Grasim Industries Valuation Excel Model and Intrinsic Value of Shares

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Grasim Industries Valuation : About the Company

Grasim Industries has 7+ decades of presence in the Indian market and is promoted by one of the largest business conglomerates in India. The business is also such that market dominance is achieved through scale and distribution. The company operates is highly unrelated verticals like Textiles, Cement, NBFC, Financial Services and Chemicals. Each set of business has different competitors and market conditions. This provides cash flow diversification but also subjects the company to a higher number of economic and market impacts. The other concerns which the company faces are of capital allocation and strategy across various business verticals.

In the chemicals business, Grasim has caustic soda capacity of 1147+ KTPA. The company is diversifying its chemical business in chlorine and alkali chemicals. They are also one of the largest epoxy resin manufacturers in the world. Under the Cement business, UltraTech is the 3rd largest cement company in the World, excluding China with a consolidated capacity of 105+ million tonnes per annum. It is the largest cement manufacturer in India. From here, we go ahead with Grasim Industries Valuation and Intrinsic Value of its shares.


Read more here: Grasim Industries 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:

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 Grasim Industries Valuation.

Financial Year Revenue Growth Rate
Year 1 7%
Year 2 -2%
Year 3 12%
Year 4 22%
Year 5 15%
Revenue Growth Rates: Grasim Industries 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 : Grasim Industries Valuation
Financial Statements Forecast : Grasim Industries 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.

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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 15784 -4321 -15987 16730 50978
Free Cash Flow to Equity -38849 -121237 83398 300578 319525
FCFF and FCFE values: Grasim Industries 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 50978.13
Growth Rate 5.00%
Cost of Capital 10.83%
Terminal Value 918812.92
Terminal Value: Grasim Industries 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 Grasim Industries Valuation.

WACC Calculation for Grasim Industries Valuation.
WACC Calculation for Grasim Industries 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 Grasim Industries Valuation. (Units are INR Millions)

PV of FCFF and FCFE  for Grasim Industries Valuation.
PV of FCFF and FCFE for Grasim Industries 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.

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Grasim Industries Valuation Units
PV in INR Million 681998
No of Shares Outstanding (In Million) 657
Intrinsic Value 1038.05
Current Market Price of Share 1412
Current Discount/Premium 36%
Intrinsic Value of the Shares: Grasim Industries Valuation

Grasim Industries Valuation and Intrinsic Share Price = INR 1038.05

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Download the Excel Model from Here!

References: Investopedia
You can read more about the company on its website!
Investor Presentation.
For fundamental analysis of other listed companies click HERE!

(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)

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