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Satyam Computer Services Intrinsic Valuation – post Acquisition

Check out more on my blog: fundamentalvaluation.blogspot.com

Author: Puneet Malik

Date: Sep 01, 2009

Executive Summary

Satyam investors have witnessed a massive wipe-out of their wealth, with its
market cap nose-diving by 501% since Dec, 08. Typical of any financial scam ridden
company, Satyam stock got punished once its Chairman Mr. Ramalinga Raju jolted
the market with the news of billion dollars financial irregularities. The acquisition by
Tech-Mahindra infused confidence among investors community, reflected in the
300% stock appreciation since approval by India Law Board. The valuation report
conducted the fundamental analysis of Satyam and valued it at Rs. 214.49, with
75% of its value coming from terminal phase.

How has Satyam Valuation changed post-acquisition by Tech-


Mahindra?

1
SAY has recovered since post-acquisition

Fundamental valuation is good as long as market gets it. Page 1


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With increased government intervention, Satyam managed to sell 41% stake to


Tech-Mahindra in Apr, 2009. In the previous valuation(pre-acquisition), controlling
for all the risk factors facing company at the time, Satyam was valued at Rs. 102 in
May,09 (the stock was trading at 45 at the time).

There have been several developments post-acquisition such as release of Q3 09


audited financial results, addition of new clients and disclosure of consolidated
financial liabilities/assets of Satyam. This, in addition to management takeover, has
improved the investor confidence level, reflected in the stock price, trading at Rs.
123.20.

The valuation report will re-evaluate Satyam’s enterprise value, taking into account
all new developments since Tech-Mahindra acquisition.

Valuation model

The 2 most popular valuation models are Relative valuation and Fundamental
analysis (a.k.a Discounted Cash flow model).

Without getting into much detail, relative valuation does a comparative valuation of
similar companies based on various metrics (P/E,PEG,EV/Sales). This approach
works best if the companies are relatively similar from growth, margins, cost of
capital and industry perspective. For example, one can compare TCS and Wipro
using P/E as both of them operate in IT outsourcing industry and get bulk of their
revenue from outside India. Although Satyam operates in the similar industry as
HCL, the idiosyncratic risks facing company today creates uncertainty about its
future growth prospects. To use relative valuation, one must control for all such risk
factors before slapping a multiple on Satyam. Not impossible, but it is fairly
challenging to control for such risk factors in determining P/E multiple of Satyam.

The Fundamental analysis is a more comprehensive and intuitive model to value


firms like Satyam, facing unsystematic risk such as higher cost of capital, uncertain
growth prospects and distorted financial statements. The research paper uses a 2
stage FCFF (free cash flow to firm) model, appropriate for growth oriented
companies. Satyam is a growth oriented company, operating in IT outsourcing
industry2. The 2 stage model categorizes company’s growth into – High growth
phase, followed by low growth phase leading to a terminal/stable growth. 3

Years 2009-2012 2013-2016 2017 and going forward


Type of High growth Low growth Terminal year and Stable
growth growth

2
Revenues from Indian exports of software and back-office outsourcing services rose
by 16 percent in the 08-09 FY until mar09 to US$46.3 billion
3

Fundamental valuation is good as long as market gets it. Page 2


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Global IT outsourcing industry

IT outsourcing industry can be categorized into –

1. Application Outsourcing (AO)


This includes outsourcing application development/support to countries,
possessing competitive advantage of skilled technical labor. Gartner forecasts
the AO worldwide market to grow from $70.9 billion in 2008 to $97.9 billion
in 2012, registering a four-year CAGR of 8.9%.
2. Business Process Outsourcing (BPO)
This category includes contracting out company’s internal processes – Back
office operations like Finance/Human Resources and Front office systems like
CRM. BPO is the fastest growing segment in the IT outsourcing industry,
expected to grow at a CAGR of 9% in the next 5 years (2008 – 2012).
According to Gartner, the worldwide BPO market is expected to grow from
$171 billion in 2008 to $239 billion in 2012.
3. IT management
This business segment includes outsourcing of company’s Information
Technology Network management and other infrastructure management
services. Gartner forecasts the worldwide IT Management segment to grow at
a CAGR of 7.3% from $202 billion in 2007 to $292 billion in 2012.

(Source: Gartner)

(Source: Gartner)

Based on above data, the worldwide IT outsourcing market in 2008 totaled


around $456 billion. (AO - $70.9b, BPO - $171b, IT Mgmt – $216.7b)

India’s share of outsourcing market

According to NASSCOM, India’s FY 08-09 outsourcing export revenue


increased by 16 percent to US$46.3 billion. On the other hand, the domestic

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IT outsourcing revenue grew by 21% to $11.8 billion, resulting in India’s share


of worldwide outsourcing market to be 12.6%.4
In 2008, Indian AO export grew by 14.7% to $26.5 billion and BPO related
exports registered a 16.5% gain moving to $12.7 billion5. Engineering and
Product services exports increased to $7.1 billion.

Satyam Intrinsic valuation

Although several financial projections go into DCF valuation, the paper highlights
the salient parameters that have bigger impact on Satyam’s valuation. The research
paper will reference the most recently released audited Q3, 09 estimates of Tech-
Satyam that presents a much clearer picture of its financial situation.

Revenue projection

As discussed above, India’s share of worldwide IT outsourcing industry in 2008 was


12.6% - Application outsourcing share of global market is 46.60%6 and BPO share of
global market is 9.35 %7. Since India emerged as the outsourcing leader in early
2000s, several other countries like China have emerged as the competing
destination for outsourcing buyers. But in a 2008 Gartner study on Outsourcing,
analyzing 42 countries on criterion like cost, education, labor, infrastructure and
government support, India emerged as the most preferred destination for
outsourcing.

The US financial crisis has increased the cost sensitivity of large buyers, putting
India at a cost advantage compared to western BPO providers. India, among other
outsourcing destinations, enjoys several advantages such as language skills,
excellent government support and most importantly, moving up of IT vendors in
supply chain, providing higher value added services. BPO being the fastest growing
segment in IT outsourcing, Gartner forecasts the Indian share of global BPO
market to double by 2010.

Indian Application outsourcing (AO) exports already controls a healthy market share
of 38.15%. But the spiraling labor costs, higher cost of living, increased attrition and
margin pressures due to financial crisis will pose challenges to Indian IT market

4
(46.3+11.8)/456=12.6%
5
Doesn’t include companies with Corporate HQ outside India
6
Assuming domestic market has same AO (57%) and BPO (28%) distribution as in exports
market. Total Indian AO revenue=26.5+0.57*11.8=33. Global AO market
share=33/70.9=46.6% where 26.5 is AO export and 11.8 is domestic IT market
7
(12.7+0.28*11.8)/171 where 12.7 is BPO export, 11.8 is domestic market and 171 is total
market

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players in strengthening its market share. On the positive note, the domestic IT
market is estimated to grow at a CAGR of 18.3% through 2012 to $22.87 billion,
propelling the growth for Indian IT service providers. Indian share of global AO
market is estimated to increase to at least 55% in next 4 years.

With Indian BPO market share growing to 18.7% and AO to 55% through 2012, the
total Indian IT revenue in 2012 will be (.187*2398+.55*97.99)=98.53. This results in
a 4 year CAGR of (98.53/56.310)^.25 -1=15%. NASSCOM estimates 2009-2010 IT
revenues to grow in the range of 4-7%. Based on the above estimates, the revenue
growth for next 4 years is -

2009 2010 2011 2012


Rev growth 5 18.5 18.5 18.5
(%)

In the terminal year, Satyam will exhibit characteristics of a mature and stable
growth company, growing at a rate not greater than Indian risk free rate11 of 3%.

Sensitivity analysis in the appendix addresses the valuation impact for different
growth rates.

EBIT margins

Lacking any other credible financials, recently disclosed audited Q3 2009 results are
used to estimate next 4 years EBIT margins. Q3 2009 income statement has high
legal expenses (attributed to lawsuits) and high bench costs (economy downturn
and financial irregularity) depressing the Dec Q3 EBIT margins to 12.99%. In Q3,
legal expenses constituted Rs 108 cr/4.7% of Q3 revenue (historically legal
expenses were 2.23% of revenue) and bench costs were Rs. 120 cr. At the time of
this valuation, global economy is seen to be ramping up and it is estimated that
bench costs should decrease with the recovery in sight. Additionally, it is believed
that legal costs will continue to depress company’s margins for next 2 years until
the legal liabilities are settled. The valuation analysis adjusts Q3 EBIT margins for
high bench costs (keeping the high legal expenses), estimating the next 2 year EBIT
margin of 18.2212%.

8
This is the AO market in 2012
9
This is the BPO market in 2012
10
46.3 is export market and 85% of domestic market of 11.8 results in 56.33 total IT-BPO
market
11
Indian 10 year yield is 7% and Indian Moody’s rating for local currency is Ba2,
corresponding to a spread of ~4%
12
See Appendix for calculation of next 2 years margin using Q3-09 financials

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Satyam’s Q3-2009 EBIT margin of 12.99% is below SWITCH average, attributed to


instability and legal challenges. Normalizing Q3-09 EBIT margins for legal and bench
costs, company is expected to maintain 18.22% margin for next 2 years, increasing
to 21%13 in 2012.

Last 5 Yr Avg. of EBIT margins

Wipro IBM Infosys TCS HCL Avg. of IT


industry
5 Yr 20.03 17.82 28.39 23.87 17.0 19.61
average 1
(%)

With increased competition and maturing of IT outsourcing industry, margins are


expected to get depressed through terminal year (2017). The terminal/stable growth
EBIT margin is the profit margin of a larger/mature company in a stable growth
mode. In a stable growth mode, Satyam is expected to deliver EBIT margin of
19.61%, average margin of IT service industry.

Future capital investments

Company requires infusion of new capital to continue growing. The model uses
Capital turnover ratio, defined as Revenue/Invested capital14, to determine future
capital needs.
Last 5 year average of Capital turnover for SWITCH companies

Wipro Cogniz Infosys TCS HCL Avg. of


ant SWITCH
5 Yr 1.74 3 2.76 2.06 2.2 2.38
average

To estimate Satyam’s Capital turnover during growth phase (through 2012), the
model uses average Capital turnover of SWITCH companies of 2.38. In low growth
phase, company’s turnover ratio will decrease to 115(average turnover of Sensex-
30), reflecting the maturity of the industry.

13
See Appendix for normalized margin calculations
14
Minus cash
15
See Appendix for Sensex-30 Capital turnover

Fundamental valuation is good as long as market gets it. Page 6


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The Capital requirement in stable growth period is determined by the Return on


Invested capital and the amount of growth16. The retention ratio (net of Capex) is
estimated to be 23% in stable growth. See section below on Excess Return in stable
growth phase.

Cost of capital

Cost of capital is the weighted average of 2 components –

1. After tax cost of debt


2. Cost of Equity

Cost of Debt

Satyam’s annualized cost of debt as of Q3, 09 (ending in Dec) was 16%. The
company took a loan of Rs.600cr to meet its working capital needs, carrying a
high rate of 13.5%. Cost of debt is determined by the risk free rate + risk
premium attributed to risk default. The risk default premium for Indian
companies generally has 2 components –

a. Country default – Unlike USA, India has a default rating of Ba2 according
to Moody’s. This carry a ~400bp spread over risk free rate.
b. Company default – This is company specific and identifies company’s
ability to service its debt, generally determined by Interest ratio coverage.

Indian IT sector receives bulk of its revenue (95% on an average) from


outside India (USA/Europe), nullifying the country risk premium. Company
default is the only risk component, contributing to spread on top of Indian risk
free rate. As of Q3-09, Satyam has an outstanding liability of Rs.5817.96cr17
and the interest coverage ratio of 7.0418, corresponding to a spread of 250bp
over Indian risk free rate of 3%19. According to new management, company
plans to retire Rs300cr of debt this year, carrying an interest rate of 13.5%.
Once the impending lawsuit liability is settled in 2 years, company’s interest
coverage ratio should improve further, lowering its after-tax cost of debt to
3.4520% through 2012 and to 2.7621% in the terminal year.

Cost of Equity

16
Retention ratio=Growth/Return on Capital.
17
See section on Total outstanding debt
18
See Appendix for Synthetic Credit Rating
19
Indian 10 Yr Yield is 7% and Indian country risk premium is 400bp corresponding to
Moody’s Ba2 rating
20
Corresponds to 200bp spread over Indian risk free
21
Corresponds to 100bp spread over Indian risk free

Fundamental valuation is good as long as market gets it. Page 7


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This is determined by company’s levered beta and the market risk premium.
Although historically, market risk premium ran around 4%, financial crisis has
drastically increased premium to around 7.5%. It is expected that market will
continue to exact high premium for next couple of years before reverting to
historical average of 4%.

The paper uses top-down approach to calculate Satyam’s unlevered beta of


0.8 – average beta of SWITCH companies. As company grows and scale up, its
beta also approaches 1. The valuation uses a beta of 1 in the terminal year.

The cost of equity in the growth phase is 10.16%, reducing to 8.1% in the
terminal year. (The contribution of country risk premium is ignored as Satyam
receives bulk of its revenue from developed economies, carrying zero country
risk premium)

WACC

Using above costs of debt and equity, weighted average cost of capital for
Satyam decreases from 9.73% in growth phase to 7.83% in the
stable phase. (See Appendix for WACC calculation)

Excess Return in Stable phase

This is the most important component in any valuation that generates value for the
company. It is the excess return over cost of capital that adds/detracts value from a
company – companies generating higher excess returns will have higher valuations
than others. Maintaining excess returns require company to have sustainable
competitive advantage. Companies like Microsoft, maintaining a monopoly, have
managed to enjoy higher excess returns for several years.

There is another school of thought, like Mckinsey, which believes that the company
will generate zero excess returns in stable growth – higher excess returns attracts
new entrants, increasing competition and thus depressing excess returns.

The sustainability of competitive advantage determines the longevity of excess


returns. The bigger the competitive advantage, the longer the company enjoys
excess returns.

Although there have been several players in the outsourcing industry, it is believed
that each player holds some competitive advantage, supported by the fact that
SWITCH average ROI for the last 5 years has been 33.5022%.

22
This figure adjusts for any R&D expense, not treated as equity. Indian IT company’s
average WACC is ~9%.

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Average of last 5 year ROI

Wipro Infosys TCS Cognizan HCL Average


t
ROI (%) 23.42 50.98 30.11 38.69 24.32 33.50

These high ROIs may be justified by higher switching costs of IT outsourcing buyers
or by company’s competitive advantage in different verticals. (Tech Mahindra’s
focus on Telecommunication niche)

Matured technology companies such as Dell23 and HP24 enjoys an excess return of
around 6% in their most recent fiscal results. With the maturing of IT outsourcing
industry and increased competition, it is estimated that IT outsourcing companies
like Satyam will continue to enjoy excess return, though of the order of ~5-6%. As
discussed in cost of capital section, WACC in the stable growth is estimated to be
7.83%, resulting in ROC of 7.83+5=12.83%. The company will need to retain 23%
(G=b*ROC; G=3%, ROC=12.83%) of capital in the stable growth, as part of
capex. Investors, who hold a different opinion about excess returns, can visit the
sensitivity analysis section to find the variance analysis.

Debt/liabilities

According to Q3-09 released financials, Satyam’s outstanding consolidated debt as


of Mar-09 was Rs.966cr.

Type of Debt Amount (cr)


BPO loan 169
Financial leases 328
Fund based loan 469
=966
(Source: Q3-09 financials)

Facing lawsuits due to financial irregularities, company has pending litigation that
can cost company from 3500-7000cr, according to legal experts. The class action
suit is with United States District Court for the Southern District of New York,
pending consideration of lead plaintiff, according to Q3-09 released company
financials. It is estimated that lawsuit charges should settle in 2-3 years, resulting in
a legal liability of Rs.4492.2625cr.

Other liabilities26:

23
Dell generated 4.17% excess return in FY ending Jan-09.
24
HP generated 6.02% excess return in FY ending Oct-08.
25
Expected value of liability=5000. Settlement in 2 years, so PV(5000,@5.5%)=4492.26
26
Source Q3-09 financials

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Type of Amount27
liability (cr)
Caterpillar 192
Bridge 105.6
S&V 62.1
management
=359.7
(Source: Q3-09 financials)

This results in total debt and liability of 966+4492.26+359.7=Rs 5817.96

Cost of Options/RSUs

According to Q3-09 financials, company has following options and RSUs


outstanding.

Option/RSU type Term (yrs) Number in force(mil)


ASOP-B 5 12.79
ASOP-ADS 5 1.2
RSU 5 3.9
Total options in force=19.09mil

Using Black Scholes, option value is 9828 and total cost of options/RSU
=98*19.09=Rs. 187.02cr

Discounted Cash Flow Analysis


Revenue Growth 5 18.5 18.5 18.5 10.75 6.88 4.94 3 3
(%)
Mar-09 FY09E FY10E FY11E FY12E FY13E FY14E FY15E FY16E Terminal-
ttm
29 Yr
Sales 9767.00 10255.0 12152.5 14400.8 17064. 18899.4 20198.7 21196.1 21831.9 22486.95
0 9 2 97 5 9 1 9
EBIT margin (%) 17.46 18.22 18.22 21.00 21.00 19.26 18.39 17.96 17.52 17.52
EBIT 1705.00 1868.52 2214.20 3024.17 3583.6 3640.25 3714.90 3806.18 3825.46 3940.22
4
Tax-rate 30 14.00 22.50 31.00 31.00 31.00 31.00 31.00 31.00 31.00
14.00
EBIT(1-T) 1466.30 1606.93 1716.01 2086.68 2472.7 2511.77 2563.28 2626.27 2639.57 2718.75
1

Sales/Inv. Capital 2.22 2.22 2.22 2.22 1 1 1 1


New Cap. 220.42 697.12 802.10 922.90 1410.62 1024.48 813.90 566.12 524.93

27
US$=Rs48 Eur=Rs69
28
Using vol=40%, K=2, t=5, rf=3%, Stock price=100 and div-yield=0.78%
29
TTM is through Mar-09, as Balance Sheet details are given until Mar-09. Mar rev is projected
to be same as Feb
30
Missing tax info for Jan and Mar, tax rate of FY-07/08 is used

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Investments
Total Invested 31 3028.42 3725.54 4527.64 5450.5 6861.16 7885.65 8699.55 9265.67 9790.60
2808.00
Capital 4

FCFF 1386.51 859.66 1071.90 1270.2 677.29 1263.94 1628.95 2003.68 2083.18
1

Total cash 32
1521.40
LTD/OBD 5817.96
Market Leverage 33 7.81 4.4 2.7 1 3 4 4.5 5 5
14.61
(%)
Levered-Beta 0.94 0.94 0.87 0.83 0.8 0.9 0.95 0.98 1 1
Cost of debt (%) 16 5.5 5.5 5 5 4.5 4.25 4.13 4 4
After-tax cost of 13.76 4.73 4.26 3.45 3.45 3.11 2.93 2.85 2.76 2.76
Debt
Cost of Equity 10.16 10.16 9.68 9.44 7.2 7.65 7.88 7.99 8.1 8.1
(%)
Mkt. Risk 7 7 7 7 4.5 4.5 4.5 4.5 4.5 4.5
premium (%)
WACC (%) 10.68 9.73 9.44 9.28 7.16 7.51 7.68 7.76 7.83 7.83

ROIC (%) 53.06 44.17 42.59 40.52 31.65 27.75 25.66 24.29 12.83

PV 1263.51 715.82 816.77 903.19 447.88 776.18 928.29 1058.60


Terminal Value 22772.7
0

EV 29682.94
Total Cash 34
1521.4
LTD/OBD 5817.96
Unfunded 89
pension
Cost of Options 187.02
Total Equity Val 25110.30
Outstanding 35
117
shares
Share value (Rs.) 214.49

Value from 23.28%


Growth
Value from 76.72%
Terminal

Appendix
31
See Appendix for invested capital as of Mar-09
32
Including cash from second round of allotment to Tech Mahindra
33
Base year calculated by recursive function in Excel, using calculated market value and
current net debt
34
Includes cash inflow from second round of allocation of 19.8cr shares @58
35
Includes 19.8cr second round of allocation

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A. EBIT Margin for Q3-2009

Revenue 2294
Operating expense 1930
Depreciation 66

EBIT 298
EBIT margin 12.99%
(Source Q3-2009 financials)

Operating expenses

Expense type Amount (Rs. Cr)


Bench cost 120
Legal cost 108

B. EBIT margin without high Bench cost36, attributed to instability and


slump in economy

Revenue 2294
Operating expense 1930
Depreciation 66
Remove Bench cost (120)

EBIT 418
EBIT margin 18.22%

C. Normalized EBIT margin without high Bench and Legal cost

Revenue 2294
Operating expense 1930
Depreciation 66
Remove Bench cost (120)
Remove Legal cost37 (62.12)

EBIT 480.12
EBIT margin 20.93%
(Source Q3-2009 financials)

D. Synthetic rating for Satyam’s Debt

36
Legal cost will continue to be high for next 2 years, until legal claims are settled
37
Historically legal costs are 2% of revenue

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Total Net debt = 5775.6838-1521.4(total cash after second round of


allotment)=4254.28

EBIT-next Year = 1868.52

Net Capex required next year =220.42

Before-tax cash flow=1868.52-220.42=1648.10

Interest-coverage-ratio=1648.10/(4254.28*Interest-rate)

The above interest rate can be solved using excel against the default spreads
corresponding to respective S&P credit ratings.

Implied spread over Indian risk free rate based on S&P ratings= ~2.5%

Credit rating = A

Indian risk free rate=3% (400bp is country risk premium leading to 7% 10 Yr yield)

Because Satyam gets 95% of its revenue39 from outside India (primarily developed
economies), company’s risk drivers are least related to India-specific risk and hence,
shouldn’t be punished by slapping a 400bp country risk premium for just operating
out of India.

Cost of debt= 3+2.5=5.5%

E. Total Assets as of Mar-200940


38
See Section on Total debt
39
Source 2007-08 financials
40
Source Q3-2009 financials

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Current Assets:

Account Receivables: 1324

Account Receivables (past due 0-180): 587

Cash: 373

Fixed Assets: 1085

Investments at cost: 627

Total Assets: 3996

Current Liabilities: 815

Invested Capital = 3996-373-815 = 2808

F. Sensex Capital turnover41


G. Sensitivity Analysis
Code Name Revenue Capital Cash Sales/Cap
500410 ACC Ltd. 80000.00 84925 9914 1.06651
500103 Bharat Heavy Electricals Ltd. 271440.00 307468 86209 1.226798
532454 Bharti Airtel Ltd. 270250.00 472643 54863 0.646872

41
Latest financials from Reuters

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532868 DLF Ltd. 100440.00 396191 21421 0.268004


500300 Grasim Industries Ltd. 188571.00 243871 5595 0.791397
500182 Hero Honda Motors Ltd. 125378.00 50735 1310 2.536732
500440 Hindalco Industries Ltd. 656252.00 761005 17168 0.882252
500696 Hindustan Unilever Ltd. 210592.00 86539 18373 3.089399
500209 Infosys Technologies Ltd. 216930.00 221630 112460 1.987084
500875 ITC Ltd. 168444.00 204562 13183 0.880159
532532 Jaiprakash Associates Ltd. 44067.00 207270 24621 0.241266
500510 Larsen & Toubro Limited 410718.00 568129 14397 0.741727
500520 Mahindra & Mahindra Ltd. 269198.00 319079 29675 0.930181
532500 Maruti Suzuki India Ltd. 217811.00 140616 19868 1.803848
532555 NTPC Ltd. 465082.00 935533 153605 0.594789
500312 ONGC Ltd. 1052567.00 1307376 186525 0.939078
532712 Reliance Communications Limited 222346.00 775891 24800 0.296031
500325 Reliance Industries Ltd. 1371470.00 1757672 44741 0.800657
500390 Reliance Infrastructure Ltd. 140554.00 347129 5552 0.411486
500900 Sterlite Industries (India) Ltd. 214484.00 393942 24535 0.580617
524715 Sun Pharmaceutical Industries Ltd. 44808.00 82634 16690 0.679486
532540 Tata Consultancy Services Limited 278129.00 226858 13440 1.303212
500570 Tata Motors Ltd. 717378.00 731595 41213 1.039103
500400 Tata Power Company Ltd. 181515.00 318464 11779 0.591861
500470 Tata Steel Ltd. 1475950.00 1216060 61483 1.278347
507685 Wipro Ltd. 259616.00 278866 54993 1.159657
Average 1.029483
H. Sensitivity Analysis

Because 7542% of Satyam’s value is attributed to Terminal value, any valuation will
be incomplete without conducting sensitivity analysis43 on terminal parameters.

Terminal Growth rate (%)

0 1 2 3 4

0 165.38 165.38 165.38 165.38 165.38

2 165.38 173.24 183.05 196.19 215.05

4 165.38 176.13 190.08 209.42 238.17


Termina
l Excess 6 165.38 178.18 195.07 218.82 254.60
Return
(%)

42
See section on DCF model
43
Sophisticated models will do sensitivity analysis in multidimensional space, changing more
than 1 parameter simultaneously. For such models, contact author@ pm1205@stern.nyu.edu

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Fundamental valuation is good as long as market gets it. Page 16

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