FINANCE TALKS

According to conventional financial theory, the world and its participants are rational human being and strive to maximize their wealth prudently. However, there are many instances where emotion and psychology influence our decisions, causing us to behave in unpredictable or irrational ways. Dean of Wall Street, Mr. Benjamin Graham stated in his popular book “The Intelligent Investor” that markets are more psychological and less logical. Behavioral finance, a relatively new field of finance, attempts to combine behavioral and psychological theory with conventional economics and finance to provide explanations for why people make irrational financial decisions. Here are some of the main behavioral biases that investors need to look out for: Loss-aversion bias : Loss aversion refers to investor's tendency to strongly prefer avoiding losses to acquiring gains. The fear of loss leads to inaction. Studies show that the pain of loss is twice as strong as the pleasure of gain of a simila

Credit rating refers to the rating of the ability of a borrower to service its debt related obligations. These ratings, which are provided by a credit rating agency, are issued at issuer level as well as at individual debt levels. Further, separate ratings are provided for short term and for long term. Although credit rating pertains to debt, it is also of relevance to equity investors as a company can provide returns to equity investors only if the lenders are serviced first. Thus, credit rating provides an investor with the level of financial risk involved and can thus drive the return expectations of investors. Further, going through the historical evolution of credit rating of the company can also provide perspectives on how the management reacts to external feedback. Typically, credit rating reports specify what are the factors that have led to the rating agency conclude on a particular rating. It also specifies what the rating agency considers as key concerns. If a company has wo

Cyclical trends are non-permanent trends that reverse over a period of time. Cyclical trends can be observed at many different levels: Economic cycle : It refers to the typical process an economy takes to go from expansion to recession and back. The stages in economic life cycle can be broken into four phases: (i) Expansion / Boom: The expansion is characterized by increased consumption of goods and services driven by higher income, lower interest rates and high level of consumer confidence. High demand for products results in higher production and higher employment which in turn keeps the momentum on the consumption high. Booming economy increases consumer and business confidence. Thus, businesses plan capacity expansion and consumers plan to acquire long term assets. As businesses and consumers seek loans to fund such expenditure, it results in overall increase in borrowing and thus leads to higher interest rates. Higher consumption also results in high inflation as the economy reac

Angel Investors invest in small startups or entrepreneurs. Often, angel investors are among an entrepreneur's family and friends. The capital angel investors provide may be a one-time investment to help the business propel or an ongoing injection of money to support and carry the company through its difficult early stages. Angel investors provide more favorable terms compared to other lenders, since they usually invest in the entrepreneur starting the business rather than viability of business. Angel investors are focused on helping startups take their first steps, rather than the possible profit that they may get from the business.  Angel investors are also called informal investors, angel funders, private investors, seed investors or business angels. These are affluent individuals who inject capital for startups in exchange for ownership equity or convertible debt. Some angel investors invest through crowdfunding platforms online or build angel investor networks to pool in capita

·       About The Company It is a technology-focussed engineering and design company engaged in turnkey electronics manufacturing services (“EMS”), specialising in precision manufacturing for diverse end-use industries, including industrial appliances, automotive, healthcare, consumer products and IT industries. According to the F&S Report, among the large bouquet of EMS players in India, it is one of the fastest growing Indian-headquartered ESDM companies. The Company has a track record of technical innovation which involves working with the engineering teams of their marquee customers, and over the years, they have evolved to provide integrated services and solutions to OEMs, from the initial product concept stage to volume production through concept co-creation and product realization. Their manufacturing infrastructure enables them to undertake a high mix of products with flexible production volume requirements. They are leaders in high mix low volume product management and a