Corporate Valuation in the Indian ITeS Sector

Indian Journal of Commerce and management (IJOCAM), 2017

Corporate valuation/business valuation is the process of determining the economic worth of the company based on its business model and external environment and suppurate with reasons and empirical evidence. Valuation is the process of determining the economic value of a business or a company which reflects the performance of the company both its past performance as well as expectation of its future performance. Valuation is used by financial market participants to determine the price they are willing to buy or sell to the effect of sale of business. To study the intrinsic value of the firm’s equity and compare the calculation of intrinsic value with their corresponding market values. The data is analyzed by using financial models like discounted cash flow method, Dividend growth model applied for rubber tyre companies and done comparative studies. The intrinsic value of the firm’s equity compared to the market value. This paper is expected to reveal that how the Indian companies tend to reward better value to the shareholders that are measures the corporate valuation and encourages regulators to initiate further timely reforms to build a strong relationship between those who run the company and the stakeholders.

E+M Ekonomie a Management, 2021

In the past few decades, IC has been viewed as a crucial factor for improved financial performance of IT companies. Globally, the IT industry has shown positive trendlines and the tremendous importance of intangible resources as part of intellectual capital. Intellectual capital per se may not be a novel topic in the IT industry. Nonetheless, this paper focuses on determining which type of intellectual capital is paramount for financial success, which has remained an open puzzle. The aim of this paper is to analyse the human, relational, structural and innovation capital of IT companies and to measure their impact on financial performance. Moreover, the authors have analysed the impact of the intellectual capital elements on several key performance indicators as the most frequently used in these kinds of studies. In order to address this aim, the study collected primary data from 101 respondents – business owners, managers and experts from a rapidly growing IT ecosystem in South-Eas...

Today the intellectual capital is a key factor in company’s profitability. Two major forces have driven the high performance workplace over the past two decades: globalization and increasing in technological changes. In this environment, the intellectual capital and intangible assets is fundamental to success. In the new economic competition, knowledge assets provide a sustainable competitive advantage. The measurement is fundamental to support management decision in allocation investment and investor’s decision regarding the value versus price. In our research we consider a group of Romanian listed companies on Bucharest Stock Exchange and analyze the importance of intangible value into the total market value of the equity. From accounting point of view the importance of intangible assets is very low but from the market evidence was indicated 47% importance of intangible value in total market value for the Romanian listed companies.

Intellectual capital (IC) shows a significantly growing acceptance as a worthy topic of academic investigation and practical implication. The main objective of this study is to determine the monetary value of intellectual capital and to examine whether the joint explanatory power of intellectual capital (IC), book value (BV) and earnings (residual income based on GAAP) for stock price is superior to that of earnings and book value of Indian companies. Additionally, the study aims to investigate the impact of intellectual capital on corporate value creation. This study is conducted on 110 leading knowledge companies operating in India during the period 2007 to 2011. An appropriate method is to be applied for measuring the intellectual capital performance of the company. In our study we extend the Ohlson's (1995) discounted residual income method to rationally measure firm's value by considering intellectual capital (IC). Regression models are examined in order to test the hypotheses included in the proposed conceptual framework. The empirical findings suggest that the efficient management of company's intellectual capital, in addition to earnings and tangible assets, can explain corporate value. Results proved that, in the Indian business context, the development of Intellectual resources seems to be one of the most significant factors of success. This study extends the understanding of the role of intellectual capital in creating corporate value and building sustainable competitive advantages for companies in emerging economies like India and may bring implications for valuation and reporting of intellectual capital.

2016

This paper provides a study concerning IT value substance in IT-based industries. The applied method is a partial adjustment valuation approach, expressing that the real output is part of the preferred output. Thus, there should be a coefficient between both, which shakes the relationship in between, called a speed of adjustment. To examine the method, this theory experimented six Indonesian IT-based firms through two cases: three-factor K, L, and I and two-factor K and L models. Here K = regular capital, L = labour expense, and I = IT spending. The results disclose dissimilarities between the two cases, the three-factor model retains performance ratios superior to the two-factor model. This deviation leads to a comprehension that the value of IT is tangible in improving business performances. Consequently, the performance variables will be material to evaluate the role of IT in the firm. Thus, open for the IT value engineering study to develop further.

Journal of Critical Reviews, 2019

This paper examines the nexus between Intellectual Capital and Value of Information Technology Firms in the Indian Information Technology Industry. Forty-five companies, listed on BSE S&P IT Sector, were taken as a sample, for the purpose of this study. Methodology: Value Added Intellectual Coefficient (VAIC) method, as developed by Pulic (1998) and Granger Causality, was used for the evaluation of intellectual capital and its relationship with the value of sample companies. Findings: The result of the study supports the hypothesis that the value of firms could be explained by the intellectual capital. It is found that there was significant association between intellectual capital and the value of sample firms. Practical Implication: The corporate are to be suggested to concentrate more on human capital efficiency. Besides, the Government officials, policy makers and other stake holders are advised to urge the corporate disclosure practices

Corporate valuation/business valuation is the process of determining the economic worth of the company based on its business model and external environment and suppurate with reasons and empirical evidence. Valuation is the process of determining the economic value of a business or a company which reflects the performance of the company both its past performance as well as expectation of its future performance. Valuation is used by financial market participants to determine the price they are willing to buy or sell to the effect of sale of business. To study the intrinsic value of the firm's equity and compare the calculation of intrinsic value with their corresponding market values. The data is analyzed by using financial models like discounted cash flow method, Dividend growth model applied for rubber tyre companies and done comparative studies. The intrinsic value of the firm's equity compared to the market value. This paper is expected to reveal that how the Indian companies tend to reward better value to the shareholders that are measures the corporate valuation and encourages regulators to initiate further timely reforms to build a strong relationship between those who run the company and the stakeholders.

Journal of Intellectual Capital, 2005

Purpose -This study investigates the adequacy of existing intangible asset models and defines and codifies common principal valuation drivers of intangible assets for use in enterprise balanced scorecard valuation practices of information technology (IT) firms. Design/methodology/approach -Existing intangible asset balance scorecard valuation models and value chain models are evaluated to extract their value components and align them with performance-based activities of the business enterprise to define a common taxonomy of value drivers of intangible assets. Chief executive officers (CEOs), chief finance officers (CFOs) and "other executives" of IT firms validate the taxonomy. Findings -IT firms that use a standard and consistent taxonomy of intangible assets could increase its ability to identify and account for more intangible assets for measurement and valuation. Research limitations/implications -This study is limited to the Washington Metropolitan Area, is a single sector study (IT firms), the target audience is CEOs and CFOs; and emphasis is on the Score Card (SC) type model as classified by Sveiby. Future studies could expand the geographic circumference, the scope to other industry sectors, and the target audience to other decision makers Practical implications -The framework of intangible valuation areas (FIVA) allows a business to identify and link performance measurements/indicators to its intangible value drivers. It supports the capture and subsequent evaluation of leading and lagging indicators in the achievement of a knowledge management strategy. Originality/value -FIVA provides a framework to have command of and access to effective utilization of business resources and knowledge, to develop, sustain and enhance its mission effectiveness and/or competitive advantage.

Investigaciones Europeas de Dirección y Economía de la Empresa, 2014

This article compared the proposal for measuring intangibles of Gu&Lev for the sectors of software (classified in services) and equipment and technology for computing (classified in industry) in the United States. The idea of comparing the sectors arose from the discovery in two previous articles of a discrepancy in the results mainly for the indices proposed by Gu&Lev to measure intangibility and their impact on value creation. The database used was Thomson-Reuters collected in Datastream, with information covering the period from 2001 to 2010. Gu&Lev (2003, 2011) present a proposal that aims to calculate a variable, comprehensive value, which encompasses the tangible and intangible assets of the company and are therefore a proxy for their market value. If this variable explains the market value, it is a solution to a problem that afflicts accountants, which is how to account for intangibles in the balance sheet. They also propose two other variables, one that is a proxy for the flow of intangibles (Intangibles-Driven-Earnings-IDE), and another that is a proxy for the stock of intangibles (Intangible Capital-IC). and CAPEX) presented negative signals, which was unexpected. The correlation between RD and CAPEX is not high; the strong correlation between SGA and RD may have changed the RD signal. The other two models did not present significance for any of the explanatory variables. As mentioned previously, the result of the model that relates the sum of intangibles and tangibles to the company's market value is the most relevant and the hypothesis was corroborated. As concerns the intangibility indices, the results diverge from those found for the software sector. The only indicators that presented explanatory power at 1% were MtCV, ICM and RI; a disappointing result. We did not manage to find any justification for the lack of statistical significance of the other intangibility indices (IDEM, ICOM; ICBV). The comparison with the software sector indicated that intangibility indicators are not repeated when we carry out a sectoral analysis.