ASSIGNMENT

Course name: Valuation  

Course code: 19FMT503A
Course: MBA in Financial Management
Department: Management Studies 
Faculty: Faculty of Management and Commerce 

TOPIC – Pro Forma Balance Sheets And

Income and Statements

Submitted by,
NAME REG NO

NITISH A V 19MCMS047064

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Contents
Introduction................................................................................................................................................3
Objective of the analysis.............................................................................................................................3
Sources for collecting data.........................................................................................................................3
Results of the analysis and conclusion.......................................................................................................4
KEY RATIOS..............................................................................................................................................4
Pro-Forma Statements............................................................................................................................5
Net-Working Capital................................................................................................................................6
EPS Calculation........................................................................................................................................6
References..................................................................................................................................................7

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Introduction

In this report, there will be a detailed view on how the analysis were done and what are the
analysis that were done, along with preparing Pro forma Income and balance sheets and this is
one of the most important skills of a manager which is to forecast and predict the future by
preparing pro forma statements with the historic data that is given.
Here, the historic data of Marico is taken, which is an FMCG company that is listed on the NSE
and BSE, also doing pretty well in this business and also in the stock market giving good returns
to its investors and ensuring a stable growth over the years, therefore this stable company was
chosen for the analysis and here we were required to forecast the future of the company by
preparing the required statements and calculations.

Objective of the analysis

 To prepare Pro forma statements.

 To forecast for the next 5 years.
 Calculating the WACC and the value of discounted cash flows.
 Terminal value estimation.
 Calculation of working capital.
 Estimating the Intrinsic value of the firm.
 Calculating the PE ratio of the firm.
 Calculating all key ratios for the process of forecasting.
 Arriving at the EPS

Sources for collecting data

 Money control
 Screener
 Tickertape

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Results of the analysis and conclusion

For the analysis we have used the historic data of the last 5 years of the Marico company. The
following data was extracted from Money control.com, Tickertape, Screener and the data is
taken from 2015 to 2020, the last known data that was available.
Firstly, we have calculated the key ratios that are required to prepare Pro forma statements
such as the average growth rate for the last 5 years and 3 years along with, Current
assets/sales, Current liabilities/sales, tax rate, Depreciation/sales ratio among the others that
were calculated.

KEY RATIOS

From the data obtained, we used the key ratios to forecast and prepare Pro forma income
statement and balance sheet for the next 5 years. Also, we have estimated the CAPEX with the
available data and arrived at the Pro forma statements and for estimating the forecasts we
have mostly used the sales to estimate the ratio for any given category and we have estimated
the Beta for debt to be at 9% and Risk free rate to be 7% and the latest Beta for equity stands at

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50% and an equity risk premium at 4%. Using these key ratios, we have arrived at the following
statements.

Pro-Forma Statements

The above information is from the Pro forma income and balance sheet that was generated and
it shows a steep increase in the value of assets and liabilities as well. Which is a good sign for
the company and its shareholders and the investors as well. The company’s net working capital
is also in a good position with the net working capital increasing year on year and with
Operating income increasing and in turn increasing the operating profit.
Good changes in the NWC were seen in its pro forma statements and it is good sign to say that
the company is handling its cash flows efficiently, the cash flows were steady throughout the
years but steady cash flows didn’t affect the company’s net income or the operating profits
which shows that the company has decreased its operating expenses and reduced it’s other
expenses and increased their profits.

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Net-Working Capital

With the Free cash flows and the rate of discounting of the cash flows, the terminal value of the
company stood at 186 billion rupees at the end of 5 years @ 2025.

EPS Calculation

The intrinsic firm value stood at 233 billion rupees which shows that the company is
undervalued in terms of company valuation and in terms of Market capitalization, it is highly
over valued with respect to its share price and the number of shares outstanding in the market
available for the buyers.

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References

https://www.screener.in/company/MARICO/consolidated/
https://in.reuters.com/finance/stocks/overview/MRCO.NS
https://www.moneycontrol.com/india/stockpricequote/personal-care/marico/M13