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NEN Presentation on Valuation
- 2. Valuation – from industry / deal perspective Theoretical definitions How industry views it… Perceived value for an asset or business which is agreeable to both seller and Perceived value for an asset or business which is agreeable to both seller and buyer at negotiated terms in the framework of valuation arrived and as on that particular market scenario 2
- 3. Factors driving valuation • Business drivers – critical factors exclusive to the business and the specific company • U d t d th k Understand the key revenue, cost and profit drivers – P l t d fit d i Pulse of the business f th b i • Management profile • Growth prospects and its sustainability • Corporate governance in the company Corporate governance in the company • Macro economic dynamics plays a crucial role – sentiment and timing 3
- 4. Science vis‐à‐vis judgement In theory, composition of valuation…. Judgement Scientific Methods M h d Actually composition practiced in the industry !! A t ll iti ti d i th i d t !! Scientific Methods Methods + judgement + Experience j g p = VALUATION Judgement FRAMEWORK 4
- 5. Discounted cashflow technique – widely used valuation technique DISCOUNTED CASH FLOW Discounted cash flow calculates the present value of future “free cash‐flows” expected to be generated by the company. • What is PRESENT VALUE ? – Value of money earned tomorrow, today! • COST OF CAPITAL – A blended cost of financing entire company. Considers costs of debt and equity in their respective proportions • TERMINAL VALUE – P Perpetual value b t l l beyond projected period. O of th major components of d j t d i d One f the j t f total valuation 5
- 6. Discounted Cash Flow ‐ Formula FREE CASH FLOW TO FIRM Earnings Before Interest Tax & Depreciation (1‐tax) Depreciation (Rate) Capital Expenditure Capital Expenditure change in working capital 6
- 7. FCFF is discounted to present value `IN MILLION Year 1 Year 2 Year 3 Year 4 Terminal value l FCFF 10 25 34 45 100 PRESENT VALUE (YEAR 0) FIRM VALUE `148 MILLION (Without Terminal value `86 million) Discounted at 10% cost of capital Discounted at 10% cost of capital 7
- 8. About Ourea Capital Advisors & Shrirang Tambe • Ourea Capita Advisors provide experienced and knowledge driven advisory to its clients in the domain of business plan, fund raising, Mergers & Acquisitions and CFO function. •FFocus on S ll and M di Small d Medium E t Enterprises – th hi h value customized solutions t each company. i thus high l t i d l ti to h • Since inception 3.5 years ago, Ourea Capital Advisors has assisted over 35 companies at various states of growth across domain functions. • Today the company has built a strong reputation among leading fund managers as well as corporate clients for its quality, timely delivery and integrity. Shrirang Tambe +91 98216 19019 shrirang tambe@oureacapital com Tambe, 19019, shrirang.tambe@oureacapital.com Shrirang has considerable experience in providing corporate advisory services to clients in the areas of business plan fund raising and M&A advisory He has worked on private equity deals from plan, advisory. inception to closure handling all aspects of the transaction. He also has experience in LBO transactions which he carried out in South East Asia. As private equity manager he has funded US$ 30 million in an auto ancillary company and US$ 15 million in other manufacturing companies. y p y $ g p His has worked in the waste management, manufacturing, construction, engineering and logistics p space. He has previously worked with Clearwater Capital Partners, ANZ Investment Bank and PriceWaterhouse Coopers. He is a Chartered Accountant by qualification. 8
- 9. THANK YOU 9