Indraprastha Gas Valuation Excel Model and Intrinsic Value of Shares

Reading Time: 5 minutes

Source link | LinkedIn Profile | Twitter Profile

Indraprastha Gas Valuation : About the Company

Incorporated in 1998, IGL took over Delhi City Gas Distribution Project in 1999 from GAIL (India) Limited (Formerly Gas Authority of India Limited). With the backing of strong promoters – GAIL (India) Ltd. and Bharat Petroleum Corporation Ltd. (BPCL) – IGL plans to provide natural gas in the entire capital region. The company operates in the Utility industry where market dominance comes through scale, distribution network, licensing and capacity. IGL was started to lay the network for the distribution of natural gas in Delhi to consumers in the domestic, transport, and commercial sectors. Today IGL has its operations in NCT of Delhi, Noida, Greater Noida, Ghaziabad, Rewari, Karnal and Muzaffarnagar with 555+ CNG stations, 13.75+ lacs residential consumers and 5600+ industrial / commercial customers. From here, we go ahead with Indraprastha Gas Valuation and Intrinsic Value of its shares.

Also Read on FinMedium:  How Adani sold Adani Green 20% stake at Rs 456 per share – Beat The Street

Read more here: Indraprastha Gas Shares Fundamental Analysis 

Methodology Used:

Discounted cash flow (DCF) is a valuation method used to estimate the value of an investment based on its expected future cash flows. DCF analysis attempts to figure out the value of an investment today, based on projections of how much money it will generate in the future. The following step by step procedure is followed.

  1. Determining the Revenue Growth Rates
  2. Forecasting the Financial Statements
  3. Deriving the FCFF and FCFE
  4. Calculating the Terminal Value
  5. Calculating the Discount Rate
  6. Discounting the Cashflows
  7. Arriving at the Intrinsic Value of the Shares

You can also get the formula based DCF Excel Model from below (Use code “BDV25” to get 25% off)

Step 1: Determining the Revenue Growth Rates

We arrive at the below table by using the past and expected future performance of both the company and the economy. This along with adjustments to changes in the management expectations, extraordinary events and other macro factors give the revenue growth rates for Indraprastha Gas Valuation.

Financial Year Revenue Growth Rate
Year 1 12%
Year 2 -20%
Year 3 35%
Year 4 18%
Year 5 15%
Revenue Growth Rates: Indraprastha Gas Valuation

Step 2: Forecasting the Financial Statements

The financial statements are forecasted for a period of 5 years using the annual report data of the company. The assumptions used for forecasting are tabulated below. The Excel model is completely editable and can be adjusted for specific changes which may happen over a period of time.

Financial Statements Forecast :Indraprastha Gas Valuation
Financial Statements Forecast :Indraprastha Gas Valuation

Step 3: Deriving the FCFF and FCFE

Free cash flow to the firm (FCFF) represents the amount of cash flow from operations available for distribution after accounting for depreciation expenses, taxes, working capital, and investments. FCFF is a measurement of a company’s profitability after all expenses and reinvestments. It is given as follows.

Also Read on FinMedium:  Detailed Research note on Indian Energy Exchange

Free cash flow to equity (FCFE) is a measure of how much cash is available to the equity shareholders of a company after all expenses, reinvestment, and debt are paid. FCFE is a measure of equity capital usage.

F/S Items (INR Millions) Mar-20 Mar-21 Mar-22 Mar-23 Mar-24
Free Cash Flow to Firm 10330 7266 10855 13013 15858
Free Cash Flow to Equity 12613 7182 11128 13267 16139
FCFF and FCFE values: Indraprastha Gas Valuation

Step 4: Calculating the Terminal Value

Terminal value (TV) is the value of a business or project beyond the forecast period when future cash flows can be estimated. It assumes that a business will grow at a set growth rate forever after the forecast period. Terminal value often comprises a large percentage of the total assessed value.

Terminal Value Calculation Units INR Millions
Free Cash Flow to Firm 15858.11
Growth Rate 5.00%
Cost of Capital 11.99%
Terminal Value 238127.47
Terminal Value: Indraprastha Gas Valuation

Step 5: Calculating the Discount Rate

DCF analysis helps assess the viability of a project or investment by calculating the present value of expected future cash flows using a discount rate. Here we use the Weighted average cost of capital (WACC) to discount the cash flow. The below table from the excel model shows the calculation of WACC for Indraprastha Gas Valuation.

WACC Calculation for Indraprastha Gas Valuation.
WACC Calculation for Indraprastha Gas Valuation.

Step 6: Discounting the Cashflows

The WACC and the Cost of Equity for the company calculated in the above step are then used to discount the FCFF, FCFE and Terminal Value calculated in Step 3 and 4. In our case, we’ll only consider the FCFF based Intrinsic price of the shares as it represents the cash flow to all the suppliers of capital and not only to the equity shareholders. Thus we arrive at Present value of future FCFF for Indraprastha Gas Valuation. (Units are INR Millions)

WACC Calculation for Indraprastha Gas Valuation.
PV of FCFF and FCFE for Indraprastha Gas Valuation.

Step 7: Arriving at the Intrinsic Value of the Shares

Dividing the PV of the FCFF and Terminal Value (the Value of the entire firm) by the number of outstanding shares we get the per share intrinsic value. We can compare this price with the current market price of the stock to get the Discount or Premium to its intrinsic price.

Also Read on FinMedium:  How Operating Leverage Benefitted Intellect Design
Indraprastha Gas Valuation Units
PV in INR Million 175184
No of Shares Outstanding (In Million) 700
Intrinsic Value 250.26
Current Market Price of Share 444.00
Current Discount/Premium 77%
Intrinsic Value of the Shares: Indraprastha Gas Valuation

Indraprastha Gas Valuation and Intrinsic Share Price = INR 250.26

Subscribe to our new Youtube Channel!
Subscribe via Email for our daily analysis on 200+ stocks!
Join our Telegram Channel.

Download the Excel Model from Here!

References: Investopedia
Our 150+ Stock Valuations
Our Stock ratings List
You can read more about the company on its website!
Investor Presentation.

(Note: All the research done by me is only for educational purposes and should not be seen as Investment recommendations. I am a Research analyst and not a SEBI registered Investment Advisor. My research completely reflects my personal opinions and not of my employers. Kindly do your own due diligence before Investing)

Source link | LinkedIn Profile | Twitter Profile

Every Wednesday and Saturday, we send Info-Graphic and FinMedium Weekly Digest newsletters to our 25000+ Subscribers.

Join Them Now!

Billion Dollar Valuation

Billion Dollar Valuation

Billion Dollar Valuation shares thorough research into the Fundamentals of the businesses listed in India. With their insightful write-ups, they uncover a lot on the table.
Please Share Now :)