XYZ Company Limited

Date

Valuation Report: DUMMY

Executive Summary INDUSTRY: XX
XYZ Company Limited (hereinafter referred to as “XYZ” or “the company”) is a XX manufacturing
company and markets its products under the brand name XX in the XX region of India.
Business valuation summary of XYZ
Multiple used Equity value Rs mn Value per share (Rs)
EV/tonne method Rs 5,809 per tonne
EV/EBITDA method 4.5x
Discounted Cash Flow method NA
Book value (FY10) NA

Equity value of Rs 100 based on EV/tonne metric

The XX industry is inherently cyclical in nature and the most preferred valuation method for this industry is
EV/tonne. As XYZ is a regional XX player, we are benchmarking it against the EV/tonne of the listed
regional players, which are currently trading at Rs 4,840 per tonne of capacity. We have valued XYZ at a
20% premium to the listed regional players as XYZ enjoys significantly higher EBITDA per tonne. XYZ’s
EBITDA per tonne is __ (FY10) as against the industry average of Rs 1,255 during the same period. After
XYZ, the next highest EBITDA per tonne amongst the listed peers is ABC (ticker:, Rs 1,870) Rs 1,455.
DCF and EV/tonne methodology give similar valuations, while EV/EBITDA gives a higher valuation.
However, we note that EBITDA is highly sensitive to industry cycles and hence prefer to use EV/tonne.
Valuation factors in future capex plans
The company has plans to expand its grinding capacity from __ mn tonnes to __ mn tonnes by the second
half of FY12 and clinker capacity from __ mn tonnes to __ mn tonnes. According to the management, the
company intends to fund one-third of the capex of Rs __ mn by internal accruals and the balance by debt,
for which it has already tied-up with banks. Accordingly, our valuation is based on the expanded capacity.
Key risks
Factors affecting raw material price realisations: XYZ currently enjoys higher…..
Geographic concentration risks: The company’s plant is at a single location in XX

Summary of financials
Key forecast
(Rs Mn) FY08 FY09 FY10 FY11E FY12E FY13E FY14E FY15E
Operating income
EBITDA
Adj Net income
EPS-Rs
EPS growth (%)
RoCE(%)
RoE(%)
Source: Company, CRISIL Forecast
Disclaimer:
CRISIL has taken due care and caution in preparing this valuation report (report) solely for the internal use only of XYZ
Company Ltd. (company) on the basis of the information / documents provided by the company and/or obtained by CRISIL
from sources considered reliable. CRISIL does not guarantee the accuracy, adequacy or completeness of the information /
documents / report and is not responsible for any errors or for the results obtained from the use of the same. CRISIL
especially states that it has no financial liability whatsoever to the company / any other user of the report.
This report has to be read in full but especially with the statement of limiting conditions appearing in pages 2 & 3 of
this report
Valuation Analysis – XYZ Company Limited

Engagement Background
Scope and purpose
XYZ Company Limited (hereinafter referred to as “XYZ” or “the company”) is an
integrated XX manufacturing company and markets its products under the brand name
BBB in the XX region.
We understand that the management of XYZ wants to evaluate the business of the
company for the purpose of internal analysis. In this regard, the management of the
company has engaged CRISIL Limited (hereinafter referred to as CRISIL Research or
CRISIL Equities) to conduct a report on a valuation analysis of the business of the
company as at 21 July 2010.
This descriptive report is our deliverable against the same.

Sources of information
Company-specific information – All company-specific information, including but not
limited to, past profit and loss accounts and balance sheet of XYZ Company, future
profitability and cash flow projections and qualitative information on the company, were
sourced from the management of the company, either in the written hard copy or digital
form, or through a series of discussions with the management of the company. The
information provided by the management of the company includes historical annual
reports, company presentations and other relevant data.

Industry and economy information

● Interviews with management of the company

● Press clippings and other publicly available information
● CRISIL Industry Research
● Other databases subscribed by CRISIL Research
It may be mentioned that the management of the company has been provided an
opportunity to review our draft report as part of our standard practice to make sure that
factual inaccuracies are avoided in our final report.

Statement of limiting factors

Affecting valuation results
Valuation analysis and results are specific to the purpose of valuation and the valuation
date mentioned in the report as agreed per terms of our engagement. It may not be valid
for any other purpose or as at any other date. Also, it may not be valid if done on behalf
of any other entity.
Valuation analysis and results are also specific to the date of this report. A valuation of
this nature involves consideration of various factors including those impacted by
prevailing stock market trends in general and industry trends in particular. As such,
CRISIL Equities’ valuation results are, to a significant extent, subject to continuance of
current trends beyond the date of the report. We, however, have no obligation to update
this report for events, trends or transactions relating to the company or the
market/economy in general and occurring subsequent to the date of this report. We
provide no assurance that a sale or acquisition deal can be completed successfully at or
close to our recommended valuation within a particular time frame. Our valuation only
represents the most likely price around which a deal can happen if more than one
independently acting potential buyers/sellers are to be found after adequate efforts but
within a limited timeframe after our analysis such that they have similar knowledge of the
business being transacted and its environmental factors and who have no other strategic
factors weighing upon their mind as regards potential of this business.

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Valuation Analysis – XYZ Company Limited

In the course of the valuation, CRISIL Equities was provided with both written and verbal
information, including market, technical, financial and operating data. We have, however,
evaluated the information provided to us by the company through broad inquiry, analysis
and review (but have not carried out a due diligence or audit of the company for the
purpose of this engagement, nor have we independently investigated or otherwise verified
the data provided). Through the above evaluation, nothing has come to our attention to
indicate that the information provided was materially mis-stated/incorrect or would not
afford reasonable grounds upon which to base the report. We do not imply and it should
not be construed that we have verified any of the information provided to us, or that our
inquiries could have verified any matter, which a more extensive examination might
disclose. The terms of our engagement were such that we were entitled to rely upon the
information provided by the company without detailed inquiry. Also, we have been given
to understand by the management that it has not omitted any relevant and material factors
and that it has checked out relevance or materiality of any specific information to the
present exercise with us in case of any doubt. Accordingly, we do not express any opinion
or offer any form of assurance regarding its accuracy and completeness. Our conclusions
are based on these assumptions, forecasts and other information given by/on behalf of the
company. The management of the company has indicated to us that it has understood that
any omissions, inaccuracies or misstatements may materially affect our valuation
analysis/results. Accordingly, we assume no responsibility for any errors in the above
information furnished by the company and their impact on the present exercise. Also, we
assume no responsibility for technical information furnished by the company and believe
it to be reliable.
We express no opinion on the achievability of the forecasts given to us. The assumptions
used in their preparation, as we have been explained, are based on the management’s
present expectation of both - the most likely set of future business events and
circumstances, and the management’s course of action related to them. It is usually the
case that some events and circumstances do not occur as expected or are not anticipated.
Therefore, actual results during the forecast period may differ from the forecast and such
differences may be material.
No investigation of the company’s claim to title of assets has been made for the purpose
of this valuation and the company’s claim to such rights has been assumed to be valid. No
consideration has been given to liens or encumbrances against the assets, beyond the
loans disclosed in the accounts. Therefore, no responsibility is assumed for matters of a
legal nature. The fee for the report is not contingent upon the results reported.

Others
We owe responsibility to only the directors of the company that has retained us and
nobody else.
CRISIL Equities does not accept any liability to any third party in relation to the issue of
this valuation report.
Neither the valuation report nor its contents may be referred to or quoted in any
registration statement, prospectus, offering memorandum, annual report, loan agreement
or other agreement or document given to third parties without our prior written consent.
We retain the right to deny permission for the same.

This report has to be read in full but especially with the statement of limiting conditions appearing in pages 2 & 3 of this report 3
Valuation Analysis – XYZ Company Limited

Key factors affecting projections and valuations

Key factors affecting RM prices
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Key factors affecting costs and profitability

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Valuation Analysis – XYZ Company Limited

Industry Overview
XXXX is a regional play
An explanation on the Indian XXX industry – details on current peculiarities, trends, etc.

CHART

Source: CMA, CRISIL Equities

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

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Valuation Analysis – XYZ Company Limited

Company Positioning
Positioning of the company vis-avis peers; geographic presence – sales mix/market share

This report has to be read in full but especially with the statement of limiting conditions appearing in pages 2 & 3 of this report 6
Valuation Analysis – XYZ Company Limited

SWOT Analysis
Strengths Weakness
• xx • xx
Opportunities Threats
• xx • xx

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Valuation Analysis – XYZ Company Limited

Financial Summary
Revenues to grow at a …………
XXXX
.

Revenues Table
Key forecast
(Rs Mn) FY08 FY09 FY10 FY11E FY12E FY13E FY14E FY15E
Net Revenues
% growth (Y-o-Y)
Source: Company, CRISIL Equities Estimates

Installed Capacity
FY08 FY09 FY10 FY11E FY12E FY13E FY14E FY15E
Grinding Capacity (MTPA)
Additions
Clinker Capacity
Additions

Expected
Particulars Capacity Cost (Rs mn) commissioning date
Cement grinder ,000 MTPA FY12
Clinker ,000 MTPA FY12
Power plant MW FY12

Total capacity post expansion

Cement grinder MTPA
Clinker MTPA
Power plant MW

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Valuation Analysis – XYZ Company Limited
XYZ’s PAT margin and return ratios to..

Total debt-equity ratio to …

In FY10, XYZ’s total debt-equity ratio was 0.5x compared to 0.4x. The marginal rise in
the ratio was due to the capex incurred by the company.

Debt-to-equity to remain at comfortable levels

Trends in Total Debt and Debt-Equity Ratio FY08 FY09 FY10 FY11E FY12E FY13E FY14E FY15E
Total Debt (Rs Mn)
Debt-Equity
Source: Company, CRISIL Equities Estimates

Going forward, we expect the company’s total debt-equity to peak in FY11E at __x and
then decline to __x in FY12E and __x in FY13E, respectively.

This report has to be read in full but especially with the statement of limiting conditions appearing in pages 2 & 3 of this report 9
Valuation Analysis – XYZ Company Limited

Valuation
Valuation methodology
We have used the following methods for valuation:
● Comparable company multiples
o EV/EBITDA
o EV/tonne
● Discounted cash flow
● Book value

Business valuation summary of XYZ

Equity Valuation Multiple used Equity Value Rs mn Value per share (Rs)
EV/Tonne Method Rs5,809 per tonne
EV/EBITDA Method 4.5x
Discounted Cash Flow Method -
Book Value (FY10) -

AN EXPLANATION OF ALL METHODS USED

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Valuation Analysis – XYZ Company Limited

Income Statement
(Rs mn) FY08 FY09 FY10 FY11E FY12E FY13E FY14E FY15E
Net sales
Operating Income
EBITDA
Depreciation
Interest
Other Income
PBT
PAT
No. of shares
Earnings per share (EPS)

Balance Sheet
(Rs mn) FY08 FY09 FY10 FY11E FY12E FY13E FY14E FY15E
Equity capital (FV - Rs 10)
Reserves and surplus
Debt
Current Liabilities and Provisions
Deferred Tax Liability/(Asset)
Minority Interest
Capital Employed
Net Fixed Assets
Capital WIP
Intangible assets
Investments
Loans and advances
Inventory
Receivables
Cash & Bank Balance
Applications of Funds
Source: Company, CRISIL Equities Estimates

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Valuation Analysis – XYZ Company Limited

Cash Flow
(Rs mn) FY08 FY09 FY10 FY11E FY12E FY13E FY14E FY15E
Pre-tax profit
Total tax paid
Depreciation
Change in working capital
Cash flow from operating activities
Capital expenditure
Investments and others
Cash flow from investing activities
Equity raised/(repaid)
Debt raised/(repaid)
Dividend (incl. tax)
Others (incl extraordinaries)
Cash flow from financing activities
Change in cash position
Opening Cash
Closing Cash

Ratios
FY08 FY09 FY10 FY11E FY12E FY13E FY14E FY15E
Growth ratios
Sales growth (%)
EBITDA growth (%)
EPS growth (%)
Profitability Ratios
EBITDA Margin (%)
PAT Margin (%)
Return on Capital Employed (RoCE) (%)
Return on equity (RoE) (%)
Dividend and Earnings
Dividend per share (Rs)
Dividend payout ratio (%)
Dividend yield (%)
Earnings Per Share (Rs)
Efficiency ratios
Asset Turnover (Sales/GFA)
Asset Turnover (Sales/NFA)
Sales/Working Capital
Financial stability
Net Debt-equity
Interest Coverage
Current Ratio
Source: Company, CRISIL Equities Estimates

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Notes
Notes
Notes
CRISIL Independent Equity Research Team
Mukesh Agarwal magarwal@crisil.com +91 (22) 3342 3035
Director

Tarun Bhatia tbhatia@crisil.com +91 (22) 3342 3226

Director- Capital Markets

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