Finance Managemnt-2

Assignment -2

Exide Industries Ltd. And Amara Raja Batteries Ltd.

Ameya Yeole 02
Degusa Patel 06

Prachi Gujar 14

Yogesh Kulkarni 39
 EXIDE BATTERIES LTD.
BV Market
Book value weight value (Rs. MV weight
Sources (Rs. Cr.) % Cr.) %
Equity 85 1.91 11449.5 99.96
R&S 4349.07 97.97 -
Long term
loans 4.99 0.11 4.99 0.04
4439.06 11454.49
WACC (Exide)
Pre-tax Post tax
Sources MV weight % cost % cost % WACC %
Equity 99.96% - 14.5% 14.49%
Long term
loans 0.04% 6.01% 3.9% 0.002%
14.50%

Exide Industries
20.00%

15.00%

10.00% Exide Industries

f(x) = 0.88x - 0
5.00% Linear (Exide Industries)
R = 0.29
0.00%
-10.00% -5.00% 0.00% 5.00% 10.00% 15.00%
-5.00%

-10.00%

-15.00%
 AMARA RAJA BATTERIES LTD.
Market
Book value (Rs. BV value MV weight
Sources Cr.) weight % (Rs. Cr.) %
0.8127454
Equity 17.081 63 15214.6 100
99.187254
R&S 2084.561 54 - -
Long term
loans - - - -
2101.642 15214.6

WACC(Amara Raja)
Pre-tax Post tax cost
Sources MV weight % cost % % WACC %
Equity 100% - 16% 16.00%
Long term
loans - - - -
16.00%
 Amara Raja
30.00%

25.00%

20.00%
Amara Raja
15.00%
f(x) = 1.04x + 0.04 Linear (Amara Raja)
R = 0.29
10.00%

5.00%

0.00%
-10.00% -5.00% 0.00% 5.00% 10.00% 15.00%
-5.00%

-10.00%

Calculations
Exide Industries Ltd.
Equity book value of Exide Industries is Rs.1 per share
Market values are taken as average of March 2016 rates per share.
Beta value on BSE : 1.33
Beta value on NSE : 1.31
Beta value on www.Infinancials.com : 0.97
Beta value on www.topstocksearch.com : 1.05
Average of all published Beta values: 1.165
Calculated value of Beta: 0.88
Market Value = (Book value/ Face value)* Market value
Market Value = (85/1)*134.7 = 11449.5
Cost of equity =Re= Rf+ beta (Rm-Rf)

Re= 6.8+ 0.88(8.8) = 14.544

Cost of debt ( Kd)=(interest amount/long term loan) * 100

Kd = (0.3/4.99)*100 = 6.01

Therefore pre-tax cost %= 6.01

Post tax cost percentage =6.01*(1-0.35)=3.9%

Weighted average cost of capital = 14.50%

Amara Raja Batteries Ltd.

Equity book value of Amara Raja is Rs.1 per share
Market values are taken as average of March 2016 rates per share.
 Amara Raja has interest free loans of Rs.742 Cr, the repayment of which will
commence in 2025. And thus there will be no cost of debt to the company.
Market Value = (Book value/ Face value)* Market value

Market Value = (17.081/1)*890.73 = 15214.6

Cost of equity =Re= Rf+ beta (Rm-Rf)

Re= 6.8+ 1.04(8.8) = 16

Beta value on BSE : 1.11

Beta value on NSE : 1.11
Beta value on www.topstocksearch.com : 0.639
Beta value on www.Infinancials.com : 0.29
Average of all published Beta values: 0.79
Calculated value of Beta: 1.04

Weighted average cost of capital = 16%