Pidilite Industries: Assessing Credit Quality

Varun Dawar; Debasish Maitra; Arit Chaudhury

Product #:9B16B019

Supplier:Ivey

Discipline:Accounting, International Business

Setting:India, 2015

Details:Case (PDF) • 7 pages • 2016-11-23

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In mid-2015, a credit analyst with a leading investment company was tasked with assessing the overall credit quality of a chemical company that equity analysts had recommended as a long-term investment for his firm’s insurance equity fund. The analyst set out to use various financial parameters—liquidity, working capital, profitability, efficiency, capital structure, and debt servicing. He believed that a fair assessment of credit quality could help capture a firm’s financial health in its entirety, and had a lot to consider as he began his analysis. The case illustrates best practices for credit analysts in assessing a target company’s overall financial risk profile using the company’s publicly available audited financial statements.

Learning Objectives

This case is designed for use in MBA-level courses on credit analysis or advanced accounting, or in banking courses. It promotes discussion of the framework and key components for sound credit analysis in assessing a company’s overall financial risk profile. After completing the case, students should be able to

understand the relevance and framework for undertaking credit quality analysis;
discuss the financial parameters for evaluating a company’s credit quality and overall financial risk profile;
understand and estimate various financial credit ratios;
develop insight into a company’s financial health based on a trend analysis of financial credit ratios; and
estimate the overall credit quality of a target company.

Pidilite Industries: Assessing Credit Quality

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Learning Objectives