IndusInd Bank: Residual Income Valuation

Name: IndusInd Bank: Residual Income Valuation (English version)
SKU: 9B16N015

Varun Dawar; Rakesh Arrawatia; Saumya Ranjan Dash; Arit Chaudhury

Product #:9B16N015

Supplier:Ivey

Discipline:Finance, International Business

Setting:India, 2013

Details:Case (PDF) • 7 pages • 2016-05-24

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In early 2013, an analyst at an insurance company was examining whether IndusInd Bank, a mid-size bank in India, would be a good investment for the insurance fund’s equity portfolio. From January 2008 until March 30, 2013, the bank’s stock had tripled under its new management. The analyst wondered whether deploying funds in the bank would yield any significant returns. He decided to use the available financial information and the residual income valuation method to forecast the company’s stock price.

Learning Objectives

This case is suitable for use in an undergraduate or graduate course on valuation. Students are introduced to the use of residual income valuation methodology to identify a potential investment target. Two Microsoft Excel documents are also available: a student spreadsheet and an instructor spreadsheet. After completion of the case, students will be able to do the following:

Use a strengths, weaknesses, opportunities, and threats analysis to determine the opportunities and risks associated with a potential investment target.
Understand the key assumptions and mechanics of the residual income valuation methodology.
Perform a valuation of stocks using the residual income valuation methodology.

IndusInd Bank: Residual Income Valuation

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Learning Objectives