BUSINESS VALUATION

CIA 1 COMPONENT 1

SUBMITTED BY :

JUHI SACHETI

1720347
INTRODUCTION

Graphite India Limited

Graphite India Limited (GIL) is the pioneer in India for manufacture of Graphite Electrodes as
well as Carbon and Graphite Specialty products. GIL’s manufacturing facilities are spread across
6 plants in India and it has also got a 100% owned subsidiary at Nuremberg, Germany, by name
Graphite COVA GmbH.

Having started in 1967 in collaboration with erstwhile Great Lakes Carbon Corporation (GLCC)
of USA, GIL has been continually improving its product quality and services thereby scaling
newer heights of excellence and customer recognition. This journey has been fueled by our
reliance on cutting-edge technology, a natural penchant for innovation and creativity, eco-
friendly approach in production process, consistency of product quality and services as well as
productivity and cost optimization.
BALANCE SHEET
Balance Sheet of Graphite India ------------------- in Rs. Cr. -------------------
Mar 19 Mar-18 Mar-17 Mar-16 Mar-15

12 mths 12 mths 12 mths 12 mths 12 mths

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS
Equity Share Capital 39.08 39.08 39.08 39.08 39.08
Total Share Capital 39.08 39.08 39.08 39.08 39.08
Reserves and Surplus 4614.34 2562.71 1812.78 1738.08 1714.53
Total Reserves and Surplus 4614.34 2562.71 1812.78 1738.08 1714.53
Total Shareholders Funds 4653.42 2601.79 1851.86 1777.16 1753.61
NON-CURRENT LIABILITIES
Long Term Borrowings 0 0 0 0 41.72
Deferred Tax Liabilities [Net] 113.59 94.5 84.03 72.8 82.12
Other Long Term Liabilities 0.01 0.04 1.8 1.26 0.01
Total Non-Current Liabilities 113.6 94.54 85.83 74.06 123.84
CURRENT LIABILITIES
Short Term Borrowings 359.59 155.29 126.82 179.92 143.99
Trade Payables 572.76 394.82 210.84 158.16 186.81
Other Current Liabilities 209.78 218.62 93.2 87.34 136.54
Short Term Provisions 34.05 30.9 34.19 55.41 102.7
Total Current Liabilities 1176.18 799.63 465.05 480.82 570.05
Total Capital And Liabilities 5943.2 3495.96 2402.74 2332.04 2447.5
ASSETS
NON-CURRENT ASSETS
Tangible Assets 606.19 642.61 615.52 539.36 589.13
Intangible Assets 1.12 0.67 1.09 1.52 1.69
Capital Work-In-Progress 16.77 8.12 32.06 65.49 9.59
Fixed Assets 624.08 651.4 648.67 606.37 600.4
Non-Current Investments 574.9 208.26 98.49 172.76 213.06
Long Term Loans And Advances 8.11 7.87 8.32 15.76 20.58
Other Non-Current Assets 10.09 12.47 14.1 0.07 0.12
Total Non-Current Assets 1217.18 880 769.58 794.95 834.16
CURRENT ASSETS
Current Investments 1991.47 1032.84 565.43 376.32 267.01
Inventories 1820.83 669.94 512.63 632.02 854.99
Trade Receivables 704.52 758.82 406.81 442.17 387.88
Cash And Cash Equivalents 30.2 31.12 41.06 5.77 11.34
Short Term Loans And Advances 4.23 3.56 3.29 62.63 75.83
OtherCurrentAssets 174.77 119.68 103.94 18.17 16.29
Total Current Assets 4726.02 2615.96 1633.16 1537.08 1613.34
Total Assets 5943.2 3495.96 2402.74 2332.04 2447.5
PROFIT AND LOSS ACCOUNT
Profit & Loss account of Graphite India ------------------- in Rs. Cr. -------------------
Mar 19 Mar-18 Mar-17 Mar-16 Mar-15

12 mths 12 mths 12 mths 12 mths 12 mths

INCOME
Revenue From Operations [Gross] 6597.56 2941.36 1368.86 1396.4 1551.1
Less: Excise/Sevice Tax/Other Levies 0 25.23 85.98 77.96 74.14
Revenue From Operations [Net] 6597.56 2916.13 1282.88 1318.44 1476.96
Other Operating Revenues 139.74 42.07 22.89 28.24 20.25
Total Operating Revenues 6737.3 2958.2 1305.77 1346.67 1497.22
Other Income 196.35 88.89 83.89 26 30.74
Total Revenue 6933.65 3047.09 1389.66 1372.68 1527.96
EXPENSES
Cost Of Materials Consumed 2100.22 711.45 517.32 459.91 694
Purchase Of Stock-In Trade 0 11.8 0 0.9 0
Changes In Inventories Of FG,WIP And Stock-In Trade -679.33 13.18 20.09 128.08 -19.7
Employee Benefit Expenses 221.64 175.78 152.04 136.14 138.47
Finance Costs 10.89 6.18 6.5 7.41 12.23
Depreciation And Amortisation Expenses 56.01 46.43 41.56 44.42 38.75
Other Expenses 888.73 693.45 540.72 467.56 529.17
Total Expenses 2598.16 1658.27 1278.23 1244.43 1392.92
43543 43542 43541 43540 43539

12 mths 12 mths 12 mths 12 mths 12 mths

Profit/Loss Before Exceptional, ExtraOrdinary Items And Tax 4335.49 1388.82 111.43 128.25 135.04
Exceptional Items -54.86 0 0 0 -5.6
Profit/Loss Before Tax 4280.63 1388.82 111.43 128.25 129.44
Tax Expenses-Continued Operations
Current Tax 1468.58 464.72 3.28 49.5 47.12
Deferred Tax 6.3 10.47 -4.13 -3.63 0.13
Total Tax Expenses 1474.88 475.19 -0.85 45.87 47.25
Profit/Loss After Tax And Before ExtraOrdinary Items 2805.75 913.63 112.28 82.38 82.19
Profit/Loss From Continuing Operations 2805.75 913.63 112.28 82.38 82.19
Profit/Loss For The Period 2805.75 913.63 112.28 82.38 82.19

OPERATING INVESTED CAPITAL

YEAR 19 18 17 16 15
ASSETS 5943.2 3495.96 2402.74 2332.04 2447.5
(NON CURRENT INVESTMENTS) 574.9 208.26 98.49 172.76 213.06
= OPERATING INVESTED CAPITAL 5,368.30 3,287.70 2,304.25 2,159.28 2,234.44
ANALYSIS:

The operating invested capital of the firm has been in varying between 2300 to 5300 crores,
mainly increasing from 2015 to 2018, with a big jump in 2019. The increase can be as a
consequence of new projects initiated by the company, or expansion of their plants. Hence the
company has been functioning pretty well, with increasing profits year after year.

NET OPERATING PROFIT LESS ADJUSTED TAXES (NOPLAT)

Net Operating Profit Less Adjusted Taxes (NOPLAT) is a financial metric that calculates a
firm's operating profits after adjusting for taxes. By using operating income, or income before
taking interest payments into account, NOPLAT serves as a better indicator of operating
efficiency than net income.

Mar 19 Mar-18 Mar-17 Mar-16 Mar-15

PROFIT BEFORE TAX 4280.63 1388.82 111.43 128.25 129.44

(+) INTEREST EXPENSE 10.89 6.18 6.5 7.41 12.23

(-) INTEREST INCOME 0 0 0 0 0
(-) NON OPERATING INCOME 196.35 88.89 83.89 26 30.74
= EBIT 4,095.17 1,306.11 34.04 109.66 110.93

TAX PROVISION FROM INCOME STATEMENT 1474.88 475.19 -0.85 45.87 47.25

(+) TAX SHIELD ON INTEREST EXPENSE 3.267 1.854 1.95 2.223 3.669
(-) TAX ON INTEREST INCOME 0 0 0 0 0
(-) TAX ON NON OPERATING INCOME 58.905 26.667 25.167 7.8 9.222
=TAXES ON EBIT 1,419.24 450.38 -24.07 40.29 41.70

NOPLAT (EBIT- TAXES ON EBIT) 2,675.93 855.73 58.11 69.37 69.23

Note : for calculation purpose taxes are taken at 30%

ANALYSIS:

The net operating profit less adjusted taxes were highest in 2019. Since then, it has been
decreasing. In 2017, it reached lowest, but gained momentum in from 2018 onwards and is
increasing. However, since 2018, the NOPLAT has been increasing at a rapid rate because of the
expansion of the plants and collaboration with GLCC.
RETURN ON INVESTED CAPITAL (ROIC)
Return on invested capital is a calculation used to assess a company's efficiency at allocating the
capital under its control to profitable investments.

The return on invested capital ratio gives a sense of how well a company is using its money to
generate returns. Comparing a company's return on invested capital with its weighted
average cost of capital (WACC) reveals whether invested capital is being used effectively. This
measure is also known simply as "return on capital."

Formula :

Net Operating Profit After Tax (NOPAT)/Invested Capital = ROIC

YEAR 19 18 17 16
NOPLAT 855.73 58.11 69.37 69.23
INVESTED CAPITAL 3,287.70 2,304.25 2,159.28 2,234.44

ROIC 26.03% 2.52% 3.21% 3.10%

ANALYSIS:

The ROIC is maximum in 2019, almost being 26%, while least in 2018, being 2.5%. The
company had approximately the same ROIC until 2017, after which it dipped but increased
rapidly in 2019. The company has diversified its product portfolio this year, and maybe this will
lead to increase in ROIC here after.

FREE CASH FLOW

Free cash flow represents the cash a company generates after cash outflows to support operations
and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of
profitability that excludes the non-cash expenses of the income statement and includes spending
on equipment and assets as well as changes in working capital.

19 18 17 16 15
NOPLAT 2675.928 855.733 58.107 69.367 69.233
(+) DEPRECIATION 56.01 46.43 41.56 44.42 38.75
= GROSS CASH FLOW 2,731.94 902.16 99.67 113.79 107.98

CHANGE IN NET CA 2,110.06 982.80 96.08 -76.26 -199.58

(+) CAPITAL EXPENDITURE -36.42 27.09 76.16 -49.77 -46.7
= GROSS INVESTMENT 2,073.64 1,009.89 172.24 -126.03 -246.28

= FREE CASH FLOW 658.30 -107.73 -72.57 239.82 354.26

ANALYSIS:

Free cash flow (FCF) is a measure of how much cash a business generates after accounting for
capital expenditures such as buildings or equipment. This cash can be used for expansion,
dividends, reducing debt, or other purposes. The company spent most on capital expenditure in
2017, maybe because they were preparing and experimenting expansions that time. The company
had most FCF in 2019, and before that it had been highly unstable with the FCF value going in
negative in 2017 and 2018.

DRIVERS OF FCF

YEAR 19 18 17 16 15
OIC 5368.3 3287.7 2304.25 2159.28 2234.44
NOPLAT 2675.928 855.733 58.107 69.367 69.233
ROIC 0.35% 0.55% 0.74% 0.74%