ABSTRACT
On a chilly December 2019 evening in Ahmedabad, Aarti Chabarria tried to make sense of the pile of data. She joined as an analyst in a transaction advisory group at Trident Capital last summer. Trident was preparing a pitch for Balaji Wafers Pvt. Ltd, (Balaji) on its fundraising options for its pan-India expansion. Aarti had to prepare a note on valuation and financing options for Balaji and submit it to her immediate boss in the next 24 hours. Trident was preparing a pitchbook including valuation and financing options for Balaji's pan-India expansion. Trident, a Mumbai-based investment bank, was involved in advisory services on M&A, fundraising, IPO management, loan syndication, and more. Aarti had collected information on the industry growth rate, competitive landscape, profit margin, cap-ex, and working capital requirements. However, she got stuck on estimating the cost of capital for Balaji, which is a crucial cog-in-the-wheel for her arriving at Balaji wafer's valuation. Aarti recently completed her MBA (Finance) and knew how to calculate the weighted average cost of capital for firms in different industries. However, the tools she learnt required beta and market-cap of the firm, which is not readily available for unlisted firms. She was wondering, how should she go about calculating the cost of capital for a private firm?
