Name Do Thi Suong Quyen
Question 1
Write your answer for Part A here.
Year 2018E 2019E 2020E 2021E 2022E
FCF 1,836.00 2,754.00 4,131.00 6,196.50 9,294.75
Using the given assumptions and the revenue of 10,000 cr for 2017, we evaluate the sequence as
follows for 2018:
Revenue 2018 = Revenue 2017+ (Revenue 2017*Revenue growth) = 10,000+(10,000*50%)= 15,000
EBITDA = EBITDA Margin * Revenue = 20%*15,000 = 3,000
Capex = 2%*Revenue = 2%*15,000 = 300
D&A = 40% Capex = 40%*300 = 120
EBIT = EBITDA – D&A – 3,000-120 = 2,880
EBIT*(1-Tax) = 2,880*(1-30%)= 2,016
FCF = EBIT*(1-tax) + D&A – Capex = 2,016+120-300= 1,836
We repeat the caculation for the years of 2019E, 2020E, 2021E, 2022E
Write your answer for Part B here.
Teminal Value from 2023 onwards = Free cash flow (2022E)/Discount rate = 9,294.75/12%
=77,465.25 (in Crs)
Write your answer for Part C here.
Enterprise value of Patanjali = net present value of (free cash flow+ terminal value)
= npv(12%(discount rate), FCF+ terminal value from 2018E to 2022E). Fomula built-in in excel.
= 59,937.96 (in Crs)
Paste the excel sheet containing your calculations here.
PATANJALI AYURVED In Crs
0 1 2 3 4 5
Year
2017 2018E 2019E 2020E 2021E 2022E
Revenue
10,000.00 15,000.00 22,500.00 33,750.00 50,625.00 75,937.50
EBITDA
2,000.00 3,000.00 4,500.00 6,750.00 10,125.00 15,187.50
D&A <b>
80.00 120.00 180.00 270.00 405.00 607.50
EBIT
1,920.00 2,880.00 4,320.00 6,480.00 9,720.00 14,580.00
EBIT*(1-tax) <a>
1,344.00 2,016.00 3,024.00 4,536.00 6,804.00 10,206.00
Capex <c>
200.00 300.00 450.00 675.00 1,012.50 1,518.75
FCF to company (a+b-c)
1,224.00 1,836.00 2,754.00 4,131.00 6,196.50 9,294.75
Terminal value (2023
onwards) 77,456.25
FCF + Terminal value
1,224.00 1,836.00 2,754.00 4,131.00 6,196.50 86,751.00
Enterprise Value <d> ₹ 59,937.96
Question 2
Write your answer for Part A here. Show your detailed calculations.
Calculate Patanjali’s equity value in 2017 using the P/E multiple of Dabur given in Exhibit 1
We have: Equity value = P/E * Net income
Where as:
- P/E multiple of Patanjali is the same as Dabur = 50.5x
- Net income of Patanjali 2017 = EBIT*(1-tax) = 1,344 cr. As assumptions, there is no debt,
so no interest, so net income is considered like this. (this is calculated as the steps
mentioned in Question 1A, also mentioned in spreadsheet pasted above).
Equity value = 50.5 x 1,344 = 67,872.00 (in Crs)
Write your answer for Part B here. Show your detailed calculations.
Calculate Patanjali’s equity value in 2017 using the P/E multiple of Britannia given in Exhibit 1
We have: Equity value = P/E * Net income
Where as:
- P/E multiple of Patanjali is the same as Britannia = 74.3x
- Net income of Patanjali 2017 = EBIT*(1-tax) = 1,344 cr. As assumptions, there is no debt,
so no interest, so net income is considered like this. (this is calculated as the steps
mentioned in Question 1A, also mentioned in spreadsheet pasted above).
Equity value = 74.3 x 1,344 = 99,859.20 (in Crs)
Question 3
Write your answer for Part A here.
Assumptions that could have negatively impacted the enterprise value using DCF method are as
follows:
+ Revenue growth rate: According to the case study in Exhibit 2, Patanjali's revenue increased
by 100% in 2017. Therefore, considering a growth rate of merely 50% in our estimates would
have had a negative effect on Enterprise Value.
+ Tax rate: The case study exhibit 1 multiples table indicates that Dabur's tax rate is 21%. If so,
the enterprise value would have been far higher than what we determined using a 30% tax rate.
Therefore, the enterprise value would have been significantly influenced by this assumption.
Write your answer for Part B here.
If Smith had somehow predicted the pandemic back in 2017, for his evaluation the following
would have been considered initially:
+ He would have taken into account the revenue growth decreasing from 50% Y-o-Y to perhaps
24-25% in FY 2020 - 2021.
+ Due to the disruptions caused by Covid-19, EBITDA margins would be lower, at around 10%
- 11% rather than 20%, as COGs and other expenses like rent would have decreased.
+ Declining GDP would have resulted in lower debt rates, which would have in turn cut the
discount rate at about 10.5%, which would have had an impact on it as well.
Smith would have thought Patanjali had made adjustments and managed to take advantage of
the growing ayurvedic market, indicating a significant shift in emphasis toward a healthy
lifestyle for the Indian population that believed in Ayurveda and its treatments. Smith would
estimate a 35%–40% growth in revenue for 2022 and adjust the predictions subsequently.
