ponderings & pennings

It has taken me 24 hours to write about the first memorable event that happened here and i am not happy with myself. Need to manage better.

The incident was the farewell given to the passing out batch and it turned out to be better than expected - much better. I am sure the outgoing batch will reserve a few moments of the farewell alongwith many moments of their one year stay here. I can say they had a heartful fun and though they hesitated to let their hair down, they were in form pretty soon. We were at loss for not being able to make much about what they referred to when deriving fun but we could sense that their stay here was eventful. They did narrate a few incidents - hilarious ones and i am sure we too will have a good number of such incidents at the end.

It is debatable to say if it was the end of fun for the outgoing batch or beginning of fun given the rigour and axiety filled course that this is. Likewise we can also debate if it is beginning or the end of fun for our batch.

I took some pictures but since i belong to the school which thinks that internet is too open a forum and allows access to people with all wrong intentions, i hesitate in putting pictures here moreso because these are pictures of others.

Spoiled with tears of nostalgia and above it that i am not in much contact with any of my school mates spare one girl with whom the contact is once in a blue moon.

Anyway, here’s what triggered the tear glands to work:

Received a link to an interview of Mr Sanjiv Agarwal, Partner and National Head, Valuation services, E&Y. You can check the complete interview here

To the question, that EV/EBIDTA is free from interest rate and depreication and hence is better than P/E, Mr Agarwal says that interest rate vary from company to company and hence the comparison is not true.

However, to that i believe that since EBIDTA leaves out interest it may not account for the riskiness in the business. A business’ risk is measured by the premium the market demands from it and it is reflected by the rate of interest being charged to the company. Hence a company that is thought of as risky will pay higher interest rate and hence will have a higher operational cost while a company that is less risky will similarly have a lower operational costs. A riskier company can over a period work diligently to reduce the premium demanded and improve its position vis-a-vis other companies less riskier.

So, i’d rather say that since EBIDTA ignores interest, it is its deficiency and not that of P/E ration which includes everything.