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Business Valuation Report : Aug 26, 2016 Sample Company

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Page 1: Business Valuation Report - Capanalec...Natural mineral water is the water containing less than 250ppm of total dissolved solids which are defined as natural mineral water. It falls

Business Valuation

Report

: Aug 26, 2016

Sample Company

Page 2: Business Valuation Report - Capanalec...Natural mineral water is the water containing less than 250ppm of total dissolved solids which are defined as natural mineral water. It falls

Disclaimer

1. Executive Summary

2. Company Brief Details

3. Management Team

4. Product and Services

5. Consolidated Past Financials

6. Packaged Bottled Industry in India

7. Projected Financials for Five Years

Key Financial Indicators

Revenue Assumptions

8. Business Valuation

Valuation Methodology

Business Valuation Assumptions

Business Valuation

Free Cash Flow Method to Firm

Free Cash Flow Method to Equity

Valuation Based on Multiple Method

P/E Multiple Method

EBIDTA Multiple Method

Consolidated Business Valuation of the Company

2

Sample Company

Page 3: Business Valuation Report - Capanalec...Natural mineral water is the water containing less than 250ppm of total dissolved solids which are defined as natural mineral water. It falls

3

The analyst has considered

all the financial information and statement as submitted by the management of

company, as is basis and it has not been independently verified and validated.

Sample Company

Page 4: Business Valuation Report - Capanalec...Natural mineral water is the water containing less than 250ppm of total dissolved solids which are defined as natural mineral water. It falls

The Company was incorporated in 2000 as Sample Company Ltd in Pune.

The company has set up water bottling plant in Pune and Mumbai, catering

to corporate packaged water jars required. The company caters to over 600

clients all over India with services in 16 cities including Mumbai, Pune,

Bangalore etc. It is the only company to operate as the single vendor - PAN

India packaged drinking water suppliers.

We have carried out the Business valuation of the consolidated group of

companies at the request of the company as a going concern basis. The

exercise has been targeted to get the total intrinsic value of the overall

business operations over five years with reasonable achievable growth rate.

.

Business valuation has been arrived at by using Two Stage Discounted

Cash flow (DCF) method. Two stages of the business growth have been

considered based on the aggressive growth in initial five years of the

business and sustainable growth in the future.

Business Valuation has also been arrived at by Comparative PE multiple

and EBIDTA multiple method based on the prevailing companies in similar

industry. Due to non-availability of the financial details of such peer

companies, we have used proxy from nearest industry segment and

companies providing packaged water.

The Business Valuation of the Company is being arrived at weighted

average of all three methods. Our business valuation based on the industry

growth assumptions and business unique advantageous position has been

arrived at Rs. 4583.77 Lakhs, Rs. 5035.75 Lakhs and Rs. 4482.31 Lakhs

respectively with DCF, PE multiple and EBIDTA multiple methods. The

consolidated weighted average valuation of the company has been arrived

at Rs. 4608.68 Lakhs.

4

Sample Company Valuation Summary

Sample Company

Page 5: Business Valuation Report - Capanalec...Natural mineral water is the water containing less than 250ppm of total dissolved solids which are defined as natural mineral water. It falls

The Company was incorporated in 2000 as Sample Company Ltd. In

Pune. The company has set up water bottling plant in Pune and Mumbai,

catering to corporate packaged water jars required. The company over last

10 years, has firstly emerged as a firm growing with double digit in

processing and supplying Mineral Water and Packaged Drinking Water.

Over the time, it has pioneered the packaged drinking water industry by

setting benchmark standards for corporate services and product quality.

The company caters to over 600 clients all over India with services in 16

cities including Mumbai, Pune, Bangalore, Hyderabad, Chennai, Kolkata,

Delhi, Gurgaon, Noida, Chandigarh, Ahmedabad, Vizag, Bhubaneswar,

Kochi and Jamshedpur. The processed water offered by the company is

widely used in with various MNCs, IT/ITES, Manufacturing, Automotive,

Banking and Financial Institutions. It is the only company to operate as the

single vendor - PAN India packaged drinking water suppliers.

Sample Company's products are in compliance with the BIS standards.

Their processing unit is outfitted with modern machines and technologies

sourced from reliable vendors. The company conducts stringent quality

tests on the processed water before packaging the same. Apart from the

water processed in-house, Sample Company largely supplies water of

brands like Bisleri, Aquafina, Bailey, McDowell’s on franchisee models.

Their daily supplies, all year round are barely affected by seasonal

changes as water is the most essential commodity consumed by the

employees. Sample Company is also the preferred vendor for

Infrastructure and Facility Management companies such as Jones Lang

LaSalle and CB Richard and Ellis. With all the necessary state wise

statutory compliances in place, Sample Company is one of the few

structured companies in the highly unorganized space which is looking for

a turn around.

Mr. Promter

A Chartered Accountant by profession, He has pioneered the

unstructured, fragmented corporate packaged drinking water industry

across India. Led the company to be the only service provider with a PAN

India presence.

Mr. Promoter

Having completed his MBA from New York, He has worked on wall

street, followed by various multi national companies before joining the

business. Responsible for Mumbai operations and marketing.

Mr. Promoter

Having a successful stint with Morgan Stanley and Bear Stearns in New

York, He is responsible for CRM, Vendor Management and Sales &

Marketing on a PAN India level.

Mr. Promoter

With 16 years of experience, He manages Key Accounts and is

responsible for overall Operations of the firm, primarily in Bangalore and

Pune.

Founder Management Team:

5

Sample Company

Page 6: Business Valuation Report - Capanalec...Natural mineral water is the water containing less than 250ppm of total dissolved solids which are defined as natural mineral water. It falls

Packaged Drinking Water

The company offers packaged drinking water in 20 liters jars to its clients .

The company has set up water bottling plant at Pune and Mumbai. It

supplies over 50% turnover near Mumbai and Pune through their own

bottling plant and remaining approx. 50% sales being carried out through

an affiliate model in 14 other cities across India’s geography.

The company has maintained highest quality standard in their water

purification and bottling plant. In purification process, the raw water

undergoes reverse osmosis filtration and sterilisation using ozone gas and

ultra-violet light before it is packaged into jars for delivery. Use of

Chlorination, Micron Filtration, Reverse Osmosis, Ozonation, U.V

Sterilization and High Pressured Sterilizing equipment eliminates growth

and presence of micro-organisms. There are check points at every stage

of manufacturing that are continuously monitored in order to ensure safe

and healthy consumable water. It has also provided GPS tracking devices

for each vehicle and an SMS is sent to every client the moment vehicles

arrive the vicinity.

USP of Sample Company Offerings:

First to receive IS14543:2004 granted by the Bureau of Indian

Standards, Pune.

CAGR of 40% supplying 12500 Jars daily.

The only company providing Single Vendor PAN India services

of Packaged Drinking Water.

Strategic Alliance Partnership with JLL and preferred vendor of

CBRE and JCI for water contracts.

6

Sample Company

Page 7: Business Valuation Report - Capanalec...Natural mineral water is the water containing less than 250ppm of total dissolved solids which are defined as natural mineral water. It falls

Consolidated

Past

Financials

In Rs. Lakhs

Profit and Loss Account:

Year 2014 2015 2016

Gross Sales

Domestic 820.9 888.5 1091.2

Exports 0.0 0.0 0.0

Sub Total 820.9 888.5 1091.2

Less Excise Duty and Cess 0.0 0.0 0.0

Net Sales 820.9 888.5 1091.2

Non Operating Income 5.1 11.6 1.9

Total Income 826.0 900.1 1093.1

Expenditure

Manufacturing Expenses

Raw Materials Consumed ( Indigenous) 310.0 359.4 455.7

Stores and spares consumed ( Indigenous) 0.0 0.0 0.0

Others 84.9 74.1 78.9

Sub Total 394.9 433.6 534.6

Depreciation 33.1 68.7 38.5

Cost Of Production 428.0 502.3 573.1

Finished Goods Opening Balance -0.8 -0.2 -0.2

Finished Goods Closing Balance 0.0 0.0 0.0

SubTotal: Finished Goods change in stock -0.8 -0.2 -0.2

Cost Of Sales 427.2 502.0 572.8

Administrative and Selling Expenses

Salary and staff expenses 102.6 35.3 58.62

Other admin and selling expenses 285.2 263.6 267.25

Audit Fees & directors Remuneration 0.0 0.0 0.00

Sub Total 387.9 298.9 325.9

Miscellaneous Expenses written off 0.0 0.0 0.0

Total 387.9 298.9 325.9

Finance Charges

Interest on Fixed Loans / Term loans 9.0 0.0 0.3

Interest on Working capital loans 0.0 0.0 0.0

Bank Charges 0.0 0.0 0.0

Total 9.0 0.0 0.3

Non Operating Expenses 0.0 0.0 0.0

Profit Before Tax 2.0 99.1 194.1

Tax

Income Tax provision 2.2 4.5 4.5

Deferred Tax Liability -1.5 -9.2 -0.5

Deferred Tax Asset 0.0 0.0 0.0

Total 0.7 -4.8 4.0

Net Profit for the year ( PAT) 1.3 103.9 190.1

7

Sample Company

Page 8: Business Valuation Report - Capanalec...Natural mineral water is the water containing less than 250ppm of total dissolved solids which are defined as natural mineral water. It falls

Profit and Loss Account:Balance Sheet:

Consolidated

Past

Financials

In Rs. Lakhs

Year 2014 2015 2016

Share Capital

Issued, Subscribed and Paid up 41.0 41.0 41.0

Share Application Money 0.0 0.0 0.0

Total 41.0 41.0 41.0

Reserves and Surplus

Balance transferred from profit and loss a/c 1.3 103.9 190.1

Other Reserve 187.9 74.4 -8.7

Total 189.3 178.2 181.4

Secured and Unsecured Loans

Working Capital Bank Finance 0.0 0.0 0.0

Term Loans 12.5 4.6 11.0

Other Debts 68.9 65.8 96.7

Unsecured Loans 0.0 0.0 0.0

Total Debt 81.3 70.4 107.7

Deferred Tax Liability 0.6 0.0 0.0

Fixed Assets

Gross Block 328.6 387.1 430.7

Less Accumulated Depreciation 229.9 298.6 337.1

Net Block 98.7 88.5 93.7

Add : Capital Work in Progress 2.4 0.0 0.0

Total 101.1 88.5 93.7

Intangibles Assets

Deferred Tax Asset 7.6 16.2 16.4

Other Intangible assets 0.1 0.5 0.7

Total 7.6 16.7 17.1

Additions to Fixed Assets 0.0 0.0 0.0

Investments 0.0 0.0 0.0

Current investments 0.0 0.0 0.0

Non-Current investments 1.1 13.7 13.7

Sub Total 1.1 13.7 13.7

Investment in group companies / subsidiaries 0.0 0.0 0.0

Total 1.1 13.7 13.7

Inventories

Raw Material 6.9 3.8 3.8

Stores and Spares 0.0 0.0 0.0

Stocks-in-process 0.0 0.0 0.0

Finished Goods 0.0 0.0 0.0

Total 6.9 3.8 3.8

Sundry Debtors

Domestic Receivables 230.0 221.4 308.0

Debtors more than 6 months 0.0 0.0 0.0

Total 230.0 221.4 308.0

Cash and Bank Balances

Cash on Hand 37.6 27.7 29.1

Bank Balances 0.0 0.0 0.0

Total 37.6 27.7 29.1

Loans and Advances

Advances / current asset 13.1 13.3 23.1

Advances to group / subsidiaries companies 0.0 0.0 0.0

Total 13.1 13.3 23.1

Non Current Assets 25.8 37.5 37.5

Current Liabilities

Sundry Creditors for goods 70.3 72.9 115.5

Advance received from customers 0.0 0.0 0.0

Provision for Taxation & Others 13.5 16.2 20.7

Other current liabilities 26.2 30.1 46.1

Total 110.0 119.1 182.3

Total Assets 422.1 408.8 512.3

Total Liabilities 422.1 408.8 512.3

8

Sample Company

Page 9: Business Valuation Report - Capanalec...Natural mineral water is the water containing less than 250ppm of total dissolved solids which are defined as natural mineral water. It falls

Packaged Bottled Industry in India

The packaged bottled water industry in India is primarily segmented into

packaged drinking water and Natural Mineral Water.

Packaged drinking water is the water derived from any source of

potable water and subjected to various treatments to meet the prescribed

standard before being packed in a plastic or glass container.

Natural mineral water is the water containing less than 250ppm of total

dissolved solids which are defined as natural mineral water. It falls under

premium water segment .

Packaged drinking water holds about 85% of the market. However,

natural mineral water is consumed primarily by the rich urban population

owing to its high cost.

Maximum sale of bottled water comes from the retail sector; but this is

changing with demand coming from social functions and corporate

events, especially for bulk water or bottled water cups. With the aim to

capture all the segments of society, players have started foraying into

packaged water pouches at low price points, but this is still in the

experimental stage.

The unavailability of clean drinking water, especially away from home,

will be the biggest growth driver during the forecast period. Growing

health awareness and the rising risk of waterborne diseases will also

facilitate growth. In addition, growth in the category is set to be the further

supported by drinking water shortages which prevail especially urban

areas, making consumers move towards bulk drinking water. The

increase in the number of domestic and foreign tourists in the past years,

and in the years to come, is expected to be an another major driver for

bottled water sales in India.

Sample Company deals in packaged drinking water, which would be

growing at the rate of 20-22% in next five years. This provides a huge

growth prospect for the company in the near future, owing to the

certifications in place and the existing market coverage.

Today, Indians are consuming more than 20 Litres of bottled water per

head each year in comparison to 4-5 Litres in Late 1990s. With an

increase in health awareness, tourism and the easy availability of bottled

water, the per capita consumption of bottled water in India has increased

in the recent years.

The total market was valued at Rs.60 billion in 2013, of which the top five

players accounted for 67 per cent of the market share. This market is

expected to grow at a CAGR of 22 percent, to reach Rs.160 billion in

2018.

Industry

Overview

9

Sample Company

Page 10: Business Valuation Report - Capanalec...Natural mineral water is the water containing less than 250ppm of total dissolved solids which are defined as natural mineral water. It falls

Packaged Bottled Industry in India

Major player existing in the industry with their multiple brands are Parle

Bisleri, Parle Agro, Coca-Cola, PepsiCo, Kothari Beverages, etc. There

are more than 180 brands in the unorganized sector. The small players

account for nearly 19% of the total market.

Bottled Industry - Market Segment*

Two Primary Market Segments

Retail – about 80% of the bottled water market

Home/Office Delivery (HOD)

PET segment is just over one-half the total bottled water volume.

PET 52.8%,

HOD 34.3% 17.8%, 1-2.5 gal. 16.5%)

Vended 8% (not bottled water)*BeverageMarketing Corp. – 2006

The phenomenal increase in demand for bottled water from just 2.0 mn

cases in 1990-91 to 112 mn cases presently was being boosted further

by the concern and need for safe drinking water.

Leading Brands in the industry are : Bisleri, Aquafina, Kingfisher, Bailley

and McDowells.

Industry

Overview

Future Projections Assumptions :

Year 2017 2018 2019 2020 2021

No. of Jars 3693212 4189804 4753997 5395107 6123744

Growth Rate 25.00% 19.00% 19.00% 19.00% 19.00%

Price Per Jar (Rs.) 30.64 32.20 33.83 35.55 37.35

Sundry Creditors 15.83% 15.83% 15.83% 15.83% 15.83%

Sundry Debtors 29.40% 29.40% 29.40% 29.40% 29.40%

Fixed Asset Growth 20.00% 20.00% 20.00% 20.00% 20.00%

Future projections of the company arrived on assumption as mentioned

below are based on the existing industry growth scenario on reasonable

basis to integrate with company’s operational capacity. The financial

assumptions have been considered based on the con-current practices

of the company. The other income and taxation for the future projections

has been considered on the basis of management inputs and

suggestions.

10

Sample Company

Page 11: Business Valuation Report - Capanalec...Natural mineral water is the water containing less than 250ppm of total dissolved solids which are defined as natural mineral water. It falls

Projected

Financials for

Next 5 Years

In Rs. Lakhs

Projected Profit and Loss Account:

11

Year 2017 2018 2019 2020 2021

Gross Sales

Domestic 1131.68 1349.02 1608.38 1917.94 2287.48

Exports 0.00 0.00 0.00 0.00 0.00

Sub Total 1131.68 1349.02 1608.38 1917.94 2287.48

Less Excise Duty and Cess 0.00 0.00 0.00 0.00 0.00

Net Sales 1131.68 1349.02 1608.38 1917.94 2287.48

Non Operating Income(Director's Remuneration) 200.00 166.52 198.53 236.74 282.35

Total Income 1,331.68 1,515.54 1,806.91 2,154.68 2,569.83

Expenditure

Manufacturing Expenses

Raw Materials Consumed ( Indigenous) 550.07 651.81 771.95 914.37 1083.21

Stores and spares consumed ( Indigenous) 0.00 0.00 0.00 0.00 0.00

Others 0.00 0.00 0.00 0.00 0.00

Sub Total 550.07 651.81 771.95 914.37 1083.21

Stock in process Opening Balance 0.00 0.00 0.00 0.00 0.00

Stock in process Closing Balance 0.00 0.00 0.00 0.00 0.00

Sub total -- WIP change in stock 0.00 0.00 0.00 0.00 0.00

Depreciation 36.00 37.80 39.69 41.67 43.75

Cost Of Production 586.07 689.61 811.64 956.04 1126.96

Finished Goods Opening Balance 0.00 0.00 0.00 0.00 0.00

Finished Goods Closing Balance 0.00 0.00 0.00 0.00 0.00

SubTotal: Finished Goods change in stock 0.00 0.00 0.00 0.00 0.00

Cost Of Sales 586.07 689.61 811.64 956.04 1126.96

Administrative and Selling Expenses

Salary and staff expenses 43.84 48.23 53.05 58.36 64.19

Rent , Rates and Taxes 12.00 12.00 12.00 13.20 13.20

Others 49.40 58.89 70.21 83.72 99.85

Other admin and selling expenses 156.21 188.62 227.76 275.02 332.09

Audit Fees & directors Remuneration 200.00 166.52 198.53 236.74 282.35

Sub Total 461.45 474.25 561.55 667.04 791.68

Miscellaneous Expenses written off 0.00 0.00 0.00 0.00 0.00

Total 461.45 474.25 561.55 667.04 791.68

Finance Charges

Interest on Fixed Loans / Term loans 11.96 11.96 11.96 11.96 11.96

Interest on Working capital loans 0.00 0.00 0.00 0.00 0.00

Bank Charges 0.00 0.00 0.00 0.00 0.00

Total 11.96 11.96 11.96 11.96 11.96

Non Operating Expenses 0.00 0.00 0.00 0.00 0.00

Profit Before Tax 272.20 339.71 421.76 519.64 639.23

Tax

Income Tax provision(Adjusted) 20.42 25.48 31.63 38.97 47.94

Deferred Tax Liability 0.00 0.00 0.00 0.00 0.00

Deferred Tax Asset 0.00 0.00 0.00 0.00 0.00

Total 20.42 25.48 31.63 38.97 47.94

Net Profit for the year ( PAT) 251.78 314.23 390.13 480.67 591.29

Sample Company

Page 12: Business Valuation Report - Capanalec...Natural mineral water is the water containing less than 250ppm of total dissolved solids which are defined as natural mineral water. It falls

Projected

Financials for

Next 5 Years

Projected Balance Sheet:

In Rs. Lakhs

12

Year 2017 2018 2019 2020 2021

Share Capital

Issued, Subscribed and Paid up 41.00 41.00 41.00 41.00 41.00

Share Application Money 0.00 0.00 0.00 0.00 0.00

Total 41.00 41.00 41.00 41.00 41.00

Reserves and Surplus

Balance transferred from profit and loss a/c 251.79 314.23 390.13 480.67 591.29

Other Reserve 181.38 433.17 747.40 1137.50 1618.20

Total 433.17 747.41 1137.53 1618.17 2209.49

Secured and Unsecured Loans

Working Capital Bank Finance 0.00 0.00 0.00 0.00 0.00

Term Loans 4.60 4.60 4.60 4.60 4.60

Other Debts 65.81 65.81 65.81 65.81 65.81

Unsecured Loans 0.00 0.00 0.00 0.00 0.00

Total Debt 70.40 70.40 70.41 70.41 70.41

Deferred Tax Liability 0.00 0.00 0.00 0.00 0.00

Fixed Assets

Gross Block 471.20 511.04 548.40 580.70 604.60

Less Accumulated Depreciation 373.05 410.85 450.54 492.21 535.96

Net Block 98.15 100.19 97.86 88.49 68.64

Add : Capital Work in Progress 0.00 0.00 0.00 0.00 0.00

Total 98.15 100.19 97.86 88.49 68.64

Intangibles Assets

Deferred Tax Asset 16.17 16.17 16.17 16.17 16.17

Other Intangible assets 0.48 0.48 0.48 0.48 0.48

Total 16.65 16.65 16.65 16.65 16.65

Additions to Fixed Assets 0.00 0.00 0.00 0.00 0.00

Investments 0.00 0.00

Current investments 0.00 0.00 0.00 0.00 0.00

Non-Current investments 13.68 13.68 13.68 13.68 13.68

Sub Total 13.68 13.68 13.68 13.68 13.68

Investment in group companies / subsidiaries 0.00 0.00 0.00 0.00 0.00

Total 13.68 13.68 13.68 13.68 13.68

Inventories

Raw Material 3.83 4.00 4.00 4.00 4.00

Stores and Spares 0.00 0.00 0.00 0.00 0.00

Stocks-in-process 0.00 0.00 0.00 0.00 0.00

Finished Goods 0.00 0.00 0.00 0.00 0.00

Total 3.83 4.00 4.00 4.00 4.00

Sundry Debtors

Domestic Receivables 332.71 396.61 472.90 563.90 672.50

Debtors more than 6 months 0.00 0.00 0.00 0.00 0.00

Total 367.92 414.61 514.90 639.60 794.30

Cash and Bank Balances

Cash on Hand 313.22 610.92 986.10 1454.90 2040.20

Bank Balances 0.00 0.00 0.00 0.00 0.00

Total 145.72 382.02 615.60 915.50 1296.30

Loans and Advances

Advances / current asset 13.25 13.25 13.25 13.25 13.25

Advances to group / subsidiaries companies 0.00 0.00 0.00 0.00 0.00

Total 13.25 13.25 13.25 13.25 13.25

Non Current Assets 37.50 37.50 37.50 37.50 37.50

Current Liabilities

Sundry Creditors for goods 179.14 213.55 254.60 303.60 362.10

Advance received from customers 0.00 0.00 0.00 0.00 0.00

Provision for Taxation & Others 40.83 50.96 63.30 77.90 95.90

Other current liabilities 50.74 55.82 61.40 67.50 74.30

Total 270.72 320.32 379.30 449.00 531.83

Total Assets 815.31 1179.12 1628.24 2178.58 2852.73

Total Liabilities 815.29 1179.13 1628.24 2178.58 2852.73

Sample Company

Page 13: Business Valuation Report - Capanalec...Natural mineral water is the water containing less than 250ppm of total dissolved solids which are defined as natural mineral water. It falls

Projected

Financials for

Next 5 Years

Key financial Indicators:In Rs. Lakhs

13

Year 2017 2018 2019 2020 2021

Total Operating Income(TOI) 1131.68 1349.02 1608.38 1917.94 2287.48

EBIDTA 120.17 222.96 274.88 336.53 412.59

EBIDTA/Total Operating Income (%) 10.62% 16.53% 17.09% 17.55% 18.04%

Interest 11.96 11.96 11.96 11.96 11.96

Depreciation 36.00 37.80 39.69 41.67 43.76

Operating Profit after Dep.& Int. 72.20 173.20 223.23 282.90 356.87

Non Operating Income/Exps. 200.00 166.52 198.53 236.74 282.35

Profit Before Tax(PBT) 272.20 339.71 421.76 519.64 639.22

Profit After Tax(PAT) 251.79 314.23 390.12 480.66 591.28

PAT/ TOI (%) 22.25% 23.29% 24.26% 25.06% 25.85%

Net Cash Accruals (NCA) 287.79 352.03 429.81 522.34 635.04

Net Fixed Assets 98.15 100.19 97.85 88.51 68.65

Tangible Networth (TNW) 457.53 771.76 1161.88 1642.55 2233.83

Exposure in Group Co./Sub.

--- Investments 0.00 0.00 0.00 0.00 0.00

--- Loans and Advances 0.00 0.00 0.00 0.00 0.00

Quasi Equity 0.00 0.00 0.00 0.00 0.00

Adjusted Tangible Net Worth (ATNW) 457.53 771.76 1161.88 1642.55 2233.83

Long Term Debt (LTD) 4.60 4.60 4.60 4.60 4.60

Short Term Debt (STD) 65.80 65.80 65.80 65.80 65.80

Working Cap. Bank Finance 0.00 0.00 0.00 0.00 0.00

Financial guarantees 0.00 0.00 0.00 0.00 0.00

Total Debt 70.40 70.40 70.40 70.40 70.40

Total Liabilities 341.12 390.73 449.67 519.50 602.69

Total Debt/Adjusted Tangible Net Worth 0.15 0.09 0.06 0.04 0.03

Long Term Debt / Adjusted Tangible Net

Worth0.01 0.01 0.00 0.00 0.00

Total Liabilities / Tangible Net Worth 0.75 0.51 0.39 0.32 0.27

Total Liabilities / Adjusted Tangible Net Worth 0.75 0.51 0.39 0.32 0.27

Total Current Assets 663.01 1024.78 1476.23 2036.04 2729.99

Total Current Liabilities 336.52 386.12 445.07 514.89 598.08

Net Working Capital(NWC) 326.49 638.66 1031.16 1521.15 2131.90

Current Ratio 1.97 2.65 3.32 3.95 4.56

Return on Capital Employed (%) 27.43% 31.83% 25.18% 21.53% 19.36%

Interest Coverage Ratio 8.34 16.51 20.33 24.88 30.48

Total Debt/Net Cash Accrual 0.24 0.20 0.16 0.13 0.11

Inventory Turnover days 2.35 2.09 1.77 1.51 1.28

Debtors Turnover days 105.84 105.84 105.84 105.84 105.84

Creditors Turnover days 117.24 117.91 118.74 119.54 120.35

Debt Service Coverage Ratio (in case of

term loan)1.01 2.54 3.13 3.83 4.69

Sample Company

Page 14: Business Valuation Report - Capanalec...Natural mineral water is the water containing less than 250ppm of total dissolved solids which are defined as natural mineral water. It falls

Business

Valuation

Valuation Methodology:

Business valuation has been arrived at by using Two Stage Discounted Cash

flow (DCF) method. Two stages of the business growth have been considered

based on the aggressive growth in initial five years of the business and

sustainable growth in the future.

First stage business valuation has been considered on actual assumptions of

growth drivers of the company as mentioned in the business assumptions

section. Second stage business valuation is based on the calculation of the

terminal value of the business entity based on the sustainable growth rate, return

on capital investment, reinvestment rate.

Finally, two staged cash flow has been discounted by discounting rate to arrive at

the net present value of the cash flow for business valuation.

Business Valuation Assumptions:

Year 2017 2018 2019 2020 2021

Market Return 11.50% 11.50% 11.50% 11.50% 11.50%

Risk Free Rate 7.45% 7.45% 7.45% 7.45% 7.45%

Risk Premium 4.05% 4.05% 4.05% 4.05% 4.05%

Beta Value 1.10 1.10 1.10 1.10 1.10

Cost of Equity 11.91% 11.91% 11.91% 11.91% 11.91%

Marginal Rate of Tax 30.00% 30.00% 30.00% 30.00% 30.00%

Debt / Total Funds 12.93 8.20 5.64 4.07 3.03

WACC 11.90 11.90 11.90 11.90 11.90

Discount Factor 1.00 1.12 1.25 1.40 1.57

Invested Capital in Operations 286.39 266.41 289.94 312.62 332.63

ROIC 99.22 132.00 149.59 170.05 195.77

ASSUMPTIONS ABOUT TERMINAL

VALUE

Perpetual Growth Rate 6.00% 6.00% 6.00% 6.00% 6.00%

Sustainable ROIC 30.00% 30.00% 30.00% 30.00% 30.00%

Reinvestment Rate 20.00% 20.00% 20.00% 20.00% 20.00%

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Sample Company

Page 15: Business Valuation Report - Capanalec...Natural mineral water is the water containing less than 250ppm of total dissolved solids which are defined as natural mineral water. It falls

Business

Valuation

Free Cash Flow Method to Firm:

Year 2017 2018 2019 2020 2021

PBIT 284.17 351.67 433.72 531.60 651.19

Less: Actual Tax Paid 20.42 25.48 31.63 38.97 47.94

Less: Tax Shield on Interest 3.59 3.59 3.59 3.59 3.59

Add: Tax on Interest and Investment Income 0.00 0.00 0.00 0.00 0.00

NOPLAT 260.16 322.61 398.50 489.04 599.66

Add: Depreciation 36.00 37.80 39.69 41.67 43.75

Gross Cash Flow 296.16 360.41 438.19 530.71 643.41

Less: Capital Expenditure 0.00 0.00 0.00 0.00 0.00

Less: Working Capital Investment -63.72 14.46 17.30 21.21 25.87

Less: Increase in other assets 274.22 297.70 375.18 468.80 585.30

Add: Increase in other liabilities/provisions 68.27 39.48 46.63 55.10 65.30

Free Cash Flow to Firm 153.93 87.72 92.35 95.80 97.54

Terminal Value 0.00 0.00 0.00 0.00 6546.58

Total Cash Flow 153.93 87.72 92.35 95.80 6644.12

Discounted Cash Flows 153.93 78.39 73.75 68.37 4236.92

Value of the Firm 4611.35

Add: Beginning Cash Balance 29.14

Add: Fair Value of Investments 13.68

Less: Fair Value of Existing Debt 70.40

Fair Value of Equity 4583.77

No. of Shares Outstanding 410000.00

Fair Value per Share 1117.99

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In Rs. Lakhs

Sample Company

Page 16: Business Valuation Report - Capanalec...Natural mineral water is the water containing less than 250ppm of total dissolved solids which are defined as natural mineral water. It falls

Business

Valuation

Comparative Multiple Valuation Method

EBDITA Multiple :

PE Multiple :

In the absence of comparable company financials, we have considered recentlylisted IPO company in similar products segment. IPO listing price wasconsidered at 51 P/E multiple for Manpasand Beverages, a company inpackaged bottled manufacturing and distribution. We have considered PEmultiple of 20 and 18 for FY2017 and FY2018 respectively, almost 60% discountto the listed company multiple as the basis of our valuation.

Year 2017 2018

PAT 251.79 314.23

No. of Shares 410000 410000

EPS 61.41 76.64

PE Multiple 20 18

Price 1228.2 1379.6

Business Valuation 5035.75 5656.21

Year 2017 2018

EBIDTA 320.17 389.47

EBIDTA Multiple 14 12

Enterprise Value 4482.31 4673.70

In US market, EBDITA multiple for beverages (soft) segment inclusive of bottledpackaged water is around 12. We may consider the same on higher side forgrowth stage companies. Specially for Corporate segment in bulk waterpackaged segment, multiple would be higher based on the sector CAGR of over22% We have considered multiple of 14 and 12 for FY2017 and FY2018respectively as the basis of valuation.

Weighted Average Valuation :

We have arrived final business valuation on the basis of weighted average basisof all three valuation. We have provided 70%, 10%, 20% weightages to DCFValuation, PE Multiple Valuation and EBIDA multiple valuation respectively.

Valuation Methodology Valuation Weightage Weighted Value

DCF Valuation 4583.77 70% 3208.64

PE Valuation 5035.75 10% 503.58

EBIDTA Valuation 4482.31 20% 896.46

Final Weighted Average Valuation 4608.68

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Sample Company

Page 17: Business Valuation Report - Capanalec...Natural mineral water is the water containing less than 250ppm of total dissolved solids which are defined as natural mineral water. It falls

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Sample Company

Page 18: Business Valuation Report - Capanalec...Natural mineral water is the water containing less than 250ppm of total dissolved solids which are defined as natural mineral water. It falls

18

Sample Company