Equity Valuation

RevenueEBITDA LessOperating Profit (EBIT)

Less Net interest LessLess Taxation

Net Profit Less

LessCash flow Summary Add

Cash flow from operations LessLess CapexLess Dividends+ / - Change in net debtLess Change in WC

FCFE

Relative Valuation data

EV/ SalesEV / EBITDAEV / Invested CapitalPEP/ Book Value

Sales (Revenue)Cost of Goods Sold (COGS)Gross MarginStaff, Gen & Admn Exp (SG&A)EBITDADepreciationEBIT InterestOther IncomePBTTaxPATMinority InterestReported PAT

This is from the Annual Report of Century Textiles and Industries Limited for the year 2008-09

Rs. In Crores2008-09

A CASH FLOW FROM OPERATING ACTIVITIES:

Profit For The Year Before Taxation : 346.95 Add / (Less) : Depreciation and Amortization 206.42 (Surplus) / Loss on sale / discardment of Fixed Assets (Net) -54.09 Interest and Finance charges (Net) 97.2 Dividend on Investments -2.74 Proportionate amounts written off against Miscellaneous Expenditure 99.99 Prior Period Adjustments (Net) -0.71

Operating Profit Before Working Capital Changes 693.02 Adjustments for : Trade and other receivables -4.76 Inventories -57.69 Trade Payables 107.55

Cash Generated From Operations 738.12 Add / (Less) : Voluntary Retirement Compensation -16 Direct Taxes Paid -48.32

Net Cash Generated From Operating Activities 673.8

B CASH FLOW FROM INVESTING ACTIVITIES :

Purchase of Fixed Assets (Includes Borrowing Costs Capitalized) -892.33 Sale of Fixed Assets 72.37 Interest Received 6.59 Dividend on Investments 2.74 Long term Investments Acquired -18.84 Current Investments Acquired -798.67 Current Investments Sold 798.67

Net Cash Used in Investing Activities -829.47

C CASH FLOW FROM FINANCING ACTIVITIES :

Working Capital and Short Term Borrowings -37.93 Repayment of Other Borrowings -368.64 Other Loans taken 748.08 Interest and Finance Charges paid -117.89 Dividend Paid -41.78 Tax on Dividend -7.12

Net Cash Generated From Financing Activities 174.72

NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 19.05

Cash and Cash equivalents - Opening balance 46.64

Cash and Cash equivalents - Closing balance 65.69

CALCULATION OF FCFF FOR THE CURRENT YEAR FROM THE ABOVE

Net cash generated from Operating activitiesAdd / Less Net cash used in Investing activities

Free Cash Flow to Firm

CALCULATION OF FCFE FOR THE CURRENT YEAR FROM THE ABOVE

Net cash generated from Operating activitiesAdd / Less Net cash used in Investing activitiesAdd / Less Net Cash generated / used from / in Financing activities :

Net debt borrowed Interest and finance charges paid Net Preference shares issued Prefrence dividend paid including tax on dividend Equity shares issued (Equity dividend paid is delebrately not included)

Free Cash Flow to Equity holders

This is from the Annual Report of Century Textiles and Industries Limited for the year 2008-09

Rs. In Crores2007-08

397.73

170.162.88

89.18-8.192.6-0.5

743.95

-30.91-138.51175.08

749.61

-54.35-110.1

585.16

-694.352.373.89

8.1-11.76

-1531.061531.06

-691.75

CASH FLOW FROM FINANCING ACTIVITIES :

17.94 Net debt borrowed-576.49 Preference shares issued674.95 Interest and Finance charges paid

-100.56 Preference dividend paid including tax on dividend0 Equity shares issued0 Equity dividend paid including tax on dividend

15.84

-90.75

137.39

46.64

Valuation of Equity shares using FCFF

Present Value of FCFF including the PV of Terminal ValueAdd: Opening Cash and Cash equivalentsLess : Preference shares outstanding including the preference dividend payable to themLess : Debt outstanding including interest charges payable to themValue of Equity Number of Equity sharesIntrinsic value of equity per share is : Value of Equity / Number of Equity shares

Less : Preference shares outstanding including the preference dividend payable to them

Intrinsic value of equity per share is : Value of Equity / Number of Equity shares

Assumptions

Revenue growth rates have to be projected based on business conditionsCapex can be expressed as a percentage of Revenue or as a percentage of Net or Gross Fixed assetsDepreciation can be expressed as a percentage of Revenue or as a percentage of Net or Gross Fixed assetsWorking capital items like cash, BR, inventory etc can be expressed as a percentage of Revenue or as a percentage of Net or Gross Fixed AssetsTrademarks, intangibles, goodwill, other assets, deferred taxes and pension obligations in the balance sheet have to be projected based on estimatesEBIT and / or EBITDA / NOPAT margins can be expressed as a percentage of RevenueTax rate is to be projected

Revenue growth rates have to be projected based on business conditionsCapex can be expressed as a percentage of Revenue or as a percentage of Net or Gross Fixed assetsDepreciation can be expressed as a percentage of Revenue or as a percentage of Net or Gross Fixed assetsWorking capital items like cash, BR, inventory etc can be expressed as a percentage of Revenue or as a percentage of Net or Gross Fixed AssetsTrademarks, intangibles, goodwill, other assets, deferred taxes and pension obligations in the balance sheet have to be projected based on estimatesEBIT and / or EBITDA / NOPAT margins can be expressed as a percentage of Revenue

Working capital items like cash, BR, inventory etc can be expressed as a percentage of Revenue or as a percentage of Net or Gross Fixed AssetsTrademarks, intangibles, goodwill, other assets, deferred taxes and pension obligations in the balance sheet have to be projected based on estimates

Current Projected Period3/31/2011 Year 1 Year 2 Year 3 Year 4

Sales 315065.6Cost of Goods Sold (COGS)EBITDA (Operating Income)Dep & AmortisationOther non-cash chargesEBIT InterestEBTTaxEATSales GrowthEBITDA Margin

Net capexNet working capital

Net debt raisedPreference capital raisedEquity capital raisedOutstanding debtOutstanding preference sharesOutstanding equity sharesOutstanding number of eq sh

Cost of debtEffective Tax RateBeta of the companyRisk Free RateMarket ReturnCost of equityCost of Preference sharesWACCTerminal rate

TerminalYear 5

DCF VALUATION

FCFF

RevenueX Operating Margin (%)= Operating Profit

Less Depreciation= EBIT

Effective Tax Rate (%)Tax Adjusted EBIT

Add DepreciationAdd Other Non Cash ChargesLess Increase / Decrease in WC AddLess Capex Add

Free Cash Flow to the Firm LessLessLess+/-

Discounted Free flow for the Operating periodTerminal Value DiscountedFirm Value

Less Total Debt & Pref CapitalAdd Transferable Liquid Investments Add

Total Equity Value of the CompanyNumber of Shares in issueIntrinsic Value of per shareCurrent Market Value per share

Weighted Average Cost of Capital

WACCCost of EquityRf + B (Rm - Rf)Rf BetaRmCost of Equity

Cost of Debt (pre-tax)Cost of Debt (post-tax)

WACC

Terminal Value (Value driver formula)Terminal Growth Rate (%)Terminal Value Discounted

DCF VALUATION

FCFE

Revenue 1Operating Margin (%) 2Operating Profit 3Depreciation 4EBIT 5Interest Charges paid 6EBT 7Effective Tax Rate (%) 8EAT 9Depreciation 10Other Non Cash Charges 11Increase / Decrease in WC 12Capex 13Pref Dividends Paid 14Net change in Debt 15Free Cash Flow to the Equity shareholders 16

1718

Discounted Free flow for the Operating period 19Terminal Value Discounted 20Equity Value 21

22Transferable Liquid InvestmentsTotal Equity Value of the CompanyNumber of Shares in issueIntrinsic Value of per shareCurrent Market Value per share

Cost of EquityRf + B (Rm - Rf)Rf BetaRmCost of Equity

Terminal Value (Value driver formula)Terminal Growth Rate (%)Terminal Value Discounted

GIVEN

Opening Revenue (Rs) 10000Revenue growth per year 25%Operating Margin 15%Depreciation (Rs) 700 per yearEffective Tax Rate 30%Other non-cash charges (Rs) 500 per yearInc / Dec in Working Capital (Rs) 300 per yearCapex 2000 in the third yearPref Div paid per year 0 per yearDebt raised during the year 700 at the beginning of the 4th yearCost of Debt 14%Risk Free rate of Interest 6%Market Return 16%Beta of the Stock 1.15Terminal Growth Rate 2.50%Debt outstanding 2000Encashable liquid investments 100Total equity shares issued by the company 7500Number of shares in issue 750Current Market Price 45Cash flow projection period 5 yearsPref Shares outstanding 0

A SIMPLE DISCOUNTED CASH FLOW (DCF) MODEL FOR VALUING A SHARE

Revenue Growth Rate 22%Terminal Growth Rate 4%Operating Margin 15%Tax Rate 25%Capex Growth as % of gross assets 2%Inc WC as % of revenues 1%Cost of Debt 12%Cost of Equity using CAPM 17.33%Debt Equity Ratio 2:03Weighted Avg Cost of Capital 14.00%Equity 60 RsNo.of Shares at Rs.10 Face Vale per Share 6Total Capital 100 Rs

FCFF Year 0 Year 1 Year 2

Revenues 200.00 244.00 297.68Operating Margin 0.15 0.15 0.15EBIT 30.00 36.60 44.65Taxes 7.50 9.15 11.16EBIT(1-t) 22.50 27.45 33.49 + Depreciation 12.50 5.00 5.00 - Capital Expenditures 3.00 10.00 10.00 - Chg WC 1.00 1.22 1.49Free Cash Flow to the Firm (FCFF) 31.00 21.23 27.00Terminal year Present Value of FCFF 18.62 20.78Present Value of Terminal year cash flow

The ValuationPV of FCFF during growth phase = 62.38PV of Terminal Value = 239.11Value of Operating Assets of the firm = 301.49Value of Excess Cash & Non-operating asse 10Value of Firm = 311.49 - Value of Outstanding Debt = 40Value of Equity = 271.49Value of Equity per share = 45.25

A SIMPLE DISCOUNTED CASH FLOW (DCF) MODEL FOR VALUING A SHARE

Risk Free Rate of Return 7.50%Market Return 15%Beta of the Stock 1.31

Value of Equity Per Share 45.25

Year 3

363.170.15

54.4813.6240.86 0 1 2 3

5.00 GFA 150 160 170 180

10.00 DEP 30 35 40 45

1.82 NFA 120 125 130 135

34.04354.20

22.98239.11

A SIMPLE DISCOUNTED CASH FLOW (DCF) MODEL FOR VALUING A SHARE FCFF

FCFF Year 0 Year 1 Year 2

Revenues 306335.70 335284.42 366968.80Operating Margin 0.254 0.263 0.272EBITDA 77809.27 88057.76 99656.11Less: Dep and Amortization 6559.90 6559.90 6559.90Taxes 22613.17 26079.32 29790.79EBIT(1-t) 48636.19 55418.54 63305.42 + Depreciation+Other non cash cha 6559.90 6559.90 6559.90 - Capital Expenditures 11968.70 15622.54 15622.54 - Chg WC 458.60 458.60 458.60Free Cash Flow to the Firm (FCFF) 42768.79 45897.30 53784.18

Present Value of FCFF 41432.06 43828.16

The ValuationPV of FCFF during growth phase = 230238.82PV of Terminal Value = 4164224.10Value of Operating Assets of the fir 4394462.92

250Value of Firm = 4394712.92 - Value of Outstanding Debt = 1600 - Value of Pref sh outstanding = 0Value of Equity = 4393112.92Value of Equity per share = 488.12

Calculation of WACCPost tax cost of debt 38.33%Cost of Equity 10.50%Cost of Preference shares 0.00%Debt for years 1 to 5 1600Equity 158999Preference shares 0Total Capital 160599WACC for years 1 to 5 10.78%

Value of Excess Cash & Non-operating assets=

Debt for year 5 onwards 1600Equity 158999Preference shares 0Total Capital 160599WACC for year 5 onwards 10.78%

Interest on debt 583.2Interest on debt after year 5 901.92

A SIMPLE DISCOUNTED CASH FLOW (DCF) MODEL FOR VALUING A SHARE FCFF

Year 3 Year 4 Year 5 Terminal Year

401647.35 439603.03 481145.510.281 0.290 0.300

112782.12 127636.99 144448.446559.90 6559.90 6559.90

33991.11 38744.67 44124.3372231.11 82332.42 93764.21

6559.90 6559.90 6559.9015622.54 15622.54 15622.54

458.60 458.60 458.6062709.87 72811.18 84242.97

6946843.89 Terminal period value46130.04 48349.87 50498.70

4164224.10 PV of Terminal period

A SIMPLE DISCOUNTED CASH FLOW (DCF) MODEL FOR VALUING A SHARE FCFE

Revenue Growth Rate 25%Terminal Growth Rate 5%Operating Margin 15%Tax Rate 30%Capex Growth as % of incremental revenues 5%Inc WC as % of incremental revenues 2%Cost of Debt 12%Cost of Equity using CAPM 16.80%Debt Equity Ratio 200000Weighted Avg Cost of Capital 11.20%Equity 100000 RsNo.of Shares at Rs.10 Face Vale per Share 10000Total Capital 100 Rs

FCFE Year 0 Year 11

Revenues 10000.00 12500.00Operating Margin 0.15 0.15EBITDA 1500.00 1875.00Less: Interest paid 280.00 280.00Less: Depreciation & Amort 700.00 700.00EBT 520.00 895.00Taxes 156.00 268.50EAT 364.00 626.50 + Depreciation and non-cash charges 1200.00 1200.00 - Capital Expenditures 0.00 0.00 - Chg WC 300.00 300.00+/- Net change in debt- Dividends to Pref shares 0.00 0.00Free Cash Flow to Equity Shareholders (FCFE) 1264.00 1526.50

Present Value of FCFE 1306.93

The ValuationPV of FCFE during growth phase = 6175.88PV of Terminal Value = 13591.79Value of Operating Assets of the firm = 19767.67Value of Excess Cash & Non-operating assets 100Value of Equity = 19867.67Value of Equity per share = 26.49

A SIMPLE DISCOUNTED CASH FLOW (DCF) MODEL FOR VALUING A SHARE FCFE

Risk Free Rate of Return 6.00%Market Return 15%Beta of the Stock 1.2

Value of Equity Per Share 26.49

Year 2 Year 3 Year 4 Year 5 Terminal Year2 3 4 5

15625.00 19531.25 24414.06 30517.580.15 0.15 0.15 0.15

2343.75 2929.69 3662.11 4577.64280.00 280.00 378.00 378.00700.00 700.00 700.00 700.00

1363.75 1949.69 2584.11 3499.64409.13 584.91 804.63 1079.29954.63 1364.78 1779.48 2420.35

1200.00 1200.00 1200.00 1200.000.00 2000.00 0.00 0.00

300.00 300.00 300.00 300.00700.00

0.00 0.00 0.00 0.001854.63 264.78 3379.48 3320.35

29545.461359.47 166.17 1815.84 1527.46

13591.79

InputsEarnings before interest and taxes = 100Expected growth for next 5 years = 10%Expected growth after year 5 = 5%Tax rate = 40%Debt ratio for the firm = 20%Cost of equity = 12%Pre-tax cost of debt = 7%Return on capital in high growth= 12%Return on capital in stable growth = 10%

0 1 2 3 4 5 Terminal YearExpected Growth rate 10% 10% 10% 10% 10% 5%Reinvestment rate 83.33% 83.33% 83.33% 83.33% 83.33% 50.0%EBIT $ 100.00 $ 110.00 $ 121.00 $ 133.10 $ 146.41 $ 161.05 $ 169.10 Taxes $ 44.00 $ 48.40 $ 53.24 $ 58.56 $ 64.42 $ 67.64 EBIT(1-t) $ 66.00 $ 72.60 $ 79.86 $ 87.85 $ 96.63 $ 101.46 - Reinvestment $ 55.00 $ 60.50 $ 66.55 $ 73.21 $ 80.53 $ 50.73 FCFF $ 11.00 $ 12.10 $ 13.31 $ 14.64 $ 16.11 $ 50.73 Terminal Value $ 932.56

Present Value $ 9.96 $ 9.92 $ 9.88 $ 9.84 $ 577.40

Value of Firm = $ 617.01 $ 670.42 $ 728.31 $ 791.04 $ 858.98 $ 932.56 ! This is the present value of the cash flows to the firm

Value of Equity = $ 493.61 ! Equity as % of value starting in each year; year 2, year 3…

Value of Debt = $ 123.40 ! Debt as % of value

EBIT $ 100.00 $ 110.00 $ 121.00 $ 133.10 $ 146.41 $ 161.05 $ 169.10 Interest Exp $ 8.64 $ 9.39 $ 10.20 $ 11.07 $ 12.03 $ 13.06 EBT $ 101.36 $ 111.61 $ 122.90 $ 135.34 $ 149.03 $ 156.05 Taxes $ 40.54 $ 44.65 $ 49.16 $ 54.13 $ 59.61 $ 62.42 Net Income $ 60.82 $ 66.97 $ 73.74 $ 81.20 $ 89.42 $ 93.63 - Reinvestment $ 55.00 $ 60.50 $ 66.55 $ 73.21 $ 80.53 $ 50.73 + New Debt Issued $ 10.68 $ 11.58 $ 12.55 $ 13.59 $ 14.71 $ 9.33 FCFE $ 16.50 $ 18.05 $ 19.74 $ 21.58 $ 23.60 $ 52.22 Terminal Value of Equity $ 746.05

Present Value $ 14.73 $ 14.39 $ 14.05 $ 13.72 $ 436.72

Value of Equity = $ 493.61

Capital StructureDebt at end of year $ 123.40 $ 134.08 $ 145.66 $ 158.21 $ 171.80 $ 186.51 $ 195.84

Cost of Equity 12.00% 12% 12.00% 12.00% 12.00% 12.00%Pre-tax Cost of Debt 7.00% 7% 7.00% 7.00% 7.00% 7.00%After-tax Cost of Debt 4.20% 4.20% 4.20% 4.20% 4.20% 4.20%Cost of Capital 10.44% 10.44% 10.44% 10.44% 10.44% 10.44%

Terminal Year

FCFF FCFEebit ebittaxes int expebit(1-t) ebtreinvestment taxesfcff net incometerminal value reinvestmentpresent value new debt issued

! This is the present value of the cash flows to the firm value of firm fcfe starting in each year; year 2, year 3… value of debt terminal value

value of equity present valuevalue of equity

Wtd avg cost of capitalcost of equity

ebit on day zeroebit growth rate during the growth periodterminal growth rate

! This is the new debt issued each year tax ratedebt ratio for the firmcost of equityreinvestment rate or capex and incremental working cap

! This is 30% of each year's firm value

! Computed using a 70% Equity; 30% Debt ratio.

reinvestment rate or capex and incremental working cap

FCFF Model

DCF Analysis: WACC Method

Net income (PAT)Add Interest expense Add

Less Tax effect of interest expense Add

= After-tax interest expense Add

Net operating profit after tax (NOPAT) Add

Add Depreciation Add

Add Amortization Add

Add Deferred taxes (non cash charges) Less

Add Minority interestAdd Income from affiliates Less

Add Other noncash items +/-

Less Changes in net working capital (NWC) +/-

Less Capital expenditures

Other Free cash flowTerminal value (EBITDA multiple)Total free cash flows to capital providers

ValuationFirm valuePlus: excess cashLess: debt outstandingLess: minority interestLess: preferred stockEquity valueValue per share

WACC calculationDebt/market equityRelevered beta

WACCKe

FCFE Model FCFF Model adjusted for leverage of the firm

DCF Analysis: Equity Residual Method DCF Analysis: Adjusted Present Value (for leverage)

Net income (PAT) Net income (PAT)Depreciation Add Interest ExpenseAmortization Less Tax Effect of Interest ExpenseDeferred Taxes = After Tax Interest ExpenseMinority Interest NOPATIncome from Affiliates Add DepreciationOther Non-Cash Items Add AmortizationChanges in Net Working Capital Add Deferred Taxes Equity Cash Flow from Operations Add Minority InterestCapital Expenditures Add Income from AffiliatesChange in Debt Add Other Non-Cash ItemsChange in Preferred Less Changes in Net Working CapitalPreferred Dividends (includes convertible) Other Less Capital Expenditures

Other Residual Cash Flows Unlevered Free Cash Flow Terminal Value (P/E Multiple) Terminal Value (EBITDA Multiple) Cash Flows to Common Equity Holders Cash Flows to Capital Providers

Valuation ValuationEquity Value Unlevered Free Cash FlowsValue per Share Add Debt Tax Shield

Firm ValuePlus: Debt Outstanding Plus: Excess CashPlus: Minority Interest Less: Debt OutstandingPlus: Preferred Stock Less: Minority InterestLess: Excess Cash Less: Preferred StockFirm Value Equity ValueCost of Equity Calculation Value per ShareDebt/Market EquityRelevered Beta

Ke

FCFF Model adjusted for leverage of the firm

DCF Analysis: Adjusted Present Value (for leverage)

Aban Offshore - Parag Parikh

CASH FLOW

OPENING CASH AND BANK

Profit After TaxLess Investment IncomeAdd Interest PaidAdd Miscellaneous Expenses W/OffAdd DepreciationAdd Minority IncomeAdd / Less Deferred TaxationAdd / Less OthersAdd / Less Change in Working Capital

CASH FLOW FROM OPERATING ACTIVITIES

Add / Less Change in Fixed AssetsAdd / Less Change in InvestmentsAdd Investment Income

CASH FLOW FROM INVESTING ACTIVITIES

Add Increase in EquityAdd / Less Change in Preference CapitalAdd / Less Change in BorrowingsAdd / Less Change in Minority InterestLess Interest PaidLess Dividend- EquityLess Dividend- Preference CapitalLess Minority Income

CASH FLOW FROM FINANCING ACTIVITIES

NET CHANGE IN CASH

CLOSING CASH AND BANK

Profit and Loss AccountHINDUSTAN UNILEVER LIMITED

Dec-04

Income

Sales Turnover 10996.72Exise Duty 939.61Net Sales 10057.11Other Income 171.12Stock Adjustments -76.69

Total Income 10151.54

ExpenditureRaw Materials 5413.77Power & Fuel Cost 164.77Employee Cost 574.84Other Manufacturing Expenses 193.84Selling and Admin Expenses 1713.73Miscellaneous Expenses 377.93Preoperative Expenses Capitaliz 0

Total Expenses 8438.88

Operating Profit 1541.54 (Total Income-Other Income - Total Expenses)PBDIT (add back Other Income) 1712.66Interest 129.98PBDT 1582.68Depreciation 120.9Other Written Off 0Profit Before Tax 1461.78Extra-Ordinary items 56.29PBT (Post Extra Ord Items) 1518.07Tax 320.74Reported Net Profit 1197.33

(Total Income-Other Income - Total Expenses)

Tommy Hilfiger

Total RevenuesLess Cost of Goods Sold Add= Gross Profit =Less SG & A expense LessLess D&A expense == Operating Income (EBIT) LessLess Interest expense Less= Taxable Income LessLess Tax expense LessLess Minority Interest and Other == Net Income AddAdd Interest LessAdd D&A expense AddLess Capital Exp =Add Asset Sales LessLess Acquisitions =Less Changes in WC= FCFF

Less=AddLessAdd=

Star Bucks CorporationIncome Statement 2000

Retail Sales 1807704Speciality Sales 315810Net Sales 2123514Cost of Goods Sold 961999Gross Margin 1161515Store Operating Expenses 671420Other Operating Expenses 64292Depreciation and Amortisation 111578SG & A expenses 119250Operating Income (EBIT) 194975Interest and Other Income 21255Interest and Other Expense 0Gain on Sale of Investment 216230Earnings Before Tax 432460Income Taxes 86492Net Income 129738Number of Shares 182190Earnings Per Share 0.71

EBIT 194975Taxes on EBIT 77990NOPAT 116985Depreciation and Amortization 111578Capex -222565Change in WC 299495Free Cash Flow to Firm 305493

Parameters Dabur HUL ITCRs. In Crores

PBDIT 12 15 20Book Value of Assets 75 80 100Sales 80 100 160Profit after Tax 8 10 16Cash Flow 9 12 18

Market Capitalization 150 240 360

RatiosMV/ PBDIT 12.5 16 18 15.50 0.20MV / BV 2 3 3.6 2.87 0.20MV / Sales 1.875 2.4 2.25 2.18 0.60

1.00

Relative Valuation ### 26DCF 35

Book Value 28Market Value 15

26

Parameters Dabur HUL ITCRs. In Crores

Sales 150 140 160EBITDA 70 60 75EBIT 30 25 35EAT 15 13 20BV 100 90 110

Market Capitalization 600 550 650

RatiosMV/ Sales 4.00 3.93 4.06 4.00 0.20MV / EBITDA 8.57 9.17 8.67 8.80 0.20MV / EBITDA 20.00 22.00 18.57 20.19 0.20MV/EAT 40.00 42.31 32.50 38.27 0.20MV/BV 6.00 6.11 5.91 6.01 0.20

Industry Average

Weights for ratios

Industry Average

Weights for ratios

IPO Company

18 55.890 51.6

125 163.1312.5

14

Rs 270.53 Crores

Rs 27.05 Price per share of IPO Company on Relative Valuation basis

IPO Company

100 79.9440 70.4128 113.0716 122.4670 84.09

Rs 469.98

Rs 47.00

Contribution of each parameter to Mcap

Contribution of each parameter to Mcap

An economic moat is a structural thingHard to duplicate and thus long lastingYour competitors know your secret and yet still cant copy.

Southwest Airlines of nineties

1 Economies of Scale and ScopeWal-Mart, Home-Depot, P&G, Lowe, CintasMarket leader in a fragmented and unorganized sector

2 Network affecteBay, Mastercard, Visa, American Express

3 IPR Patents, trademarks, regulatory approvals or customer goodwillDisney, Nike, Genentech

4 High customer switching costsPaychex, Microsoft

Hard to duplicate and thus long lastingYour competitors know your secret and yet still cant copy.

McLeod Russel Largest Tea Producer in the worldJagran Prakashan Highest News paper circulation in NorthAsian Paints Customer loyaltySun TV Cable TV business in South India

Reliance Industries India's largest refinerPatents, trademarks, regulatory approvals or customer goodwill Colgate Palmolive (India) More than 50% market share in toothpaste

OnMobile Global VAS provider of choice for domestic and global mobile telecom operatorsNestle India Strong brand in food productsShriram Transport finance Commercial Vehicle FinancePidilite Industries Adhesives

Highest News paper circulation in North

More than 50% market share in toothpasteVAS provider of choice for domestic and global mobile telecom operators

Based on RevenueFAST GROWING STOCKS

Cox and KingsJaiprakash PowerGSFCOberoi RealtyPrestige EstatesMonnet IspatMotherson Sumi Systems LimitedAdani PowerMercatorPipavav Defence

Based on Forward PE PE to EPS Growth rate High Dividend YieldLEAST EXPENSIVE STOCKS BEST PEGs INCOME GENERATORS

Jubliant Life Science Cheenai PetroleumJBF Industries JSW Steel JBF IndustriesAban Offshore CPCL TVS Motor CoDeepak Fertilizers Cox and Kings Gateway DistriparksDalmia Bharat Enterprieses HEG Limited HPCLHDIL JK Cement Gujrat Industries PowerSintex India Cements Jagran PrakashanSesa Goa Usha MartinKalpataru Power Ashok LeylandSterlite Industries Oil IndiaIL&FS Transportation Hexaware TechnologiesZuari Industries

Shiv-Vani Oil and Gas exploration Limited

High Dividend YieldINCOME GENERATORS

Cheenai Petroleum

Gateway Distriparks

Gujrat Industries PowerJagran Prakashan

Hexaware Technologies

Filters

1 Past 5 years growth of top line (Revenue or Sales) > 20%

2 Past 5 years growth of bottom line (PAT or Net Profit) > 20%

3 Past 5 years growth of EPS > 20%

4 Past 5 years EBIT, EBITDA, NOPAT & PAT margins > 20%

5 EBITDA to (Net Working Capital + Net Fixed Assets) ratio > 20%

6 EBITDA to EV (Market Capitalization of Equity + Debt - Excess Cash & CE) > 15%

7 PE ratio < 10

8 PEG ratio (PE / EPS growth rate) < 1

9 Dividend Yield Ratio (Dividend / Share price) > 5%

10 DSCR > 3

Weight Scores1 to 5

10% 3 0.3 = or > 1 < 2 No

10% 2 0.2 = or > 2 < 3 May not

10% 3 0.3 = or > 3 < 4 Yes

10% 4 0.4 = or > 4 < 5 Surely Yes

10% 2 0.2

10% 3 0.3

10% 4 0.4

10% 5 0.5

10% 2 0.2

10% 3 0.3

3.1

10% 0