Tata Steel Limited

Equity Share Valuation

F.Y 2018-19
Advanced Corporate Finance Assignment

Prepared By: Roll No. Section

Nishtha Mehra PGFC 1920 C
Kaushal Goswami PGFC 1912 C
Jennise Singh PGFC 1911 C
Reshma Chauhan PGFC 1927 C
Manojna Bajpai PGFC 1953 C
Tarun Bhadoria PGFC 1943 C
Smiksha Sharma PGMA 1935 MA

TATA Steel Limited

Valuation on the basis of FCFF and FCFE

Year FCFF Year FCFE

2019 6,779.79 2019 6,379.57

2020 7,447.60 2020 6,587.78

2021 8,181.19 2021 6,802.79
2022 8,987.03 2022 7,024.82
2023 9,872.26 2023 7,254.09
2024 10,844.68 2024 7,490.84
2025 11,912.88 2025 7,735.32
2026 13,086.29 2026 7,987.78
2027 14,375.29 2027 8,248.48
2028 15,791.26 2028 8,517.69
2029 17,346.70 2029 8,795.68
Total FCFF 117,845.18 Total FCFE 76,445.27

Present Value - FCFF ₹ 50,890.29 Present Value - FCFE ₹ 32,692.19

TERMINAL VALUE - FCFF ₹ 143,773.18 TERMINAL VALUE - FCFE ₹ 64,455.39
PV- FCFF TERMINAL VALUE ₹ 32,625.86 PV- FCFE TERMINAL VALUE ₹ 12,116.53
ENTERPRISE VALUE ₹ 83,516.15 Value of Equity ₹ 44,808.72

Value of Debt ₹ 26,776.07

Value of Equity ₹ 56,740.08

Value Per Share ₹ 471.68 Value Per Share ₹ 372.49

Current Market Price as on March 07, 2020 : INR 351.55

Year 2019

PBT 16,227
Less: Taxes -5,670.61
Add Dep and Amort 3,802.96
Add Finance Cost 2,823.58
Cashflow from Operations before working capital changes 17,183

Tax Rate ( As per Schedule 43) 34.95%

Working Capital Changes

Change in Inventories -232.00
Change in Other Assets -12,152.00
Change in Current Assets -12,384.00

Change in Current Liabilities -14.00

Change in Current Liablities -14.00

Change in Working Capital -12,398.00

Income Taxes Paid 5,671

Cash flow from operating activities including working capital changes 10,455.79

CAPEX / Investments / CWIPs -3,676

FCFF 6,780

Finance Cost 2,823.50

Tax Savings on Finance Cost 987
Net Borrowings 1,437

FCFE 6,380

Number of Outstanding Shares 1,202,944,492

Capital Structure
Debt in Crores 26,776.07
Equity in Crores 72,729.70
Total Capital Employed 99,505.77
Cost of Debt 10.00%
Cost of Equity 18.19%

WACC 15.99%

Levered Beta 1.38

D/E ratio 0.37
Tax Rate 34.95%
BETA Conversion Factor 1.24
Unlevered Beta 1.11

Risk Free Rate -> 10 YEAR GOI BOND RATE 6.60%

Cost of Equity 18.19%

Market Return - Rm - 5 year 12%
Market Return - Rm - 10 year 15%

Steel sector 10 year growth rate 9.85%

2004 2200
2019 9000

Terminal FCFF Growth Rate 3.50%

Terminal FCFE Growth Rate 4.00%

Internal Growth Rate 9.85%

Sustainable Growth Rate 3.26%