Robinder and I (Team MS15F007) started with a small enterprise. In the beginning we could not even bid, as our available cash was 0,95 Cr., which is smaller than the minimum bid that can be submitted. Therefore we had to raise capital in the beginning. We decided to take debt, because we wanted to report a debt-equity ratio that was not detrimental to our share price. So we started with a ratio of 3:1. The issuance of shares would have been the other possibility. Our strategy was to alternate between issuance of equity and raising debt in order to maintain a good debt-equity ratio and to be able to grow our balance sheet total constantly.
Our strategy was to bid not too high that we can win projects that do not only increase sales but were also efficient in terms of revenues. That was important for us, since we had a small firm and we could only bid for two projects at most. So we really had to minimize the risk of our projects. We could win one out of the two projects we had submitted bids on in the first round. The auction price was the minimum bid price, so we thought it should be a really good deal for us.
In the following rounds we kept on playing the same strategy: constant growth of capital plus winning one additional project in each round. Only in one round we were not able to acquire a project.
We were ranked in the lower midfield throughout the game but ended unfortunately on the 10th rank in the end. In sum we won 4 projects. 3 out of our 4 projects were profitable. We also had 3 profitable rounds out of 5. So we could not really find the mistake that we had made. We had actually been very happy that we won 3 projects at the minimum bid price.
I can only guess that our largest problem was the fact that we were not able to increase our net worth despite winning lucrative projects. We maybe should have bidden more aggressive to win more projects. Since we won approximately only 50% of our bids, the costs of our remaining capital, that we were not able to use, could have been too high.
Me and Gopindra started with a small firm and we couldnt bid for anything with the then cash in our hands = 0.95 cr. So we thought of raising maximum equity as it will provide as chance of raising more in coming rounds. Being a small firm we couldnt choose many projects initially, which was an advantage for us as we could evaluate everything well. In the first round, we found a really nice project, but finding an optimum bid amount was a challenge as we had to place our entire cash for bidding for that project. But we took that risk and raised maximum equity and almost maximum debt, which worked very well for us making us first in the first round. Even second round was good for us as we won everything we bidded for. But since third round, as our company grew and time allotted for each bid decreased, we couldnt evaluate projects properly and we started to loose bids. We almost lost all the projects in last round and our share value dropped from 122 to 84. The initial success encouraged us to proceed with aggressive bidding and in first two rounds we raised maximum equity and debt in the pursuit of growing our firm, this excessive percentage of debts backfired on our share value and since then we maintained the 2:1 ratio. We also did careful calculations to raise the exact amount for bidding using a simple excel sheet, which helped in avoiding instances of negative arbitrage. But losing bids made our calculations useless in the last rounds. We also followed a strategy to raise maximum equity in each round as it increased our capacity to raise capital in upcoming rounds.
We felt that aggressive biding was more seen in the later rounds, where we were bit conservative. Teams were willing to take more risks with more cash in their hands. Careful understanding of project cash flows, careful structuring of capital and ability to guess other's risk taking capacity are the key element to success in winning bids. Sometimes luck too has its role to be play.
My group (Me and Vishnupriya) started with a medium firm. We worked out prior to the game what are the pros and cons of being a small or large firm and how the strategy (i.e. which are the projects to be chosen tentatively) of each should be. As we have 10cr to start off with, we decided to bid for less riskier and high margin projects. Frankly speaking we were stunned on seeing the large number of projects to be evaluated in first round itself. According to our premeditated strategy, we raised capital keeping an eye on the D/E ratio maintaining it in the range 1.5-2 otherwise can have negative impact on the share price. We got a clear idea of what kind of projects are beneficial to be evaluated depending on our amount that can be spent from a list of many projects considering the time constraints. We didn’t have much options earlier as it was a medium firm. Investing in the ‘higher return-lesser riskier’ projects is the trick. We did not prefer aggressive investment in the initial rounds since we have other safer options to increase the share price and net worth of the firm. We managed to win at least 2 bids per round that helped in covering the interest and dividend expenses. Similar is the strategy in the further rounds other than being more aggressive. We could risk being aggressive because we felt we have enough capital to cover the expenses. However being cautious and aggressive simultaneously worked out for us. We bagged 15 bids in total which is a mixture of short, medium and long term projects with short term projects being more. We didn’t really concentrate on increasing the net worth of our firm explicitly. We expected that if share price can be increased by choosing profitable projects, net worth also raises successively. We bid precisely to win accounting for IRR of the project. We were positioned 1st in the fourth round. But we dropped down to 3rd after the final round for which we thought we raised more capital but failed to invest the whole in fruitful projects because of the time constraints could be the reason. Hence the current liabilities are not met with the revenues generated thereby reducing the net worth of the firm. Overall we felt we performed well to maintain the share price above 120rs mark consistently and increasing the net worth to 400cr from 10cr
CE11B091: My group with megha shyam ce11b091 started with a medium firm. As we had less time to make a lot of calculations we decided to keep certain ratios fixed or nearly constant. We had 10 cr in hand so we deided to raise half the equity and some debt to maintain a 66 percent debt ratio. We tried to keep these constant as much as possible. So the cost of capital was nearly fixed. Initially we bidded for many small projects which gave us good share price value and profut percentage. As our net worth grew and rounds started to grow smaller we bidded for 1 medium project. This strategy worked good and we were in the lead for round 2 and 3. Our share price sky rocketed to 177 which was far more than anyone. We thought this was enough and started to concentrate on net worth. We made some errors in the D/E ratio which costed us a lot in the 4th round as we slipped to 4th. Then we chose not to borrow the next round and get the ratios right which could not compensate much and all our past work was wasted. But we ended with 600 crores of net worth starting from 10 crores. So as far as i can see keeping a healthy debt ratio and concentrating on the profit percentage actually helps a lot. So many lots of smaller projects were having positive effects on the share prices. Going for 1 big project also had the risk of loosing the project and having idle capital. Hence i felt that we made much higher bids for the bigger projects. I wish we hadn't made an error with the 4th round, otherwise we could have ended at the top.
CE11B092: As Richi said our share price sky rocketed to Rs.177, it was that round where we put all our capital in one single lot 80cr project with cash flow of 130 cr. We bid it for 95 cr and it paid off. We were in No.1 position in terms of share price for the first three rounds . This was possible because we only targeted single lot – 1yr,2yr projects, keeping our ratios fixed. Even with the multi lot projects, since the cash flows are for the whole project, we found the one lot cash flow and we only bid for one lot. In order to evaluate the projects our WACC was almost fixed at around 9- 10 % as we ensure that our debt is around 67% of total capital. In every round we took debt( always a 3-year debt).This worked out really well. We thought we had enough capital to expand and become large firm. In one round ( third round i guess), the maximum debt that can be taken was some 300 crores and we were surprised looking at that. For a medium firm and that too in 3rd year we got such a huge advantage. We made good use of that limit and ended first after 3rd round . To expand to a large firm we need to increase our present worth and balance the share price. But the 3-year debts started affecting us from the fourth round where we miscalculated the outstanding debt and got our D/E ratios wrong. We tried to make sure that there was no idle capital at the end of every round.But in the final round we were left with some 20 crores of unused capital. This was due to fact that we were searching for projects to put all our money in one lot. We couldn’t find any such projects and we failed in using all our capital. That was a debacle as our share price which touched peaks plunged to Rs.94 at the end. But we ended with a good net present worth and as a result we are 4th overall. The strategy , we should say for a medium sized firm , is simply bidding for short term projects in the beginning with immediate cash flows and no idle capital, then bid aggressively for long term projects when u see ur share price is higher with the ratios being maintained.
Harish (CE11B074) and I had a medium firm in the simulation game. To begin with, we had 10 crores of money in hand. So, we invested in short term projects (1-2 years) which required nominal investment. We did not take large amount of debt/ equity in the beginning. Although there was a positive impact on the share price, our NPV value showed no improvement. After the 2nd round, we took debt and equity in the ratio of 2:1. We accumulated a sum of 60-70 crores and invested in large projects worth 25 crores. We evaluated a few number of projects with the help of excel and went ahead with them if found attractive, ending up bidding for around 3-4 projects in each round. We also relied on lots in Multi lots projects. It was perhaps because of this fact that we won nearly 80% of our bids. However, the Net Present Worth still dwindled. Then, Prof. Thillai Rajan suggested us to increase our NPV by investing in longer term projects to secure our future. This proved to be a plus point in the last two rounds of the game! We invested in a range of projects - short term and long term (6-10 years) projects. Diversification helped to increase our Net Present Worth. Also, we increased our D/E to 3:1 in the last two rounds.
CE11B074: In addition to what Pooja said: Our share price fell from 100 to 94 in first round as we won only 67% of the bids. So, we decided to win the maximum number of bids at optimum amount, along with the idea to keep D/E as 2:1. We won all the bids in the subsequent rounds which resulted in appreciation of share price. It also helped us to safeguard ourselves from negative arbitrage, which we would have otherwise faced if we would have lost the bids. Losing the bids would have kept our raised money stagnant leading to a negative impact on our share price. So, share price is a function of not only D/E ratio but also of growth rate of the firm and percentage of bids won. We evaluated the seemingly attractive projects in excel, noted down the NPV of the chosen ones on paper and compared them. Then we kept them in priority. The project which gave maximum NPV attracted us to take up the multiple lots (2-3 in number), if it had any, instead of investing in a new project. In one round, we thus ended up bidding for 2 multiple lot projects with 3 lots each. To win the bids for which we really had our eyes on, our bidding amount was slightly more than 1.5 times the base price. For example, the bidding price for 10 crore project was set as 15.2 crore. Finally, we were able to increase our NPV with the help of diversification as mentioned by Pooja.
CE11B070: We started as a small firm with about 1 crore minus 5% dividends as cash in hand available for funding. Since the project is time bounded, we had few predetermined rules in terms of debt and equity to be raised as well as the D/E ratio (1.5-2). We raised all the possible shares that we could as this will help us in raising more equity in the future rounds. With about 3.7 crores available for investment, we bid for a project. With the limited cash we could only bid for a single project, but unfortunately we couldn’t win the bid. This led to fall in the firm’s share prices as there is absolutely no revenue generated and the interest and dividend payments had to be done. Though in the real scenario, no payments had to be done as loans are taken only after winning the bids, there is a loss incurred in terms of banks goodwill which indeed is captured here as an additional cost. So the share prices were down by 5.5% at the end of round 1.
The plan for round 2 is to be cautions in selection of projects as there is a lot of cash in hand and there is a risk of share price falling further down in case bids are lost again. Hence in the second round, we bid for a less risky, single 2 year project which we are certain in terms of winning the bid and revenue generation. We won the bid, the revenue is generated as planned and all went well according to plan and yeah, our share prices went to 110.
Here we have decided to bid aggressively for the projects as there is good amount of cash available for bidding and there is a chance of very good revenue generation. We hence bid for 4 projects, all long duration projects which will earn us revenues over 6-10 year period. At the end of this round, we won all the bids that we had placed and have 4 more projects in hand. But, the result was not as expected. There is very less revenue generated, but the amount invested is very high. As a result, the profit after tax went negative indicating the losses incurred. This led to decrease in EPS by 50%, sales by more than 10% and the share prices fell down by 40%.
This is the worst mistake that any firm could do. When all the money is invested in long term projects, the near future will be worst. The firm goes into losses, and there won’t be any money to pay the interests. And this will lead to a much worst scenario where no bank will be willing to give any further loans. Hence you cannot bid for any projects in the next two to three years. Since, the tournament was only for 5 years there isn’t a second chance for us to correct the mistake. The next round was only a waiting game for us, as we had 0 cash to bid. But because of our high net worth we ended up 3rd at the close of 4th round. The same was the case in the next round as well. We couldn’t take any loans. And only very few shares could be issued (0.028 cr.). So the cash available for bidding was only 1.84 crore. Adding to our woes, there is only one project in round 5 which has PLMI of less than 2 crore. We put all the money that we had into that project, but we lost the bid by a very small margin of 0.07crore. And so, D/E ratio of 0 and more dividends to pay further reduced our share price.
The result could have been different had we been a little more cautious in the project selection and bid on at least a single project which gives immediate revue at the end of first year. More effort and thought has to be put in choosing the project more wisely than on working out with bid numbers. And putting the results apart, I personally had enjoyed the activity and learnt very essential things related to project selection and bidding.
Sundeep and I owned a large firm, we had 100 crores for investment so we thought to bid for a large project which was around 200 crores and some small projects for which we took a loan of 190 crores and bid for the projects but unfortunately, we haven’t won any bids the first round so we ended with a huge sum of debts and interests, to compensate for it we had bid for another project which returned 400 crore after two years it took around two rounds for us to get out of the huge liabilities. This episode taught us that large firms attach themselves a huge risk and especially when the debt amount is very high, but still there is a very good chance of bouncing back when your next bids are placed carefully. It took two rounds for us to get comfortable with the bidding process, as in the first year we incurred huge debts and in second we bid for projects which had late returns, initially our strategy was to bid for large projects which had good returns we tried to use only debt as the interest rate was less compared to that of equity. We had to raise equity in round three as all our cash was exhausted, we did bounce back after round three but by then our share price dropped steeply for us to get it back. We placed last in rankings, which was disappointing but gained a good understanding of the process, pros of being a large firm is that we have the capacity to invest in many projects of all ranges, but difficulty comes while choosing the projects as we had to analyze all projects in a very short time and place our bids, and also when bidding for large projects by raising debt , share price drop is something that is difficult to avoid. Overall the experience was good, if given a chance to play again these learning will be useful.
We started as a small firm. In first round, our aim was to maintain/increase the share value. So we raised the debt and equity with D/E between 1.5 and 2. We raised about 4 crore and bid for a single lot project but we lost this bid. In second round, we bid for a single lot project which is a bit less risky and we won the bid which resulted in increase in the share price. In third round, we found multi lot projects which are very clear that we can win the bid. For example, there was a multi lot 10 year project with total of 100 lots and maximum lots that we can bid are 5. As there were only 10 competing groups, it was very clear that we can win the bid and we invested in that project. In this round we bid for 4 projects and we won the bids. As we bid for long term projects, revenues generated in subsequent years were not guaranteed and resulted in lower revenues and share value fell down below 100. Because we raised a lot of debt and there was no cash to pay the debt for the next round, we were not able to raise the debt for 4th round which resulted in bidding for no project. As the D/E was not well maintained our share price fell down. In the fifth round, we were not able to raise the debt. We raised the equity as much as we can and bid for a single lot project, but we lost the bid. We should have bid for many less attractive projects for base value and as many bids that we can instead of bidding for a single project which is very attractive and there is a chance that every one bid for such a project. So that we can increase the net worth at the same time we could have won the bids. We should have bid for some short term projects along with long term projects to survive the firm. Siva Teja Ch. (CE11B072)
Ravi Teja(CE11B079) and I (CE11B080) were alloted a medium firm with a budget of Rs. 10 crores. Our plan was to find small projects which we were quite certain to win. So we decided to look for projects which wouldn't gather everyone's attention and started bidding for them. In the first round we raised both debt and equity with D/E ratio of around 2. With the funds raised we were able to bid for 3 multi-lot projects of which we won 2. We finished fourth in the round. Even if we finished fourth, our share price went down.
From the first round we learned that, bidding for multi-lot projects were safer than single lot projects. So we focused more on multi-lot projects. In the second round also we raised both equity and debt, but we reduced the the amount raised from equity and took more debt. We had enough funds to bid for 2 medium and 1 small project of which we were able to win all. We finished 3rd in the round. We followed the same strategy in the next round, but in spite of winning all the bids, we went down to seventh due to low net worth. This occured because we raised too much debt in order to bid for bigger projects. Even though are share price increased, the net worth came down. We weren't able to identify our mistake and we raised more debts in the next two rounds also and ended up with very low net worth. But we were able to maintain our share price and was in one of the four teams with more than Rs. 100 crore as share price.
During the entire course of the game our objective was to find projects which wouldn't garner as much attention as other projects, but still good, and to bid for them with sufficient amounts so that we win all the projects that we bid for, which was quite useful. But since most of the teams followed the same path and bid only for a few projects they were sure of, competition was less. It would have been better to bid at least for the base value for a larger number of projects. Also we should have kept the debt under control so that our net worth wouldn't have dipped so much.
Gopindra S. Nair (CE11B073) [Part 2]: By 4th year our share price had gone back up above 100 and our rankings improved. We picked the fruits of our aggressive approach in the 2nd year. The large loans from our second year had matured but we had the cash to deal with it. As our company grew larger in size and the time allotted per turn decreased we began to find it difficult to carefully analyse all the projects. In the first year where we had just 1 project to analyse in half an hour, but now we had to analyse around 20 projects in 20 minutes. Of course we ignored many projects at the onset itself if it appeared too risky. But we couldn't only bid for the conspicuously good ones either as others would bid for it aggressively (again in hindsight this might not have been the case as others would also have followed the same logic). We started to get the feeling that the bidding was getting more aggressive.
In the 5th year our share value was at an all time high of 122. I think we became rank 2 or 3. We were proud of our achievement and baffled by the highest ranked share value of 177. We realized that either our bidding was getting poor or the other companies were bidding more aggressively as we had lost some projects in the previous year. It must have been the latter (or both) because there was this one company with a minimum bid of 3Cr and a return of 6Cr or nothing with equal probability for which we bid around 3.6Cr but the winning bid was above 4Cr. But the overall finances of our company was well. We had paid off all our debts and if we played this round properly we might just win the tournament. We raised maximum equity and enough debt so that the correct ratio is maintained. Because of the limited time, we had started to analyse the projects more by intuition than by consulting the excel sheet. But we manage to exhaust all our cash and place the bids.
The game ended and the results were a bit of a shock. Our share value had plummeted to the measly 80s. Our rank had dropped to 5 or 6. We had won none of the projects we bid for the previous year. Something happened in the last year and I don't know what. Nevertheless, bringing up a 1Cr company to a net worth of more than 500Cr in a short span of 5 years is a remarkable achievement.
Johan (CE14D040) and I (MS14D013) started as a small firm. Even after taking debt in round one, we could bid only for few projects. We knew this game is only for five round (year) unlike real life where company expects to exist for infinite time. Our strategy was to bid first two rounds for almost riskless (lowest std dev. & volatility) projects, so that we do not go bankrupt in the beginning it self. In first round we won just one bid but we were at loss as we could not account for multi slot in return, which we corrected from next round. Once our net worth increased after round two, we started bidding for more projects with higher bid. We always bid projects keeping book building method in mind, which says people bidding for maximum slots in a project will be given preference. Upto round 3 we were ranked low eventhough we were bidding carefully. We blamed it to be a small firm, because we were not able to bid aggressively unlike others. In round four and five we put our bet on high value project with higher bid. Here we took risk as instead of going for diversification, we took up at most one or two projects with high return and bid for all slots. And these rounds were game changer for us, as our overall rank moved to second and net worth ranked as one.
Since we ranked highest at the end, it will be difficult for us to find out where we went wrong but if we were medium or large firm, our strategy would have been different and yes, having a small firm is not disadvantage.
We were very happy to see the firm grow from small company to large company (through Book value) towards the end of the game. There were mistakes we committed in the form of having unused capital at the end of levels which was solved as we neared the final stages of the game. The game was a good learning experience and gave us a real life simulation of bidding. During the class discussions after the game, with the statistics presented by Sir, we realised that we could have bid more projects by borrowing more capital. We adopted a strategy of risk free bidding to slowly grow from small firm to large firm.
M.R. Aravindan (MS15D002) and Zubin Nayak (MS14S018)
We started as a large firm with Rs. 100 crore as equity. We were confident that not too many firms would be large and so there will be less competition in bidding for large projects and we had a good chance of winning large projects. Also as competition would be less, we wouldn't have to BID aggressively and end up with what is called as winner's curse.
Unfortunately, we were not aware that in projects with lots, the yearly revenues will be shared among all the lots. So we bid and won one lot in a large project with a bid of Rs. 500 crore but got revenues of Rs. 70-80 crore in the 1st year and thus ended up with a loss in the 1st year itself and our cash balance became almost zero and we had to issue shares and take loans aggressively over the next 2 rounds to make up for that mistake. That added to our financial problems as both our P&L statement as well as Balance Sheet were not healthy and it also limited our ability to bid for projects. But we kept our D/E ratio around 2 in order to be safer with cashflows. However, this lower leverage led to loss of share value as the Cost of Capital increased because of higher Equity proportion. In order to bid for larger projects and grow fast, we capitalized fast and added equity. This was the only way we could recover. However, this also resulted in lower share value , but led to higher Net Worth
We also realized that other teams were not bidding aggressively and that we could get projects at the minimum prices itself. We decided that we will prefer bidding for multi-lot projects over single lot as there was a better chance of winning bids that way unless a single lot project was very profitable (in which case we bid aggressively to win the bid). Winning bids was crucial as we were raising capital to bid and if we did not win the bids, the capital would be wasted. We were able to win more than 80% of the bids we participated in. As we bid for larger projects, our number of bids were not very high.
In Round 4 and 5 we raised debt so that we could expand faster. Our strategy was not to have any unused capital at the end of any particular round. However, when we failed to win any bid, that capital was leftover and resulted in loss of profit as it had to be serviced. However, we accounted for this as we bid for projects that has very good IRRs as compared to the cost that we were paying through interest on debt and dividends on equity.
Another reason we were constrained to have unused capital at the end of rounds was that in Bid2win we had to bid for projects and raise capital simultaneously and while bidding we had to have cash adequate for submitting the bids but it was inevitable that we would not win all the bids. In a real life situation, companies bid as well as raise capital multiple times in a financial year and as such they use the capital raised but not deployed due to unsuccessful bid in the next bid.
By the 3rd, 4th round our position became comfortable and we were able to bid for many projects. We used this opportunity to expand our balance sheet and by the end of all the rounds, we were placed 2nd by size.
Through the game it became very clear to us that companies have to think of many things while bidding for a project such as adequate capital and other resources and they have to keep in mind that capital and resources would be engaged after wining a project and would become free at the end of the project. This makes proper planning in a dynamic environment very challenging. Companies also have to keep in mind that competitors too are bidding for the same projects and tactical as well as strategic interests have to kept in mind while bidding (strategy adopted by ICICI Bank in the Bengaluru Airports). We used this principle when we bid for large projects initially as we knew there would not be high competition for large projects as very few teams would be large firms and by winning large projects, we would be in a comfortable position to take on our rivals later by bidding more aggressively.
Navneet [CE11B077] and I [CE11B081] were allotted a large firm with an initial equity base of 100 crores. We could have the following approaches- bid for many small/medium projects to compete aggressively with smaller firms, bid for only large firms where there’d be very less competition or go for a mixed bag with reasonable weightage to small and large projects.
In the first round we opted for the second choice – go for only large projects. There were about 3 large projects available for us. We raised the maximum equity and debt allowed for us in that round. The result of this round awarded us a couple of lots in the projects. However, our share value fell drastically from 100 to 79. Our liabilities were far more than the profit so the cash flows couldn’t neutralize the total debt. Due to this we weren’t able to raise any debt in the successive round, and available equity wasn’t enough to overcome the liabilities. We were stuck with no money available to bid for any project. After consultation with the instructor a parameter in our previous round was changed from the back-end of the Bid2Win website; it was that the loan raised in the first year was extended to a 3-year period from a 2-year term. Doing this reduced the amount of instalments we’d be required to pay every year to absolve the debt.
On the other hand, a positive change in this round was that our company’s net worth was the highest because of the size of projects we had invested in. The cash flows were distributed over long periods- 10 years or so. An important lesson from this critical round was to raise debt over longer terms if we are to try for long term projects.
From the next rounds we bid for both small as well as large projects. We chose projects with large number of lots and also those with comparatively high Per Lot Minimum Investment (PLMI) to have better chance of winning. But at the end of this round we observed that we hadn’t won all the expected bids; some other projects where we hadn’t tried went for the base price. Being a large firm we could have prioritized large opportunities first because there won’t be much contest as there were few large firms out there. A medium sized firm bid for only 2 projects but with high bid value and they got those. It was understood that we were being too aggressive in bidding here. Our share value increased by mere 3 units to Rs 82, which was still lesser than initial.
For the next two rounds we followed a similar strategy, although with less vigour as we bid for the biggest projects, and also some small projects with many lots to keep the cash coming. We hardly ever went for high risk alternatives where the probability varied as 0.1-99 %. In the meantime our net worth was increasing at slower rate than before due to new small–term projects but the share price was on an increase. We hadn’t used all the equity because debt could provide us enough money. We weren’t bidding for all large projects available for the fear of losing, which in turn could impose more indebtedness, depreciate our share value and restrict us from advancing in further round(s). Nonetheless, it would have been better had we bid for only large/medium projects because the type of thinking we had was, in most probability, present in other large firms too which even led to no bids for some projects which we could have easily won at base price. This vision wasn’t clear during the game as it was too hectic given the strategy we adopted. We had almost 5000 Cr usable cash in the last round, almost 85-90% of which we used for bidding. Maybe using all of it for only large projects would have yielded better results. At the end our share price skyrocketed to 122.04 from 107 in one round. Overall, the company's shares rose substantially as compared to ground zero.
In general, a D/E ratio of about 2 favoured our bids. Projects with many lots and high PLMI are safe for large firms.
MS15F007:
ReplyDeleteRobinder and I (Team MS15F007) started with a small enterprise. In the beginning we could not even bid, as our available cash was 0,95 Cr., which is smaller than the minimum bid that can be submitted. Therefore we had to raise capital in the beginning. We decided to take debt, because we wanted to report a debt-equity ratio that was not detrimental to our share price. So we started with a ratio of 3:1. The issuance of shares would have been the other possibility. Our strategy was to alternate between issuance of equity and raising debt in order to maintain a good debt-equity ratio and to be able to grow our balance sheet total constantly.
Our strategy was to bid not too high that we can win projects that do not only increase sales but were also efficient in terms of revenues. That was important for us, since we had a small firm and we could only bid for two projects at most. So we really had to minimize the risk of our projects. We could win one out of the two projects we had submitted bids on in the first round. The auction price was the minimum bid price, so we thought it should be a really good deal for us.
In the following rounds we kept on playing the same strategy: constant growth of capital plus winning one additional project in each round. Only in one round we were not able to acquire a project.
We were ranked in the lower midfield throughout the game but ended unfortunately on the 10th rank in the end. In sum we won 4 projects. 3 out of our 4 projects were profitable. We also had 3 profitable rounds out of 5. So we could not really find the mistake that we had made. We had actually been very happy that we won 3 projects at the minimum bid price.
I can only guess that our largest problem was the fact that we were not able to increase our net worth despite winning lucrative projects. We maybe should have bidden more aggressive to win more projects. Since we won approximately only 50% of our bids, the costs of our remaining capital, that we were not able to use, could have been too high.
Philip - Good summary and reflection.
ReplyDeleteMe and Gopindra started with a small firm and we couldnt bid for anything with the then cash in our hands = 0.95 cr. So we thought of raising maximum equity as it will provide as chance of raising more in coming rounds. Being a small firm we couldnt choose many projects initially, which was an advantage for us as we could evaluate everything well. In the first round, we found a really nice project, but finding an optimum bid amount was a challenge as we had to place our entire cash for bidding for that project. But we took that risk and raised maximum equity and almost maximum debt, which worked very well for us making us first in the first round.
ReplyDeleteEven second round was good for us as we won everything we bidded for. But since third round, as our company grew and time allotted for each bid decreased, we couldnt evaluate projects properly and we started to loose bids. We almost lost all the projects in last round and our share value dropped from 122 to 84.
The initial success encouraged us to proceed with aggressive bidding and in first two rounds we raised maximum equity and debt in the pursuit of growing our firm, this excessive percentage of debts backfired on our share value and since then we maintained the 2:1 ratio. We also did careful calculations to raise the exact amount for bidding using a simple excel sheet, which helped in avoiding instances of negative arbitrage. But losing bids made our calculations useless in the last rounds. We also followed a strategy to raise maximum equity in each round as it increased our capacity to raise capital in upcoming rounds.
We felt that aggressive biding was more seen in the later rounds, where we were bit conservative. Teams were willing to take more risks with more cash in their hands.
Careful understanding of project cash flows, careful structuring of capital and ability to guess other's risk taking capacity are the key element to success in winning bids. Sometimes luck too has its role to be play.
My group (Me and Vishnupriya) started with a medium firm. We worked out prior to the game what are the pros and cons of being a small or large firm and how the strategy (i.e. which are the projects to be chosen tentatively) of each should be. As we have 10cr to start off with, we decided to bid for less riskier and high margin projects. Frankly speaking we were stunned on seeing the large number of projects to be evaluated in first round itself. According to our premeditated strategy, we raised capital keeping an eye on the D/E ratio maintaining it in the range 1.5-2 otherwise can have negative impact on the share price. We got a clear idea of what kind of projects are beneficial to be evaluated depending on our amount that can be spent from a list of many projects considering the time constraints. We didn’t have much options earlier as it was a medium firm. Investing in the ‘higher return-lesser riskier’ projects is the trick. We did not prefer aggressive investment in the initial rounds since we have other safer options to increase the share price and net worth of the firm.
ReplyDeleteWe managed to win at least 2 bids per round that helped in covering the interest and dividend expenses. Similar is the strategy in the further rounds other than being more aggressive. We could risk being aggressive because we felt we have enough capital to cover the expenses. However being cautious and aggressive simultaneously worked out for us. We bagged 15 bids in total which is a mixture of short, medium and long term projects with short term projects being more. We didn’t really concentrate on increasing the net worth of our firm explicitly. We expected that if share price can be increased by choosing profitable projects, net worth also raises successively. We bid precisely to win accounting for IRR of the project. We were positioned 1st in the fourth round. But we dropped down to 3rd after the final round for which we thought we raised more capital but failed to invest the whole in fruitful projects because of the time constraints could be the reason. Hence the current liabilities are not met with the revenues generated thereby reducing the net worth of the firm. Overall we felt we performed well to maintain the share price above 120rs mark consistently and increasing the net worth to 400cr from 10cr
My roll number: ce11b096
DeleteCE11B091:
ReplyDeleteMy group with megha shyam ce11b091 started with a medium firm. As we had less time to make a lot of calculations we decided to keep certain ratios fixed or nearly constant. We had 10 cr in hand so we deided to raise half the equity and some debt to maintain a 66 percent debt ratio. We tried to keep these constant as much as possible. So the cost of capital was nearly fixed. Initially we bidded for many small projects which gave us good share price value and profut percentage. As our net worth grew and rounds started to grow smaller we bidded for 1 medium project. This strategy worked good and we were in the lead for round 2 and 3. Our share price sky rocketed to 177 which was far more than anyone. We thought this was enough and started to concentrate on net worth. We made some errors in the D/E ratio which costed us a lot in the 4th round as we slipped to 4th.
Then we chose not to borrow the next round and get the ratios right which could not compensate much and all our past work was wasted. But we ended with 600 crores of net worth starting from 10 crores. So as far as i can see keeping a healthy debt ratio and concentrating on the profit percentage actually helps a lot. So many lots of smaller projects were having positive effects on the share prices. Going for 1 big project also had the risk of loosing the project and having idle capital. Hence i felt that we made much higher bids for the bigger projects. I wish we hadn't made an error with the 4th round, otherwise we could have ended at the top.
CE11B092:
DeleteAs Richi said our share price sky rocketed to Rs.177, it was that round where we put all our capital in one single lot 80cr project with cash flow of 130 cr. We bid it for 95 cr and it paid off. We were in No.1 position in terms of share price for the first three rounds . This was possible because we only targeted single lot – 1yr,2yr projects, keeping our ratios fixed. Even with the multi lot projects, since the cash flows are for the whole project, we found the one lot cash flow and we only bid for one lot. In order to evaluate the projects our WACC was almost fixed at around 9- 10 % as we ensure that our debt is around 67% of total capital. In every round we took debt( always a 3-year debt).This worked out really well. We thought we had enough capital to expand and become large firm. In one round ( third round i guess), the maximum debt that can be taken was some 300 crores and we were surprised looking at that. For a medium firm and that too in 3rd year we got such a huge advantage. We made good use of that limit and ended first after 3rd round . To expand to a large firm we need to increase our present worth and balance the share price. But the 3-year debts started affecting us from the fourth round where we miscalculated the outstanding debt and got our D/E ratios wrong. We tried to make sure that there was no idle capital at the end of every round.But in the final round we were left with some 20 crores of unused capital. This was due to fact that we were searching for projects to put all our money in one lot. We couldn’t find any such projects and we failed in using all our capital. That was a debacle as our share price which touched peaks plunged to Rs.94 at the end. But we ended with a good net present worth and as a result we are 4th overall. The strategy , we should say for a medium sized firm , is simply bidding for short term projects in the beginning with immediate cash flows and no idle capital, then bid aggressively for long term projects when u see ur share price is higher with the ratios being maintained.
CE11B045
ReplyDeleteHarish (CE11B074) and I had a medium firm in the simulation game. To begin with, we had 10 crores of money in hand. So, we invested in short term projects (1-2 years) which required nominal investment. We did not take large amount of debt/ equity in the beginning. Although there was a positive impact on the share price, our NPV value showed no improvement. After the 2nd round, we took debt and equity in the ratio of 2:1. We accumulated a sum of 60-70 crores and invested in large projects worth 25 crores. We evaluated a few number of projects with the help of excel and went ahead with them if found attractive, ending up bidding for around 3-4 projects in each round. We also relied on lots in Multi lots projects. It was perhaps because of this fact that we won nearly 80% of our bids. However, the Net Present Worth still dwindled. Then, Prof. Thillai Rajan suggested us to increase our NPV by investing in longer term projects to secure our future. This proved to be a plus point in the last two rounds of the game! We invested in a range of projects - short term and long term (6-10 years) projects. Diversification helped to increase our Net Present Worth. Also, we increased our D/E to 3:1 in the last two rounds.
CE11B074:
DeleteIn addition to what Pooja said: Our share price fell from 100 to 94 in first round as we won only 67% of the bids. So, we decided to win the maximum number of bids at optimum amount, along with the idea to keep D/E as 2:1. We won all the bids in the subsequent rounds which resulted in appreciation of share price. It also helped us to safeguard ourselves from negative arbitrage, which we would have otherwise faced if we would have lost the bids. Losing the bids would have kept our raised money stagnant leading to a negative impact on our share price. So, share price is a function of not only D/E ratio but also of growth rate of the firm and percentage of bids won. We evaluated the seemingly attractive projects in excel, noted down the NPV of the chosen ones on paper and compared them. Then we kept them in priority. The project which gave maximum NPV attracted us to take up the multiple lots (2-3 in number), if it had any, instead of investing in a new project. In one round, we thus ended up bidding for 2 multiple lot projects with 3 lots each. To win the bids for which we really had our eyes on, our bidding amount was slightly more than 1.5 times the base price. For example, the bidding price for 10 crore project was set as 15.2 crore. Finally, we were able to increase our NPV with the help of diversification as mentioned by Pooja.
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ReplyDeleteThis comment has been removed by the author.
DeleteCE11B070:
ReplyDeleteWe started as a small firm with about 1 crore minus 5% dividends as cash in hand available for funding. Since the project is time bounded, we had few predetermined rules in terms of debt and equity to be raised as well as the D/E ratio (1.5-2). We raised all the possible shares that we could as this will help us in raising more equity in the future rounds. With about 3.7 crores available for investment, we bid for a project. With the limited cash we could only bid for a single project, but unfortunately we couldn’t win the bid. This led to fall in the firm’s share prices as there is absolutely no revenue generated and the interest and dividend payments had to be done. Though in the real scenario, no payments had to be done as loans are taken only after winning the bids, there is a loss incurred in terms of banks goodwill which indeed is captured here as an additional cost. So the share prices were down by 5.5% at the end of round 1.
The plan for round 2 is to be cautions in selection of projects as there is a lot of cash in hand and there is a risk of share price falling further down in case bids are lost again. Hence in the second round, we bid for a less risky, single 2 year project which we are certain in terms of winning the bid and revenue generation. We won the bid, the revenue is generated as planned and all went well according to plan and yeah, our share prices went to 110.
Here we have decided to bid aggressively for the projects as there is good amount of cash available for bidding and there is a chance of very good revenue generation. We hence bid for 4 projects, all long duration projects which will earn us revenues over 6-10 year period. At the end of this round, we won all the bids that we had placed and have 4 more projects in hand. But, the result was not as expected. There is very less revenue generated, but the amount invested is very high. As a result, the profit after tax went negative indicating the losses incurred. This led to decrease in EPS by 50%, sales by more than 10% and the share prices fell down by 40%.
This is the worst mistake that any firm could do. When all the money is invested in long term projects, the near future will be worst. The firm goes into losses, and there won’t be any money to pay the interests. And this will lead to a much worst scenario where no bank will be willing to give any further loans. Hence you cannot bid for any projects in the next two to three years. Since, the tournament was only for 5 years there isn’t a second chance for us to correct the mistake. The next round was only a waiting game for us, as we had 0 cash to bid. But because of our high net worth we ended up 3rd at the close of 4th round. The same was the case in the next round as well. We couldn’t take any loans. And only very few shares could be issued (0.028 cr.). So the cash available for bidding was only 1.84 crore. Adding to our woes, there is only one project in round 5 which has PLMI of less than 2 crore. We put all the money that we had into that project, but we lost the bid by a very small margin of 0.07crore. And so, D/E ratio of 0 and more dividends to pay further reduced our share price.
The result could have been different had we been a little more cautious in the project selection and bid on at least a single project which gives immediate revue at the end of first year. More effort and thought has to be put in choosing the project more wisely than on working out with bid numbers. And putting the results apart, I personally had enjoyed the activity and learnt very essential things related to project selection and bidding.
Pavan Kumar.B
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ReplyDeleteSundeep and I owned a large firm, we had 100 crores for investment so we thought to bid for a large project which was around 200 crores and some small projects for which we took a loan of 190 crores and bid for the projects but unfortunately, we haven’t won any bids the first round so we ended with a huge sum of debts and interests, to compensate for it we had bid for another project which returned 400 crore after two years it took around two rounds for us to get out of the huge liabilities. This episode taught us that large firms attach themselves a huge risk and especially when the debt amount is very high, but still there is a very good chance of bouncing back when your next bids are placed carefully.
ReplyDeleteIt took two rounds for us to get comfortable with the bidding process, as in the first year we incurred huge debts and in second we bid for projects which had late returns, initially our strategy was to bid for large projects which had good returns we tried to use only debt as the interest rate was less compared to that of equity. We had to raise equity in round three as all our cash was exhausted, we did bounce back after round three but by then our share price dropped steeply for us to get it back.
We placed last in rankings, which was disappointing but gained a good understanding of the process, pros of being a large firm is that we have the capacity to invest in many projects of all ranges, but difficulty comes while choosing the projects as we had to analyze all projects in a very short time and place our bids, and also when bidding for large projects by raising debt , share price drop is something that is difficult to avoid. Overall the experience was good, if given a chance to play again these learning will be useful.
roll no. CE11B071 & CE11B082
ReplyDeleteWe started as a small firm. In first round, our aim was to maintain/increase the share value. So we raised the debt and equity with D/E between 1.5 and 2. We raised about 4 crore and bid for a single lot project but we lost this bid. In second round, we bid for a single lot project which is a bit less risky and we won the bid which resulted in increase in the share price. In third round, we found multi lot projects which are very clear that we can win the bid. For example, there was a multi lot 10 year project with total of 100 lots and maximum lots that we can bid are 5. As there were only 10 competing groups, it was very clear that we can win the bid and we invested in that project. In this round we bid for 4 projects and we won the bids. As we bid for long term projects, revenues generated in subsequent years were not guaranteed and resulted in lower revenues and share value fell down below 100. Because we raised a lot of debt and there was no cash to pay the debt for the next round, we were not able to raise the debt for 4th round which resulted in bidding for no project. As the D/E was not well maintained our share price fell down. In the fifth round, we were not able to raise the debt. We raised the equity as much as we can and bid for a single lot project, but we lost the bid.
ReplyDeleteWe should have bid for many less attractive projects for base value and as many bids that we can instead of bidding for a single project which is very attractive and there is a chance that every one bid for such a project. So that we can increase the net worth at the same time we could have won the bids. We should have bid for some short term projects along with long term projects to survive the firm.
Siva Teja Ch. (CE11B072)
Ravi Teja(CE11B079) and I (CE11B080) were alloted a medium firm with a budget of Rs. 10 crores. Our plan was to find small projects which we were quite certain to win. So we decided to look for projects which wouldn't gather everyone's attention and started bidding for them. In the first round we raised both debt and equity with D/E ratio of around 2. With the funds raised we were able to bid for 3 multi-lot projects of which we won 2. We finished fourth in the round. Even if we finished fourth, our share price went down.
ReplyDeleteFrom the first round we learned that, bidding for multi-lot projects were safer than single lot projects. So we focused more on multi-lot projects. In the second round also we raised both equity and debt, but we reduced the the amount raised from equity and took more debt. We had enough funds to bid for 2 medium and 1 small project of which we were able to win all. We finished 3rd in the round. We followed the same strategy in the next round, but in spite of winning all the bids, we went down to seventh due to low net worth. This occured because we raised too much debt in order to bid for bigger projects. Even though are share price increased, the net worth came down. We weren't able to identify our mistake and we raised more debts in the next two rounds also and ended up with very low net worth. But we were able to maintain our share price and was in one of the four teams with more than Rs. 100 crore as share price.
During the entire course of the game our objective was to find projects which wouldn't garner as much attention as other projects, but still good, and to bid for them with sufficient amounts so that we win all the projects that we bid for, which was quite useful. But since most of the teams followed the same path and bid only for a few projects they were sure of, competition was less. It would have been better to bid at least for the base value for a larger number of projects. Also we should have kept the debt under control so that our net worth wouldn't have dipped so much.
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ReplyDeleteGopindra S. Nair (CE11B073) [Part 2]: By 4th year our share price had gone back up above 100 and our rankings improved. We picked the fruits of our aggressive approach in the 2nd year. The large loans from our second year had matured but we had the cash to deal with it. As our company grew larger in size and the time allotted per turn decreased we began to find it difficult to carefully analyse all the projects. In the first year where we had just 1 project to analyse in half an hour, but now we had to analyse around 20 projects in 20 minutes. Of course we ignored many projects at the onset itself if it appeared too risky. But we couldn't only bid for the conspicuously good ones either as others would bid for it aggressively (again in hindsight this might not have been the case as others would also have followed the same logic). We started to get the feeling that the bidding was getting more aggressive.
ReplyDeleteIn the 5th year our share value was at an all time high of 122. I think we became rank 2 or 3. We were proud of our achievement and baffled by the highest ranked share value of 177. We realized that either our bidding was getting poor or the other companies were bidding more aggressively as we had lost some projects in the previous year. It must have been the latter (or both) because there was this one company with a minimum bid of 3Cr and a return of 6Cr or nothing with equal probability for which we bid around 3.6Cr but the winning bid was above 4Cr. But the overall finances of our company was well. We had paid off all our debts and if we played this round properly we might just win the tournament. We raised maximum equity and enough debt so that the correct ratio is maintained. Because of the limited time, we had started to analyse the projects more by intuition than by consulting the excel sheet. But we manage to exhaust all our cash and place the bids.
The game ended and the results were a bit of a shock. Our share value had plummeted to the measly 80s. Our rank had dropped to 5 or 6. We had won none of the projects we bid for the previous year. Something happened in the last year and I don't know what. Nevertheless, bringing up a 1Cr company to a net worth of more than 500Cr in a short span of 5 years is a remarkable achievement.
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ReplyDeleteThis comment has been removed by the author.
ReplyDeleteJohan (CE14D040) and I (MS14D013) started as a small firm. Even after taking debt in round one, we could bid only for few projects. We knew this game is only for five round (year) unlike real life where company expects to exist for infinite time. Our strategy was to bid first two rounds for almost riskless (lowest std dev. & volatility) projects, so that we do not go bankrupt in the beginning it self. In first round we won just one bid but we were at loss as we could not account for multi slot in return, which we corrected from next round. Once our net worth increased after round two, we started bidding for more projects with higher bid. We always bid projects keeping book building method in mind, which says people bidding for maximum slots in a project will be given preference. Upto round 3 we were ranked low eventhough we were bidding carefully. We blamed it to be a small firm, because we were not able to bid aggressively unlike others. In round four and five we put our bet on high value project with higher bid. Here we took risk as instead of going for diversification, we took up at most one or two projects with high return and bid for all slots. And these rounds were game changer for us, as our overall rank moved to second and net worth ranked as one.
ReplyDeleteSince we ranked highest at the end, it will be difficult for us to find out where we went wrong but if we were medium or large firm, our strategy would have been different and yes, having a small firm is not disadvantage.
We were very happy to see the firm grow from small company to large company (through Book value) towards the end of the game. There were mistakes we committed in the form of having unused capital at the end of levels which was solved as we neared the final stages of the game. The game was a good learning experience and gave us a real life simulation of bidding. During the class discussions after the game, with the statistics presented by Sir, we realised that we could have bid more projects by borrowing more capital. We adopted a strategy of risk free bidding to slowly grow from small firm to large firm.
DeleteM.R. Aravindan (MS15D002) and Zubin Nayak (MS14S018)
ReplyDeleteWe started as a large firm with Rs. 100 crore as equity. We were confident that not too many firms would be large and so there will be less competition in bidding for large projects and we had a good chance of winning large projects. Also as competition would be less, we wouldn't have to BID aggressively and end up with what is called as winner's curse.
Unfortunately, we were not aware that in projects with lots, the yearly revenues will be shared among all the lots. So we bid and won one lot in a large project with a bid of Rs. 500 crore but got revenues of Rs. 70-80 crore in the 1st year and thus ended up with a loss in the 1st year itself and our cash balance became almost zero and we had to issue shares and take loans aggressively over the next 2 rounds to make up for that mistake. That added to our financial problems as both our P&L statement as well as Balance Sheet were not healthy and it also limited our ability to bid for projects. But we kept our D/E ratio around 2 in order to be safer with cashflows. However, this lower leverage led to loss of share value as the Cost of Capital increased because of higher Equity proportion. In order to bid for larger projects and grow fast, we capitalized fast and added equity. This was the only way we could recover. However, this also resulted in lower share value , but led to higher Net Worth
We also realized that other teams were not bidding aggressively and that we could get projects at the minimum prices itself. We decided that we will prefer bidding for multi-lot projects over single lot as there was a better chance of winning bids that way unless a single lot project was very profitable (in which case we bid aggressively to win the bid). Winning bids was crucial as we were raising capital to bid and if we did not win the bids, the capital would be wasted. We were able to win more than 80% of the bids we participated in. As we bid for larger projects, our number of bids were not very high.
In Round 4 and 5 we raised debt so that we could expand faster. Our strategy was not to have any unused capital at the end of any particular round. However, when we failed to win any bid, that capital was leftover and resulted in loss of profit as it had to be serviced. However, we accounted for this as we bid for projects that has very good IRRs as compared to the cost that we were paying through interest on debt and dividends on equity.
Another reason we were constrained to have unused capital at the end of rounds was that in Bid2win we had to bid for projects and raise capital simultaneously and while bidding we had to have cash adequate for submitting the bids but it was inevitable that we would not win all the bids. In a real life situation, companies bid as well as raise capital multiple times in a financial year and as such they use the capital raised but not deployed due to unsuccessful bid in the next bid.
By the 3rd, 4th round our position became comfortable and we were able to bid for many projects. We used this opportunity to expand our balance sheet and by the end of all the rounds, we were placed 2nd by size.
Through the game it became very clear to us that companies have to think of many things while bidding for a project such as adequate capital and other resources and they have to keep in mind that capital and resources would be engaged after wining a project and would become free at the end of the project. This makes proper planning in a dynamic environment very challenging. Companies also have to keep in mind that competitors too are bidding for the same projects and tactical as well as strategic interests have to kept in mind while bidding (strategy adopted by ICICI Bank in the Bengaluru Airports). We used this principle when we bid for large projects initially as we knew there would not be high competition for large projects as very few teams would be large firms and by winning large projects, we would be in a comfortable position to take on our rivals later by bidding more aggressively.
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ReplyDeleteNavneet [CE11B077] and I [CE11B081] were allotted a large firm with an initial equity base of 100 crores. We could have the following approaches- bid for many small/medium projects to compete aggressively with smaller firms, bid for only large firms where there’d be very less competition or go for a mixed bag with reasonable weightage to small and large projects.
ReplyDeleteIn the first round we opted for the second choice – go for only large projects. There were about 3 large projects available for us. We raised the maximum equity and debt allowed for us in that round. The result of this round awarded us a couple of lots in the projects. However, our share value fell drastically from 100 to 79. Our liabilities were far more than the profit so the cash flows couldn’t neutralize the total debt. Due to this we weren’t able to raise any debt in the successive round, and available equity wasn’t enough to overcome the liabilities. We were stuck with no money available to bid for any project. After consultation with the instructor a parameter in our previous round was changed from the back-end of the Bid2Win website; it was that the loan raised in the first year was extended to a 3-year period from a 2-year term. Doing this reduced the amount of instalments we’d be required to pay every year to absolve the debt.
On the other hand, a positive change in this round was that our company’s net worth was the highest because of the size of projects we had invested in. The cash flows were distributed over long periods- 10 years or so. An important lesson from this critical round was to raise debt over longer terms if we are to try for long term projects.
From the next rounds we bid for both small as well as large projects. We chose projects with large number of lots and also those with comparatively high Per Lot Minimum Investment (PLMI) to have better chance of winning. But at the end of this round we observed that we hadn’t won all the expected bids; some other projects where we hadn’t tried went for the base price. Being a large firm we could have prioritized large opportunities first because there won’t be much contest as there were few large firms out there. A medium sized firm bid for only 2 projects but with high bid value and they got those. It was understood that we were being too aggressive in bidding here. Our share value increased by mere 3 units to Rs 82, which was still lesser than initial.
For the next two rounds we followed a similar strategy, although with less vigour as we bid for the biggest projects, and also some small projects with many lots to keep the cash coming. We hardly ever went for high risk alternatives where the probability varied as 0.1-99 %. In the meantime our net worth was increasing at slower rate than before due to new small–term projects but the share price was on an increase. We hadn’t used all the equity because debt could provide us enough money. We weren’t bidding for all large projects available for the fear of losing, which in turn could impose more indebtedness, depreciate our share value and restrict us from advancing in further round(s). Nonetheless, it would have been better had we bid for only large/medium projects because the type of thinking we had was, in most probability, present in other large firms too which even led to no bids for some projects which we could have easily won at base price. This vision wasn’t clear during the game as it was too hectic given the strategy we adopted. We had almost 5000 Cr usable cash in the last round, almost 85-90% of which we used for bidding. Maybe using all of it for only large projects would have yielded better results. At the end our share price skyrocketed to 122.04 from 107 in one round. Overall, the company's shares rose substantially as compared to ground zero.
In general, a D/E ratio of about 2 favoured our bids. Projects with many lots and high PLMI are safe for large firms.