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After studying and analysing this case, students would be able to evaluate and understand the importance and need of an infrastructure sector in a country, its inherent risks and scope of infrastructure investment and financing in India – National Infrastructure Pipeline and the important role of Non-Banking Finance Company’s (NBFC) vis-à-vis banks in infrastructure financing in India; critically analyse and recommend alternative decisions in a business problem situation using multi-criteria decision analysis, which is a tool used for business portfolio analysis; understand and evaluate the corporate portfolio management (CPM) tools used for an optimum portfolio mix to turn around companies; identify and suggest an optimum portfolio mix to turn around a finance company using CPM assessment applied to Pidun matrix; and recommend operational and strategic levers for successful turnaround implementation by using the integrated canvas on turnaround.

On 10 May 2020, in New Delhi, India, J. Ray took charge as a full-time director of an Indian Non-Banking Finance Company – Infrastructure Finance Company (NBFC-IFC). The NBFC-IFC of the Indian Government extended long-term financial assistance to infrastructure projects in India. During the financial year (FY) 2017–2018 till FY 2019–2020, the company suffered substantial losses to the tune of US$13.7bn, with profitability experiencing a notable decline – return on assets at a negligible 0.11% and return on equity of only 0.68%.

The NBFC-IFC had a declining yield on advances at 7.05%, net interest margins (NIMs) of 2.08% against a high cost of borrowing at 7.66%, a declining loan book (by 4.35%) of US$336.27bn and a fast-deteriorating asset quality with highest ever non-performing assets (NPAs) at 19.70% of its loan book. Such financial parameters, compared with that of the industry average of banks and finance companies, meant that the NBFC-IFC Ray had taken over was fast bleeding and was on the brink of being declared a sick company. In comparison, private and other government players had profitable and much healthier financials, and Ray felt that there was a need for improvement. To make things worse, Ray got to know that the Indian Government was in the final stages of setting up a new development finance institution focused on long-term infrastructure financing in India. Ray realized the question was not only of the NBFC-IFC remaining relevant but also of its existence in the fast-evolving sector. Ray wondered what could his his integrated canvas be for a turnaround strategy that could include effective management of an optimal portfolio mix.

With a healthy capital-to-risk (weighted) assets ratio of 30.85% and a satisfactorily improved net worth of US$103.1bn, in the given Reserve Bank of India regulatory provisions for the NBFC-IFC including restrictive exposure norms and NBFC-IFC’s operational mandate prescribed by the Indian Government, Ray had to shift the product and sectorial investment of the NBFC-IFC to reduce the NPAs, increase loan book size and improve the yield of advances and its NIM to effectively turn around the company’s profitability. Ray realized that he needed his team to evaluate and select a product and sector strategy for this change.

The present case of financing investment in infrastructure is interesting for implementation in developing economies because a lack of infrastructure is a common problem and there is a necessity of achieving a more developed infrastructure system to support accelerated economic growth in these countries. This case can be used in elective courses on corporate finance strategy and corporate portfolio management for infrastructure finance companies. This case can be taught in elective courses in post-graduate and MBA programs. This case can also be included in management development programs (MDP), executive MBA programs and executive-level courses that have subjects such as corporate finance strategy, corporate portfolio management and strategy management that focus on turnaround strategies including portfolio management for banks and finance companies.

Teaching notes are available for educators only.

CSS 11: Strategy.

This research analyzes borrowers' credit utilization through prepayment behavior in peer-to-peer (P2P) lending. The authors investigate factors influencing the decision to prepay and assess the role of P2P lending as an alternative source of consumer credits.

The authors use individual loan-level data from the LendingClub, one of the largest P2P platforms in the USA. The authors use a Logit model and a sample selection model estimated by the two-stage Heckman method. The empirical analysis considers borrower-specific and loan-specific characteristics as well as macroeconomic factors.

The authors present a number of significant findings that can enhance understanding consumers' financing decisions. The authors offer evidence that borrowers are able to take advantage of cheaper loans offered by P2P lending to better manage credit card balance and consolidate debt. The authors find that borrowers tend to prepay P2P loans quickly when the aggregate cost of borrowing is low, suggesting that P2P lending offers an efficient alternative to obtain credit. This is particularly true for creditworthy borrowers that are able to take advantage of competing sources of finance. The authors' results provide evidence that P2P lending can improve consumers' optimal credit utilization.

P2P lending has grown exponentially and has become a significant credit supplier to consumers and small businesses. While the existing literature mostly focuses on default risks, prepayment has received much less attention. This research fills in the gap and investigates borrowers' prepayment behavior in P2P loans and the role of P2P lending as an alternative source of consumer credits.

The purpose of this study is to develop a decision-support framework that can be used by decision-makers to suspend public infrastructure projects. Additionally, the study also investigates how to select the most convenient infrastructure project for suspension.

The proposed framework includes an extensive set of factors and a novel comparison mechanism that can reveal the most convenient infrastructure project to be suspended. A comprehensible literature review and focus group discussion (FGD) sessions were conducted to identify factors that should be considered for suspension. Then, the neutrosophic analytic hierarchy process (N-AHP) method was used to determine the relative importance of the factors. Finally, the proposed comparison mechanism was demonstrated through a hypothetical case study and Technique for order of preference by similarity to ideal solution (TOPSIS) analysis.

Results showed that suspension decisions cannot be made merely based on “financial” factors. Instead, the other aspects, namely “Technical and managerial” and “Social and Environmental”, should also be taken into consideration. Second, factors related to the initial investment, cost of refinancing, cash flow, permits and approvals, insufficiency of bidders, degradation of the components, reputation, impact on stakeholders and criticality of the infrastructure were particularly elaborated as the most significant, needing the utmost attention of the decision-makers. Lastly, the results demonstrated that the proposed comparison mechanism has considerable potential to identify the most convenient infrastructure project for suspension.

Public infrastructure projects are often under pressure due to the inflationary state and economic stagnation of countries after major crises. The suspension decision for infrastructure projects necessitates comprehensible assessments to consider all consequences. Studies have widely investigated the contractual and legal aspects of project suspension in light of existing literature. However, little effort has been devoted to identifying the factors that decision-makers should consider before suspending a particular infrastructure project. Furthermore, existing literature does not investigate how to select the most convenient infrastructure project for suspension either. Thus, by developing a specific suspension framework for infrastructure projects by considering various factors, this study is the earliest attempt to examine the contract suspension mechanism of public infrastructure projects. In this respect, the study significantly contributes to the theory of contract management domain and has important managerial implications.

This study examines the impact of debt maturity structure on stock price crash risk (SPCR) in Asian economies and the moderating effect of firm age on this relationship.

The study utilized annual data from 432 nonfinancial firms publicly listed in six Asian countries: China, Hong Kong, Japan, Singapore, Pakistan and India. The observation period covers 14 years, from 2007 to 2020. The sample was categorized into three groups: the entire sample and one group each for developing and developed Asian economies. A generalized least squares panel regression method was employed to test the research hypotheses.

The results suggest that long-term debt has a significant negative influence on SPCR in Asian economies, indicating that firms with high long-term debt experience lower future SPCR. Moreover, firm age negatively moderates this relationship, implying that older firms may experience a more pronounced reduction in SPCR due to high long-term debt. Finally, firms in developed Asian economies with high long-term debt are more effective in mitigating the risk of a significant drop in their stock prices than firms in developing Asian economies.

This study contributes to the literature in several ways. To the best of the researcher’s knowledge, this is the first of such efforts to investigate the relationship between debt maturity structure and crash risk in Asia. Additionally, it reveals that long-term debt influences SPCR directly and indirectly in Asia through the moderating role of firm age. Lastly, it is likely one of the first studies by a research team in Asia to compare the nonfinancial markets of developed and developing Asian countries.

After reading and analysing the case study, the students would be able to understand the various challenges in terms of credit expansion for a rural co-operative bank, discuss the role of an apex co-operative bank within the three-tier credit structure, understand the co-operative banks’ product offerings in the agribusiness space and understand the various styles of leadership and change management models within a rural bank.

This case study exemplified the enabling role played by a co-operative credit institution, Andhra Pradesh State Co-Operative Bank (APCOB). It discussed the issues and challenges APCOB faced in mainstreaming an unconventional lending process through its lower tiers. Although the three-tier credit structure played a significant role in the disbursal of short-term loan to farmers, the managing director strongly felt the need to reach out to farmer institutions like farmer producers organization through suitable product offering and right processes.

This case study could serve as an introduction to rural credit co-operatives in MBA courses such as bank management, agricultural finance and rural credit and organizational behaviour. The case study could also be administered as a part of training programmes for state co-operative banks, district central co-operative banks and urban co-operative bank that are involved in planning and execution of development strategies in the area of co-operative banking and agribusiness development.

Teaching notes are available for educators only

CSS: 1: Accounting and Finance.

This article describes financial professionals' perceptions of their clients' financial behaviors and the explanatory factors underlying these behaviors.

In this qualitative research, the authors seek to understand financial professionals' experiences in relation to how their clients manage their own finances. The authors conduct and analyze 26 semi-structured interviews with financial professionals from several industries within the financial sector in Canada.

The professionals in this study noted that despite their clients' financial knowledge, several other factors can explain these individuals' financial behaviors. They include psychological factors (such as financial bias, the need for instant gratification, and the lack of awareness regarding the long-term effects of certain types of financial behaviors), financial habits (such as lifestyle, financial planning and lack of discipline) and the financial system's flexibility with respect to debt financing and repayment. These perceptions are categorized according to whether they are related to debt financing or repayment, savings or investments.

By using a qualitative methodology that relies on the perceptions of financial professionals, this study aims to better understand the financial behaviors of individuals and households, and these behaviors' underlying factors. This study's findings could be useful to various stakeholders interested, in one way or another, in financial literacy, such as organizations aiming to strengthen and promote financial literacy, educators, researchers, regulatory bodies of financial institutions and financial advisers.