2004 2005 2006 2007 Worst Case

Sales 0.05 4 30 250 Best Case

PAT 0 -5 1 15

Duration ( Amount @ the time

in yrs) Investment IRR (expected) of IPO/liquidation
Round I 4.5 3,000,000.00 100% 67,882,250.99
Round II 4 6,000,000.00 70% 50,112,600.00
Round III 3 12,000,000.00 45% 36,583,500.00

Worst Case Initial Round I Round II Round III

Promoter 100% 81.32% 71.46% 65.65%
Round I 18.68% 16.42% 15.08%
Round II 12.12% 11.14%
Round III 8.13%
100.00% 100.00% 100.00% 100.00%

Best Case Initial Round I Round II Round III

Promoter 100% 86.78% 79.06% 74.24%
Round I 13.22% 12.05% 11.31%
Round II 8.89% 8.35%
Round III 6.10%
100% 100% 100% 100%

Starting # of shar 1000000

Face value ps 0.01
Paid up cap 10000
Worst Case Initial Round I Round II Round III
Promoter 10000 10000 10000 10000
Round I 2297.8089528066 2297.808952807 2297.8089528066
Round II 1696.30763922 1696.30763921999
Round III 1238.34864923003
Total 10000 12297.808952807 13994.11659203 15232.4652412566
Price per share 13.06 35.37 96.90
Best Case Initial Round I Round II Round III
Promoter 10000 10000 10000 10000
Round I 1523.9998133315 1523.999813331 1523.99981333148
Round II 1125.059819428 1125.05981942774
Round III 821.322898912345
Total 10000 11523.999813332 12649.05963276 13470.3825316716
19.685041781219 53.33049760014 146.105752267364
Earnings Company Valuation @
Multiplier IPO
30 450,000,000.00

40 600,000,000.00

Valuation @ each
Worst Case Undiluted equity - WC round
15.08% 18.48% 16,235,962.21
11.14% 12.12% 49,498,509.36
8.13% 8.13% 147,607,527.98
Valuation @ each
Best Case Undiluted equity - BC round
11.31% 13.15% 22,820,076.66
8.35% 8.89% 67,458,064.44
6.10% 6.10% 196,810,037.31
Valuation - worse case Initial Round I Round II
Promoter 13,055,915.71 35,370,942.52
Round I 3,000,000.00 8,127,566.84
Round II 6,000,000.00
Round III
Total 16,055,915.71 49,498,509.36
Validation totals 16,055,915.71 49,498,509.36
Exit Multiples 28.03 9.09

Valuation - best case Initial Round I Round II

Promoter 19,685,041.78 53,330,497.60
Round I 3,000,000.00 8,127,566.84
Round II 6,000,000.00
Round III
Total 0 22,685,041.78 67,458,064.44
Validation Totals 22,685,041.78 67,458,064.44
Exit Multiples 26.449146789615 8.894414700315
 Doubts
15 is 150 mn?
Why is the best case taken as 40
instead of 45(avg)?
Price per share not matching

Round III
96,903,242.94
22,266,513.92
16,437,771.13
12,000,000.00
147,607,527.98
147,607,527.98
3.05

Round III
146,105,752.27
22,266,513.92
16,437,771.13
12,000,000.00
196,810,037.31
196,810,037.31
3.048625
 0 1 2 3 4 5 6 7
Equity 25
Reserves + surplus 100
Networth 125 400 490 900 1125 1905 2355 2905
PAT (projected) 75 90 110 225 280 450 550
RoCE 23.10% 22.50% 22.50% 25% 24.90% 23.60% 23.40%
Valuation 900 1080 1320 2700 3360 5400 6600
Investment Required 200 300 500
Target RoR 40% 30% 20%
Expected Returns 2108.27 856.83 720
% of final valuation 31.94% 12.98% 10.91%
% at the time of rounds 41.20% 14.57% 10.91%
 12

PAT for yr 7
Upside 120.00%
Downside 60.00%

Promoter Share
55.83% 44.17%
 0 1 2 3 4 5 6 7
Equity 25
Reserves + surplus 100
Networth 125 400 490 900 1125 1905 2355 2905
PAT (projected) 75 90 110 225 280 450 550
RoCE 23.10% 22.50% 22.50% 25% 24.90% 23.60% 23.40%
Valuation 900 1080 1320 2700 3360 5400 7920
Investment Required 200 300 500
Target RoR 40% 30% 20%
Expected Returns 2108.27 856.83 720
% of final valuation 26.62% 10.82% 9.09%
% at the time of rounds 32.83% 11.90% 9.09%
 12

PAT for yr 7
Upside 120.00%
Downside 60.00%

Investor Share Promoter Share

46.53% 53.47%
 0 1 2 3 4 5
Equity 25
Reserves + surplus 100
Networth 125 400 490 900 1125 1905
PAT (projected) 75 90 110 225 280
PAT actuals 45 54 66 135 168
RoCE 23.10% 22.50% 22.50% 25% 24.90%
Valuation (Projected) 900 1080 1320 2700 3360
Valuations Actuals 540 648 792 1620 2016
Investment Required 200 300 500
Target RoR 40% 30% 20%
Expected Returns 2108.27 856.83 720
% of final valuation (Expected) 31.94% 12.98% 10.91%
% at the time of rounds (Expected) 41.20% 14.57% 10.91%

% of final valuation (Actuals) 53.24% 21.64% 18.18%

% at the time of rounds (Actuals) 83.04% 26.45% 18.18%

Refined % of actuals 39.40% 16.01% 13.45%

 6 7 12

2355 2905
450 550 PAT for yr 7
270 330
23.60% 23.40% Upside 120.00%
5400 6600 Downside 60.00%
3240 3960

Investor Share Promoter Share

55.83% 44.17%

Investor Share Promoter Share

Author:
93.06% 6.94% The promoter dilution
cannot be less than 26
%.

68.86% 26%
Interest on Term Loans 0.4 14%
Loan @ Total
Loan @ First Second Half Interest @ Interest @ Interest per
Year Loan @ BOT Half EOT EOT First Half Second Half year
1 6.40 6.40 6.40 0.45 0.45 0.90
2 6.40 6.40 6.00 0.45 0.45 0.90
3 6.00 5.60 5.20 0.42 0.39 0.81
4 5.20 4.80 4.40 0.36 0.34 0.70
5 4.40 4.00 3.60 0.31 0.28 0.59
6 3.60 3.20 2.80 0.25 0.22 0.48
7 2.80 2.40 2.00 0.20 0.17 0.36
8 2.00 1.60 1.20 0.14 0.11 0.25
9 1.20 0.80 0.40 0.08 0.06 0.14
10 0.40 0.00 0.00 0.03 0.00 0.03
Working Capital Requirements
Year 1 Year 2 Year 3 Year 4 onwards same as 3
Raw Materials 1.5 1.40 1.68 1.97
Stock in progress 0.03 0.03 0.03 0.04
Finished Goods 0.5 0.52 0.62 0.75
Book Debt 1 1.44 1.73 2.02
Total 3.39 4.07 4.77
Margin 25% 0.85 1.02 1.19
Less Margin 2.54 3.05 3.58
Trade Credit 0.5 0.47 0.56 0.66
Finance Reqd for working Capital 2.08 2.49 2.92
Interest on Bank Borrowi 18% 0.37 0.45 0.53
Depreciation Calculations
Preoperative Exp 1.15 Contingency 0.75
Law IT Preopt Exp Conting Exp Total Cost
Land 0.39 0.05 0.03 0.48
Building 1.5 3.34% 10% 0.20 0.13 1.84
Plant & m/c 6.2 8.09% 33.34% 0.84 0.55 7.59
Misc Fixed Assets 0.4 5.15% 33.34% 0.05 0.04 0.49
Total 8.49
Law Depreciations - Straight Line Method
Building 0.06
Plant & m/c 0.61
Misc Fixed Assets 0.03
Total per anum 0.70
Depr for IT purposes - Written down method
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9
Building 0.184 0.165 0.149 0.134 0.120 0.108 0.098 0.088 0.079
Plant & m/c 2.530 1.686 1.124 0.749 0.499 0.333 0.222 0.148 0.099
Misc Fixed Assets 0.163 0.109 0.073 0.048 0.032 0.021 0.014 0.010 0.006
Total 2.876 1.960 1.345 0.931 0.652 0.463 0.334 0.245 0.184
Income Tax
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9
Profit before income tax 0.59 1.14 1.67 1.71 1.76 1.80 1.84 1.88 1.91
Add Depr - St Line 1.29 1.84 2.37 2.41 2.46 2.50 2.54 2.58 2.61
Reduce Depr - written d -1.59 -0.12 1.02 1.48 1.81 2.04 2.21 2.33 2.42
Unabsorbed depr 1.02 0.69
Taxable income 0.00 0.79 1.81 2.04 2.21 2.33 2.42
Deduction 30% of gross income 0.24 0.54 0.61 0.66 0.70 0.73
Net taxable income 0.56 1.27 1.43 1.54 1.63 1.70
Tax @ 45% 0.00 0.00 0.00 0.25 0.57 0.64 0.70 0.73 0.76
Profitability Extimates Price for T 12

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

Installed Capacity 2880 2880 2880 2880 2880 2880 2880 2880
Capacity Utilization 50% 60% 70% 70% 70% 70% 70% 70%
Capacity Util Actuals 1440 1728 2016 2016 2016 2016 2016 2016

(a) Sales Realizations 17.28 20.74 24.19 24.19 24.19 24.19 24.19 24.19
(b) Cost of Production
RawM (% of sales) 65% 65% 65% 65% 65% 65% 65% 65%
Raw Materials 11.23 13.48 15.72 15.72 15.72 15.72 15.72 15.72
Power (% os sales) 4% 4% 4% 4% 4% 4% 4% 4%
Power 0.69 0.83 0.97 0.97 0.97 0.97 0.97 0.97
Wages & salary (% Inc) 5% 5% 5% 5% 5%
Wages & salary 0.90 1.00 1.20 1.26 1.32 1.39 1.46 1.53
Factory Overhead (% Inc) 6% 6% 6% 6% 6% 6% 6%
Factory Overhead 0.05 0.05 0.06 0.06 0.06 0.07 0.07 0.08
(c) Admin & selling exp
Admin Expenses 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1
Selling Expenses (% of Sales) 10% 10% 10% 10% 10% 10% 10% 10%
Selling Expenses 1.73 2.07 2.42 2.42 2.42 2.42 2.42 2.42
(d) Gross Profit before int 2.58 3.20 3.72 3.66 3.59 3.52 3.45 3.37
(e) Total Fin Expenses
Interest on term loans 0.90 0.90 0.81 0.70 0.59 0.48 0.36 0.25
Interest on Bank Borr 0.37 0.45 0.53 0.53 0.53 0.53 0.53 0.53
Total Interest 1.27 1.34 1.34 1.23 1.11 1.00 0.89 0.78
(f) Depreciation 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70

(g) Operating Profit 0.61 1.16 1.69 1.73 1.78 1.82 1.86 1.90
Preliminary Expenses 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
PE % written off every year 10% 10% 10% 10% 10% 10% 10% 10%
(h) Exp written off 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02
(i) Profit/loss before tax 0.59 1.14 1.67 1.71 1.76 1.80 1.84 1.88
 (j) Provision for Tax 0.00 0.00 0.00 0.25 0.57 0.64 0.70 0.73
(k) PAT 0.59 1.14 1.67 1.46 1.19 1.16 1.15 1.14
Dividend in % 0 12% 12% 14% 14% 16% 16% 18%
(l) Less: Dividend 0.00 0.14 0.20 0.20 0.17 0.19 0.18 0.21
(m) Retained Profit 0.59 1.00 1.47 1.26 1.02 0.97 0.96 0.94
(n) Add: Depreciation 1.29 1.70 2.17 1.96 1.72 1.67 1.66 1.64
Year 10 Prelim exp written off 1.31 1.72 2.19 1.98 1.74 1.69 1.68 1.66
0.071 (o) Net Cash Accruals 1.31 1.72 2.19 1.98 1.74 1.69 1.68 1.66
0.066
0.004
0.141

Year 10
1.93
2.63
2.49

2.49
0.75
1.74
0.79
Year 9 Year 10
2880 2880
70% 70%
2016 2016

24.19 24.19

65% 65%
15.72 15.72
4% 4%
0.97 0.97
5% 5%
1.61 1.69
6% 6%
0.08 0.08

0.1 0.1
10% 10%
2.42 2.42
3.29 3.21

0.14 0.03
0.53 0.53
0.67 0.55
0.70 0.70

1.93 1.95
0.2 0.2
10% 10%
0.02 0.02
1.91 1.93
0.76 0.79
1.14 1.15
18% 20%
0.21 0.23
0.94 0.92
1.64 1.62
1.66 1.64
1.66 1.64
 1 2 3 4
# of albums 6 30 48 60
# Cum 6 36 84 144
PY 0 6 36 84
Sales from current year 50% 50% 50% 50%
Sales from previous year 100% 100% 100% 100%
Sales # CY 30000 150000 240000 300000
Sales # PY 0 60000 360000 840000
Total Sales 30000 210000 600000 1140000
Revenue
Sales $ 1800 12600 36000 68400
Costs
Royalty cost 270 1890 5400 10260
Replication Cost 300 2100 6000 11400
Selling & GA 850 1000 1200 1500
Marketing & selling Cost 720 5040 14400 27360
Total Costs 2140 10030 27000 50520
Fixed Cost 1200 7200 16800 28800 In depreciation sheet.
PBDIT -340 2570 9000 17880
Interest 0 0 0 0
Depr/Ammr - Album 300 1800 4200 7200
Depr/Ammr - Inv 0 0 0 0
Taxable Income -640 770 4800 10680
Net Acc Loss
Tax at 40% 0 308 1920 4272
PAT -640 462 2880 6408
 Sales PY 10000
Price PU 60

Fixed cost PA 200000

Royalty % 15%
M&S % 40% Exclude royalty
Replication Cost PU 10
Div number 1000
Tax % 40%

In depreciation sheet.