Parimal Pharma Ltd. sold its few brands to another pharmaceutical company namely Areva Ltd. for a sum of ₹6,000 crore. Number of options were available to Parimal Pharma Ltd. to deploy these funds to generate profits for

CS Professional · Capital Commodity and Money Market · PYQS · June 2018
Parimal Pharma Ltd. sold its few brands to another pharmaceutical company namely Areva Ltd. for a sum of ₹6,000 crore. Number of options were available to Parimal Pharma Ltd. to deploy these funds to generate profits for the company. A team was constituted to decide and finalize the following proposals: (I) ₹2,000 crore shall be invested in the equity of various companies as a strategic partner. (II) ₹1,500 crore shall be used to provide inter-corporate loans as to provide yield of 12%. (III) ₹1,500 crore shall be used to buy back its own equity shares having face value of ₹10 each at a price of ₹3,000 per share (present market price of ₹2,400 per share) being 10% of the paid up equity share capital of the company by way of tender route wherein promoters also intend to participate. Promoters hold 75% equity shares in the company. (IV) ₹500 crore were allocated to a team which will actively participate in capital and commodity market to generate a return of 15%: (vi) Presuming that the activities of this team generates similar kind of profit for 12 months, what shall be the profit/loss in percentage terms on the investment made by this team.

Answer & Explanation:

Proposal IV(d)(vi) - Aggregate Profit/Loss for 12 Months Net Profit or Loss for each activity: Net Profit (from 1(d)(i)) = ₹50,00,000 Net Profit (from 1(d)(ii)) = ₹8,00,000 Net Profit (from 1(d)(iii)) = ₹12,00,000 Net Loss (from 1(d)(iv)) = ₹40,00,000 Net Profit (from 1(d)(v)) = ₹1,41,00,000 Total Profit by Department in One Month: ₹50,00,000 + ₹8,00,000 + ₹12,00,000 - ₹40,00,000 + ₹1,41,00,000 = ₹1,71,00,000 Profit for Total 12 Months: ₹1,71,00,000 x 12 = ₹20,52,00,000 In percentage term on an investment of ₹500 Crores in a year: (₹20,52,00,000 / ₹500,00,00,000) x 100 = 4.104%

Topics: Capital and Commodity Market

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