can someone please assist me with analysis of this case atudy VAKRANGEE: ANATOMY OF STOCK VALUATION 1 Poga Gupti and Zahid Jamar wrote this case solby to provide matorial for chas discussion. The authors do not intond to iflustrate either oflective or innflloctive handing of a managonial sihution. The authors may have disguised certain names and other idantifying information to protect confidentilith. This publication may not be transmitted, pholocopied, digitinod, or othorwise reproduced in any form or by any moans without the pormissian of the copynight holder. Reproduction of this material is not covered under autherization by any reproduction rights organization. To arder copies or nequest pemission to reproduce materials, contact Ney Pubbishing. Avey Business School, Westem Cogyright 92020, Ney Business School Foundation Vorsion: 20200703 On April 20, 2018, Priyankar Khandelwal was furious as he watched the stock value from his fund seemingly evaporate right in front of his eyes. Khandelwal, the fund manager at Principal First, had been managing the mid-sized information technology (IT) fund for the previous five years. Khandelwal asked his assistant to put in a sell order to cover his long position 2 in Vakrangee Limited (Vakrangee) at a substantial loss. He had bought the stock in the beginning of October 2017. The stock hit a high in Jamuary 2018 but had subsequently been sliding (see Exhibit 1). In his fund, Khandelwal had allocated a substantial amount to Vakrangee in the initial investment. Based on the current market price of the stock, there was a net loss of 169 million 3 and a loss of 592 million unrealized from the top for the fund. 4 This loss caused the net asset value of the fund to fall by 35 per cent year to date, because Khandelwal had not hedged his position. Khandelwal's clients were irate, and more than 25 per cent of his firm's investors had withdrawn their money from the fund. Principal First had also reprimanded him and put him on notice. Khandelwal wondered where he went wrong in his analysis of Vakrangee. He had done the valuation exercise himself, checked and cross-checked his assumptions, looked at industry and credit reports, and had found it to be a good stock with good future prospects. What had he missed? What could he have done better? PRINCIPAL FIRST Principal First was a Mumbai-based boutique investment management and investment advisory firm. The investment objective of the firm was to deliver notable risk-adjusted retums consistently while ensuring capital preservation. The firm was founded in 2005 and had been an carly investor in the Indian alternative 'This case was awarded an honourable mention in the the ISB-lvey Global Case Compettion 2018. The prize was sponsored by ISB. 2 A long position was the buying of a stock, commodity, or currency with the expectation that it (would] rise in value; "Long Position (Long)," Investopedia, March 20, 2020, accessed April 6, 2010, www. investopedia.com/terms/Vi.

1. can someone please assist me with analysis of this case atudy
VAKRANGEE: ANATOMY OF STOCK VALUATION 1 Poga Gupti and Zahid Jamar wrote this
case solby to provide matorial for chas discussion. The authors do not intond to iflustrate either
oflective or innflloctive handing of a managonial sihution. The authors may have disguised certain
names and other idantifying information to protect confidentilith. This publication may not be
transmitted, pholocopied, digitinod, or othorwise reproduced in any form or by any moans without
the pormissian of the copynight holder. Reproduction of this material is not covered under
autherization by any reproduction rights organization. To arder copies or nequest pemission to
reproduce materials, contact Ney Pubbishing. Avey Business School, Westem Cogyright 92020,
Ney Business School Foundation Vorsion: 20200703 On April 20, 2018, Priyankar Khandelwal
was furious as he watched the stock value from his fund seemingly evaporate right in front of his
eyes. Khandelwal, the fund manager at Principal First, had been managing the mid-sized
information technology (IT) fund for the previous five years. Khandelwal asked his assistant to put
in a sell order to cover his long position 2 in Vakrangee Limited (Vakrangee) at a substantial loss.
He had bought the stock in the beginning of October 2017. The stock hit a high in Jamuary 2018
but had subsequently been sliding (see Exhibit 1). In his fund, Khandelwal had allocated a
substantial amount to Vakrangee in the initial investment. Based on the current market price of the
stock, there was a net loss of 169 million 3 and a loss of 592 million unrealized from the top for the
fund. 4 This loss caused the net asset value of the fund to fall by 35 per cent year to date,
because Khandelwal had not hedged his position. Khandelwal's clients were irate, and more than
25 per cent of his firm's investors had withdrawn their money from the fund. Principal First had
also reprimanded him and put him on notice. Khandelwal wondered where he went wrong in his
analysis of Vakrangee. He had done the valuation exercise himself, checked and cross-checked
his assumptions, looked at industry and credit reports, and had found it to be a good stock with
good future prospects. What had he missed? What could he have done better? PRINCIPAL
FIRST Principal First was a Mumbai-based boutique investment management and investment
advisory firm. The investment objective of the firm was to deliver notable risk-adjusted retums
consistently while ensuring capital preservation. The firm was founded in 2005 and had been an
carly investor in the Indian alternative 'This case was awarded an honourable mention in the the
ISB-lvey Global Case Compettion 2018. The prize was sponsored by ISB. 2 A long position was
the buying of a stock, commodity, or currency with the expectation that it (would] rise in value;
"Long Position (Long)," Investopedia, March 20, 2020, accessed April 6, 2010, www.
investopedia.com/terms/Viong.asp. = INR = Indian rupee; USS1 = 66.18 on April 20,2018; all
currency amounts are in unless otherwise specified. "An unrealized loss occurred when a stock
decreased after an investor had bought it, but the stock had not yet been sold; "How to Calculate
Unrealized Gain and Loss of Investment Assets," The Motley Fool, November 25, 2016, accessed
April B, 2020, ww. fool.com/knowledge-centerhow-to-calculate-unrealized-gain-and-loss-of-
inves.aspx.funds category. Principal First had endeavoured to provide a credible, trustworthy
alternative platform to global investors who wished to participate in the long-term economic growth
of India. Principal First ran various hedge funds under the alternative platform category that were
focused on investing in Indian companies and Indian stock markets. Hedge funds were alternative

2. investment vehicles that employed aggressive investment strategies to earn higher returns for
their investors. Principal First had a successful track record. As of March 2018, it had more than
10 billion in investments on various funds. Because the firm focused on hedge funds, it was not
subject to some investment regulations that strictly applied to mutual funds, such as the amount of
investment in a particular category, sector, or company. The firm had both sector-specific funds
and general category funds. Principal First followed a mixture of quantitative and qualitative
valuation strategies. On the quantitative side, it looked at discounted cash flow and relative
valuation methodologies. On the qualitative side, the firm followed the philosophy of Michael
Shearn, described in his book The Investment Checklist: The Art of In-Depth Research. 5 The
main idea that Shearn, who owned a private investment firm, discussed in the book was that a
qualitative analysis of a company was necessary to gauge the intrinsic value of its shares (see
Exhibit 2). The qualitative valuation strategy was also built by Motilal Oswal Asset Management
Company (Motilal), an Indian brokerage, fund house, and research firm. Motilal introduced a
unique and focused investing process called QGLP, which discussed four key parameters to
analyze a stock: quality, growth, longevity, and price (see Exhibit 3). PRIYANKAR KHANDELWAL
Khandelwal was a star fund manager at Principal First. He had been managing the IT fund for six
years. Under his management, the fund had consistently outperformed the market, delivering a
five-year compounded annual growth rate (CAGR) of 28 per cent. It had earned him a reputation
as an astute stock evaluator. Khandelwal was a mechanical engineer with a management degree
from a top-rated college in India. He had always been a star performer in academics, and
continued to excel in his career. He had been recruited by Principal First during a campus visit and
hired as a research analyst. He worked for the company for three years as an analyst and had
been a fund manager for the next six years. He was one of the youngest research analysts in the
company to become a fund manager. His average five-year assets under management amounted
to 1.3 billion, which made his fund one of the most sought after in the company's portfolio.
Khandelwal was a staunch believer in fundamental analysis of companies, and thus made his
investment decisions based on the fundamentals of a company. His analysis was based on
financial statement analysis, ratios, and industry cyclicality. At Principal First, he was known as the
"value hawker." Some of his early investments had generated more than 100 per cent returns in
one year. The mid-sized IT fund Khandelwal managed was not a regular fund. It was especially
designed for very aggressive, high-net-worth investors who had a very high-risk appetite. Usually,
funds had a cap on each stock at 5 to 10 per cent of the portfolio value, depending on the fund.
However, this fund allowed fund managers to invest 30 per cent of their portfolio in one stock
without prior approval.2017 REPORT CARD FOR THE FUND AND THE FUND MANAGER The
previous year had been extraordinary for Khandelwal. His fund delivered a CAGR of 38 per cent,
beating all of Principal First's other funds. Khandelwal believed that his strategy of concentrating
funds in selected stocks had paid off well (see Exhibit 4). Investors were very happy and confident
about his fund selection, and Khandelwal received a large bonus for his extraordinary
performance. His exceptional performance in the current quarter was due to his overexposed
position in Vakrangee, a mid-tier IT company. He entered Vakrangee in the beginning of October
2017, when its stock price was 240. When the stock reached a high of 500 in January 2018.
Khandelwal did not liquidate his position, believing that there was still more value in the company.

3. In an analyst meeting regarding his fund in mid-January 2018, Khandelwal stated that he had
chosen Vakrangee based on its low intrinsic valuation. He believed the company still had huge
potential for growth and maintained a target of 2900 for the stock. His research of the company
included collating its history, lines of business, and profitability patterns from the company's annual
financial statements. VAKRANGEE Vakrangee was incorporated in 1990 in Mumbai as a private
limited company and was initially named Vakrangee Investments and Consultancy Private Limited.
It was converted into a public limited company in 1992, and the name of the company was
changed to Vakrangee Limited in 1995. The company successfully went public in 1994.
Vakrangee, which was characterized as a technology company on the stock exchanges, was
listed on both the Bombay Stock Exchange and the National Stock Exchange. When it initially
started operating as a business, Vakrangee was mainly involved in share transfer and bill
discounting activities. Later, the company became involved in the preparation of voter identification
cards for Mumbai and some districts in Gujarat and Rajasthan. It was a reasonably successful
business. The company acted as a merchant banker to many of the successful equity offerings in
the primary market, as well as a sub-broker. The company had also established a software
division, which provided tumkey solutions to customers." The company had a major upturn in its
sales and profitability when it modified its business model in 2010. The company became primarily
an e-governance service provider, before evolving into its curreat iteration as a systems integrator
and IT-enabled solutions provider. The company was engaged in two major business segments:
system integration e-governance and Vakrangee centres (or kendras in Hindi). Under the first
segment, the company executed various mission-mode projects under the National eGovernance
Plan of India, with services including large scale enrolment, print management solutions, and
document management solutions. Vakrangee was also one of the major enrolment agencies for
the Unique Identification Authority of India." "Annual and Quarterty Results," Vakrangee Limied,
accessed April 15, 2020. www.vakrangee,invannual_quarterty_resuli.itml. ;Vakrangee Lid.,
MoneyCantrol, March 20, 2004, accessed May 28, 2018,
mww.moneycontrolcomvcompanyfactsivakrangeeihistoryNSTVS. " lbid. " ICRA Limited,
Vakrangoe Limitod, 1-2, July 14, 2017, accessed May 28, 2018. wwwicra
inRRationale/ShowRationaleReport?ld 37827.