CA. VARUN CHANDNA 349, Registered Valuer Golf Course Road, Sector B.Com, CAIIB, FCA, Dip.IFRS, FRM Gurugram (Haryana) ~ 1 Registered with IBBI Phone: (0124) 492 44¢ E-mail: aca.varun@gmail.com Floor, Centrum Plaza IOV Registered Valuers Foundatio Strictly Private and Confidential To, The Board of Directors ARCTURUS BUSINESS SOLUTIONS PRIVATE LIMITED 805, Vikas Deep Building, Laxminagar District Centre Laxminagar, Delhi - 110 092 06" April 2019 Dear Sir/ Ma'am, This isin reference to our engagement letter, the various discussions that we had and th that we have received from the Management and Key Managerial Persons of the Company (hereinafter referred to as the “ABSPL" or “the Company”) from time to time in connection with the valuation analysis of the company. EXECUTIVE SUMMARY Report Summarized Varun Chandna, a registered member of institute of Valuers is enrolled with 1881 as a Registered Valuer with Registration No. 1BBI/RV/02/ 2019/1169 has been engaged by the Company (M/s ‘Arcturus Business Solutions Private Limited - “ABSPL” or “the Company”) to prepare and submit the Valuation Report, valuing the fair value of the Company. ‘The Valuer is independent of any conflict of interest with company. Appointed Date (03° April 2019 ‘Company Background ‘Arcturus Business Solutions Private Limited is @ Private Company incorporated as Arcturus Business Solutions LLP on 15 April 2014 and converted into a Private Limited Company on 01 March 2019. It is registered at Registrar of Companies, Delhi with authorized share ‘capital is Rs. 1,000,000 and its paid-up capital is Rs. 7,00,000. Arcturus Business Solutions Private Limited's Corporate Identification Number is (CIN) U74999DL2019PTC346807 and its registration number is 346807. Its Email address is stiwari@arcturusbusiness.com and its registered address is 805, Vikasdeep Building Laxmi Nagar istrict Centre East Delhi DL- 11 Page 1 of 18CA. VARUN CHANDNA 349, Registered Valuer B.Com, CAIIB, FCA, Dip.IFRS, FRM Registered with IBBI er: IOV Registered Valuers Foundation Floor, Centrum Plaza Golf Course Road, Sector Gurugram (Haryana) - 122011 Phone: (0124) 492 4404 E-mail: aca.vai @gmail.com Strictly Private and Confidential Directors of Arcturus Business Solutions Private Limited are Swati Tiwari and Ankit Kumar. Since the company recently got converted, its yet to file its statutory financials with RoC (Registrar of Companies) and conduct its first ‘Annual General Meeting. Business Activity. The Company undertakes Artificial Intelligence activities. It undertakes Al based analytics on Images and Videos, Drone Based Asset Inspection and Strategic Business Advisory for Power Transmission sector. ‘Arcturus Business Solutions bring disruptive innovation and niche services in the Power, Energy and Infrastructure Sector by using Antfical intelligence and Deep Learning for Vision data analytics. Their team is an amalgamation of Power sector and Al and Deep learning professionals who work for creation of Al and deep tech based analytical solutions for Power and Energy Sector. ‘AlonAsset is their cloud based Al platform for the Asset Performance Enhancement using Image Analytics for automated defect detection on large and inaccessible assets on Power & Infrastructure. They bring unique value proposition in the form of meaningful & useful analytics of client’s data hence contributing to their asset performance enhancement. In India, where Transmission and Distribution Losses in Power Transmission can go upto 1/3% of the power supply, they can let the ‘transmitter or power generator know the points where the losses are being incurred by taking video images from drones and analyzing them. Purpose of Valuation ‘Company proposes to offer and issue Equity Shares to GAIL india Limited to the extent of INR 1,00,00,000/- (Indian Rupees One Crore only) towards its investment in the company. The current valuation report is intended for arriving the issue price per Equity Share for aforementioned investment by GAIL. ‘The company plans to issue Equity Shares of INR 1,00,00,000/- as per ‘Method of Valuation its projections during the current financial year. jscounted Cash Flow Method under Income Based Approach | Bases of Value lve | Premise of Value The Enterprise Value of the Company is valued assuming the business of Arcturus Business Solutions Private Limited will continue on a going ‘concern basis. | Date of Valuation 31 March 2019 ‘Value Conclusion Enterprise Value of the Company as on 31.03.2019 comes to INR 9.19 Crores. Page 2 of 18CA. VARUN CHANDNA 349, 3"! Floor, Centrum Plaza Registered Valuer Golf Course Road, Sector B.Com, CAIIB, FCA, Dip.IFRS, FRM Gurugram (Haryana) - 122011 Registered with IBBI Phone: (0124) 492 4404 Member: IOV Registered Valuers Foundai E-mail: aca.varun@gmail.com Strictly Private and Confidential Experts Involved CA Sarita Arora of M/s Asit Mehta & Company, Chartered ‘Accountants, New Delhi have prepared the provisional and projected financials for the company and provided us explanations and clarifications on the matter. Restrictions on the use of the | The report is only for the purposes of issuance of Equity Shares to report GAIL India Limited based upon their due diligence and investment in I the company. SCOPE AND PURPOSE OF THIS REPORT The valuation of ABSPL is being carried out for the purpose of determining the enterprise value of the Company. The management of ABSPL has appointed Varun Chandna (*Valuer”) to ascertain and advise the Enterprise value so as to issue Equity Shares to GAIL India Limited, a public sector undertaking interested in investing in the company through by taking equity share in the company to the tune of Rs. 1,00,00,000/-. This valuation report shall be used for certain statutory disclosure as mentioned under Companies Act, 2013. The valuation of company’s fair value is done on the basis of internationally accepted pricing methodology on arm’s length basis considering the Discounted Cash Flow methodology. Carrying out an independent enquiry, audit, investigation, validation as to the projections and assumptions provided by the management of the company is beyond the scope of our work. To an extent this work/ due diligence for investment is being undertaken by GAIL India Limited. Expression of an opinion or any other form of assurance thereon or as to how closely the actual results will correspond to the results projected by the management of ABSPL is out of our scope and we do not assume any liability for any losses occasioned to ABSPL, their directors, stakeholders or any other parties as a result of our reliance on the management prepared financial projections. ‘SOURCES OF INFORMATION For the purpose of arriving at the fair value, we have essentially relied on the information provided to us by the management and our conclusions are dependent on and subject to such information being complete and accurate in all material respects. We have relied upon the projections and other information and explanations provided to us by the ‘management of ABSPL. The principal sources of information used in undertaking our assessment include: Page 3 of 18CA. VARUN CHANDNA 349, 3"! Floor, Centrum Plaza Registered Valuer Golf Course Road, Sector n, CAIB, FCA, Dip.IFRS, FRM Gurugram (Haryana) ~ 12201 tered with IBBI Phone: (0124) 492 4404 Member: IOV Registered Valuers Foundation E-m varun@gmail.com Strictly Private and Confidential a) Management Certified Provisional Financial Statements for the Financial Year Ended 31.03.2019. b) Management certified projected financial statements for next 3 financial years ending on 31.03.2022. ©) Cash Flows Statements finalized for GAIL India Limited and ONGC Limited for prospective investment. 4) Discussion with M/s Arcturus Business Solutions Private Limited on various aspects related to the information provided to us and inputs used in the Discounted Cash Flow (DCF) Methodology. €)_ Such other analysis, review and inquiries, as we considered necessary. BRIEF INDUSTRY OVERVIEW AND OUTLOOK ‘As per PwC report on Artificial Intelligence (Al) in India, 2018, the outlook for the Industry remains positive. It states that Al is an over-arching concept that encompasses multiple (often overlapping) disciplines. ‘These draw upon knowledge and techniques from mathematics, statistics, computer science and domain- specific expertise to create models, software programs and tools. Al refers to the ability of a computer or a computer-enabled robotic system to process information and. produce outcomes in a manner similar to the thought process of humans in learning, decision making and solving problems. By extension, the goal of Al systems is to tackle complex problems in ways similar to human logic and reasoning, Alis probably one of, if not, the most significant general purpose technologies of our era. With machine learning, we can now build systems that are capable of improving their own performance by learning from data over time. A continual challenge humans have been facing is identifying ways to perform certain tasks such as recognising images and audio so that we can replicate similar functionalities using software applications. Machine learning systems try to mimic the learning processes of humans—that is, learning at scale from Page 4 of 18CA. VARUN CHANDNA 349, 3" Floor, Centrum Plaza Registered Valuer Golf Course Road, Sector 53 B.Com, CAIB, FCA, Dip.IFRS, FRM Gurugram (Haryana) ~ 122011 Registered with IBBI Phone: (0124) 492 4404 Member: IOV Registered Valuers Foundation E-mail: aca.varun@gmail.com Strictly Private and Confidential data and achieving levels of performance comparable to humans in processing it and arriving at certain outcomes. ABSPL also analysis the images to solve the problems. These images may be static or in form of a video. ‘Machine Learning and Al can solve the problems from following: 14) ee cogton At this juncture, the aid of machine in doing unconventional jobs is becoming the need of the hour with the growth in business not getting managed by human intervention alone and humans needing machine -aid and logic to finish the routine task that is of mammoth volume. ‘Swiggy is leaning on technology, specifically artificial intelligence (Al), to help its systems keep pace with his rapid growth. “Al is critical for us to sustain our growth,” says Dale Vaz, who heads engineering and data science at Swiggy. Over the past 12 to 18 months, Swiggy has been expanding this team, putting core resources behind it. The firm has also intensified its focus on building a strong data repository, thanks to the explosive growth of interactions, to catalyse the adoption of Al. For a company like Swiggy, winning a competitive tech advantage with Al is a high-stakes necessity. itis ina heated duel for market share with arch-rival Zomato, but sees Uber Eats, Food Panda and even Dunzo as looming rivals. ‘Al has, of course, been in use among consumers for a few years. For example, on mobile phones, digital Personal assistants such as Siri, Google Now and Cortana all try to learn from the usage and behaviour of the phone's owners. Games such as Far Cry and Call of Duty lean on these technologies. In the world of Page 5 of 18CA. VARUN CHANDNA 34 3"! Floor, Centrum Plaze Registered Valuer Golf Course Road, Sector 53 B.Com, CAIB, FCA, Dip.IFRS, FRM Gurugram (Haryana) - 122011 Registered with IBBI Phone: (0124) 492 44 E-mail Member: IOV Registered Valuers Foundation aca. varun@gmail.com Strictly Private and Confidential business, retailers such as Target and Amazon have used Al to predict consumer behaviour, as have banks, media ventures and music streaming services. ‘Al has become something of a magic wand to wave at all tech problems, even as there's widespread debate around its utility and optimal applications. Startups focusing on niche areas in Al are receiving investor backing, ventures with strong Al capabilities are now beginning to win deals and customers beyond early pilots and, most notably, specialists in the field, especially data scientists, are in high demand. “At least 25-30% of the proposals we now get involve a significant element of Al,” says Girish Shivani, executive director at YourNest, an early-stage venture capital firm with interest in so-called deep- tech startups. Kris Laxmikanth, CEO of Bengaluru-based HR firm Headhunters, says that the market for talent with A-linked skills is becoming overheated. Salary jumps of 100-150%are becoming the norm to lure away an established data scientist. There are also instances of Indian Al startups relocating to Silicon Valley in the US for want of relevant talent here. (Source: ET dated 10th Feb 2019) ‘As Alisall set to bring about a revolution in the business landscape, businesses and consumers are bound to be divided on how quickly and eagerly they should adopt and integrate the new applications and workflows arising from it. During the initial phases in particular, businesses will need to identify the requisite data, direct training processes and refine outputs. ‘As manual jobs get automated, businesses and society will need to rethink skill areas and move away from procedural tasks to higher involvement strategic ones with a greater focus on creativity, adaptability and an outcome-oriented mindset. Most importantly, business leaders and government authorities should prioritise areas where Al can bring. about widespread visible and quick positive impact. This would require them to decide on whether they should invest in enhancing existing processes and workflows to increase efficiency and/or reduce costs or create alternative business and operating models built around new experiences and modes of interactions with humans. ‘Areas where Al'can create value Threats/ Caveats to Al in achieving its potential ] f SLNo. 1 ‘Al holds the potential to address socioeconomic concerns such as stimulating economic growth, improving global health and education and helping enhance the quality of life for humans. Institutional frameworks for Al development and adoption across businesses and society are paramount for ensuring that the benefits of Al are equitably dispersed. The three pillars of Al innovation—private sector, public sector and academia—would need to collaboratively create an enabling environment for the above. + The pace of innovation for Al-powered solutions such as digital assistants, recommender systems and more are subject to individuals and businesses sharing data Page 6 of 18CA. VARUN CHANDNA Registerec Floor, Centrum Plaza Golf Course Road, Secto! Valuer B.Com, CAIIB, FCA, Dip.IFRS, FRM Gurugram (Haryana) ~ 12: Registered with IBBI Phone: (0124) 492 4404 Member: IOV Registered Valuers Foundation E-mail: aca.varun@gmail.com Strictly Private and Confidential freely. Tighter data security, policy and legal recourse can provide a reassuring premise for facilitating data- sharing. Al systems like chatbots, digital assistants and robots can, at least partially, carry out customer service operations such as informing about new —_products/services, handling feedback and concerns and responding with solutions. In the present scenario, an ALpowered customer service set-up may also require a ‘human touch’, which will help create a differentiated, convenient and seamless experience for customers. ‘Al applications hold the potential to automate a number of repetitive tasks such as entering timesheet hours and routine communication ‘Al assistants and applications are expected to evolve from their roles as mere assistants to those of advisors that can effectively process information and suggest | appropriate courses of action to facilitate important | such as emails and paperwork. decisions. | ‘Al, when integrated into businesses, | High costs and the lack of technical expertise are is expected to bring about ‘among the key barriers to the effective integration of higher productivity, efficiency and growth. Alin businesses. While costs are expected to go down in the future, core skills in Al development and | innovation may need to be addressed. ‘Al managers at the workplace can improve fairness and transparency in conducting appraisals and giving promotions and raises at the workplace. The perception of fairness will however require Al systems to be responsible and explainable. Al systems | will need to be developed in such a way that they are free from biases, robust against tinkering or | manipulation attempts and easily understandable in | their workings and outcomes. | ‘Further, the start-ups are likely to get a boost with government's focus on start up companies including their funding, taxation etc. and with expectation of new stable government getting elected in May’ 2019 will also encourage better start-up environment in india. VALUATION APPROACH AND METHODOLOGY Valuation by its very nature, cannot be regarded as an exact science and the conclusions arrived at in ‘many cases will be subjective and dependent on the exercise of individual judgment. Given the same set of facts and using the same assumptions, expert opinions may differ due to the number of separate judgment decisions. There can therefore be no standard formulae to establish an indisputable value, although certain formulae are helpful in assessing reasonableness. Page 7 of 18um Plaza CA. VARUN CHANDNA Registered Valuer Golf Course Road, Sector 53 B.Com, CAIIB, FCA, Dip.IFRS, FRM Gurugram (Haryana) ~ 122011 Registered with IBBI Phone: (0124) 492 4404 Member: IOV Registered Valuers Foundation E-mail: aca.varun@igmail.com Strictly Private and Confidential International Valuation Standard (IVS) 105 Valuation Approaches and Methods provides guidance for appropriate valuation approach and method to be used to arrive at a fair valuation. The principal valuation approaches are (a) Market Approach, (b) Income Approach and (c} Cost Approach. Para 10.3 of IVS 105 states that: “The goal in selecting valuation approaches and methods for an asset is to find the most appropriate method under the particular circumstances. No one method is suitable in every possible situation. The selection process should consider, at a minimum: 2) the appropriate basis(es) of value and premise(s) of value, determined by the terms and purpose of the valuation assignment, 1b) the respective strengths and weaknesses of the possible valuation approaches and methods, ©) the appropriateness of each method in view of the nature of the asset, and the approaches or methods used by participants in the relevant market, and 4) the availabilty of reliable information needed to apply the method{s).” Para 10.4 of IVS 105 states that: “Valuers are not required to use more than one method for the valuation of an asset, particularly when the valuer has a high degree of confidence in the accuracy and reliability of a single method, given the facts and circumstances of the valuation engagement. However, valuers should consider the use of ‘multiple approaches and methods and more than one valuation approach or method should be considered ‘and may be used to arrive at an indication of value, particularly when there are insufficient factual or observable inputs for a single method to produce a reliable conclusion.” In addition, Ind AS 113 issued by the Institute of Chartered Accountants of India deals with Fair Value ‘Measurement. The Ind-AS defines “Fair Value” as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The definition of fair value focuses on assets and liabilities because they are a primary subject of accounting measurement. In addition, this Ind AS shall be applied to an entity's own equity instruments measured at fair value. Fair value is a market-based measurement, not an entity-specific measurement. For some assets and liabilities, observable market transactions or market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. However, the objective of a fair value measurement in both cases is the same—to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at ‘the measurement date under current market conditions (i.e. an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability). Page 8 of 18CA. VARUN CHANDNA 349, 3" Floor, Centrum Plaza Registered Valuer Golf Course Road, Sector 53 B.Com, CAIIB, FCA, Dip.IFRS, FRM Gurugram (Haryana) ~ 12201 Registered with IBBI Phone: (0124) 492 4404 Member: IOV Registered Valuers Foundation E-mail: aca.varun@gmail.com Strictly Private and Confidential For the purpose of determining fair value, a valuer may therefore, use any of the approaches as per the generally / internationally accepted valuation methodologies which in its opinion are most appropriate based on the facts of each valuation. Reliance is placed on the case of Dr. Mrs. Renuka Datla vs. Solvay Pharmaceutical B.V. & Ors on 30 October, 2003, in which it was held that, a valuer has to give a Justification for selecting or rejecting a method. (A) INCOME APPROACH According to the IVS 105, The income approach should be applied and afforded significant weight under the following circumstances: 1a) the income-producing ability of the asset is the critical element affecting value from a participant perspective, and/or b) reasonable projections of the amount and timing of future income are available for the subject asset, but there are few, if any, relevant market comparables. Reason for choice of methodology adopted under the Income Approach Although there are many ways to implement the income approach, methods under the income approach are effectively based on discounting future amounts of cash flow to present value. They are variations of the Discounted Cash Flow (DCF) method and the concepts below apply in part or in full to all income approach methods. Under DCF approach, the future free cash flows of the business are discounted to the valuation date to arrive at the present value of the cash flows of the business or capitalized using a discount rate depending on the capital structure of the company. This approach also takes into account the value of the business in perpetuity by the calculation of terminal value using the exit multiple method or the perpetuity growth method, whichever is appropriate. ABSPL is a new/ start-up company and its valuation depends upon its future cash flows. The future cash flows submitted by the company were previously accepted by its CCDs subscriber and money infused based upon the projected financial statements. This time also, the CCD subscriber which is the Holding Company of ABSPL relying upon its promising future cash flows is willing to invest in the company. In our opinion, not much has changed between the last valuation and issuance of debentures in Jan’ 2019 till date and accordingly we have also used the same DCF Method to arrive at the fair value of the company which happens to be at the similar level as it was during previous issuance of CCDs. Page 9 of 18CA. VARUN CHANDNA 349, 3" Floor, Centrum Plaz Registered Valuer Golf Course Road, Sector 5 B.Com, CAIIB, FCA, Dip.IFRS, FRM Gurugram (Haryana) Registered with IBBI Phone: (0124) 492 4404 Member: IOV Registered Valuers Foundatior E-mail: aca.varun@gmail.com Strictly Private and Confidential (8) MARKET APPROACH According to IVS 105, The market approach should be applied and afforded significant weight under the following circumstances: n under the a) the subject asset has recently been sold in a transaction appropriate for considers basis of value, b)_ the subject asset or substantially similar assets are actively publicly traded, and/or ¢) there are frequent and/or recent observable transactions in substantially similar assets Usually under the market approach, the methods that maybe applied are Market Price Method, Comparable Multiple Method (CMM), Comparable Transaction Method (CTM) or Price of Recent Investment Method (PORI). Under CMM method various multiple like EV/Sales, EV/EBITDA, P/BV P/E, Price/Sales can be used to value a business depending upon the facts and circumstances of the cases. Reason for choice of methodology adopted under the Market Approach ABSPL is a relatively new company and there is not comparable company which is listed on Indian Stock Exchanges similar to ABSPL in terms of industry, background etc. Accordingly, we have not applied this, approach. (C) COST APPROACH ‘According to IVS 105, the cost approach should be applied and afforded significant weight under the following circumstances: a) participants would be able to recreate an asset with substantially the same utility as the subject, asset, without regulatory or legal restrictions, and the asset could be recreated quickly enough that a participant would not be willing to pay a significant premium for the ability to use the subject asset immediately, b) the asset is not directly income-generating and the unique nature of the asset makes using an income approach or market approach unfeasible, and/or ) the basis of value being used is fundamentally based on replacement cost, such as replacement value. Cost Approach is a valuation technique that reflects the amount that would be required currently to replace the service capacity of an asset (often referred to as current replacement cost) Accordingly, under this approach (also referred to as Assets Approach), the book value / replaceable value / realizable value of the underiying assets of the company is determined to arrive at the value of the business, depending on the facts and circumstances applicable to a company. Usually under the cost approach, the methods that maybe applied are Net Book Value Method, Net Replaceable Value Method and Net Realizable Value Method. Page 10 of 18CA. VARUN CHANDNA 349, 3" Floor, Centrum Plaza Re urse Road, Sector B.Com, CAIIB, FCA, Dip.IFRS, FRM Gurugram (Haryan: Registered with [BI Phone: (0124) 49. Member: IOV Registered Valuers Found istered Valuer Golf C varun@gmail.com E-mail: ac Strictly Private and Confidential Reason for choice of methodology adopted under the Cost Approach Since the company is mainly banking upon its intellectual capital, talent and credibility of promoters, its fair value will not come from its Assets and Liabilities in its Balance Sheet. Accordingly, we have not considered this approach. CONCLUSION Considering the guidance provided by International Valuation Standards, we intend to value the company based on only one method which is Discounted Cash Flow Method. All the assumptions and forecasts/projections required for this method are available with the company and have been reliably approved by the management. This also takes into account the cash flow generating ability of all its assets and of its operations. VALUATION ANALYSIS INCOME APPROACH - Discounted Cash Flow Method (DCF) Discounted Cash Flow method indicates the fair market value of a business based on the value of cash flows that the business is expected to generate in future. This method involves the estimation of post-tax cash flows for the projected period, after taking into account the business's requirement of reinvestment in terms of capital expenditure and incremental working capital. These cash flows are then discounted at a cost of capital that reflects the risks of the business and the capital structure of the entity. In the present case, since we are valuing the equity of the company and the company does not pays dividends, Free Cash Flow Model of Cash Flows is used instead of Dividend Discount Model (0DM). For the purpose of valuation of shares in this transaction through DFCF methodology, we have relied upon the projections provided by the management for next 3 financial years starting from FY 2019-20 and ‘ending FY 2021-22 duly supplemented by its Terminal Value based on the Gordon Model and extrapolating the adjusted free cash flows for last year at an annual growth rate of 1% percent to perpetuity. To arrive at Ke (Cost of capital) we have considered the Rf (Risk Free) rate of 7.39 % & Market Return of 16.06%. We arrived at a Ke of 17.11 % after considering appropriate risk premium (considering the size of the Company, nature of its business and the Industry in which it operates). Page 11 of 18CA. VARUN CHANDNA 349, 3"! Floor, Centrum Plaza Registered Valuer Golf Course Road, Sector 53 B.Com, CAIIB, FCA, Dip.IFRS, FRM Gurugram (Haryana) - 122011 Registered with IBBI Phone: (0124) 492 4404 Member: IOV Registered Valuers Foundation E-mail: aca.varun@gmail.com Strictly Private and Confidential The Key Assumptions are as under: PiskFre ate) |e tec ret eta forcompasle companies ate aspercaPa frowth ate ae forthe pape o termina vale genby the management ace mental Working Capital oor negate woring capital a employee cost woul be funded fom advances or equity capex vale 2 certified bythe management (MR 15 Las) verge anual ape 24 onwar il perpetuity isin abit to surplus generated by company tha will beimsted uit prion fates NonmalTaxRate- upto 018 Nonmal Tax Rate 2018 and onwards ates considered based on existing rates onthe dat ofthis ep. ‘The projections of the company and the Net Present Value based upon such projections is as under: SESS SETS SLE ‘Yearly Cash Flows- Explicit Period Amount (it IN Crows) Particlaes Ey EEE EE lsrrrot efor tx) xs) Issue of shares, é 1.00 000 008 o10 on on) oon) as om a0 as. 025 338 332 a oa] {capital Expenditure netof borrowings ©: 051 on 032 [Movement in non currentassets Repayment of Laan ©: 045) |cash Outtow (Revere Expenditure) 286 661 377 [tax Payment : 064. 339 ‘Taal Outflow or 7 TAS 35 Free Cash Flows) waa 02 2a 370 Feri 00 050 730 230 Discount rate 050] 050 050) 050 [Decounting actor 1100] ox 054 036 Discounted Cash Flows ea oa 3s 352 [NPV af Expl Period a Page 12 of 18CA. VARUN CHANDNA 349, 3"! Floor, Centrum Plaza Registered Valuer Golf Course Road, Sector 53 B.Com, CAIB, FCA, Dip.IFRS, FRM Gurugram (Haryana) ~ 122011 Registered with IBBI Phone: (0124) 492 4404 Member: IOV Registered Valuers Foundation E-mail: aca.varun@gmail.com Strictly Private and Confidential WEIGHTED AVERAGE COST OF CAPITAL OR THE DISCOUNT FACTOR In order to determine the fair value of the business under the DCF method the Capital Asset Pricing Model (CAPM) has been used. This model discounts the future free cash flows based on a Weighted Average Cost Of Capital ie. WAC. WACC = Ke*E/(D+£) + Kd*D/(D+£) Where, = Debt Funds quity Shareholders Funds Ke=Cost of Equity Kd = Cost of Debt Accordingly, the key variables of the WACC are explained as follows: Cost of Equity (Ke) ‘The cost of equity is the minimum rate of return that an equity shareholder expects on his investment. It is calculated as per the formula as given below: Ke = RF+ BRP + RPZ Where, Rf= Risk Free Rate B= Beta RP = Market Risk Premium. RPZ = Company Specific Risk Premium Considering the above formula, the Ke = 7.39% + 1.23*(16.06%-7.39%) = 18.06% Since the company is expected to have only a single loan outstanding of Rs. 45 Lakhs as on 31.03.2020 which isa loan from director (interest free) and is expected to be repaid before 31.03.2022, the same has not been considered for debt-equity ratio of the company which is more futuristic and the company is not expected to avail any debt because of well capitalization. Accordingly WACC comes to 18.06%. Market Risk i calculated at 16.06% as under: Page 13 of 18CA. VARUN CHANDNA Registered Valuer B.Com, CAIIB, FCA, Dip.IFRS, FRM Registered with IBBI ‘Member: IOV Registered Valuers Foundation Particulars Base value of the Sensex [Sensex Valueas on Number of years {Sensex multiple - Current over the Base year | Average Market Return (CAGR) 349, 3e¢ Floor, Centrum Plaza Golf Course Road, Sector 53 Gurugram (Haryana) ~ 122011 Phone: (0124) 492 4404 E-mail: aca.varu gmail.com Strictly Private and Confidential 100.00 38,872.00 40.02 388.72 The adjusted WACC for the purposes of discounting / Discounting Factor (Df) is as under: [Weighted Average Cost of Capital | Company Specific Risk |Add: Liquidity premium Adjusted Weighted Average Cost of Capital / Reqd. Rate of, [Return from Investment ‘The break-up of the Company Specific Risk is as follows: Talent Risk / Atrition/ Sucession of promoters - Company Risk Discount for Start Up Level Inability to grow beyond a comfort level-to grow big Discount for Lack of Control - Investor taking minor stake (GROWTH RATE IN PERPETUITY: 1% VALUE OF EQUITY: 18.06% 22.00% 10.00% 50.06% 10% 8% 2% 2% 22% Fair Value is the price, in cash or equivalent, that a buyer could reasonably be expected to pay, and a seller could reasonably be expected to accept, if the business were exposed for sale on the open market for a reasonable period of time, with both buyer and seller being in possession of the pertinent facts and neither being under any compulsion to act. Page 14 of 18CA. VARUN CHANDNA 349, 300 F jor, Centrum Plaza Registered Valuer Golf Course Road, Sector 53 B.Com, CAIIB, FCA, Dip.IFRS, FRM Gurugram (Haryana) - 122011 Registered with IBBI Phone: (0124) 492 4404 Member: IOV Registered Valuers Foundation E-mail: aca. varun@gmail.com Strictly Private and Confidential Its calculated as per the formula given below: Value of Equity = Present Value of the Business of the Company less Present Value of Debt The various components of the above-mentioned formula are described below: PRESENT VALUE OF BUSINESS OF THE COMPANY Present Value of Cash Flows of Explicit Period + Present Value of Perpetuity =INR 4.74 Crores (As calculated above) + INR 4.45 Crores (As calculated below) = INR 9.19 Crores ‘The Perpetuity Value is caluclated as under: SE Ferpetuity Value Amount Gt INR Croves) INet Cash In-Flows at end of the Explicit Period 2180 |Growth Rate 1003 Reversi for Perpetuity 2201 ladjustments Les: Revenue Expenditure 6 les: Tax 3.66 (232) |Contingent Liabilities : | Average annual capex expenses from 2022-28 onwards 050 less: Tax Benefit 0s) (048) incremental Working Capital z INet Cash Flow for Penpetity 308 capitalised Value for Perpetity as on 31.03.2023 Tear Period 350 Discounting Factor 024 Present Value of Perpetuity = | Page 15 of 18CA. VARUN CHANDNA 349, 3" Floor, Centrum Plaza Registered Valuer Golf Course Road, Sector 53 B.Com, CAIIB, FCA, Dip.IFRS, FRM Gurugram (Haryana) ~ 122011 Registered with IBBI Phone: (0124) 492 4404 Member: IOV Registered Valuers F undation E-mail: aca. varun@gmail.com Strictly Private and Confidential The present value of perpetuity is low because of low growth rate of 1% assumed for perpetuiy and high discount rate of 50% taken into account. This is the present position and will not hold valid for long and the valuation is bound to change. if the company grows well as per projections, it future projections will have higher growth multiples and lower Disounting needed whereas if the company does not do well, it ‘will not sustain and will go down from current valuation also. [Value per Share (As on 31.03.2019) Amount (in INR Crores) Not Present Value (NPV) of Explicit Period 474 Present Value of Perpetuity 445 Enterprise Value 919 Long Term Borrowing as at31.03.2020 (Discounted) |Total Value attributable to the Current Equity Shareholders of the 919 |company considering investment of INR 10 Million solicited from prospective investors No of Equity Shares of Rs. 10 each 70,000 Equity = 70000 (Current Outstanding) Value per Equity Share (Current Share Price) 7312.89 ‘CONCLUSION BASED ON INCOME APPROACH (DCF METHOD): Present Value of the business of the Company is the sum of future discounted free cash inflow that is, expected to be realized from the business in perpetuity. Based on the Valuation analysis the Present Value of the free cash flow of the Company based on a 3-year projected period starting 31-Mar-2020 to 31-Mar- 2022 (considering FYE’ 31- Mar-2019 as already completed) and Total Value in our opinion is INR 9.19 Crores. The company may issue such number of equity shares or compulsorily convertible which do not breach the above value. 4 X cae ARUN CHANDNA Registered Valuer Securities/ Financial Assets [B61 Reg. No. BBIRVIOZ/2019/11169, Member: Institute of Valuers RVF M.No. IOVRVF/VMIF&SA/700 Page 16 of 18CA. VARUN CHANDNA 349, 3" Floor, Centrum Plaza Registered Valuer Golf Course Road, Sector 53 B.Com, CAIIB, FCA, Dip.IFRS, FRM Gurugram (Haryana) - 122011 tered with IBBI Phone: (0124) 492 4404 Member: IOV Registered Valuers Foundation E-mail varun@gmail.com Strictly Private and Confidential ‘SCOPE LIMITATION Our report is subject to the scope limitations detailed hereinafter. As such the report is to be read in totality, and not in parts, in conjunction with the relevant documents referred to in this report. Our work does not constitute an audit, due diligence certification or review of the historical financial statements and projections of the Company / Business referred to in this report. Accordingly, we are unable to and do not express an opinion on the accuracy of any financial information referred to in this report. Valuation analysis and results are specific to the purpose of valuation and valuation date mentioned in the report is as agreed as per terms of the engagement and may not hold valid as on any other future date. It may not be valid for any other purpose. The company has been provided with an opportunity to review the draft opinion/ valuation report as a part of our standard practice to make sure that factual accuracy / omissions are avoided in our Final Valuation. In case the company does not find any material error or inaccuracy in the valuation report and the calculation sheet shared with them and intimate the same to us within a reasonable period of 15 days, it shall be presumed that the valuation has been accepted by them along with all the calculations and any errors / omissions etc. discovered subsequently shall be the liability of the company to get the same rectified/ re-valued from us or any other registered valuer. Valuation analysis and results are also very specific to the date of this report. A valuation of this nature involves consideration of various factors including those impacted by the prevailing stock market trends in general and industry trends in particular. This report is issued on the understanding that the Company hhas drawn our attention to all the matters, which itis aware of concerning the financial position of the Business and any other matter, which may have an impact on our analysis, on the value of the unquoted equity shares, including any significant changes that have taken place or are likely to take place in the financial position of the Business. We have no responsibility to update this report for events and circumstances occurring after the date of this report. {In the course of the valuation, we were provided with both written and verbal information, including financial and operating data. We have evaluated the information provided to us by the Company through broad inquiry and analysis (but have not carried out a due diligence or audit or review of the Business for ‘the purpose of this engagement, nor have we independently investigated or otherwise verified the data provided). We have been represented by the management of the Company that it has not omitted any relevant and material factors. Accordingly, we do not express any opinion or offer any form of assurance regarding the accuracy and completeness of the information / data provided to us by the Company. We assume no responsibility for any errors in the above information furnished by the Company and their impact on the present exercise. Page 17 of 18CA. VARUN CHANDNA 349, 3" Floor, Centrum Plaza Registered Valuer Golf Course Road, Sector 53 B.Com, CAIIB, FCA, Dip.IFRS, FRM Gurugram (Haryana) - 122011 Registered with IBBI Phone: (0124) 492 4404 Member: IOV Registered Valuers Foundati E-mail: aca.varun@gmail.com Strictly Private and Confidential We express no opinion on the achievability of the forecasts relating to the Business given to us by the management of the Company. These forecasts are the responsibility of the management of the Company. The assumptions used in their preparation, as have been explained, are based on the Company's present ‘expectation of both - 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 or are not anticipated. Therefore, actual results during the forecast period may differ from the forecast and such differences may be material. This report is not, nor should it be construed as our recommendation on the proposed issuance of equity shares. Any decision by the shareholders regarding whether or not to proceed with the subscription shall rest solely with the shareholders. This report and the opinion / valuation analysis contained herein should not be construed as advice relating investing in, purchasing, selling or otherwise dealing in securities. Neither this report nor its contents may be referred to or quoted in any registration statement, Regulatory Purpose, prospectus, offering memorandum, annual report, loan agreement or other agreement or document given to third parties. (End) Page 18 of 18,