BHC Valuation

Financial Projections

-------------------------- ---------------------- --------------------------- ---------------------- ---------------------- ---------------------- ---------------------- ---------------------1

2
3
4
5
6
7
Year
-------------------------- ---------------------- --------------------------- ---------------------- ---------------------- ---------------------- ---------------------- ---------------------PANEL I

A. Rooms
B. Occupancy Rate
C. Average room rent (in Rs.)

2280

2410

2490

2620

2806

3161

3311

60%

61%

62%

63%

64%

65%

66%

2500

2875

3306

3802

4373

5028

5783

------------------------------------------------- ---------------------- ---------------------- ---------------------- ---------------------- ---------------------PANEL II

D. Room rent from owned

1248.30

1542.69

1863.03

2290.70

2866.10

3771.03

4612.36

properties
E. Food & beverage revenues
F. Revenue from owned

811

1003

1211

1489

1863

2451

2998

2059.695

2545.432

3073.998

3779.655

4729.071

6222.199

7610.391

87.38

107.99

130.41

160.35

200.63

263.97

322.87

2147

2653

3204

3940

4930

6486

7933

properties
G. Management fees from
managed properties
H. Total revenue

-------------------------- ---------------------- --------------------------- ---------------------- ---------------------- ---------------------- ---------------------- ---------------------PANEL III

I. Material Expenses

309

382

461

567

709

933

1142

J. Personnel expenses

309

382

461

567

709

933

1142

K. Upkeep & service expenses

371

458

553

680

851

1120

1370

L. Sales & Gen.Admin. expenses

371

458

553

680

851

1120

1370

1359

1680

2029

2495

3121

4107

5023

K. Total operating expenses

-------------------------- ---------------------- --------------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------

PANEL IV

L. EBDIT

788

M. Depreciation

119.70

973
132.32

1176

1445

1809

2380

2910

139.86

165.07

209.51

292.85

328.35

N. EBIT

668

841

1036

1280

1599

2087

2582

O. NOPLAT

534

673

829

1024

1279

1669

2066

P. Gross Cash Flow

654

805

968

1189

1489

1962

2394

Q. Gross Investments

302

R. Free cash flow from

352

446
359

399
570

712
478

1085

1848

404

114

600

800

1216
1178

operations (P-Q)
S. Non-operating cash flow

300

352
659
570
478
1004
914
1178
T. Free cash flow
-------------------------- ---------------------- --------------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------

Current Assets, Fixed Assets and Depreciation (Rs. million)

-------------------------- ---------------------- --------------------------- ---------------------- ---------------------- ---------------------- ---------------------- ---------------------A. Current assets (beginnig)

516

618

764

922

1134

1419

1867

B. Current Assets (end)

618

764

922

1134

1419

1867

2283

C. Current Assets addition

102

146

159

212

285

448

416

2110

2310

2610

2850

3350

4150

5550

200

300

240

500

800

1400

800

F. Acc. depreciation

600.00

719.70

852.02

991.88

1156.95

1366.46

1659.31

G. Net block (C+D-E)

1710.00

1890.30

1997.98

2358.12

2993.05

4183.54

4690.69

119.70

132.32

139.86

165.07

209.51

292.85

328.35

D. Gross block
E. Capital expenditure

H. Depreciation

-------------------------- ---------------------- --------------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------

Weight of Equity
Weight of Debt

95%
5%

Cost of equity of BHC

17.44%

Cost of capital of BHC

17.02%

Continueing value

44746 FCFF 8/(W ACC-g)

The value of equity

17509

======================================================================= ============ ============ ============

Assumptions
Increase in Average Room Rent

(Annual)

15%

Food and beverage revenues are

65%

of room rent

Material expenses as a % of revenues

15%

(exclude management fee)

Personnel expenses as a % of revenues

15%

(exclude management fee)

Upkeep & service as a % of revenues

18%

(exclude management fee)

Sales and General Admin. as % of revenues

18%

(exclude management fee)

Management Fee
Working Capital
Rate of depreciation
Effective tax rate
MArket value of equity

7%
30%
7%

(of Revenues from owned properties)

(of revenues)
(of Net Fixed Assets)

20%
17100

million

Market value of debt (imputed)

900

million

Cost of debt

9%

Risk free rate of return

MArket risk premium
BHC's BETA value
No. of days in years

12%
8%
0.68
365

14%
Growth rate of cash flow after 7th year
========================== ============ ============================= ============ ============ ============ ============

Year

FCAA

PVIF

PV

1 352.1733 0.854701 301.0029

2

659.491 0.730514 481.7671

3 569.8591 0.624371 355.8032

4 477.6618

0.53365 254.9043

5 1003.887 0.456111 457.8841

6 914.2469 0.389839 356.4087
7

1177.53 0.333195 392.3477

44746 0.333195 14909.21

Valuation of the firm

17509.33

Vslue of Debt

900

Value of Euq.

16609.33