SECURITY ANALYSIS & PORTFOLIO MANAGEMENT

ASSIGNMENT

TOPIC: EQUITY VALUATION OF TAPI FRUIT PROCESSING

PRIVATE LIMITED

FACULTY IN CHARGE: SUBMITTED BY:

PROF. KAPIL MATTA AYESHA NAAZ

KOKAB ZAIDI

MBA IIIrd SEM

 LIST OF ANNEXURES

Annexure Input Value Page No

1 FCFF0 -132115 2-4
FCFF1 -152968
FCFF2 -175731
FCFF3 -201881
FCFF4 -231919
FCFF5 -266423
2 KE 7.28% 5-6
3 KD 7.54% 7
4 WACC 7.28% 8
5 Terminal Value 144994 9-10

1|Page
 ANNEXURE-1

Free Cash Flow to Firm

FCFF = After tax operating Income – (Net Capital Expenditure +Change in working
capital)

After tax operating income

= (Total Revenue – Total Expenses) x (1- Corporate Tax)

= (1522088.78-1500347.82) x (1- 0.25)

= 16305.72

Revenue and Expense values are from Tapi Fruit Profit and Loss Statement FY 2021-22
(Please find the statement at the end of this file)

Here, Corporate tax taken as 25% as it is a domestic company and turnover of the company
does not exceed Rs 400 Cr.

Net Capital Expenditure

= Net Increase in Plant, Property & Equipment + Depreciation

= (PP&E Current Period – PP&E Previous Period ) + Current Depreciation

= (385678.03 -319065.93) +57572.05

= 124184.15

PP&E and Depreciation values are from Tapi Fruit Balance Sheet and Cash Flow Statement
FY 2021-22 (Please find the statement at the end of this file)

Change in non-cash working capital

= Current Assets – Current Liabilities

= 404870.99 – 380634.54

= 24236.45

2|Page
Current assets and liabilities values are from Tapi Fruit Balance Sheet FY 2021-22 (Please
find the statement at the end of this file)

FCFF0 = After tax operating Income – (Net Capital Expenditure +Change in working
capital)

= 16305.72 – (124184.15 + 24236.45)

= -132115

Growth rate

= Current Revenue – Previous Revenue

Previous Revenue

= 1522088.78 – 1312501.30

1312501.30

= 0.1596

= 15.96 %

Revenue values are from Tapi Fruit Profit and Loss Statement FY 2021-22 (Please find the
statement at the end of this file)

FCFF1

Revenue = Revenue FY2022 x (1+g) Expense = Expense FY2022 x (1+g)

= 1522088.78 x (1+ 0.1596) = 1500347.82 x (1 + 0.1596)

= 1765014.14 = 1739803.33

After tax operating income

= (Revenue – Expense) x (1-0.25)

= 18908.11

3|Page
Net Capex = Net Capex FY22 x (1+ g) Change in non-cash working capital

= 124184.15 x (1 + 0.1596) = 24236.45 x (1 + 0.15)

= 144003.94 = 27871.91

FCFF1 = After tax operating Income – (Net Capital Expenditure +Change in working
capital)

= 18908.11 – (144003.94 + 27871.91)

= - 152968

Therefore,

FCFF2 = -175731

FCFF3 = -201881

FCFF4 =- 231919

FCFF5 = -266423

4|Page
 ANNEXURE – 2

Cost of Equity (Ke)

Cost of Equity = Risk free rate + (Beta x Equity Risk Premium)

Risk Free Rate = 7.37%

The India 10 Years Government Bond has a 7.377% yield (last update 14 Feb 2023 9:15
GMT+0)

Please Refer:

http://www.worldgovernmentbonds.com/bond-historical-data/india/10-years/

Beta = -1.24%

Please refer:

https://www.moneycontrol.com/india/stockpricequote/consumer-
food/tapifruitprocessing/TFP

5|Page
Equity Risk Premium = 7.47%

= Average stock market return of 3 years – Average bond market return of 30 year

= 14.94 – 7.462

= 7.47 %

Please refer:

https://www.theglobaleconomy.com/India/Stock_market_return/

https://in.investing.com/rates-bonds/india-30-year-bond-yield-historical-data

Cost of Equity = Risk free rate + (Beta x Equity Risk Premium)

Ke = 7.37 + (-1.24x 7.47)

= 7.28 %

6|Page
 ANNEXURE -3

Cost of Debt ( Kd)

Cost of Debt = (Risk free rate + Default spread) x (1-Marginal tax rate)

Risk free rate = 7.37%

Default spread = 2.69 % (As per Damodaran 2023)

Please refer:

https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/ctryprem.html

Cost of Debt = (Risk free rate + Default spread) x (1-Marginal tax rate)

= (7.37 + 2.69 ) x (1-0.025)

= 7.55 %

7|Page
 ANNEXURE – 4

Weighted average cost of capital

Market Value of Equity

= Market Price x No of shares

= 104.95 x 2827500

= 296746125

Please refer:

https://www.moneycontrol.com/india/stockpricequote/consumer-
food/tapifruitprocessing/TFP

https://www.sebi.gov.in/filings/public-issues/sep-2022/prospectus-of-tapi-fruit-
processing-limited-sme-ipo_62950.html

Market Value of Debt

= Long term debt + Trade payable

= 379229.69 + 194119.22

= 573348.91

Above values are taken from Tapi Fruit Balance Sheet FY 2021-22 (Please find the
statement at the end of this file)

Weighted Equity Weighted Debt = 1- We

= MVE / (MVE+MVD) = 1-0.998

= 296746125 / (296746125 +573348.91) = 0.0019

= 0.998

WACC = (Ke xWe) + (Kd x Wd)

= (0.0728 x 0.998) + (0.0755 x 0.0019)

= 0.072 or 7.28%

8|Page
 ANNEXURE – 5

Terminal Value

Reinvestment Rate = Growth rate / Return on Capital Employed

Growth rate = 15.96 %

Roce = 11.55 %

Please refer:

https://upstox.com/stocks/tapi-fruit-processing-ltd-share-price/INE0M7001010/

Reinvestment rate

= g / Roce

= 15.96 / 11.55

= 138.18 %

Table 1

Terminal Value at the end of Year 5 (FY2027)

= After tax operating income in year 5 x (1- reinvestment rate)

Cost of Capital – growth rate

= 34188 x (1- 1.38) / 0.07 – 0.1596

= - 12991.44 / -0.0896

= ₹ 144994

9|Page
Discounting the terminal value and the cash flows from Table 1 at the cost of capital 7.28%
−7185 −8332 −9661 −11203 −12991+144994
= + 1.07^2 + 1.07^3 + +
1.07 1.07^4 1.07^5

= ₹ 63690

Value of operating assets = ₹ 63690

Value of Tapi Fruit Equity

= Value of operating assets - cash + debt (short & long term -management options (Preferred
shares & minority interest)

= 63690 - 4754 + 533770 - 0

= ₹ 592706

Cash and Debt values are taken from Balance sheet of Tapi Fruit Processing FY 2021-2022
(Please find the statement at the end of this file)

10 | P a g e
BALANCE SHEET

11 | P a g e
PROFIT & LOSS STATEMENT

12 | P a g e
CASH FLOW STATEMENT

13 | P a g e
14 | P a g e