Submitted By: Group 6

 Yes.
 IRR of the project is 44% till FY 5.
 The pre-money valuation of the firm is
Rs.2035.75 (Relative valuation).
 The post money valuation of the firm is
Rs.8118.66(Relative valuation).
 Since the post money valuation is greater
than the pre money valuation, it makes sense
to invest in the company.
 Strengths Weaknesses/Risks
• More than 50% of revenues come from exports. • Foreign currency risk due to exports.

• Dependence on industry cycles is irrelevant, • Negative FCFs in the first two years could deter
ensuring regular profits. the investors.

• Highly profitable with significantly high EBITDA • Cash Conversion Cycle is high.
margins compared to its peers. • Inventory levels are rising by 2.84 times which
• Monopoly as the single source for many OEMs. indicate
• -High carrying costs
• -Sales targets not being met

• Excellent production & technological

capabilities, distribution reach and customer
loyalty.
• Compliance with the six sigma standard,
ensuring high quality products.

• Strong and an experienced team to drive R&D

 Relative Valuation(Using EV/EBITDA and PE)

 Close Comparables
▪ Geographical location: India
▪ Exports (35%-50%)

 Other Close Comparables

▪ Net Fixed Assets
▪ Infrastructure
 DCF
 Assumptions
▪ FY 1 has been assumed as the current year.
▪ Average of Equity Beta of Close and Other Comparables
▪ Perpetual Growth Rate:6.5%
▪ WACC:8.08%
▪ Cost of Equity:8.50%
▪ Return on Market:9.11%
▪ Cost of Debt:7%
▪ Tax Rate:34%
 No
 We would like our investors to fund the business
all at once.
▪ Milestone-based agreements would foster rigidity.
▪ Erosion of trust between the investors and the
management.
▪ Focus on raising money rather than focussing on
growing the company.
 The delivery of a satisfactory business plan and
management accounts.

 If the increase in cash flows are more than 100%,the

lock-in period will be 5 years.

 In case the cash flows go negative for a period of

three consecutive years, anti-dilution will apply and
promoters will compensate for the same.
 IPO: Within 36 months from date of investment, the Company will
be required to provide the Investors an exit in the form of a
qualified initial public offering of the Company.

 Strategic Sale: Within a period of 6 months from the date of IPO,

the Promoter shall be obliged to facilitate a sale of the Investor
Shares to a strategic buyer at a price acceptable to the Investors.

 Offer For Sale: Within a period of 9 months from the date of

Strategic Sale, the Investors shall be entitled to call upon the
Company to conduct an offer for sale of the Investors Shares held
by the Investors and the Company and the Promoter shall actively
support the sale and take any actions as the Investor may
request.
 An IRR of 44% is generated.
 The FCFF for first two years in negative which will deter the
investors. So to avoid that we can:
 They can issue private stocks options to the investors.
 They can ensure full transparency in further rounds of
investments.

 The Investment Amount shall be utilized by the Company only for

the following purposes:
 Working capital of 40%
 Capital expenditure of 60%

 Moreover, the Investment Amount shall be utilized as per a business

plan which will need to be approved by the Investors
 The Investors shall have a right to approve/reject candidates that are
being considered for key management positions in the Company