c



 

We have projected FCFE and FCFF for Punj Lloyd using the financial statements. We have estimated the
growth rate for the firm using the formula;
`

    `    `
Where,
`  
 
    
 !
 
"#!  
For calculating the growth rate we have used the arithmetic averages of the various values for the last
four years.
For projecting both the FCFF and FCFE, we have made the following assumptions:
i rowth Rate has bee linked to the Reinvestment Rate till 2018, after that the growth rate has
been assumed to be 4% considering the growth of the Indian economy to be 4% afterwards
i For calculating the Reinvestment ratio the average values of all the parameters over the last
four years have been used
i -he net sales have been forecasted to grow at the calculated growth rate to take care of the
accounting manipulations
i CAPEX, change in NWC, Depreciation, New dwbt issued and debt repaid have been forecasted
linking them to the net revenue, the ratios which they had in 2010 have been maintained for
future years
i CAPEX has been assumed to be equal to depreciation from the year 2012
i -he terminal value has been assumed to be the value of the firm in 2018








   
 

xRs in Crs)
V $   % 
& 

'
()*
+"

'
*(*
+"

,-**`"

!4'`5
&67 

,-*+`"

,-*.
`"

,-*/
`"

,-*0
`"

,-*1`"

,-*2
`"

,-*3
`"

,-*)`
"

,-+(`
"

6,85
2
0

7,11
7
0

8,576

)820)

**8*(/

*+81.0

*/8.23

*18.1(

*381*1

+*8*3.

++8(.(

++8)**

18)0
*


280.
2


38021

)820)

**8*(/

*+81.0

*/8.23

*18.1(

*381*1

+*8*3.

++8(.(

++8)**

13.8%

13.8%

13.8%

13.8%

13.8%

13.8%

13.8%

13.8%

4.0%

4.0%

Raw Materials

2377

3259

3708

4220

4801

5463

6217

7074

8049

8371

8706

Power & Fuel

Cost
As a % of
Operating
expenses
`
6  

138.
42
0.02
3

324
9
125.
69
0.01
9

240.433
4574
0.032

273.585
4725
0.032

311.30
8632
0.032

354.23
3226
0.032

403.07
645
0.032

458.65
4391
0.032

521.89
566
0.032

593.85
691
0.032

617.61
119
0.032

642.31
564
0.032

Salaries,Wages &
Bonus
D




 


 

Other
Manufacturing
Expenses
D




 


 

Selling
and
Administration
Expenses
D




 


 

Miscellaneous
Expenses
D




 


 

Less:
Preoperative
Expenses
Capitalised
Operating
expensebefore
depreciation
D





570

698

466

530

603

686

781

888

1011

1150

1196

1244

9.37
%

10.6
4%

6.10%

6.10%

6.10%

6.10%

6.10%

6.10%

6.10%

6.10%

6.10%

6.10%

1798

146
1

1458

1659

1888

2148

2444

2781

3165

3601

3745

3895

29.5
4%

22.2
7%

19.10%

19.10%

19.10%

19.10%

19.10
%

19.10%

19.10
%

19.10
%

19.10
%

19.10
%

1074
.58

919.
15

878

999

1137

1293

1472

1674

1905

2168

2255

2345

17.6
6%

14.0
1%

11.50%

11.50%

11.50%

11.50%

11.50
%

11.50%

11.50
%

11.50
%

11.50
%

11.50
%

128.
15
2.11
%

109.
81
1.67
%

99

113

128

146

166

189

215

245

255

265

1.30%

1.30%

1.30%

1.30%

1.30%

1.30%

1.30%

1.30%

1.30%

1.30%

6086

656
3

7633

8685

9883

11245

12796

14560

16568

18853

19607

20391

0.89

0.92

0.89

0.89

0.89

0.89

0.89

0.89

0.89

0.89

0.89

0.89

119

133

183

208

237

270

307

349

398

452

471

489

 


 



6,20
6
745

6,69
6
841

7,816

8,894

10,120

11,515

13,103

14,910

16,966

19,305

20,077

20,880

760

865

984

1,120

1,274

1,450

1,650

1,878

1,953

2,031

Interest

251

429

515

515

515

515

515

515

515

515

515

515

PB-

495

413

246

350

470

605

760

936

1,136

1,363

1,438

1,516

Excise Duty
7 6!  
Sales growth
`9V`!7:`5

Depreciation





34%

34%

34%

34%

34%

34%

34%

34%

34%

34%

34%

34%

V


327

272

162

231

310

400

502

617

749

900

949

1001

 c 
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Operating Income=

841

760

865

984

1,120

1,274

1,450

1,650

1,878

1,953

2,031

Operating
Incomex1-tax rate)=

555.3042

501.7
276

570.9
08

649.627
3274

739.2
008

841.1
25

957.1
03

1089.
073

1239.2
3862

1288.
808

1340.
36

CAPEX=

225.93

Change in NWC=

-117.4

Depreciation=

132.68

FCFF=

579.4542

408.2
836
42.11
381
269.8
92
558.6
953

307.1
059
42.11
381
307.1
059
799.0
112

349.4
51
42.11
381
349.4
51
914.9
892

397.6
348
42.11
381
397.6
348
1046.
959

452.46
2411
42.113
8073
452.46
2411
1197.1
2481

470.5
609
42.11
381
470.5
609
1246.
694

489.3
833
42.11
381
489.3
833
1298.
247

(;*0).1+/+3

V  =6 $
,,,
V  =6 $
$ $  6
-

02);/0/+

314.8
234
42.11
381
208.4
461
422.4
169
(;**+
(/1
./*;0
3+0

358.520
9266
42.1138
073
237.187
5293
486.180
1227



276.4
519
42.11
381
183.1
874
366.3
493
<

.+);/
.2+

.0.;0.+
(.32

.10;.
+32

/1);3
+2)

/3.;3
*/3

/)2;3
*2+

0**;31
13*2





7 6
$

+*+.1;22*12

=6

$

*2.(/;**(.*

& < 6$ ,6



 <
21236.77167

13.78843669

13

12

11

10

(;**+(/1*/

21236.77167

0.12

19402.12583

0.13

17534.72535

0.14

16021.64799

0.15

14767.87658

0.16

13709.92258

0.1

24895.04751

0.09

29214.59508

0.08

35622.83472

0.07

46198.4751

0.06

67175.95663

0.05

129723.6998

21236
.77
19402
.13
17534
.73
16021
.65
14767
.88
13709
.92
24895
.05
29214
.6
35622
.83
46198
.48
67175
.96
12972
3.7

21236
.77
19402
.13
17534
.73
16021
.65
14767
.88
13709
.92
24895
.05
29214
.6
35622
.83
46198
.48
67175
.96
12972
3.7

21236.7
7167
19402.1
2583
17534.7
2535
16021.6
4799
14767.8
7658
13709.9
2258
24895.0
4751
29214.5
9508
35622.8
3472
46198.4
751
67175.9
5663
129723.
6998

21236
.77
19402
.13
17534
.73
16021
.65
14767
.88
13709
.92
24895
.05
29214
.6
35622
.83
46198
.48
67175
.96
12972
3.7

21236
.77
19402
.13
17534
.73
16021
.65
14767
.88
13709
.92
24895
.05
29214
.6
35622
.83
46198
.48
67175
.96
12972
3.7

21236
.77
19402
.13
17534
.73
16021
.65
14767
.88
13709
.92
24895
.05
29214
.6
35622
.83
46198
.48
67175
.96
12972
3.7

21236
.77
19402
.13
17534
.73
16021
.65
14767
.88
13709
.92
24895
.05
29214
.6
35622
.83
46198
.48
67175
.96
12972
3.7

21236.
7717
19402.
1258
17534.
7254
16021.
648
14767.
8766
13709.
9226
24895.
0475
29214.
5951
35622.
8347
46198.
4751
67175.
9566
129723
.7

21236
.77
19402
.13
17534
.73
16021
.65
14767
.88
13709
.92
24895
.05
29214
.6
35622
.83
46198
.48
67175
.96
12972
3.7

21236
.77
19402
.13
17534
.73
16021
.65
14767
.88
13709
.92
24895
.05
29214
.6
35622
.83
46198
.48
67175
.96
12972
3.7


 c 
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Net Income=

272

162

231

310

400

502

617

749

900

949

1001

CAPEX=

225.93

Change in
NWC=
Depreciation=

-117.40

276.45
19
42.113
81
183

314.823
4
42.1138
1
208

358.5209
266
42.11380
73
237

408.28
36
42.113
81
270

307.10
59
42.113
81
307

349.45
1
42.113
81
349

397.63
48
42.113
81
398

452.462
411
42.1138
073
452

470.56
09
42.113
81
471

489.38
33
42.113
81
489

New Debt
Issued=
Debt Repaid=

565.15

515

515

515

515

515

515

515

515

515

429

786.09
85
515

515

515

515

515

515

515

515

515

515

,,`

/..;((

+)3;+1

3+;3(

*/1;01

+*);(3

/0);.)

020;.2

2(2;./

302;0*

)(2;(3

)03;1.



(;*0).1+/+3

Present Value
of FCFE=
V =6
$$
7 6-

432.9954

<

257.26
16

(;**+(/
1
61.6014
3

94.05173
222

121.26
13

219.32
56

236.93
73

251.24
34

262.714
636





7 66 $
`
  $
  

`
V $&
 >

)0.1;2/03./

133

20));.0./*+

..+()02/0

+32;*1301//

& < 6 $&


 `


+32;*1301//
(;*0).1+/+3
(;*0
(;*/
(;*.
(;*+
(;**
(;*
(;*1
(;*2

*.;23
3//
+32;*
131
.(3;0
+)/
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)30
.13;*
+0/
/(3;/
)(/
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02.
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+11;/
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*+

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)

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+

+12;*
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+31;)
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203
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3*2
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212
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*/.;*+)
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123
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100
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210
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302
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3/;*.
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30;/2
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.)1




  

  

  



























 


 

 



 












 


 

 

 



 

 c








 

 



& < 6

  $`"

 


+?
*.?
*/?
*0?
*1?

(?
3.70
3.07
2.62
2.29
2.03

*;2/

  $`


  

-he peer group of Punj Lloyd includes:

*+?
*.?
*/?
*0?
*1?

3(?
4.38
3.50
2.91
2.49
2.17

)(?
5.53
4.15
3.32
2.76
2.37

& 6

.;(?
.;0?
/;(?
2.48
2.57
2.67
2.21
2.28
2.35
1.99
2.04
2.10
1.81
1.85
1.90
1.66
1.69
1.73

((?
7.82
5.22
3.92
3.14
2.62

/;0?
2.78
2.44
2.17
1.95
1.77

0;(?
2.91
2.53
2.24
2.00
1.81

(?
14.68
7.37
4.93
3.71
2.98

i ammon India
i ind Constructions xCC)
i IVRCL
i NCC
-he values for each firm were calculated as below:


+
  
  
   
B  ; 
 ;
' (
=
)

( 

AC 6*

 

  

  

 !"
%
! $
!&$ #

#$ 
%
# $
%
""$ 
%
#  #

&!$& $$

&&" &

"& &

" &"

%
$ &
%
 & #
%
&$ $

 "#

&$& &

# 

!"!# $#

 #

## &

&6

!$ "&
&" $
! #
%
 ! "
%
" "

 

 



 

A+) +

%
# !
%
 ! #

$ "

$ &

&" 

&$

!! "

!$ ##

#" 
%


"$ "
%
  $!

! $"
%
# &

 "
$! 

"
%
&
%
$

Calculation of ratios

  
  

  
 

A + &
ammon India
ind. Construct.
IVRCL
NCC
Average

D



0.016
0.007
0.011
0.014
0.012

V#`
ammon India
ind. Construct.
IVRCL
NCC
Average

D



9.5
27.7
10.5
12
14.925

=6
&

0(;2(

=6
&

/2;+2

  
V#@=
ammon India
ind. Construct.
IVRCL
NCC
Average

D



0.630
1.200
0.830
0.790
0.863

=6
&

)+;//


   
     
  
`=#`@!7<
ammon India
ind. Construct.
IVRCL
NCC
Average

`=#`@!7
ammon India
ind. Construct.
IVRCL
NCC
Average

+(*(
4.99
8.77
5.22
5.32
6.08




`=
=6
&

+(*(
5.85
11.53
5.75
5.83
7.24

0)*);..
23;++

`=
=6
&

1()+;*2
3.;/+

   
  

`=#&<%`&
ammon India
ind. Construct.
IVRCL
NCC
Average

+(*(
0.53
1.15
0.57
0.67
0.73


`=
=6
&

0*32;)1
01;*)

    


Share price as on 29th July 2011: Rs. 70

  

DCF Valuation Method
i DDM Valuation
i FCFE Valuation
Comparative Multiples Method
i P/S
i P/BV
i P/E
i EV/ EBI-DA
i EV/ EBIi EV/S

      




 









  



   








 



c


< 6 $6    ,6
 
-he market price at close to Rs. 68 is way below our valuation; this can be attributed to a very high risk
perception of the company by the investors. But still the difference is very high which means the market
does not perceive the company to grow at the rate we have calculated using their reinvestment ratio.
Also since all the competitors of Punj are valued at almost the same relative value, we can say that the
market is a bit inefficient.
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All the multiples suggest prices very close to the market value, which is in-line with the implicit
assumption of the methods that the markets are efficient.
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-he DD method gives us a very low price because of the very small amount of dividends paid by the
company, which is natural because the company is growing very fast and is operating in a very volatile
environment, which obligates the company to maintain a low dividend level.


 
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