Show me the $$

4 minute read

Michaelmas term was an exhilarating journey in Finance for me and I was pleasantly surprised by the rigour and the depth of the conversations that happened in Finance at Oxford.

We kicked off the term with Accountancy, which was handled by Professors Annette Mikes and Richard Barker. I was particularly impressed with sessions on managerial cost accounting. I learnt how cost allocations across different verticals or geographies within a large organisation can impact the motivation and psychological health of the workforce within those verticals – in essence we learnt about the ‘emotional impact’ of accounting.

It would be worth sharing another interesting discussion that happened in class which, I believe, has even more succinct implications in our current times. Apparently, until the early 19th century, concepts like depreciation and intangible assets were not yet invented in accounting parlance. And, hence, the only major costs that were reflected in the books of the accounts of major corporations of those times were labour costs. This fact was then used in the class to explain why the wages in the steel industry in the UK were depressed for a long time. The industry was going through a competitive phase and the only controllable cost that the steel makers could see in their books were labour costs.

No wonder socialists of those times had very strong views against capitalism! This learning has even deeper and more succinct implications in our current times. I firmly believe that innovation in finance and how we report our accounts is fundamental to our sustenance and progress as a society...a society which is grappling with climate change and economic disparities.

I had a fanboy moment when one of my all-time favourite movies – Margin Call was screened in the class as part of a discussion on risk management. The professor did a fabulous job in raising the ethicality of the boardroom discussion that happens in the movie, right before the fire sale. We, as a class, also spent quite some time in the shoes of Kevin Spacey and debated as to how we would have behaved, had we been instructed by the head of the ‘firm’ to conduct one of the fiercest fire sales in the financial history. 

We also discussed in detail what went wrong with risk management in Lehman Brothers and HSBC Bank. I was able to leverage my experiences of having personally investigated both these companies and contributed to a lively discussion in the class.

Ferrari IPO discussion at the Finance Lab

Finance Lab was another major high point of the term for me. John Gilligan is a Picasso when it comes to the art of valuations, deal-making and negotiations. The highlight for me was when Bank of America was invited to one of the lab sessions to discuss one of their marquee deals – IPO of Ferrari. I loved the flow and the structure of the deal and did point out to the BOA representatives about the tax implications of all the structuring employed in the transaction and what they could have done better.

Impact Finance is shaping up in a big way in Europe and we did a couple of impact investing cases as well. The one that stood out to me was the investment made by KKR in one of the Spanish edtech companies. We also had Actis, Lakestar and GIC come and discuss their investment philosophies and strategies, which made for a great learning experience. I also had a real-time experience of investment banking and what it takes to be on the trading floor. I discovered that I am very good at it, but that is a story for some other day.

It was also a great experience working on our assignments for the term. While in Michaelmas Term 1 (MT1), I leveraged my knowledge of accountancy to deep dive into accounts of the French curd maker Danone and made my recommendations to the representatives of the company. In MT2, I drilled down one of the most celebrated tools in modern-day capital allocation – net present value. I took the model apart, questioned the assumptions that go into an NPV model, modelled scenarios where the NPV (net present value) approach was a suboptimal decision-making tool, and finally made my recommendations on what we could do to improve this methodology.

Rajeev with his classmates

At the Oxford Union, I was very fortunate to discuss the redistributive intent of tax policies in welfare states with none other than Arthur Laffer. Laffer was a member of President Reagan’s Economic Policy Advisory Board and popularised the celebrated economic concept of the Laffer Curve, which measures the relationship between tax rates and the amount of tax revenue collected by governments.

Outside of the classroom, I got elected to the position of the Co-Chair of the India-Oxford Business Network. This position will help me be a bridge between the Indian business ecosystem and the School over the coming year.

What I have missed doing is actively engaging with the Blockchain Society at the School which, in my opinion, has been doing fabulous work. I wish I can be more efficient with my schedule to be a part of it.

Looking ahead, Hilary term has some very exciting things on offer. I have Asset Management, Corporate Finance + , Advanced Private Equity and a stock trading competition at Yale lined up for the next couple of months and I can’t wait to get started on them.