DESCRIPTION & LEARNING OBJECTIVES...Win Bid History Bidding History is listed on this page wherein...

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© LearnBiz Simulations LLP

DESCRIPTION & LEARNING OBJECTIVES

The “Bid2Win” game simulates the real world of infrastructure projects – evaluation,

bidding/tendering, financing and execution.

The firms in the game are randomly distributed into three groups – Small, Medium and Large. The

initial capital available with the firms is Rs. 1 cr., 10 cr. and 100 cr. respectively. Every round is

equivalent to an earth year. In every round, various projects are floated for evaluation and bidding

by the participants. The projects are accompanied by a description which divulges information about

expected future cash flows from the project. The participants will be required to apply best-case and

worst-case scenario for various projects and use concepts such as DCF and WACC to bid aggressively

for the projects.

There are two types of projects – single contractor and multi contractors. The allotment of single

contractor project will be done to the highest bidder. And the allotment of the multi contractor

project will be done on the basis of book building. Once a project is allotted, the cash flows will be

over different rounds.

In order to bid for projects, the companies are allowed to take Term Loans upto D/E = 4:1. The

interest rates charged to the firm will vary as per the D/E ratio. Also, every round the firm can tap

equity markets for raising funds. The market price of company’s share will be decided every round

on basis of D/E, EPS and Growth achieved by the company.

Thus, with unfolding of the game smaller firms will grow and enter bigger firms’ market. But, bigger

firms can always be more aggressive than smaller firms because of higher capital. At the end of the

game, the winners will be decided on basis of final enterprise value.

The general process is to enter your firm's decisions for a given period. Then, in the tournament

game, you will advance to the next time period in accordance to the specified schedule that will be

given to you. You must make sure your decisions are submitted before the specified times otherwise

no decision would be taken for a round. (Note: in other games, you will be competing against

computer managed firms and will be able to advance the game by yourself). After end of each

period, your decisions are evaluated relative to the competition and a set of reports are generated

for your introspection.

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DESCRIPTION OF GAME DECISIONS

Each firm has to bid on projects, raise cash and maintain share price.

Projects – Type, Bidding, Allotment, Expenditure

There are two types of projects – single-lot and multi-lot

For each lot of a project, there is a specified min. bid requirement. To be able to bid for

projects, you have to bid an amount greater than min. bid

For each project, you have to enter the number of lots you desire to bid. There is a cap on

number of lots for multi-lot projects

In a single-lot project, the firm who bid the maximum amount will be allotted the project

and subsequent cash flows

In a multi-lot project, multiple firms will be allotted the project and subsequent cash flows

will be on proportionate basis

The allotment procedure followed for multi-lot project will be book-building

If a multi-lot project attracts insufficient response, then it will be allotted to bidders at the

min. investment

The allotted projects will be expensed every period, i.e. it will not be capitalized. But the

cash inflows will continue as per the project description

Do remember to ‘tick’ the checkbox corresponding to project you are bidding.

For projects evaluation, assume unlevered beta to be equal to 1.0; risk-free rate equal to

0.0%; and market risk-premium equal to 5.0%. Please note that a prudent investor adds

appropriate risk-premium after accounting for volatility of expected cash flows!

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Raising Cash

Every round, you can issue equity or take debt.

For every new round, a firm can issue 100% more shares as outstanding after end of

previous round

Please note that for every outstanding share, a dividend of Rs. 5/- needs to be paid every

round

The maximum allowable debt to equity ratio is 4:1

The applicable interest rate depends on duration of the loan and debt to equity position of

the firm. The table for the same is as follows-

D/E

2-yr loan

3-yr loan

Interest Rate

Interest Rate

<=0.5 5.00% 3.00%

<=1.0 6.60% 4.00%

<=1.5 8.33% 5.00%

<=2.0 10.00% 6.00%

<=2.5 11.66% 7.00%

<=3.0 13.33% 8.00%

<=3.5 15.00% 9.00%

<=4.0 16.66% 10.00%

Whenever a new loan is being raised, the new interest rate would be used for new loan and

older loans will attract the same interest rate at which they were raised

Kindly note that you can issue shares and take loan only once in each round

A loan will attract interest on yearly basis and will have to be repaid in full at the end of its

duration

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Share Price

The share price movement will be dictated by three factors – debt to equity ratio, sales

growth and earnings per share-

D/E Effect on

Share Price

<=0.5 -5.00%

<=1.0 0.00%

<=1.5 5.00%

<=2.0 10.00%

<=2.5 5.00%

<=3.0 0.00%

<=3.5 -5.00%

>3.5 -10.00%

Sales Growth

Effect on Share Price

<=-50% -10.00%

<0% -5.00%

<50% 5.00%

>=50% 10.00%

EPS Effect on

Share Price

<=-100 -20.00%

<=-50 -10.00%

<5 -5.00%

>=5 5.00%

>=50 10.00%

>=100 20.00%

The factors are multiplicative and calculations are carried out at the end of each round.

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DESCRIPTION OF GAME SCREENS

The screen description is intended to give you a preview of what’s in store for you in the game. It is

critical to clearly understand the screens here although there is no replacement of in-game practice.

Firm Details ‘Firm Details’ tells about the size of your Firm – Small, Medium or Large. In addition, it lists all the

projects won by your firm till last round, the winning bid, lots allotted and the revenue generated by

projects till the end of last round.

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Projects List The page is where all the available projects in the current round are ‘up’ for bidding. All the details

with respect to projects are provided. Also provided is the information of Cash-in-Hand, Liabilities

payable in Current Round [Interest and Loan] and the Maximum Amount which can be used for

bidding [Net of Cash-in-Hand and Current Liabilities].

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Manage Finance Big projects require deep pockets. Both, Equity and Debt Financing is available for your firm. In a

particular round, you can issue 100% of your capital at current share price and take loan for a

maximum D/E ratio of 4:1.

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Income Statement One of the most important financial statement for the capital markets. Keeping an eye on Top-Line

and Bottom-Line at the same time can propel the share price of your firm to Moon.

Sales

‘Sales’ is the total revenue generated in last round by the projects won by your firm.

Expenses

‘Expenses’ is the cash spent on projects won after the Bidding Process.

Operational Profit

‘Operational Profit’ is net of ‘Sales’ and ‘Expenses’.

Interest

It is the cash outgo on account of outstanding loans taken by your firm.

Profit before Tax

This is net of ‘Operational Profit’ and ‘Interest’.

Taxes

Corporate Income Tax in the game is 10% of Profit before Tax.

It is interesting to note that if the Profit before Tax is negative, then the Corporate Income Tax will be

negative. What this means is that the firm will receive a tax rebate.

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Profit after Tax

This is Profit before Tax minus Corporate Income Tax.

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Balance Sheet Balance Sheet lists all the ‘Assets’ and ‘Liabilities’. ‘Debt 1’ is the Loan Maturing in next 1 year and

‘Debt 2’ is the Loan Maturing in next 2 years.

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Standings In Standings, players are ranked on 3 parameters – Share Price, Net Worth and Overall Rank. The

Share Price change has been described under “Description of Game Decisions”. The Net Worth is

calculated by incorporating expected future cash flows into current net worth and then dividing by

number of shares of the firm. This helps in normalizing net worth all the Small, Medium and Large

firms. The Overall Rank is deduced by combining the ranks of Share Price and Net Worth with equal

weightage, with Share Price being superior rank in case of a tie.

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Win Bid History Bidding History is listed on this page wherein all the allotted projects are listed with their

corresponding Winning Bid.

DESCRIPTION & LEARNING OBJECTIVES...Win Bid History Bidding History is listed on this page wherein...

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