HBR Review: Managing Shareholder Value - From Top to Bottom

HBR Review Managing for Shareholder Value – From Top to Bottom David L. Wenner and Richard W.LeBer What does being successful mean? It means different things to different people! Swarnali Choudhury Saurabh Ranadive Neetha Joy Sarang Bhutada

Situation ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],06/07/09 Presented by: Saurabh 700 300 200 800 600 1400 900 500 Price of acquiring business Investments in acquired business Dividends Repaid Net Investments PV of Net Investments PV of acquired business Time Value of Net Investments Value Destroyed Shareholder Value Return - Cost of Capital Cost of Capital - Growth = 1 + Positive Economic Profit Stable Earnings Sustainable Growth

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Complexities How do we build SV-driven organizations? 06/07/09 Presented by: Neetha 65 Percentage of total economic value Org ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],11 3 -2 14 5 3 2 -1 100 85 Sector A Sector B Sector C Total Market Value

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Solutions 06/07/09 Presented by: Swarnali CORPORATE OBJECTIVE Shareholder Value Added (SVA) ,[object Object],[object Object],[object Object],[object Object],VALUATION COMPONENTS KEY VALUE DRIVERS KEY MANAGEMENT DECISIONS Cash flow from operations Discount rate Debt Value growth duration ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Cost of capital Operating Investment Financing

[object Object],[object Object],[object Object],[object Object],[object Object],Research on Forbes 15 firms in India Only 4 companies have ‘shareholder value’ embedded in companies’ values Tata group companies did not show a surprise! 06/07/09 Presented by: Sarang Results and Conclusion Sr No Company Industry M/V/Goals 1 Reliance Industries Oil & Gas Operations No 2 Oil & Natural Gas Oil & Gas Operations Yes 3 State Bank of India Group Banking No 4 Indian Oil Oil & Gas Operations No 5 National Thermal Power Utilities No 6 Icici Bank Banking Yes 7 Steel Authority of India Materials No 8 Tata Steel Materials No 9 Tata Consultancy Svcs Business Services & Supplies No 10 Tata Motors Capital Goods No 11 Bharti Airtel Telecommunications Services No 12 Wipro Business Services & Supplies No 13 GAIL (India) Utilities No 14 ITC Food, Drink & Tobacco Yes 15 Infosys Technologies Business Services & Supplies Yes

HBR Review: Managing Shareholder Value - From Top to Bottom

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HBR Review: Managing Shareholder Value - From Top to Bottom