SBM-NMIMS: COURSE TEACHING PLAN

Assurance of Learning AOL Specific

Course Code 803FI0E036

Course Title Financial Markets and Modelling

Course
Dr. Sachin Mathur, Dr. Hema Gwalani, Dr. Sudhanshu Pani
Instructor/s
Credit Value 3
Programme MBA I Year Trimester III
& Trimester
Pre-requisite Mandatory Bloomberg Market Concepts (BMC) certification with the course

CLO1. To develop an understanding of the functions and structure of the financial markets
and the role of financial institutions. (PLO 2a)
CLO2. To apply alternative methods of firm valuation suited to firm’s characteristics. (PLO
Learning 2b)
Objectives CLO3. To learn the concepts and application of derivatives for hedging a firm’s financial
risks. (PLO 2b)
CLO4. To develop skills in spreadsheet modelling for capital investments, financial
statements forecasting, and valuation. (PLO 2c)

Upon completion of this course students will be able to:

Learning 1. Appreciate how financial markets and institutions function
Outcomes 2. Understand the basic business model of a bank
(Must be 3. Decide how to hedge financial risks of a firm
connected to 4. Value firms by choosing appropriate methods suited to the firm’s characteristics
Learning 5. Use spreadsheet models for financial analysis, capital budgeting and business valuation
Objectives) 6. Apply spreadsheet models to support decision making under uncertainty

This is an intermediate level course in finance, consolidating the learnings from the basic
courses in accounting and corporate finance, and strengthening the foundations for advanced
level finance courses and internships. It is meant to provide an understanding of financial
Course markets and institutions, financial market instruments and firm valuation. Hands-on sessions
Description on financial spreadsheet modelling aim to supplement the course with emphasis on skill-
building in using financial information resources, applying good modelling practices, and
handling real-life uncertainties in financial modelling.

Specific assessment 3 AOL CLO CLO CLO CLO

methods Credit Instruments 1 2 3 4

Class Participation 10 None - - - -

Group Project A: Financial 10 Rubric 10 - - -
Markets and Institutions
Evaluation
Group Project B1: Financial 25 Rubric - - - 25
Pattern
Forecasting Model
Group Project B2: Valuation 15 Rubric - - - 15
Model
Final Exam 40 Embedded 10 15 15 -
Questions
Total 100 20 15 15 40
Sessions Topics / Sub -topics Pedagogy adopted for class
Chapter detail
engagement
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 / Article Reference / Case Learning Outcomes
Studies session wise
Note: The two modules of the course will run parallelly, one session each per week
Module A: Financial Markets and Valuation
Financial Markets Reading: Economic Survey An introductory discussion of
Financial System 2023-24 Pg 63-69 the framework & structure of
Role of Financial financial markets
Markets & Institutions
A1 Role of Regulations
Structure of Financial LO: How financial markets and
Markets in India institutions allocate financial
resources? Understand the
structure of financial markets
Commercial Banks Financial Statements of Illustrative explanation of a
Business Model of a South Indian Bank bank’s business using financial
Bank statements
A2
LO: Understand the basic
business model of a bank
Equity Market Case (PPT): Nykaa’s IPO Discussion using equity indices
Primary market Problem set on equity and an IPO for illustration
Secondary market indices LO: Understand the basics of
A3
IPO regulation and pricing;
construction and use of stock
market indices
Exchange Rate Chapter 27 (BM): Managing Discussion and Problem
Relationships International Risks (Pg. 730- Solving
Interest rate parity 744, 751-754)
A4 Purchasing power parity Problem Nos. 1-2
LO: To understand forward
Expectations theory
exchange rates, the exchange
rate relationships and their
implications
Exchange Rate Problem Set: Exchange Rate Discussion and Problem
Relationships Relationships Solving
Interest rate parity
A5 Purchasing power parity
LO: To understand forward
Expectations theory
exchange rates, the exchange
rate relationships and their
implications
Company Valuation Case: The Valuation of Ikon Case Discussion
Paints
LO: To discuss basics of firm
A6
Chapter 19 (BM): Financing valuation and assumptions
and valuation (Pg. 510-530) underlying alternative methods

Company Valuation Case: The Valuation of Ikon Case Discussion and Problem
Paints (contd.) Solving
A7 LO: To illustrate estimation of
value using APV, WACC-
FCFF and FCFE methods
Forwards and Futures Chapter 26 (BM): Managing Discussion and Problem
A8 Risk (Pg. 700-709, 721-722) Solving
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 Concepts & application Problem Nos. 1-6, 16
in risk management LO: To be able to explain the
concept of forward and futures
and their application in
managing price risk.
Options Chapter 20 (BM): Discussion and Problem
Concepts & application Understanding Options (Pg. Solving
in risk management 545-561)
LO: To explain the concept of
A9
options and their payoffs,
factors determining option
value and application of option
in hedging.
Hedging Risks using Case: Bhagyodya Stampings Case Discussion
Derivatives
Integrated Case Study LO: To learn the application of
A10 derivatives and to decide
whether to hedge or not hedge
by evaluating alternatives to
hedge currency risk.
Module B. Financial Modelling
Modelling Basics Note and Case Exercises: Class Exercise in Spreadsheets:
Basic rules & good Good Modelling Practices in
B1 Microsoft Excel LO: Learning basic rules of
modelling practices
building an effective model
Modelling logic Case: 212 Degree Class Exercise in Spreadsheets:
Fahrenheit
B2 LO: To understand practice
Revenue model of a start-up, steps in applying basic
break-even analysis modelling logic for a start up
Financial Statement MRF Tyres: Financial Class Exercise in Spreadsheets:
Forecasting Statement Forecasts (1)
LO:
Modelling layout & 1.To learn and practice
linkages Modelling sequence and
B3
linkages for Financial
Revenue & operating Statement Forecasting
profitability model
2.Preparing the revenue &
operating profit model of a
listed company
Financial Statement Forecasting of the Income In-Class Group Exercise on
Forecasting Statement of the assigned Assigned Company
Revenue & operating company
B4 profit model preparation LO: Preparing the revenue &
operating profit model of a
listed company by applying the
modeling sequence learned.
Financial Statement MRF Tyres: Financial Class Exercise in Spreadsheets:
Forecasting Statement Forecasts (all
B5 three financial statements LO: Forecasting the models for
Three-statement model three financial statements as
(2)
preparation per the modeling sequence and

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 linkages between financial
statements.
Financial Statement Forecasting of Financial In-Class Group Exercise on
Forecasting Statements of the assigned Assigned Company
company
Three statement model LO: Forecasting the models for
B6 preparation three financial statements as
per the modeling sequence and
linkages between financial
statements.
Company Valuation MRF Tyres: DCF Valuation Class Exercise in Spreadsheets:

B7 DCF valuation using LO: Company Valuation of a

listed company and reaching
spreadsheets
the intrinsic value calculation
Company Valuation Intrinsic value calculation of Class Exercise in Spreadsheets:
the assigned company
B8 DCF valuation using LO: Company Valuation of a
listed company and reaching
spreadsheets
the intrinsic value calculation
Modelling Uncertainty Case: Scenario Analysis, Class Exercise in Spreadsheets:
Sensitivity Analysis, Goal
B9 Seek & Monte Carlo LO: Applying tools to analyse
simulation capital investment decisions
under uncertainty
Modelling uncertainty Scenario Analysis, In-Class Group Exercise on
Sensitivity Analysis, Goal Assigned Company
B10 Seek & Monte Carlo
simulation on Assigned LO: Applying tools to analyse
company valuation under
Company
uncertainty

Reading List Text book

and Brealey, R.A., Myers, S. C., Allen F., Edmans A., Mohanty, P. (2023). Principles of
References Corporate Finance. 14th Edition. McGraw Hill Education India (BM)

Course Pack (Electronic/Physical)

Cases, exercises, and other reference material

Prepared by Faculty Team Area & Program chairpersons

Approved by Associate Deans Approved by Dean SBM

Sticker for date of receipt and attachments rubric and project guidelines

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Group Project A: Analysing the IPO of a Bank

Each team will need to analyse the IPO of the given bank. The submission should be done
after Week 3 (the date will be notified in advance).

The analysis should cover:

1. The IPO objectives, process, and outcome as well as the analysis of the listing day and
long-term post-issue share performance.
2. Business and financial analysis of the bank

Rubric for Group Project A

IPO Process and Outcome Financial Analysis of Bank
5 marks (CLO 1) 5 marks (CLO 1)
*Succinct description of the IPO *Proper description of the business
process profile of the bank
*Summarising the objectives, *Appropriate analysis of the financial
outcomes and use of issue proceeds performance of the bank.
*Accurate measurement and analysis of
the listing day and post-issue returns
Levels: Exemplary (80% and above), Satisfactory (50% to Below 80%)

Submissions with high similarity and delayed submissions will not be accepted.

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Group Projects B1 and B2: Financial Modelling
The two group projects involve preparing detailed financial model, financial statement projections,
discounted cash flow valuation model and applying uncertainty modelling tools.

Each team will need to work on a listed company and make 2 submissions:
1. Group project B1 (25 marks):
Financial model and detailed financial statement projections for the company – Submission
after Week 6 (dates will be notified in advance). The detailed financial statement projections
model should include apart from the three financial statements, a revenue model and where
applicable a debt schedule. The forecasts should be prepared for at least 5 years.

2. Group project B2 (15 marks):

Discounted cash flow valuation & uncertainty model – Submission after Week 10 (dates will
be notified in advance). The discounted cash flow valuation model would involve estimating
the free cash flows, the terminal value and the cost of capital as intermediate steps in
estimating the value of the firm. The model should be accompanied by scenario analysis,
sensitivity analysis, and Monte Carlo simulation. It is mandatory to use reliable databases for
company financial statements (CMIE Prowess/ Capitaline) and for valuation inputs
(Bloomberg).

Rubric for Group Project B1

Financial model of the Financial model of the Financial Statement
business - Modelling logic business - Good modelling Forecasts
practices
10 marks (CLO 4) 5 marks (CLO 4) 10 marks (CLO 4)
*Identification of revenue, cost *Clearly defined inputs, *Correct worksheet flow
& margin drivers entered only once *Correct linkages
*Economic rationale explained *Transparent, step-wise, *Accuracy
*Rigorous methodology easy to follow processes *Interpretation of results
*Reasonable assumptions *Outputs are easy to access
*Reliable information sources & presentable

Rubric for Group Project B2

Company Valuation Modelling Uncertainty
10 marks (CLO 4) 5 marks (CLO 4)
*Clearly articulated *Use of correct tools
rationale for choices made *Rationale for selection of
for modelling cash flows and key variables to change
cost of capital *Rationale for the range
*Reasonable assumptions used for key variables
*Reliable information *Interpretation of results
sources (Bloomberg)
*Interpretation of results

Levels: Exemplary (80% and above), Satisfactory (50% to Below 80%)

Submissions with high similarity and delayed submissions will not be accepted.

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