. Other instruments available in the debt markets are debentures, NCDs, basel – III bonds and structured debts.

 Corporate Finance:

Corporate treasury stands on four pillars namely investments, cash flow management, asset liability management and budgeting. Investment committees take decisions on short term, long term and tactical fund investments, which are submitted for approval to the board. Cash flow planning deals with the tradeoff between liquidity and opportunity cost. It makes sure that the funds are available to meet the planned and unplanned out flows. Asset liability function takes care of the duration risk arising out of the difference in the maturities of the funding side and asset side. This is crucial for NBFC’s where GAP analysis is important. This needs to be reported to RBI (regulator) in specified formats. In banks, it takes care of SLR/CRR. The treasury has to plan the budget for the organisation to fund the projects based on the corporate financial principle of IRR/NPV. Budgets for monthly, quarterly, yearly are usually prepared. Budgets need to be submitted to different committees for approval, where negotiations do happen.

Not immune from RISK…

Both financial and non financial risks entail in treasury operations. Financial risk stems from factors like market, liquidity, credit and inflation. Market risk further entails currency, interest rate, commodity and equity. Whereas, non financial risk stems from operational risks arising from day to day operations like fat finger risk where a wrong information is keyed in the system. Externalities pose settlement risk, where trades confirmed are prone to fall short of delivery and get reported as unsettled resulting in the loss of opportunity. Compliance related risk is another non financial risk which requires systems to be updated in response to the frequent regulatory guidelines and new products introduced in the market. Error in designing models, for example assumptions or methods selected for valuation may result in losses.

 Types, Roles, Skills and ….

A typical treasury operates in three sections viz. front office, mid office and back office. Front office deals with decisions in respect to strategy, the mid office is responsible for compliance and risk management whereas the back office looks after audit, accounting, settlement and valuation.The different types of treasuries require different skill sets. A fixed income resource would hardly migrate to Equity as both have different perspectives. Equity looks for upside potential whereas the credit or fixed income looks to protect more down side.

Various roles present different opportunities to move across organisations or sections. Ethics, integrity and trust are the utmost requisites which get verified in reference check. Salaries in three sections are comparatively skewed towards the front office.

Career pyramid:

At the entry level technical skills such as accounting/analytical/financial modelling /commercial are appreciated more.  As one moves up the ladder from the bottom of the pyramid from a junior to senior level, changes in skill set are required from being a specialist to a generalist in order to manage people.

 Hiring the right people:

Preliminary screening is done on the basis of educational qualifications such as CA, ICWA, MBA,etc. Candidates are selected from colleges/campuses or from the open market for entry level. Corporate treasury gives opportunities to internal employees as well. Lateral hiring happens for senior positions. Front office resources are usually rank holders, high quality berries hand picked from premium institutes. Hiring happens by all possible methods and also lateral shift is possible. Good resources are also selected from accounting firms, intermediaries, broking firms and investment banks. In other countries there are roles like outsourced investment officers (OCIO). In these countries money management is outsourced, whereas in India money management is done internally. But the Indian treasuries depend on outside sources for market intelligence. Medium size companies in India have no internal expertise, so they rely on insights provided by experts on boarded by other advisory firms like the big four audit firms.

 Why CFA charterholders may be preferred?

A name with CFA designation is an added advantage. CFA program gives an edge from the perspective of valuation, and exposure to macros. Rigorous academic exposure to portfolio management, and portfolio construction makes good background for roles offered by investment side treasuries. Understanding of currency and forex management has differentiated CFA charterholders from masses. CFA charterholders are well known for equity valuation methodologies, practical considerations, and historical financial statement analysis. They are well versed with financial projections, return on capital metrics, cash flow analysis, capital budgeting and IRR’s. Areas of fixed income strategies, derivative strategies on interest rate and currency are known as well. Apart from CFA program, FRM also gives an opportunity to work in treasury for ALM or in front office.

Want to shift to treasury?

Someone who is willing to join the treasury from other roles, like credit analysts in a bank, can choose a path depending on her interest. One can start from joining course/training programs of FIMMDA/IIB. A treasurer must have an understanding of regulatory aspects of capital markets and sector dynamics. Studying the business model of the dream company would be useful for the treasurer to understand the cash flow management of the target. Knowing, the target company is debt free and having a sizable amount of investment surplus will give an idea about the skill set required. One may join CFA Society membership and start networking with fellow CFA society members who are already in the treasury side or have past experience of the role/industry. Attending relevant conferences and webinars will upgrade the knowledge of the market. One should always look for getting a foot in by giving second priority to the remunerations.

Way forward:

After being a renowned treasurer and knowing nuances of the operations, one would like to look forward to roles demanding more responsibilities. In the past the treasurers have made successfully shouldered responsibilities of positions like CFO, consulting/treasury advisors, fund raising and financial advisors, head of accounting firms etc. They have also made forays in intermediaries and broking firms, and investment banks. There have been lateral shifting opportunities across the industries e.g. from corporate treasury to banks or insurance treasury. There are roles in hedge funds, debt AIFs, and PMSs which require a skill set honed by a treasury veteran.

Link to the webinar-





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End of the Runway: Is Covid19 a watershed moment for startups?

Contributed By : Rajendra Kalur, CFA , Director- CFA Society India

“We can ignore reality but we cannot ignore the consequences of ignoring reality”: Ayn Rand

My attention was drawn to a news item which said that India Nivesh, a newly established discretionary portfolio management service & brokerage outfit to shut shop. To my mind this is just the first of the many such similar reports that are going to come in. The reason is very simple. These are unprecedented times and not many outfits would have modelled this risk. With a global lockdown in place & hardly any operations running, the lack of sales & difficulty of accessing credit would make a lot of businesses unsustainable.

This is despite the fact that financial services industry is highly volatile and is prone to frequent outbreak of crisis like situations. In India we have gone through at least 3 of them in the last dozen years, i.e., one every four years. As Michele Wulcker in her book Gray Rhinos says humans are prone to be optimistic and it is this bias that makes them to ignore the risk despite it showing up in the face.

Currently in my review of business & financial models of start ups I find the same mistakes being committed. Most of these are mere excel extrapolations based on a certain growth rate built around normal operations. Very little recognition is given to the fact that the real world is far removed from the Excel sheets and can’t be modelled on the basis of a linear growth rate. The fact that there are several ways in which disruption can strike one’s business is not woven into the model.

These lessons aren’t recent ones. We have examples from giant ones now which had to almost close down due to sudden & severe events. Businesses like Amazon & Apple too went through such phases. It’s just that they were lucky to have recovered & grown into such gigantic enterprises. In Ben Horowitz’s book “Hard Thing about Hard Things” he writes how he had to go through a harrowing time after presuming that capital is infinite. In India we have seen start-ups being merged with more established entities as they ran out of cash.

While access to credit lines would be welcome in these conditions, a start up would find it difficult to service the debt. Further it’s only a palliative and not a cure. For Startups what’s needed is a more robust modelling methodology that considers extreme events. Peak cashflow requirements need to be calculated with care & projections are made to make the runway long enough till internal accruals are ready to take over.

While many say that predicting these extreme outcomes are difficult, one can still recognise that such events can occur & key to steer a new enterprise from such eventuality lies not in denying the risk. By accepting that these risks lurk in the shadows, one can make the model more robust and create contingencies to tackle them. This would also help possible investors to calculate the trade offs. No purpose would be served by not simulating these scenarios as the enterprise would soon reach the end of the runway leaving the founders as well as their backers disillusioned.

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Session on “CIO’s Insights: Managing uncertainty” by Mr. Navneet Munot, CFA

Speaker: Mr Navneet Munot, CFA,CIO – SBI Mutual Fund

Moderator: Mr Abhishek Loonker, CFA, Director – Ascent Capital

Contributed By: CA Nishit Vyas, Senior Analyst – Deutsche Bank

These are extra-ordinary times and to quote Lenin ‘There are decades when nothing happens and then there are days when decades happen’- these are those days. While we were thinking of conquering Moon and Mars, we didn’t realise that a small virus will jeopardize not only the financial markets but also humanity at large. In the last few days, billions of people have been locked down, approximately USD 15 trillion of wealth has evaporated from the stock markets in the last 1 month, oil saw its biggest ever single day fall, several EM’s are down 40%, credit markets are frozen, volatility has zoomed and even today, we do not know what lies ahead. In the last week alone, India lost approximately USD 12 bn of forex reserves, the largest weekly drop since the Global financial crises. Volatility was at historical lows just a few weeks back, but now volatility for most asset classes is at a multi/all-time high.

Is this a black / grey or a white swan event?

  • Surely not a white swan event.A pandemic of such magnitude is unprecedented where 190 countries are impacted at the same time.
  • The Olympics have been postponed (which were last cancelled in 1944 due to World War II).
  • This is one of those unknown unknowns – we do not know that we do not know (ie: How long will this last, what is the cure, what is its financial impact, when will we return to normalcy).
  • Post Ebola, many individuals including Bill Gates had warned about the risk from such health catastrophes, but we seem to have paid little attention to it.
  • So going forward, a lot more attention needs to go to the healthcare sector

A research paper’s interesting finding:

An interesting research paper published by SSRN shows an interesting phenomenon that happened during the 1918 Flu Pandemic in the US.

Lockdown graph

It said that cities which adopted a lockdown earlier and for longer not only had lower mortality but also grew faster in the medium term. However, it must be noted that today the economies are a lot more interdependent and interconnected, the stages of economic development may vary for countries and the world is much different than it was in 1918.

The supply, demand and oil shock


Central Banks have ensured “YogakshemamVahamyaham” ie: I shall ensure the safety and well-being of my devotees

  • For the past few years the Central banks have helped address geo-political risks, credit risks, excess volatility and helped boost a slowing economy
  • The central banks have lowered interest rates, sold put options and printed money to address the economic problems. As a result, it has encouraged risk seeking behavior and increasing leverage across markets
  • Investments that are made on the basis of machine programs and algo-trading invest in these markets due to its apparent lower VAR (due to artificial lower volatility). The behavioral bias of herd mentality further accentuated this problem
  • Now due to this crisis, the Central Banks are again following the template and cutting interest rates. The US Fed has thus far:
    1. Cut interest rates by 150 bps, now at near 0
    2. Bought back treasuries, corporate bonds, ABS, Cp’s, Money Market MF’s

We are all Keynesian’s now: The fiscal must step up

  • The US is to provide a fiscal stimulus of nearly USD 2 Tn ie: ~10% of GDP
  • Countries are giving wage subsidies, guaranteeing loans, giving tax waivers, making direct cash transfers and Universal basic income might finally be a reality for many countries


  • The short term cost of a fiscal stimulus is near zero but in the long term, the costs might increase due to higher interest rate and inflation.

India and the way forward:

  • Limited fiscal space but enough headroom for monetary stimulus


  • Certain regulatory, judicial and administrative reforms should be implemented to help out certain sectors like real estate, telecom, auto and airlines. Eg: creating a crude oil reserve from our vast forex reserves (~USD 360 Bn), gold monetisation scheme etc.
  • A 1 USD fall in crude leads to USD 1.30 Bn saving for the country but this figure is a bit mis-representative. The benefit gets spread across the government, corporates and the consumers. Lower crude also implies lower remittances from countries exporting crude (due to lower petrodollar proceeds)
  • Looking at all of this, it seems India’s economic growth which was expected to rebound in the coming quarters, is now deferred (and we might have a U shaped recovery)

History doesn’t repeat itself:

  • In 1942, Dow Jones actually bottomed out, before the World War got over (1945) and before the Hiroshima-Nagasaki attacks (1945).
  • In the past 30 years, we have witnessed the coalition governments, Asian crisis (1997), Pokhran nuclear tests leading to sanctions(1998), the attacks of 9/11(2001), global financial crisis (2008) and the oil crash (2016)– but in this time period, Sensex has risen from 400 to 40000 and it is difficult to keep sanity in these times.
  • In these times we need to be cognizant of the illusion of control bias (due to easy availability of information on internet), the loss aversion bias, the recency bias, the bandwagon effect and the confirmation bias.


  • These are extraordinarily challenging times but I have faith in human ingenuity
  • A few centuries ago Mathus said that with the rate of population increase, the world will run out of food – but today, we produce more food than what the world can consume
  • Since the crisis has engulfed the whole world, it is likely that a lot more investment will go in healthcare going forward in form of medications and vaccines
  • The Marshal plan (post the WW 2 in 1948), and India’s LPG reforms (post the BoP crisis in 1991)are evidences that we have weathered such storms in the past and shall do the same again
  • History says that the new sanitary/ sewage systems were built in London and Mumbai after plague hit these cities
  • To all the friends at CFA Society, we may note that Isaac Newton developed calculus at home when Cambridge University was closed due to plague

List of recommended books to read wrt investing in these times:

  • Manias, Panics and Crashes – A history of financial crises.
  • Lords of Finance.
  • Jared diamond guns germs and steel.
  • The cost of capitalism.
  • Fact-full-ness.
  • Against the Gods: The Remarkable Story of Risk.
  • The day the bubble burst.
  • Ascent of money.
  • This Time Is Different: Eight Centuries of Financial Folly
  • When genius failed.

Webinar link:






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Session on “How to avoid common mistakes and uncommon losses” by Mr. Niteen S Dharmawat

Speaker: Niteen S Dharmawat, Co-Founder, Aurum Capital

Contributed By : Ria Agarwal


I have always felt that the best quality of a good speaker is when they can grab the attention of the audience within 30 seconds of coming on stage. This is exactly what distinguished Niteen S Dharmawat. The speaker started his session with trying to understand his audience by asking a simple question, ‘How many of you are active investors?’ This made the speaker connect with everyone in the audience immediately, and was a great way to start the session. While discussing stocks it is unavoidable to name a few companies and rate their performance so the speaker gave a very important disclaimer right at the beginning of his presentation, that nothing said today is a recommendation to/not to invest.

When investing in the markets, it is a difficult task to know which company to put your hard earned money in and which one to avoid. The agenda of our discussion today is going to be in 5 parts, discussing on how to see various steps of investing.

  1. We get tips from our contacts or hear about a stock opportunity from someone or other forms of information, how should we apply the same.
  2. How to do a quick screening and look at the basic numbers to avoid committing major mistakes.
  3. Then we would study a few parameters for an in depth study, from the information we can obtain.
  4. After that we will look into a few case studies that show examples of how mistakes could have been avoided for some scandals reported.
  5. How can delayed gratification work and why is it the most important?

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Some of the most important factors to work on before investing are as below:

  1. Timing the Market

One of the most important features is when to invest and what is more important- time to market or time in the market. Most investors are highly irrational during the bull market and have this misconception that bear markets are not good for investors whereas most of the high-stake investors have earned the most if invested during the bear phase of the market, with due diligence.

A lot of people focus on the returns but forget the time aspect especially when it comes to wealth creation.

2. Classification of your portfolio

As every investor is different, every investor should have their own investment strategy. The portfolio building strategy should keep in mind the type of stocks, the time period of investing(short, medium and long term) and also the number of stocks(shouldn’t be too many so that it is easier to keep track)
Restructuring and reconstitution of portfolio should be done as required.

3. Analysing the Financial Statements

Everyone has a different approach and different variables while understanding the annual reports, below are some of the factors.

  • a) CFO- Gives a better idea of the cash transactions of the company
  • b) Interest paid v/s net profit
  • c) Receivables trend
  • d) Promoters un-pledged holding percentage
  • e) Equity dilution
  • f) CFI and CFF
  • g) Interest to net debt

Depending on the industry there are more and different factors to look into for analysis. Analysing and reading the notes to financial statements can also be a great indicator for understanding the companies working.

4. Studying the CEO and MDA letters

Reading the Management’s Discussion and Analysis present in the annual reports along with any external communications issued by the company gives everyone a lot of insights into the internal workings of the company. The conference calls, presentations, annual reports and news from valid sources are how you can look deeper into the company rather than just their numbers.

5. Corporate Governance practices

Having good corporate governance practices is just as important as returns and sometimes more important for some investors. There are a lot of factors that can be considered for the same including the board of directors of the company (more specifically the independence of the same), the remuneration for independent directors and the overall practices followed by the company.

If you want to know about more factors there is an article solely on the practices of Corporate Governance: –

Finally at the end of the seminar a video was shown on the concept of delayed gratification known as the ‘Marshmallow experiment’. Delayed gratification is a very important concept while investing because as mentioned earlier, since time is more important of a factor than returns while talking about the money you make.

Throughout the seminar the speaker explained all these factors with various case studies and audience interaction that grabbed everyone’s attention. Overall it was a great learning opportunity and I look forward to more such sessions.

Link to session presentation –

Watch video at-


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