Evaluating Business Finance Options for Dantata's India Project

This report provides a comprehensive analysis of international financial management, focusing on Dantata, an automotive company planning to establish a new manufacturing plant in India. It explores various business finance options, including banking, share stock, private finance, public deposits, IPOs, mergers & acquisitions, and Eurobonds, evaluating their drivers, advantages, disadvantages, and processes. The report also critically assesses potential risks associated with the project's execution, considering sensitivities, foreign currency exchange, and political risks. Furthermore, it offers recommendations, incorporating SMART objectives, to facilitate effective capital raising for the Indian manufacturing plant. The study examines the financial landscape, including the drivers behind each financing option, the advantages and disadvantages, and the steps involved in securing funding, such as the role of banking institutions and the stock market. It highlights the importance of understanding risk factors like credit scores and market fluctuations while navigating the complexities of international business finance.

Running head: INTERNATIONAL BUSINESS
International Business
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Executive Summary
International financial management assists the international organizations in managing the
financial positions in international market through dealing with different foreign currencies,
political environment and market imperfections. The study has discussed the international
financial management of Dantata, which is going to construct its new automobile manufacturing
plants in India. Moreover, the study has discussed and evaluated different available business
finance options for raising adequate capital needed for operating new manufacturing plant in
India. These available business fiancé options are like IPO, equity finance, public deposit,
private finance, bank loans and Eurobond. The study has also critically analyzed the possible
risks for the organization in execution of the project in terms of sensitivities, foreign currency
and political risk. Furthermore, the study has also provided some suitable recommendations
through SMART objectives towards raising adequate capital for executing new manufacturing
plant in India.

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Table of Contents
1.0 Introduction................................................................................................................................4
2.0 Business Finance Options..........................................................................................................6
2.1 Banking Option......................................................................................................................6
2.1.1 Drivers of Banking Options............................................................................................6
2.1.2 Advantage and Disadvantage of Banking Option..........................................................7
2.1.3 Process for Involved in Banking Option........................................................................8
2.2 Share Stock............................................................................................................................8
2.2.1 Drivers for Share Stock..................................................................................................8
2.2.2 Advantage and Disadvantage of Share and Stock........................................................10
2.2.3 Process of Share Stock..................................................................................................10
2.3 Private Finance....................................................................................................................11
2.3.1 Drivers for Private Finance...........................................................................................11
2.3.2 Advantage and Disadvantage of Private Finance.........................................................11
2.3.3 Process Involved in Private Finance.............................................................................12
2.4 Public Deposit......................................................................................................................12
2.4.1 Drivers or Public Deposit.............................................................................................12
2.4.2 Advantage and Disadvantage of Public Deposit..........................................................13
2.4.3 Process Involved in Public Deposit..............................................................................13
2.5 Initial Public Offering (IPO)................................................................................................14

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2.5.1 Driver of Initial Public Offering...................................................................................14
2.5.2 Advantage and Disadvantage.......................................................................................15
2.5.3 Process of IPO..............................................................................................................16
2.6 Merger and Acquisition.......................................................................................................16
2.6.1 Driver of Merger and Acquisition................................................................................16
2.6.2 Advantage and Disadvantage of Merger and Acquisition............................................17
2.6.3 Process of Merger and Acquisition...............................................................................18
2.7 Issuing Eurobond.................................................................................................................18
2.7.1 Drivers for Issuing Eurobond.......................................................................................18
2.7.2 Advantage and Disadvantage of Issuing Eurobond......................................................19
2.7.3 Process of Issuing Eurobond........................................................................................19
3.0 Critical Risk Analysis..............................................................................................................19
3.1 Critical Risk for Project Execution Using Sensitivities.......................................................19
3.2 Critical Risk for Project Execution Using Foreign Exchange.............................................20
3.3 Critical Risk for Project Execution Using Political Risk.....................................................21
4.0 Conclusion...............................................................................................................................22
5.0 Recommendation.....................................................................................................................23
Reference List................................................................................................................................26

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1.0 Introduction
International business defines the business activities, which involve cross-border
transactions of goods and services between two or more than two countries. Due to liberation,
open market and freedom of conducting business, most of the organizations are highly inclined
towards operating business in international markets (Christiaens et al., 2015). In such situation,
financial management is the most important aspect for every internal business organization. The
success of an international business is highly dependent on effective international financial
management. International financial management is extremely important for an international
organization, which helps in trading and making money through exchange of foreign currency
(Cremers et al., 2016). Proper international financial management assists in maintaining the
international organization financially stable through properly dealing with different currency,
different political situation, diversified opportunity and imperfect markets. Such financial
management also contributes in currency derivatives, multi-currency bonds, cross-border stock
listing and international mutual funds.
While considering the international financial management in New Zealand, it can be
found that the organizations of this country are adopting several effective finance options for
proper managing the financial status in international markets. Free trade agreement and open
marker of business have encouraged the organizations in going beyond their domestic boundaries
and operate internationally (Demir & Bahadir, 2014). Moreover, the organizations of this
country adopt alternative paths towards globalizing the cost and availability of capital. They
often issue international bonds as debt investment for raising capital in operating international
business. Apart from that, the organization also utilize equity listing for selling shares to public

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for managing their international financial status through raising capital from the foreign public
for operating international business. On the other hand, the organizations often issue
Euroequity in foreign markets for raising capital from the public. Such options help the
international organizations of New Zealand in effective international financial management.
Figure 1: International Financial Management Options
(Source: Altman et al., 2017)
This study will discuss the international financial management of Dantata, which is an
automotive organization listed on both Australia as well as USA. Now, the organization is going
to construct a new manufacturing plant in India. The study will evaluate and discuss various
business finance options for the organization towards raising capital for constructing the new
manufacturing plants. The study will also provide a critical risk analysis for the organization
through sensitivities, foreign exchange and political risks associated with project execution. At

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last, the study will also provide some recommendation to the organization through SAMRT
objectives towards effectively managing the international financial management for its new
project in India.
2.0 Business Finance Options
2.1 Banking Option
2.1.1 Drivers of Banking Options
Banking can be an effective option for Dantata for financing its new manufacturing
plants in India. In India, the organization can get both options like working capital loans and
funding. According to Alexander et al. (2014), in working capital loans, the Indian banking
institutes offer loans for running one complete cycle of revenue generating operations. On the
other hand, in funding option, the baking institutes of India allow the business organization to
share their business plan, valuation of the business and project report for sanctioning the business
loans. Therefore, Dantata can avail options for two of loan options for establishing their new
manufacturing plant in India. Furthermore, Richards and van Staden, (2015) opined that one
interesting driver for banking options in India is collateral free business loans offered by some
banking institutes. Moreover, some Indian Lending business banks like HDFC, Baroda, Axis and
ICICI have more than 7 to 8 different options for collateral free business loans. In such options,
Dantata can even get loan approval without sharing the inventory of the business.
Stent et al. (2017) pointed out that with the developing economic condition of India, the
business organizations can avail bank loans from the Indian banks even at less interest rate.
Moreover, the average interest rate range for business loans in Indian banks is between 10%-
20%. Therefore, Dantata cab avail adequate business loans with quite less interest rate. On the

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other hand, India is full of banking finance options, where numerous banks provide easy and
flexible business loans options. Moreover, Dantata can easily avail business loans for new
manufacturing plants from the Indian banks like State Bank of India, ICICI Bank, HDFC Bank,
Kotak Business Loan, Tata Capital, Yes Bank and many more.
Figure 1: Banking Options in India with Lower Cost of Funds
(Source: De Jonghe & Öztekin, 2015)
2.1.2 Advantage and Disadvantage of Banking Option
Martínez‐Ferrero and Frías‐Aceituno (2015) pointed out that banking loans are always
available in Indian banks, as the banking institutes must need to keep their depositor’s money
working and earn more interest than the banks pay to its depositors. Therefore, Dantata can avail
their business loans for new manufacturing plants in India whenever required. On the other hand,
Attig and Cleary (2014) opined that borrowing too much amount of business loans can lead to
decreased cash flow for the business. In this way, it can hamper the business success of Dantata
in Indian market. Furthermore, Jiang et al. (2013) opined that the interest generated in business

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bank loans is tax deductible. Therefore, it can help the organization in reducing overall
organizational cost. Furthermore, in case of fix rate loan, the loan servicing payment remains
same throughout the life of the loan. Therefore, it will become easy for Dantata towards
calculating the budget for monthly loan payment. However, in order to get low cost loans,
Dantata must have a good credit score, which can be challenging for it.
2.1.3 Process for Involved in Banking Option
After deciding on the type of banking loans required by the organization, it must know
the scores of the business. Moreover, the organization will need to calculate credit score, time in
business, debt to income, repot on industry risk and report on cash flow. After this, the
organization will need to prepare the loan application package and submit to the concerned
lending bank (Zhang & Elmaghraby, 2014). The documents mostly required with the loan
application form are detailed business plan, financial results and projection and tax return. Based
on this information, the lending bank will sanction the specific business loan and sent a loan
approval letter to the organization. The organization can soon avail the bank loans after
receiving this loan approval letter.
2.2 Share Stock
2.2.1 Drivers for Share Stock
Equity financing can also be an efficient business financing option for Dantata in Indian
market. In such financing option, organizations issue shares, which are mostly offered for sales
towards raising share capital. Share is the indivisible unit of capital, which expresses the
relationship between the shareholder and the corporation (Enqvist et al., 2014). Unlike repaying
the invested amount of the shareholders, the organizations mostly share the amount of profit with

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shareholders in future. Therefore, the more Dantata will be able to sell its share to the investors,
the more it will be able to raise finance for successfully running the new manufacturing plant in
Indian market.
According to Karadag (2015), India is considered to be a strong stock market, where
stock prices are gradually rising and the confidence of the investors is also growing. The
investors’ optimism is also associated with economic boom of Indian market, where the investors
can easily expect profit of a particular industry. In this way, the positive sentiment of the
investors has led to bull market in Indian stock market. Therefore, Dantata can easily sell huge
share or stock to the investors for raising its share capital for new manufacturing plant in Indian
market. On the other hand, Gerschewski and Xiao (2015) opined that wide industry growth of
automobile market and growing economic condition of India can boost the equity financial
options of an organization. The organization can also sell its share to the venture capitalists and
angel investors for raising its share capital. National Stock Exchange represents 62% of the
market capitalization in Indian stock market, which is around US$1.41 trillion (Zaman, 2017).
Bombay Stock Exchange has also grabbed considered amount of Indian stock market, which can
encourage Dantata for equity financing towards raining capital.

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Figure: Rise in Benchmark Stock Exchange in Indian Stock Market
(Source: Ning et al., 2014)
2.2.2 Advantage and Disadvantage of Share and Stock
Lantto (2014) pointed out that organizations have no obligation to make interest payment
or repaying the equity to the initial investment of the investors. Unlike debt capital, equity capital
does not require periodic interest payments and repaying to the borrowing money. Therefore,
Dantata do not have to bother about repaying the investors. However, Kollmann, (2013) opined
that with every share of stock, an organization reduce its ownership stake in its business.
Therefore, Dantata can gradually lose the control on their business in such financing option.
2.2.3 Process of Share Stock
After analyzing the business funding needs, the organization can issue equity shares for
sale to the public. It can issue its shares in Indian stock market both through Bombay Stock
Exchange and National Stock Exchange (Nielsen & Roslender, 2015). After that, the
organization can find the investors like venture capital, angel investors, business owners and
event family and friends. Moreover, the organization will need to gain the confidence of the

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investors in a persuasive way through providing right valuation of the business. The organization
will need to convince the investors through projected business growth and specific intent of
capital. Furthermore, the organization can also require negotiating with the investors in regards
to profit sharing in future.