Professional Documents
Culture Documents
Group 8
Abhishek Banerjee – 08FN-0
Amit Kumar – 08FN-008
Anirudh Singh – 08FN-013
Aravind Menon M – 08FN-01
Biswajit Mohanty – 08FN-02
Praveen R – 08FN-060
Objective
To calculate the value of equity of Asian
Paints at the beginning of the Year 2004.
By using actual data for year 2004-2009.
By projecting data for year 2004-2009.
Indian Paint Industry
Overview
Current Market Size of Rs 110 bn.
Demand for paint is relatively price elastic .
Paint industry is working capital intensive.
Revenue Drivers
Decorative Paints (70%) – Housing & Building
sector
Industrial Paints (30%) – Automobiles, white
goods & industrial expansion.
Cost Drivers
Part 2
Objective: to estimate firm value based on
projection
Activities
Forecasting of NOPAT, Capex and Working Capital
based on historical CAGR, Depreciation forecast on
the basis of constant life of asset.
Calculation of forecasted firm cash flow, cost of debt
and equity
Assumptions
Sustainable GDP growth rate of 6 % has
been assumed and since Asian Paints is a
mature company a long term growth rate
of 5% has been assumed.
A constant life of assets has been assumed
for forecasting the depreciation value.
Balance sheet and P&L items are assumed
to grow at their respective CAGRs.
For forecasting beta, we have assumed
constant unlevered beta, implying that
business risk remains unchanged from
2009 onwards.
Calculation of beta: Regression
Results
Results
Share Price based on Actual FCFF Share Price based on Forecasted FCFF
G ro w th ra te , g a t te rm in a l ye a r = 5 %
The actual beta slightly lags below the forecasted beta for the period
considered and hence it contributes to a marginally higher WACC
as per the forecast.
Actual Vs Forecasted WACC
Higher forecasted WACC attributed to variation
in forecasted Beta
Conclusions