1. VALUE REPORTING -AN INSIGHT

2. WHAT IS VALUE REPORTING The Value-Reporting model is about broadening corporate reporting to have companies identify and meet analysts’ and investors’ needs for relevant information about value drivers, intangible assets and estimated future cash flows The Value Reporting Revolution clearly explains why corporations must move toward greater transparency

3. TYPES OF VALUE REPORTING Brand Valuation Economic value Added Intellectual Capital & Human Resource Accounting Wealth Creation

4. BRAND VALUATION

5. Evidence of brand value Recognition of value of intangible assets Continuous increase in the gap between companies’ book values and their stock market valuations Sharp increases in premiums above the stock market value that were paid in mergers Management attention has increased to these assets Brand is a special tangible because of the economic impact It influences the choice of customers,employees,investors Brand plays a major role to contribute to shareholder value Eg:Mc donald’s brand accounts for more than 70 percent of shareholder value Brand owning companies can earn huge returns on their capital and grow faster.

6. Brand valuation models Research –based brand equity valuations Purely financially driven approaches The most widely used is the brand –earnings- multiple model Eg: if we see infosys brand valuation calculation,follows; Determine brand profits by eliminating the non-brand prfits from the total profits Restate the historical profits at present day values Provide for the remuneration of capital to be used for purposes other than promotion of the brand Adjust for taxes Determine the brand- strength or brand-earnings multiple The valuation based on factors on a scale of 1-100 internally.

7. Infosys brand value-year 2011 201120102009 Profit before interest and tax9,3137,9006,894 Less : Non-brand income1,090891426 Adjusted profit before tax8,2237,0096,468 Inflation factor1.0001.1031.217 Present value of brand profits8,2237,7327,871 Weightage factor321 Weighted average profits8,001–– Remuneration of capital1,284–– Brand-related profits6,717–– Tax2,231–– Brand earnings4,486–– Brand multiple9.03–– Brand value40,509–– (In Crores)

8. ECONOMIC VALUE ADDED

9. Economic Value Added EVA is the difference between after tax operating profit and cost of capital invested by both debt holder and equity holder. – EVA=NOPAT-(Cost of Capital*Capital) where NOPAT is Net Operating Profit after tax Capital is capital invested by both debt holder and equity holder Cost of Capital = Weighted Average of after tax cost of equity and debt

10. NOPAT = EBIT*(1-Tax Rate) WACC = Debt/ (Debt+Equity)*(1-tax rate)*r debt + Equity/(Debt+Equity)*r equity where r debt and r equity are the specific return expected by debt and equity holders and these are calculated by CAPM. r equity = r f + b(r m - r f )

11. List of EVA Disclosure Companies in Indian Corporate Sector TCS INFOSYSTCH HINDUNILVR LT TATASTEEL SATYAMCO MP HEROHOND A DRREDDY OFSS CROMPGRE AV PIRHEALTH CADILAHC GODREJCP LAXMIMACH PIDILITIND MOSERBAER J&KBANK ISPATIND ROLTA FINPIPE UNICHEMLAB SASKEN ORCHIDCHEM THOMASCOOK NUCLEUS NAVNETPUBL EMAMILTD SUNDRMFAST JBCHEPHARM VESUVIUS ICSA TATAMETALI SHASUNCHEM

12. Medium of Disclosure Used for EVA Reporting Medium of Disclosure Used Number of Companies Percentage Director’s Report514 Management Discussion1027 Separate Section1335 Corporate Governance Report25 Additional Information to Shareholders411 Financial Highlights1130 Others like Notes to accounts, Financials statements25 in compliance with Indian GAAP More than one924

13. Areas of EVA-Application in Indian Companies Scope of Use Number of Companies Percentage Business/Financial Performance Measurement1951 Shareholder Value Enhancement1849 Incentive Payments/Equitable Reward System719 Setting targets411 More than one822

14. Extent of EVA Disclosure by Indian Companies ParticularsNumber of EVA ReportingNon Reporting Companies CAPM-based Cost of Equity Calculation1918 EVA (in Rs)343 EVA Ratio1720 EVA Statement Basic2512 EVA Statement With Adjustments235

15. INTELLECTUAL CAPITAL

16. WHAT IS INTELLECTUAL CAPITAL Intellectual capital is the difference in value between tangible assets (physical and financial) and market value. This contrasts with physical and financial forms of capital; all three make up the value of an enterprise. Measuring the real value and the total performance of intellectual capital's components is essential for any corporate head who knows how high the stakes have become for corporate survival in the Knowledge Economy and Information Age. So, the main point is how an organization can affect the firm's stock price using the leverage of intellectual assets.

17. Classification of Intellectual Capital HUMAN CAPITAL STRUCTURAL CAPITAL RELATIONAL CAPITAL

18. The value that the employees of a business provide through the application of skills, know how and expertise. Human capital also encompasses how effectively an organization uses its people resources as measured by creativity and innovation. HUMAN CAPITAL The supportive infrastructure, processes and databases of the organisation that enable human capital to function. Structural capital includes such traditional things as buildings, hardware, software, processes, patents, and trademarks. In addition, structural capital includes such things as the organization’s image, organization, information system, and proprietary databases. STRUCTURAL CAPITAL trademarks, licences, franchises, but also the less definable, such as customer interactions and relationships RELATIONAL CAPITAL

19. HUMAN RESOURCE ACCOUNTING ASSUMPTIONS The people are valuable organizational resources Value of the people is influenced by the Management Style Investors are aware about how is the employee being treated in the organisation. OBJECTIVES To provide the feedback to the managers on the performance. To compute the return on the total assets employed. (Men & Machinery) To enable planning of Manpower.

20. WEALTH CREATION

21.  Wealth is a total amount of economically relevant assets including physical, financial, human, IP asset ( R & D, technical knowhow, trade secret, etc.), and that benefits to society.  To create is to make something new, better, beneficial.  Wealth creation is more than mere possessing wealth  Making money and creation of wealth should go hand in hand

22.  Will shareholders commit same mistake?????  Theory of demand and supply –decisions based on price of a share  Role of shareholders, consumers, government  Role of institutional investors  Should value reporting be mandatory?  Conclusion ------- Highly subjective……  No concept of belongingness

23.  Long term perspective  Increasing the ability to earn  Insure future income  Banks, M&A, debenture holders, public deposits  Case analysis – Sahara’s issue of OFCD – a lesson – on brand value – is that every thing?

24. TEAM MEMBERS – PRABHASH AGARWAL – SHIVANS GUPTA – SRIDHAR HARI BABU PURAM – SHARADA SHINDE – SIDDHANT GOYAL