Description
overview of cement industry and valuation of Prism cements using net assets method of valuation, market price method and market comparables method.
MERGERS & ACQUISITIONS
VALUATIONPRISM CEMENT
The War Room
The Merchants of Venice
1
• Background
2
• Cement Industry in India
3
• About Prism Cement
4
• Net Asset Value & Market Price Method
5
• Transaction Comparables Method
6
MERGERS&ACQUISTIONS The War Room
• Trading Comparables & PECV Method
RAJASTHAN of Venice The MerchantsROYALS
• Industry Peaked in 2008 in terms of demand-supply metrics and prices
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
End users of cement include housing, infra and industries Strong Correlation with GDP of country
The War Room MERGERS&ACQUISTIONS
RAJASTHAN of Venice The MerchantsROYALS
Top 5 players ruling 40% of market (by production) Rest cement players account for 60% market share Average market share ranging from 0.1%-1.5%
Company Market Share (by production)
ACC Ambuja Cement Ultra Tech Cement Grasim Cement Shree Cement Prism Cement
12% 10% 9% 9% 4% 0.5%
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
• ISO 9001:2000 certified company • Promoted by Rajan Raheja Group • One of the largest single cement kiln plant in M.P. • Manufactures & Markets PPC Cement under brand name “Champion” • Rich deposits of high quality limestone, state-of-art plants, process controls
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
• Represents the value of share with reference to the historical cost of assets owned by the company & attached liabilities on the valuation date. • Historical cost is adopted in respect of the assets that are to continue as a part of the going concern, • Net Assets Method for valuation is appropriate in case of companies operating in capital-intensive industries.
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
Assets
• Net Fixed Assets • Intangible Assets • Investments • Net Current Assets
Liabilities
• Loan Funds • Deferred Tax Liability • Minority Interest
Adjustments
• Contingent Liabilities
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
• Evaluates the value on the basis of prices quoted on the stock exchange • Average of quoted price is considered as indicative of the value perception of the company by investors operating under free market conditions. • Generally Weighted Average Price (volume & turnover) of the market transactions for the past 6 months is considered.
MERGERS&ACQUISTIONS The War Room RAJASTHAN of Venice The MerchantsROYALS
Particulars
Volume
Monthly Turnover Average Price (Rs '000) (Rs)
Jan-08 Feb-08
719,454.74 45,835.00 388,321.05 19,549.88
63.71 50.34
Mar-08
Apr-08 May-08 Jun-08 Monthly Average Price (in Rs.)
332,870.61 13,596.70
230,435.95 227,679.20 148,850.29 9,971.71 9,410.96 5,307.81
40.85
43.27 41.33 35.66 50.63
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
• EV/Sales • EV/EBITDA
– Trailing 3 Quarters Sales and EBITDA
• EV as on 30th June, 2008
– Market Cap – Net Debt & Minority Interest subtracted – Cash & Cash Equivalent Added
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
Company Shree Cement Mangalam Cement Prism Cement Binani Cement J.K.Laxmi Cement J.K. Cement Ambuja Cement Mean Fair Value: EV/Sales
EV/Sales 1.25 0.70 1.05 1.58 1.07 0.92 1.76 1.19
EV/EBITDA 3.04 2.37 2.67 4.83 3.58 3.39 4.42 3.47
= Rs 37.7
EV/ EBITDA = Rs 43.1 MERGERS&ACQUISTIONS The War Room RAJASTHAN of Venice The MerchantsROYALS
Ratios
Madras Cement
0.22 0.004 9.86 0.02 0.01 7.88
Gujarat Ambuja
6.12 0.001 3.05 0.00 0.00 1.85
JK Cement
5.17 0.009 32.99 0.05 0.03 1.00
JK Lakshmi Cements
1.00 0.003 10.56 0.02 0.01 1.98
Binani Cements
7.47 0.003 6.62 0.02 0.01 1.71
Average
P/E P/Sales P/Capacity P/PAT P/EBIDTA MV/BV
4.00 0.004 12.62 0.02 0.01 2.88
Valuation of Prism Cements as per
P/E P/Sales P/Capacity P/PAT P/EBIDTA MV/BV 32.008 35.452 31.667 55.326 46.605 59.434
Mean valuation of Prism Cements Rs 43.41
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
Jun-08
PBT (-)Non Recurring Income Interest Income on Fixed Deposits Other Interest Income Dividend Income on Mutual Fund units 0.1 0.3 130.8 3167.3
Jun-07
2940.6
Jun-06
906.5
3 0.7 18.6
1.2 1.5 0
Forex Exchange Gains
Profit on Sale of Assets Insurance Claims Recovery Sale of Scrap Other Total Non Recurring Income (+)Non-Recurring Expenses
0
0 4.8 17.6 5.6 159.2
2
0 5.1 14.7 0.4 44.5
-39.6
-1.8 8.8 10.3 0.9 -18.7
Calculation of Adjusted PBT
Loss on Sale of assets
Total Non Recurring Expenses Adjusted Profit Before Tax
4.5
4.5 3012.6
-1.7
-1.7 2894.4
0
0 925.2
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
Particulars 2007-08 2006-07 2005-06 Total
Adjusted PBT 3,012.60 2,894.40 925.20
Weight 3 2 1 6
Product 9,037.80 5,788.80 925.20 15,751.80
Maintainable PBT
2,625.30
Tax Rate Maintainable PAT
34.00%
892.60 1,837.71
Price Earnings Multiple Capitalised Value PECV Value Equity Capital PECV Value per Share
6.95 12042.25 12042.25 2,982.50 40.38
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
Particulars
Prism Cement
2.23
Madras Cement
0.22
Shree Cement
6.38
Gujarat Ambuja
6.12
JK Cement
5.17
JK Lakshmi Cements
1
Binani Cements
7.47
P/E 2008 Capacity (in mn tonnes) Sales ( In Million Rs ) Market Cap ( Billion) EBIDTA PAT MARKET PRICE EPS Book Value (Rs mn)
2.51
8764.5 5.34 3518.7 2416.3 17.9 8.01 6151.40
8
21574.80 0.938 8013.10 4217.00 78.85 350.69 119.03
4.80
20658.65 16.22 9356.76 2603.72 465.70 73.01 672.81
18.50
4
3.65
11106.7 2.36 3349.3 1939 38.55 38.73 1193.13
5.3
11090.4 7.13 3666.4 1784.4 35.1 4.7 4176.43
57050.00 14753.401 86.02 22390.00 17690.00 56.50 9.23 46608.70 10.5 4025.653 2487.652 131.95 25.5 10533.40
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
Ratios
Madras Cement
8.15 0.00 9.86 0.02 0.01 7.88
Shree Cement
8.07 0.02 97.02 0.18 0.05 24.11
Gujarat Ambuja
8.20 0.00 3.05 0.00 0.00 1.85
JK Cement
5.17 0.01 32.99 0.05 0.03 1.00
JK Binani Lakshmi Cements Cements
2.17 0.00 10.56 0.02 0.01 1.98 11.05 0.00 6.62 0.02 0.01 1.71
Average
P/E P/Sales P/Capacity P/PAT P/EBIDTA MV/BV
7.14 0.01 26.68 0.05 0.02 6.42
Valuation of Prism Cements as per
P/E
P/Sales P/Capacity P/PAT P/EBIDTA MV/BV
57.1715
62.47216 66.97639 118.1351 68.02565 13.23987
Mean valuation of Prism Cements Rs 74.55
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
Ratios
Madras Cement
8.15 0.004 9.86 0.02 0.01 7.88
Gujarat Ambuja
8.20 0.001 3.05 0.00 0.00 1.85
JK Cement
5.17 0.009 32.99 0.05 0.03 1.00
JK Lakshmi Cements
2.17 0.003 10.56 0.02 0.01 1.98
Binani Cements
11.05 0.003 6.62 0.02 0.01 1.71
Wtd Average
6.95 0.004 12.62 0.02 0.01 2.88
P/E P/Sales P/Capacity P/PAT P/EBIDTA MV/BV
Valuation of Prism Cements as per
P/E P/Sales P/Capacity P/PAT P/EBIDTA MV/BV 55.670 35.452 31.667 55.326 46.605 59.434
Mean valuation of Prism Cements Rs 47.34
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
Summary Sheet
Method EV/Sales Fair Value EV/EBITDA Net Asset Value Method Market Price Method Market Comparable Method PECV Market Price Market Price as on 30th June Market Price 37.66 43.06 19.87 50.63 47.36 40.38 40.82 33.60 Weight 0.20 0.30 0.10 0.15 0.10 0.15
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
Thank You!!!
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
doc_479542281.pptx
overview of cement industry and valuation of Prism cements using net assets method of valuation, market price method and market comparables method.
MERGERS & ACQUISITIONS
VALUATIONPRISM CEMENT
The War Room
The Merchants of Venice
1
• Background
2
• Cement Industry in India
3
• About Prism Cement
4
• Net Asset Value & Market Price Method
5
• Transaction Comparables Method
6
MERGERS&ACQUISTIONS The War Room
• Trading Comparables & PECV Method
RAJASTHAN of Venice The MerchantsROYALS
• Industry Peaked in 2008 in terms of demand-supply metrics and prices
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
End users of cement include housing, infra and industries Strong Correlation with GDP of country
The War Room MERGERS&ACQUISTIONS
RAJASTHAN of Venice The MerchantsROYALS
Top 5 players ruling 40% of market (by production) Rest cement players account for 60% market share Average market share ranging from 0.1%-1.5%
Company Market Share (by production)
ACC Ambuja Cement Ultra Tech Cement Grasim Cement Shree Cement Prism Cement
12% 10% 9% 9% 4% 0.5%
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
• ISO 9001:2000 certified company • Promoted by Rajan Raheja Group • One of the largest single cement kiln plant in M.P. • Manufactures & Markets PPC Cement under brand name “Champion” • Rich deposits of high quality limestone, state-of-art plants, process controls
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
• Represents the value of share with reference to the historical cost of assets owned by the company & attached liabilities on the valuation date. • Historical cost is adopted in respect of the assets that are to continue as a part of the going concern, • Net Assets Method for valuation is appropriate in case of companies operating in capital-intensive industries.
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
Assets
• Net Fixed Assets • Intangible Assets • Investments • Net Current Assets
Liabilities
• Loan Funds • Deferred Tax Liability • Minority Interest
Adjustments
• Contingent Liabilities
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
• Evaluates the value on the basis of prices quoted on the stock exchange • Average of quoted price is considered as indicative of the value perception of the company by investors operating under free market conditions. • Generally Weighted Average Price (volume & turnover) of the market transactions for the past 6 months is considered.
MERGERS&ACQUISTIONS The War Room RAJASTHAN of Venice The MerchantsROYALS
Particulars
Volume
Monthly Turnover Average Price (Rs '000) (Rs)
Jan-08 Feb-08
719,454.74 45,835.00 388,321.05 19,549.88
63.71 50.34
Mar-08
Apr-08 May-08 Jun-08 Monthly Average Price (in Rs.)
332,870.61 13,596.70
230,435.95 227,679.20 148,850.29 9,971.71 9,410.96 5,307.81
40.85
43.27 41.33 35.66 50.63
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
• EV/Sales • EV/EBITDA
– Trailing 3 Quarters Sales and EBITDA
• EV as on 30th June, 2008
– Market Cap – Net Debt & Minority Interest subtracted – Cash & Cash Equivalent Added
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
Company Shree Cement Mangalam Cement Prism Cement Binani Cement J.K.Laxmi Cement J.K. Cement Ambuja Cement Mean Fair Value: EV/Sales
EV/Sales 1.25 0.70 1.05 1.58 1.07 0.92 1.76 1.19
EV/EBITDA 3.04 2.37 2.67 4.83 3.58 3.39 4.42 3.47
= Rs 37.7
EV/ EBITDA = Rs 43.1 MERGERS&ACQUISTIONS The War Room RAJASTHAN of Venice The MerchantsROYALS
Ratios
Madras Cement
0.22 0.004 9.86 0.02 0.01 7.88
Gujarat Ambuja
6.12 0.001 3.05 0.00 0.00 1.85
JK Cement
5.17 0.009 32.99 0.05 0.03 1.00
JK Lakshmi Cements
1.00 0.003 10.56 0.02 0.01 1.98
Binani Cements
7.47 0.003 6.62 0.02 0.01 1.71
Average
P/E P/Sales P/Capacity P/PAT P/EBIDTA MV/BV
4.00 0.004 12.62 0.02 0.01 2.88
Valuation of Prism Cements as per
P/E P/Sales P/Capacity P/PAT P/EBIDTA MV/BV 32.008 35.452 31.667 55.326 46.605 59.434
Mean valuation of Prism Cements Rs 43.41
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
Jun-08
PBT (-)Non Recurring Income Interest Income on Fixed Deposits Other Interest Income Dividend Income on Mutual Fund units 0.1 0.3 130.8 3167.3
Jun-07
2940.6
Jun-06
906.5
3 0.7 18.6
1.2 1.5 0
Forex Exchange Gains
Profit on Sale of Assets Insurance Claims Recovery Sale of Scrap Other Total Non Recurring Income (+)Non-Recurring Expenses
0
0 4.8 17.6 5.6 159.2
2
0 5.1 14.7 0.4 44.5
-39.6
-1.8 8.8 10.3 0.9 -18.7
Calculation of Adjusted PBT
Loss on Sale of assets
Total Non Recurring Expenses Adjusted Profit Before Tax
4.5
4.5 3012.6
-1.7
-1.7 2894.4
0
0 925.2
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
Particulars 2007-08 2006-07 2005-06 Total
Adjusted PBT 3,012.60 2,894.40 925.20
Weight 3 2 1 6
Product 9,037.80 5,788.80 925.20 15,751.80
Maintainable PBT
2,625.30
Tax Rate Maintainable PAT
34.00%
892.60 1,837.71
Price Earnings Multiple Capitalised Value PECV Value Equity Capital PECV Value per Share
6.95 12042.25 12042.25 2,982.50 40.38
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
Particulars
Prism Cement
2.23
Madras Cement
0.22
Shree Cement
6.38
Gujarat Ambuja
6.12
JK Cement
5.17
JK Lakshmi Cements
1
Binani Cements
7.47
P/E 2008 Capacity (in mn tonnes) Sales ( In Million Rs ) Market Cap ( Billion) EBIDTA PAT MARKET PRICE EPS Book Value (Rs mn)
2.51
8764.5 5.34 3518.7 2416.3 17.9 8.01 6151.40
8
21574.80 0.938 8013.10 4217.00 78.85 350.69 119.03
4.80
20658.65 16.22 9356.76 2603.72 465.70 73.01 672.81
18.50
4
3.65
11106.7 2.36 3349.3 1939 38.55 38.73 1193.13
5.3
11090.4 7.13 3666.4 1784.4 35.1 4.7 4176.43
57050.00 14753.401 86.02 22390.00 17690.00 56.50 9.23 46608.70 10.5 4025.653 2487.652 131.95 25.5 10533.40
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
Ratios
Madras Cement
8.15 0.00 9.86 0.02 0.01 7.88
Shree Cement
8.07 0.02 97.02 0.18 0.05 24.11
Gujarat Ambuja
8.20 0.00 3.05 0.00 0.00 1.85
JK Cement
5.17 0.01 32.99 0.05 0.03 1.00
JK Binani Lakshmi Cements Cements
2.17 0.00 10.56 0.02 0.01 1.98 11.05 0.00 6.62 0.02 0.01 1.71
Average
P/E P/Sales P/Capacity P/PAT P/EBIDTA MV/BV
7.14 0.01 26.68 0.05 0.02 6.42
Valuation of Prism Cements as per
P/E
P/Sales P/Capacity P/PAT P/EBIDTA MV/BV
57.1715
62.47216 66.97639 118.1351 68.02565 13.23987
Mean valuation of Prism Cements Rs 74.55
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
Ratios
Madras Cement
8.15 0.004 9.86 0.02 0.01 7.88
Gujarat Ambuja
8.20 0.001 3.05 0.00 0.00 1.85
JK Cement
5.17 0.009 32.99 0.05 0.03 1.00
JK Lakshmi Cements
2.17 0.003 10.56 0.02 0.01 1.98
Binani Cements
11.05 0.003 6.62 0.02 0.01 1.71
Wtd Average
6.95 0.004 12.62 0.02 0.01 2.88
P/E P/Sales P/Capacity P/PAT P/EBIDTA MV/BV
Valuation of Prism Cements as per
P/E P/Sales P/Capacity P/PAT P/EBIDTA MV/BV 55.670 35.452 31.667 55.326 46.605 59.434
Mean valuation of Prism Cements Rs 47.34
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
Summary Sheet
Method EV/Sales Fair Value EV/EBITDA Net Asset Value Method Market Price Method Market Comparable Method PECV Market Price Market Price as on 30th June Market Price 37.66 43.06 19.87 50.63 47.36 40.38 40.82 33.60 Weight 0.20 0.30 0.10 0.15 0.10 0.15
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
Thank You!!!
MERGERS&ACQUISTIONS The War Room
RAJASTHAN of Venice The MerchantsROYALS
doc_479542281.pptx