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INSTITUTE OF MANAGEMENT TECHNOLOGY

FMCG Sector Study and M&A perspective

2010

DECLARATION

I, Richa Agarwal, hereby declare that the project report on FMCG Sector Study and M&A Perspective is a genuine research work undertaken by me based on publicly available information All care has been taken to keep this report error free and I sincerely regret for any unintended discrepancies that might have crept into this report. I shall be highly obliged if errors (if any) be brought to my attention.

Signature RICHA AGARWAL (Student)

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Richa Agarwal, PGDM Finance (09-11)



2010

ACKNOWLEDGEMENT

A work is never a work of an individual. I owe a sense of gratitude to the intelligence and cooperation of all those people who made easy to let me understand what I needed from time to time for completion of this exclusive project. I would like to forward my sincere gratitude to Mrs. Gagan Ahluwalia, Additional General Manager Corporate Affairs, Dabur India Ltd., who gave me the opportunity to work on this project and always endured me; stood by me and without whom I couldnt have envisaged the completion of this project. I would like to express the deepest appreciation to Mr. Dhruv Sharma, Assistant Manager Corporate Affairs,Dabur India Ltd., who has the attitude and the substance of a genius: he continually and convincingly conveyed a spirit of adventure in regard to project and an excitement in regard to learning. Without his guidance and persistent help this dissertation would not have been possible. In addition, a thank you to Professor Kamble of Institute Of Management Technology, who introduced me to various models like Porter five forces model, BCG matrix etc. and whose enthusiasm for these had a lasting effect. Also, I would like to thank DABUR INDIA LTD. for allowing me to use various resources and material during commencement of my internship in their office. Last but not least I wish to avail this opportunity for expressing a sense of gratitude and love to my friends and my beloved parents for their manual support, strength, cooperation and for everything.

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CERTIFICATE OF ORIGIN

This is to certify that Ms. Richa Agarwal, a student of Post Graduate Diploma in Management (2009-2011), Institute Of Management Technology, Nagpur has worked in Dabur India Ltd. under the able guidance and supervision of Mrs. Gagan Ahluwalia (Additional General Manager Corporate Affairs).

The period for which she has worked was for 9 weeks, starting from 6th April10 to 11th June10. To the best of my knowledge no part of this report has been reproduced from any other report and the contents are based on original research.

Signature Prof. R. Kamble Institute Of Management Technology, Nagpur(FACULTY GUIDE)

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Table of Content Executive summary..................................................................................................................8 Objectives of the Study............................................................................................................9 Methodology Followed...........................................................................................................10 PART-1- STUDY OF FMCG SECTOR...............................................................................11 Chapter 1- Introduction.........................................................................................................12 1.1. Introduction of FMCG Sector.......................................................................................... 1.2. FMCG Sector Segments................................................................................................... Chapter 2 Socio Economic Contribution..........................................................................14 2.1. Sectors Contribution.......................................................................................................

Chapter 3- Key Drivers and Players of FMCG Sector.......................................................15 3.1 Key Growth Drivers........................................................................................................... 3.2 Key Trends.......................................................................................................................... 3.3 Major Issues and Challenges of FMCG Sector.................................................................. Chapter-4 FMCG Players......................................................................................................18 4.1. Dabur India Ltd................................................................................................................. 4.2. Hindustan Unilever Ltd.................................................................................................... 4.3. ITC Ltd............................................................................................................................. 4.4. Procter & Gamble Hygeine and Healthcare Ltd.............................................................. 4.5. Nestle India Ltd................................................................................................................ 4.6. Colgate Palmolive Ltd................................................................................................... 4.7. Godrej Consumer Care ProductsLtd................................................................................ 4.8. Marico Ltd........................................................................................................................ 4.9. GlaxoSmithKline Healthcare Limited.............................................................................. Chapter-5 FMCG Sector Analysis........................................................................................22 5.1. SWOT Analysis................................................................................................................ 5.2. U- Cuvre Analysis............................................................................................................ 5.3. Y-O-Y Change.................................................................................................................5 Richa Agarwal, PGDM Finance (09-11)



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List of TablesTable 1 Liquidity and Leverage Ratio................................................................................................................47 Table 2 Management Efficiency Ratio...............................................................................................................48 Table 3 Profitability Ratio ..................................................................................................................................49 Table 4 Market Based Return.............................................................................................................................49 Table 5Financial Projection - Amrutanjan........................................................................................................55 Table 6 Financial Projection - Dabur.................................................................................................................56 Table 7 Beta Calculation......................................................................................................................................56 Table 8 WACC Calculation - Amrutanjan........................................................................................................57 Table 9WACC Calculation - Dabur...................................................................................................................58 Table 10 a & b Working Capital and CAPEX Calculation - Amrutanjan.....................................................59 Table 11 a & b Working Capital and CAPEX Calculation - Dabur...............................................................60 Table 12DCF Valuation - Amrutanjan..............................................................................................................61 Table 13 DCF Valuation - Dabur........................................................................................................................62 Table 14 Financial Projection post merger........................................................................................................63 Table 15 WACC Calculation...............................................................................................................................64 Table 16 Working Capital and CAPEX Calculation.......................................................................................65 Table 17 DCF Valuation......................................................................................................................................66

EXECUTIVE SUMMARY Merger and acquisitions are critical phenomena: From an economic perspective, M&A transactions are increasingly frequent events, which reshape entire industries. From a firm perspective, it represents the single most important economic decisions in the life of a firm, bearing great opportunities as well as great risks. From an employee perspective, it is a source of uncertainty and change.

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Many M&A transactions fail to create value. Although the main motive for M&A is the generation of synergies, often the synergy targets are misused and the M&A transactions do not live up to the expectations. Based on information in the public domain, I found after acquiring `Femcare, a leading personal care brand in the domestic market, FMCG major Dabur India is inspecting for acquisitions.Like Dabur, other FMCG players are also scouting for acquisitions. These trends in FMCG sector uncover important implications for operating models. Global growth will continue to be a strategic focus for many Indian companies and M&A is a legitimate strategy to achieve this. This requires an adequate understanding of various financial models that will enable effective and integrated projections across merged entities.

OBJECTIVE OF STUDY

To develop a basic knowledge of FMCG Sector To analyze FMCG sector on the basis of various key players past financials using various analytical tools such as SWOT, U Curve Analysis, Y-O-Y Changes. To learn the application of analytical tools.7 Richa Agarwal, PGDM Finance (09-11)



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To analyze Dabur India Ltd. using various analytical tools. To understand the market movement by analyzing the historical share price. To understand synergies for M&A To develop a simulation model for Dabur India Ltd. acquiring Amrutanjan Healthcare Ltd. operating in a different market segment.

METHODOLOGY FOLLOWED

The initial step of the project was to study about the FMCG sector and Dabur Indiausing its Annual reports, website and research reports and then evaluating the financial position of the company on the basis of ratio analysis.

Analysis of FMCG sector using various tools SWOT Analysis, BCG Matrix, UCurve Analysis and financial performance based on y-o-y change.8 Richa Agarwal, PGDM Finance (09-11)



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Studying the companys product portfolio in various segments. Analysis of company on the basis of ratios, SWOT, BCG, Porter five forces model, Share price performance with 20 days and 50 days moving average.

Extracting financials for Dabur India Ltd. and a Amrutanjan Healthcare Ltd. company to design a merger model.

Financial projections for both the companies Calculating cost of equity,cost of debt and finally WACC. Projecting cash flow by DCF Valuation In the end deriving the equity value post merger.

P A R T

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STUDY OF FMCG SECTOR Introduction Socio Economic Contribution Key Drivers of FMCG Sector Key Players FMCG Analysis

1.F10

MCG SECTOR An Introduction

CNX FMCG: Index Profile

The CNX FMCGIndex is a market cap weighted index. It is a 15 stock Index from the FMCG sector Richa Agarwal, PGDM Finance (09-11)

BSETMCG: Index Profile



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that trade on the NSE. The base period is December 1995 and the base value is 1000.

presence and is characterized by a wellestablisheddistribution and unorganized cheaper segments labor network, and costs low and intense competition betweenthe organized operational cost.Availability of key raw materials, presenceacross the entire value chain gives India a competitive advantage. It has grown consistently over the last 3 4 years. Indias FMCG sector is fragmented and substantial part of sector

BSE FMCG Index is a subset of the BSE500 index. BSE-500 index represents nearly 85% of the total market capitalization on the Stock Exchange, Mumbai. 1998-99 is chosen as the base year, and within this, the date February 1, 1999 is selected as the base date for its proximity to the current period.

comprises of unbranded and unpackaged products. Based on latest trend, a report on FICCI and Technopak project a growth of 10 12 percent for the next 10 years, reaching a size of US$ 43 billion (Rs. 206,000 cr.) by 2013 and US$ 74 billion (Rs. 355,000 cr.) by 2018. Implementation of the Goods and Service Tax (GST) and opening up of Foreign Direct Investment (FDI) in retail can accelerate this growth.

The Indian FMCG sector is the fourth largest sector in the economywith a total market size in excess of US$ 25 billion (Rs. 120,000 cr.).It has a strong MNC

FMCG comprises of following segments:

Personal Care: Oral care, hair care, skin care, personal wash (soaps); cosmetics and toiletries; deodorants; perfumes; feminine hygiene; paper products.

Household : Fabric wash (laundry soaps and synthetic detergents); household cleaners (dish/utensil cleaners, floor cleaners, toilet cleaners, air- fresheners, insecticides and mosquito repellents, metal polish and furniture polish).

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Food & Beverage : Health beverages; soft drinks; staples/cereals; bakery products (biscuits, bread, cakes); snack food; chocolates; ice cream; tea; coffee; soft drinks; processed fruits, vegetables; dairy products; bottled water; branded flour; branded rice; branded sugar; juices etc.

Tobacco Lighting

2.S

OCIO - ECONOMIC CONTRIBUTION

SECTORS CONTRIBUTION Employment: It is amongst the largest employers in India. With about 9 million kirana stores selling FMCG produces, it supports livelihood of 13 million people. Another 25 million people are employed at wholesalers, distributors, stockist, etc

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Intake of Agricultural Output: US$ 2 billion (Rs. 9600 cr.) of agricultural produce is purchased by the FMCG sector, processed and converted into value added products.

Consumption of Media and Advertising: 40% of media earnings from advertising come from the FMCG sector, contribution of US$ 2 billion (Rs. 9600 cr.).

Contribution to Contract Manufacturing: About 10 percent of FMCG production is outsourced to contract manufacturing units, with ancillary industry contribution at about US$ 1.5 billion (Rs. 7200 cr.).

Fiscal Contribution: The FMCG sector contributes US$ 6.5 billion (Rs. 31,000 cr.) through direct and indirect taxes to the exchequer. Indirect taxes are about 30 percent of MRP, while direct tax includes corporate income tax.

3. K3.1 Key Growth Drivers reasons:

EY DRIVERS OF FMCG SECTOR

The FMCG industry has undergone substantial growth on account of the following

Favorable Indian Economy & Demographics: 45% people in India are under 20 years of age. Per capita disposable income has increased from $550 to $600 in 2007 (9% increase). GDP is growing at a CAGR between 8 to 9%.In the next five years, affluent13 Richa Agarwal, PGDM Finance (09-11)



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and aspirers as a total will supersede strivers and will be dominated by aspirers, as per NCAER.

Large Domestic Market: Increasing disposable income has resulted in a rise in the domestic market size. Increasing income has translated into higher consumption levels.

Disposable Income: There is increase in disposable income, observed in both rural and urban consumers, which is giving opportunity to many rural consumers to shift from traditional unorganized unbranded products to branded FMCG products and urban fraternity to splurge on value added and lifestyle products.

Buying Pattern Shift: The crisis of declining FMCG markets during 2001-04 was driven by new avenues of expenditure for growing consumer income such as consumer durables, entertainment, mobiles, motorbikes etc. Now, as many consumers have already upgraded, their income is being directed towards pampering themselves.

Presence across value chain: Indian FMCG firms have a presence across the entire value chain of the industry, from raw material supply to final processed and packaged goods, both in the personal care products and in the food processing sector. As a result firms located in India have become more cost competitive.

Growing share of organized retail: The modern trade format provides a wider visibility to the FMCG products. Organized retail has led to a boom in consumption by generating wide spread employment opportunities.

3.2 Key Trends

Underpenetrated Growth Categories:Within the Indian FMCG industry, there are few categories that grew more than 20% during 2008-2009, like shaving cream, skin/fairness cream, shampoos, skin care & cosmetics, tooth powder. Some other growth categories were hair color, skin care, anti-aging solution, deodorants and mens products.

Penetrated Growth Categories:Even mainstream categories with high penetration levels such as washing detergents, soaps and hair oils have shown strong underlying volume growth, despite sharp inflation led price increases in FY08. This is partly14 Richa Agarwal, PGDM Finance (09-11)



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related to the growth in organized retail (3-5% of turnover for most FMCG players) that gives more visibility to national brands with strong brand equity.

Health Food Categories: FMCG majors are widening their health food portfolio to cash in on the rich, urban, health conscious Indian. Sugar free Chyawanprash, organic spices and multi grain pastas and biscuits are few examples. Urban India is high on health and FMCG majors are cashing in on the opportunity.Also, with the Indian consumer becoming increasingly health conscious, the demand for juices has witnessed rapid growth.

Impact on sector due to economic slowdown: During economic slowdown, consumer expenditure of a household has declined more than decline / slowdown in their income. This suggests a decline in the share of consumption in income and a greater weight given by consumers to the precautionary motive of saving. Also, Indian consumers have reduced their expenditure share on Durables and Semi- durable goods. In many parts of rural India, we found consumption increasing due to growing incomes led by rising food price realizations and Government schemes like the National Rural Employment Guarantee Scheme (NREGS). Simultaneously, there are some signs of down trading in urban homes with fixed incomes given the more direct impact that such consumers have experiences due to the downturn.

Most FMCG products (non durables) are necessities, and therefore their volume consumption has been largely unaffected in the current economic slowdown. A report by FICCI and Technopak states that the sector has coped well with recent challenges and grew by 15 percent in 2009.

3.3 Major Challenges tothe Indian FMCG sector

Highly unorganized: Although the organized market is gaining strength, majority of the share is still captured by the unorganized market. Rising income levels and a15 Richa Agarwal, PGDM Finance (09-11)



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growing middle class allows players selling branded products to push consumers towards branded products.

High competition between large and small players: Rise in disposable incomes and more young population have spruced up demands for products in the personal care, processed food etc segments. This has led to competition among the FMCG companies may put the profit margins under pressure.

4. K4.1 DABUR India Ltd.

EY PLAYERS

Dabur India Limited is the fourth largest FMCG Company in India with Revenues of US$750 Million (Rs 3390 Crore) & Market Capitalizations of US$3.5 Billion (over Rs 16,000 Crore).The brand name Dabur is derived from the words 'Da' for Daktar or Doctor and 'bur' from Burman. From those humble beginnings, the company has grown into India's leading manufacturer of consumer healthcare, personal care and food products. Building on a legacy of quality and experience of over 125 years, Dabur operates in key consumer products16 Richa Agarwal, PGDM Finance (09-11)



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categories like Hair Care, Oral Care, Health Care, Skin Care, Home Care & Foods with key brands like Dabur Amla, Dabur Chyawanprash, Vatika, Hajmola and Real. The company has kept an eye on new generations of customers with a range of products that cater to a modern lifestyle, while managing not to alienate earlier generations of loyal customers.

4.2 HUL Ltd. Hindustan Unilever Limited is amongst the top five exporters of the country and also thebiggest exporter of tea and castor oil. The product portfolio of thecompany includes household and personal care products like soaps,detergents, shampoos, skin care products, color cosmetics,deodorants and fragrances. It is also the market leader in tea,processed coffee, branded wheat flour, tomato products, ice cream,jams and squashes.HULoperations involve over 2,000 suppliers and associates and distribution network covers 6.3 million retail outlets including direct reach to over 1 million.. In the future, the company plans to concentrate on its herbal health care portfolio(Ayush) and confectionary business (Max). Its strategy to growincludes focusing on the power brands' growth through consumerrelevant information, cross category extensions, leveraging channelopportunities and increased focus on rural growth.

4.3 ITC Ltd. Indian Tobacco Corporation Ltd is an associate of British American Tobacco with a 37 per cent stake. In 1910 the company's operations were restricted to trading in imported cigarettes. The company changed its name to ITC Limited in the mid seventies when it diversified into other businesses. ITC is one of India's foremost private sector companies with a turnover of 15,388 crore INR (FY09). While ITC is an outstanding market leader in its traditional businesses of cigarettes, hotels, paperboards, packaging and agroexports, it is rapidly gaining market share even in its nascent businesses of branded apparel, greeting cards and packaged foods and confectionary. After the merger of ITC Hotels with ITC Ltd, the company will ramp up its growth plans by strengthening its alliance with Sheraton and through focus on international projects in Dubai and the Far East. ITC's subsidiary, International Travel House (ITH) also aims to launch new products and services by way of boutiques that will provide complete travel services.

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4.4 Procter & Gamble Hygiene and Health Care Limited Richardson Hindustan Limited (RHL), manufacturer of the Vicksrange of products, was rechristened 'Procter & Gamble India' inOctober 1985, following its affiliation to the 'Procter & GambleCompany', USA. Procter & Gamble Hygiene and Health CareLimited (PGHHCL) acquired its current name in 1998, reflecting thetwo key segments of its business. P&G, USA has a 65 per cent stakein PGHHCL. The parent also has a 100 per cent subsidiary, Procter& Gamble Home Products (PGHP). The overall portfolio of thecompany includes healthcare; feminine-care; hair care and fabric carebusinesses. P&Gs Beauty Business is over US$ 10 Billion in Global Sales, making it one of the worlds largest beauty companies. The P&G beauty business sells more than 50 different beauty brands including Pantene, Olay, SKII, Max Factor, Cover Girl, Joy, Hugo Boss, Herbal Essences and Clairol Nice n Easy. In India, P&Gs beauty care business comprises of Pantene, the worlds largest selling shampoo, Head & Shoulders, the worlds No. 1 Anti-dandruff shampoo and Rejoice Asias No. 1 Shampoo.

4.5 Nestle India Ltd. Nestle India Ltd a 59.8 per cent subsidiary of Nestle SA,Switzerland, is a leading manufacturer of food products in India.Its products include soluble coffee, coffee blends and teas,condensed milk, noodles, infant milk powders and cereals. Nestle has also established its presence in chocolates,confectioneries and other processed foods. Soluble beverages andmilk products are the major contributors to Nestls total sales.Some of Nestls popular brands are Nescafe, Milkmaid, Maggi andCerelac. The company has entered the chilled dairy segment withthe launch of Nestle Dahi and Nestle Butter. Nestle has also made aforay in non-carbonated cold beverages segment through placementof Nestea iced tea and Nescafe Frappe vending machines. Exportscontribute to 20 per cent of its turnover (FY09). 4.6 Colgate Palmolive India Ltd. Colgate Palmolive India is a 51 per cent subsidiary of ColgatePalmolive Company, USA. It is the market leader in the Indian oralcare market with 51.3% market share (year to date). The

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company alsohas a presence in the premium toilet soap segment and in shavingproducts, which are sold under the Palmolive brand. Other wellknownconsumer brands include Charmis skin cream and Axion dishwash. The company's strategy is to focus on growing volumes byimproving penetration through aggressive campaigning and consumer promotions. The company plans to launch new productsin oral and personal care segments and is prepared to continuespending on advertising and marketing to gain market share. Margingains are being targeted through efficient supply chain managementand bringing down cost of operations. 4.7 Godrej Consumer Products Ltd. Godrej Consumer Products (GCPL) is a leader among India's Fast Moving Consumer Goods companies, with Personal and Home Care Products. Their brands, which include Cinthol, No. 1, Expert and Ezee, among others, are household names across the country. Their Branch Offices in Mumbai, Delhi, Kolkata and Chennai ensure pan-India coverage, while factories located at Malanpur (Madhya Pradesh), Thana (Himachal Pradesh), Katha (Himachal Pradesh), Guwahati (Assam) and Sikkim cater to the diverse requirements of their products GCPL now owns international brands and trademarks in Europe, Australia, Canada, Africa and the Middle East. Their mission is to continuously enhance the quality of life of consumers in high-growth markets with superior-quality and affordable personal care and hygiene products.

4.8 Marico Marico is a leading Indian Group incorporated in 1990 and operatingin consumer products, aesthetics services and global Ayurvedicbusinesses. The company also markets food products and distributesthird party products. Marico owns well-known brands such asParachute, Saffola, Sweekar, Shanti Amla, Hair & Care, Revive,Mediker, Oil of Malabar and the Sil range of processed foods. It hassix factories, and sub-contract facilities for production. The overseassales franchise of Marico's branded FMCG products is one of thelargest amongst Indian companies.It is also the largest Indian FMCG company in Bangladesh. 4.9 GlaxoSmithKline Healthcare Ltd.

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GlaxoSmithKline Consumer Healthcares (GCH) core business is manufacturing of health drinks under the brand Horlicks. The history of the company goes way back in 1950s when bottled Horlicks was imported from England. But in the year 1955 due to change in import policy, import of Horlicks was stopped. During 1956-57 a team of Horlicks visited India to explore possibilities for setting up a plant in India. For this the company approached Maharaja of Nabha Pratap Singh in Punjab. Later in October 1958 with the support of Maharaja, Hindustan Milkfood Manufacturer (HMML) was established to produce Horlicks. In the year 1969 Beecham plc acquired Horlicks England, which led the company to become major shareholder in HMML. In 1979 Beecham India was merged with Hindustan Milkfood Manufacturer. Later Beecham plc, UK got merged with SmithKline USA. In January 2000 the name was changed to GlaxoSmithKline Consumer Healthcare. It exports products to countries like Bangladesh, Myanmar, Sri Lanka, Middle East, Fiji, Mauritius, Nepal, Bhutan and many more. GCH has manufacturing plants located at Punjab, Andhra Pradesh, Haryana, Hyderabad, Chennai, Guwahati, Ghaziabad, Bangalore and Gurgaon.

5. F

MCG ANALYSIS

5.1 SWOT ANALYSIS STRENGTHS Low operational costs Presence of established distribution networks in both urban and rural areas Presence of well known brands20 Richa Agarwal, PGDM Finance (09-11)

WEAKNESS Lower scope of investing in technology and achieving economies of scale, especially in small sectors. Low export levels



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in FMCG Sector

Me-too products, which illegally mimic the labels of the established brands, these products narrow the scope of FMCG products in rural and semi- urban market.

OPPORTUNITIES Untapped rural market Rising income levels, i.e. increase in purchasing power of consumers Large domestic market population of over one billion Export potential High consumer good spending a

THREAT Removal of import restrictions resulting in replacing of domestic brands. Slowdown in rural demand

5.2 U Curve Analysis

In Crore Sales PBDIT PBDIT Sales

Rs. HUL 21,215. 15 3,241.4 8 / 15.28% Dabur 2,476. 52 473.4 19.12 %

Maric o 1,902. 34 222.1 11.68 %

Godre j 1,113. 67 209.11 18.78 %

Colga te 1,786. 87 364.04 20.37 %

GSK 2,025. 76 402.14 19.85 %

P&G 815.6 4 246.0 4 30.17 %

Ema mi 739.7 9 141.5 7 19.14 %

Ditc Specialist Generalis h s ts

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HUL Sales (in 10,151. Rs. Cr) 54 PBDIT (in Rs. 1,712.6 Cr) 6 PBDIT/S ales 16.87%

Dabur 1,246. 01 188.28 15.11 %

Mari co 957.0 5 89.94 9.40 %

Godr ej 580.0 7 105.7 9 18.24 %

Colgat e 999.17 202.53 20.27%

GSK 1025.3 7 209.67 20.45 %

P&G 719.51 159.69 22.19%

Emami 224.01 36.39 16.24%

Through market forces, markets that are largely free of major entry barriers are eventually characterized by two kinds of competitors: full-line generalists and product/market specialists. Full-line generalists compete across a range of products and markets, and are volume-driven players for whom financial performance improves with gains in market share. Specialists tend to be margin- driven players, and their financial performance deteriorates as they increase their share of the broad market. Contrary to traditional economic theory, then, evolved markets tend to be simultaneously oligopolistic as well as monopolistic. Figure plots financial performance and market share of various key players of FMCG sector viz. Emami, HUL, Godrej, Colgate Palmolive, P&G, Dabur, Marico and GSK. The figure indicates that both at the lower volume end and at the higher volume end, there are big profits22 Richa Agarwal, PGDM Finance (09-11)



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/ margins Though there are big profits at the two ends of the parabola, the game is totally different at the lower revenue end compared to the higher revenue. Similarly, at the middle end of the curve [where we have medium volumes], there is a sharp fall in returns (a phenomena that is seen across industries). This Mid- Zone has been defined as the Ditch. In a competitive, mature market, there is room for only three generalists but there can be more number of product / market specialists as is evident from the figures. Here is a classification of the two:

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5.3 Y-o-Y Change 5.3.1 COGS as aCompany Dabur Marico Godrej Consumer HUL ITC Colgate GSK Consumer Healthcare P&G Hygiene and Healthcare Nestle FY10 45.40% 47.40% 46.40% 49.86% FY09 48.60% 53.50% 55.20% 52.46% 9MFY1 0 45.60% 48.20% 47.00% 50.60% 40.00% 43.10% 37.00% 31.30% 51.00% 9MFY0 9 49.30% 54.50% 56.70% 53.70% 42.40% 43.60% 38.00% 30.50% 52.80%

% of Sales

36.0% 37.5%37.10%

38.6% 33.5%38.00% 30.10%

47.70%

48.70%

5.3.2 Gross Profit MarginCompany FY10 Dabur 54.60% FY09 51.40% 9MFY1 0 54.40% 9MFY0 9 50.70%

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Marico Godrej Consumer HUL ITC Colgate GSK Consumer Healthcare P&G Hygiene and Healthcare Nestle

52.60% 53.60% 50.14% 64.05% 62.54% 62.90%

46.50% 44.80% 47.54% 61.36% 66.51% 62.00% 69.90%

51.80% 53.00% 49.40% 60.00% 56.90% 63.00% 68.70% 49.00%

45.50% 43.30% 46.30% 57.60% 56.40% 62.00% 69.50% 47.20%

52.30%

51.30%

5.3.3 EBITDA MarginCompany Q4FY1 04FY0

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0 Dabur Marico Godrej Consumer GSK Consumer Healthcare P&G Hygiene and Healthcare Nestle 20.53% 14.98% 23.52% 24.20% 29.60% 21.50%

9 18.81% 14.48% 22.96% 26.80% 27.90% 24.40%

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P A R TSTUDY OF DABUR INDIA LIMITED Dabur India Ltd. An Introduction Strategic Business Units Dabur Analysis

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1. D

ABUR INDIA LIMITED An Introduction

Dabur India Ltd. with revenue of Rs. Rs 3390 Crore (FY10)made its beginnings with a small pharmacy andhas marked its presence with significant achievements and today commands a market leadership status. The Company has come a long way in popularizing and making easilyDABUR:IN SENSEX:IND

available a whole range of products based on the traditional science of Ayurveda. And Dabur has set very high standards in developing products and processes that meet stringent quality norms.

LAST PRICE (INR)(as on June 4, 2010)

190

BSE Code NSE Code Bloomberg Code

500096 DABUR DABUR IN

3 Subsidiary

Group

companies

-

Dabur

International, Fem Care Pharma and newu

8 step down subsidiaries: Dabur Nepal Pvt. Ltd (Nepal), Dabur Egypt Ltd (Egypt), Asian Consumer Care (Bangladesh), Asian Consumer

FUNDAMENTALS

Care (Pakistan),867.586 166,923.50 5.820 33.058 54.372 0.604

African

Consumer

Care

(Nigeria), Naturelle LLC (Ras Al KhaimahShares (Millions) Market Cap (Millions) Earnings Price/Earnings ROE Beta vs. Sensex

UAE), Weikfield International (UAE) and Jaquline

17 ultra-modern manufacturing units spread around the globe over India.

Products marketed in over 60 countries.

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Wide and deep penetration with 50 C&F agents, more

than 5000 distributors and over 2.8 million retails outlets all over India

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The Company's business is structured in three strategically aligned strategic business units: Consumer Care Division (CCD) which markets a wide range of products across various consumer categories. This division accounted for 72.8% of the Companys consolidated sales in 2008-09.

Consumer Health Division (CHD) which offers over-the-counter (OTC)products, branded ethical and classical products based on the Ayurveda platform.This Division accounted for 7.3% of Consolidated Sales in 2008-09.

International Business Division (IBD) which has made rapid strides and become a key growth driver for the Company. With its business spread over Middle East,North Africa and South Asia,the division contributed to 18.5% of the consolidated sales in 2008-09.

2. S30

TRATEGIC BUSINESS UNITS




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2.1 Consumer Care Division Extension of existing brands to more sub-categories and making more choice available to consumers, coupled with increased focus on rural penetration, was the key platform on which CCD leveraged its growth during 2008-09. The division reported growth of 13.8%, supported by strong performance across various segments. The CCD business is divided into four key portfolios: healthcare, personal care, home care and foods. These cater to a number of consumer market segments including hair care, oral care, baby and skin care, health supplements, digestives, home care and foods. Share of these product segments in CCD sales is presented in Figure.

Products Health Care

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Personal Care Hair Care

Skin Care

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Home Care

Food

2.2Consumer Health Division (CHD) The Consumer Health Division, comprising a range of healthcare products that provide34 Richa Agarwal, PGDM Finance (09-11)



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Ayurveda-based solutions for health related issues, continued to be key focus area for the Company during the year. With both the OTC(Over the Counter) and Classical product categories continuing to drive the Companys CHD business, that was initiated in 2008. CHD registered an 18.9% growth (FY09), with both, the Ethical &OTC portfolio doing well across the range driven by packaging up gradation, mass media activities and a whole range of on ground consumer activations including Dabur Ayurvedic Health Camps. With Juhi Chawla as its brands ambassador, the Womens Health portfolio comprising Dashmularishita did well growing by 13.25and 14.2% respectively. The newly launched Dabur Active Blood Purifier also gained market share in this segment. Other new product launched during the year-Dabur Super Thanda Tail and Dabur Active Antacid evoked a good market response. Dabur Badam Tail, launched during the previous year, recorded 20.6% growth, with sales touching about Rs.6 crore in the second year of its launch. The Honitus franchise in this segment grew 13.6% during 2008-09 with new variants Mulethi Power and Honey Mint, adding to the brand portfolio. 2.3 International Business Division The division, which has been transformed from being a small operation into a multilocation business spreading through the Middle East, North Africa, West Africa and South Asia, grew by 39.9%during the year 2009 and emerged as the fastest growing division of the Company. The divisions performance was supported by strong volume-led growth as well as price increases undertaken to offset the impact of high inflation on input costs during the year. This acceleration in growth of IBD led to its contribution to Daburs consolidated revenue going up to 18.5% for FY09 from 15.7% a year ago. The key categories accelerating the divisions growth are Hair Creams, Toothpastes, Hair Oils and Conditioners.It is pertinent to mention that the brand architecture in the Companys

35




2010

overseas markets remains similar to that in India, though the product sold under these brands are customized and modified to the requirements of these markets. A significant contributor to the divisions growth during 2008-09 was geographical expansion, resulting from opening up of fresh markets like Lebanon,Turkey,Algeria, Morocco and Mauritania that offer new avenues for growth. The divisions topline growth was boosted by robust performance in key geographies like GCC,Nigeria and Bangladesh. GCC, which is one of the Companys key markets, grew by 46%during the year as a result of excellent offtakes witnessed in the Vatika Hair Oil franchise, and also high growth in Vatika Naturals styling hair cream. Egypt, which has emerged as another key geography,doubled itself with a growth of 99% during the fiscal with strong performances from Vatika Hair Cream and Vatika Olive Lite Hair Oil. Nigeria, which is predominantly an Oral Care market for IBD,delivered a strong 36% growth for the year .Brands that delivered strong performances during the year in this market were Dabur Herbal Toothpaste and Dabur Herbal Gel. Asian Consumer Care, Bangladesh, performed exceedinglywell, reporting a growth of 56% during the fiscal. The growth was led by increased distribution penetration and focused brand approach. Nepal which is one of the key markets in the Indian subcontinent, recorded a steady growth of 11%. The Pakistan operation was, however, impacted by the political uncertainty prevailing in the country.

3. D3.1 SWOT Analysis36

ABUR ANALYSIS




2010

STRENGTH Differentiated products Wide distribution network Brand strength

WEAKNESS Inadequate presence in South India

OPPORTUNITY Untapped Market Market Development Innovation Increasing income level of the middle class Creating pattern additional consumption

THREAT Existing Competition New Entrants

The analysis shows Dabur IndiasStrengths, Weaknesses, Opportunities and Threats which is operating in FMCG sector which will give a clear picture of the business environment it is operating in at the present time. Strengths: The strengths of a business or organization are positive elements, something they do well and are under their control. The following section will outline main strengths of Dabur India

Having alliances with other strong and popular businesses is a major plus point for Dabur India as it helps bring in new customers and make business more effective.

Being a market leader in the niche market (FMCG industry), as Dabur India is, it boosts profit, turnover and market share.

37




2010

Competitive pricing is a vital element of the overall success, as this keeps them in line with their rivals, if not above them.

Keeping costs lower than their competitors and keeping the cost advantages helps them pass on some of the benefits to consumers.

The products offered by them are original, meaning many people will return to Dabur India to obtain them.

Dabur Indias marketing strategy has proved to be effective, helping to raise profiles and profits and standing out as a major strength.

Their innovation keeps them a front-runner in FMCG as it is regularly turning out new patents/proprietary technology.

High quality machinery, staff, offices and equipment ensure the job is done to the utmost standard.

Dabur India has an extensive customer base, which is a major strength regarding sales and profit. Moreover people view it with respect and have faith in it.

Being financially strong helps them deal with any problems, ride any dip in profits and out perform their rivals.

Dabur Indias international operations mean a wider customer base, a stronger brand and a bigger chunk of the global market.

Having little competition, being one of very few companies providing this product is a major factor in Dabur Indias performance.

Supplier relationships are strong at Dabur India, which can only be seen as strength in their overall performance.

Weaknesses: Weaknesses of a company or organization are things that need to be improved or perform better, which are under their control. Dabur India Ltd has not observed any failure on the part of thecompany to correct major weakness in internal control system except that in the South, they do not have a strong presence especially in the hair oil segment Opportunities: Opportunities are external changes, trends or needs that could enhance the business or

38




2010

organizations strategic position, or which could be of a benefit to them. This section will outline opportunities that Dabur India is currently facing.

Dabur India could benefit from Governmental support, in the form of grants, allowances, training etc.

Looking at export opportunities is a way for them to raise profits. Changes in technology could give an opportunity to bolster future success. They could benefit from expanding their online presence and making more money from online shoppers/internet users.

The changes in the way consumers spend and what they buy provides a big opportunity for them to explore.

They are in good financial position, which is an opportunity for them to explore in terms of investment in new projects.

Grasping the opportunity to expand the customer base is something they can aim for, either geographically or through new products.

Takeover and merger opportunities could be explored for them and used to acquire new customers, new resources and enter new markets.

Forming strategic alliances and joint ventures is an opportunity for them to maximize profit and gain new business.

Structural changes in the industry open other doors and opportunities for them.

Threats: Threats are factors which may restrict damage or put areas of the business or organization at risk. They are factors which are outside of the company's control. Being aware of the threats and being able to prepare for them makes this section valuable when considering contingency plans and strategies. This section will outline main threats Dabur India is currently facing.

Tax increases placing additional financial burdens on Dabur India could be a threat. Change in demographics could threaten Dabur India.

39




2010

The financial burden of increasing interest rates could be a threat to them. Regulations requiring money to be spent or measures to be taken could put financial or other pressure on Dabur India.

New products/services from rival firms could lead to their products/services being less in demand.

Being undercut by low-cost imports is a major threat for them. Slow growth and decline of the FMCG market. Increased competition from overseas is another threat as it could lead to lack of interest in their products/services.

Extra competition and new competitors entering the market. Substitute products available in the market present a major threat to Dabur India

3.2 BCG Matrix

40




2010

Dogs Cash Question STARS Fem Dazzl A DABUR Glucose M R Cows Mark Honey Chyawanprash New U DABUR

K

E

T

S

H

A

R

E

A Hajmola Meswak R Real K New U E T G R O W T H

High

Low

High

Low

41




2010

3.3 Porter Five Forces Model

42




2010

1) The threat of substitute products: The existence of close substitute products increases the propensity of customers to switch to alternatives in response to price increases (high elasticity of demand). Buyer propensity to substitute Relative price performance of substitutes Buyer switching costs Perceived level of product differentiation

In case of Dabur since it is in major areas of FMCG and health care products so it need not fear threat of substitute products in the recent future. But it has to constantly reinvent its existing product lines in order to cope up with the innovations of its competitors.

2) The threat of the entry of new competitors: Profitable markets that yield high returns will draw firms. This results in many new entrants, which will effectively decrease profitability. Unless the entry of new firms can be blocked by incumbents, the profit rate will fall towards a competitive level (perfect competition). The existence of barriers to entry (patents, rights, etc.) Economies of product differences Brand equity Switching costs or sunk costs Capital requirements Access to distribution Absolute cost advantages Learning curve advantages Expected retaliation by incumbents Government policies

Dabur India is in business for more than 100 years. Dabur India Ltd. made its beginnings with a small pharmacy, but has continued to learn and grow to a commanding status in the

43




2010

industry. The Company has gone a long way in popularizing and making easily available a whole range of products based on the traditional science of Ayurveda. And it has set very high standards in developing products and processes that meet stringent quality norms. So, all the advantages of first mover, learning curve, brand loyalty, patents and economies of scale exist with Dabur India. The various product into which Dabur India is operating and giving edge over others are: Personal care through Ayurveda:Dabur introduced Indian consumers to personal care through Ayurveda, with the launch of Dabur Amla Hair Oil. So popular is the product that it becomes the largest selling hair oil brand in India. Launched Dabur Chyawanprash in tin pack:The ancient restorative Chyawanprash is launched in packaged form, and becomes the first branded Chyawanprash in India. Entered Oral Care & Digestives segment: In rural markets, wherehomemade oral care is more popular than multinational brands, Dabur introduces Lal Dant Manjan. With this a conveniently packaged herbal toothpowder is made available at affordable costs to the masses. Dabur continues to make innovative products based on traditional formulations that can provide holistic care in our daily life. An Ayurvedic medicine used as a digestive aid is branded and launched as the popular Hajmola tablet. Care with fun:The Ayurvedic digestive formulation is converted into a children's fun product with the launch of Hajmola Candy. In an innovative move, a curative product is converted to a confectionary item for wider usage. Leadership in health care:Dabur establishes its leadership in health care as one of only two companies worldwide to launch the anti-cancer drug Intaxel (Paclitaxel). Dabur Research Foundation develops an eco-friendly process to extract the drug from its plant source. Real blitzkrieg:Dabur captures the imagination of young Indian consumers with the launch of Real Fruit Juices - a new concept in the Indian foods market. The first local brand of 100% pure natural fruit juices made to international standards, Real becomes the fastest growing and largest selling brand in the country.

44




2010

Super specialty drugs:With the setting up of Dabur Oncology's sterile cytotoxic facility, the Company gains entry into the highly specialized area of cancer therapy. The state-of- the-art plant and laboratory in the UK have approval from the MCA of UK. They follow FDA guidelines for production of drugs specifically for European and American markets. 3) The intensity of competitive rivalry: For most industries, this is the major determinant of the competitiveness of the industry. Sometimes rivals compete aggressively and sometimes rivals compete in non-price dimensions such as innovation, marketing, etc. Number of competitors Rate of industry growth Intermittent industry overcapacity Diversity of competitors Informational complexity and asymmetry Fixed cost allocation per value added Level of advertising expense Economies of scale Sustainable competitive advantage through improvisation

Key players and competitors of Dabur India currently are Hindustan Unilever Ltd., Tata Tea, Nestle India Ltd., Britannia Industries Ltd., Colgate Palmolive Ltd., Marico Ltd., GlaxoSmithKline, Cadbury India ltd., ITC Ltd., and Procter & Gamble. Since the industry is growing at a very rapid pace and so is the no. of players. So Dabur India has to constantly relook at its strategy in order to increase its global dominance. 4) The bargaining power of customers: It is the ability of customers to put the firm under pressure and it also affects the customer's sensitivity to price changes. Buyer concentration to firm concentration ratio Degree of dependency upon existing channels of distribution Bargaining leverage, particularly in industries with high fixed costs Buyer volume Buyers Switching cost relative to firm switching costs

45




2010

Buyer information availability Availability of existing substitute products Buyer price sensitivity Differential advantage (uniqueness) of industry products RFM Analysis

Bargaining powers of buyers have increased dramatically with the advent of Globalization. With increased presence of other players in the market as mentioned previously, suppliers have got wide range of choices. So Dabur India has to formulate strategy in such a manner to keep abreast with the increasing competition by improving the quality and reducing the prices over the period.

5) The bargaining power of suppliers: (Also described as market of inputs). Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm. Suppliers may refuse to work with the firm, or e.g. charge excessively high prices for unique resources. Supplier switching costs relative to firm switching costs Degree of differentiation of inputs Presence of substitute inputs Supplier concentration to firm concentration ratio Employee solidarity (e.g. labor unions) Threat of forward integration by suppliers relative to the threat of backward integration by firms Cost of inputs relative to selling price of the product. Due to its over 100 years presence Dabur does have a very strong bond with the suppliers. Also Dabur does follow the policy of having good relations with all the peoples with which it deals. This helps in having a good relation with the suppliers. Also the policy of being accountable to stakeholders be it customers, without whom it will not be in business, shareholders, who have an important stake in Daburs business and the employees, suppliers who have a vested interest in making it all happen- are their stakeholders.

46




2010

3.4 Fundamental Analysis Liquidity and Leverage RatioMar 05 Current Ratio Quick Ratio Debt to equity ratio Interest Coverage RatioTable 1

Mar 06 0.89 0.32 0.05 38.50

Mar 07 0.89 0.36 0.05 65.16

Mar 08 1.07 0.49 0.03 34.46

Mar 09 1.06 0.38 0.19 30.55

0.76 0.24 0.14 36.41

Current Ratio of Dabur for last 5 year is near to 1 and for last 2 financial years it is more than 1 this indicates that the company is in good position as Current Ratio standard for FMCG industry is 1:1 which indicates that the current asset of Dabur consists of less amount of inventory. Value of sundry debtors is quite high. The liquidity ratios have increase from previous year which shows that Dabur has increased its liquidity further. Debt/Equity ratio means the ratio of finance coming from Debts compared to shareholders. A ratio exceeding 1 may be a cause for concern. As it can be seen that the Debt/Equity ratio is near to 0.03 & 0.05 for the last three year this means that company operate the business mainly through owner funds but this financial year Debt/Equity ratio has increased from 0.03 to 0.19 this indicate that company has taken loan from market to finance the business. With Debt/Equity ratio we can say that in this financial year 2009 company is investing Rs 1 from their pocket and 19 paisa from outside. As they have taken loan from market then there Interest coverage ratio has decreased. Interest Coverage Ratio show that how Leverage the company is the higher the ratio the less leverage

Management Efficiency Ratio

Mar05 Receivable ratio Inventory Ratio turnover 24.98 Turnover 8.26

Mar06 35.31 9.03

Mar07 39.70 10.72

Mar08 25.94 9.52

Mar09 22.63 8.66

47




2010

Total Asset TurnoverTable 2

3.18

3.15

3.92

4.33

4.50

Inventory turnover ratio show that how many times in a year has the company converted its inventory into debtor. As the Inventory turnover ratio has decreased as compared to the previous 4 year this show how slow the goods are moving in the market and also indicate the production and sales efficiency of the company.Debtor turnover ratio show how that how many times company can convert debtors into cash in a year.DTR has decreased as compared to the previous 4 years which is good on behalf of the company because they are recovering money faster from debtor. Asset turnover ratio is net sales/net asset has ATR is increasing marginally for all the 4 year this show that company net sales is increasing year on year which is good from companys point of view.

Profitability RatioMar05 14.08% 14.73% 15.29% 13.41% 11.62% 49.94% 43.90% Mar06 18.22% 17.91% 18.13% 15.97% 13.78% 50.65% 51.61% 48.13% 48.13% 45.58% Mar07 16.19% 17.46% 18.17% 16.29% 14.15% 47.94% 64.79% 59.26% 59.26% 57.57% Mar08 18.48% 18.62% 19.48% 17.45% 14.89% 43.97% 77.78% 68.06% 68.06% 67.72% Mar09 16.83% 18.44% 19.66% 17.75% 15.34% 40.20% 62.17% 59.02% 59.02% 54.57%

Gross Profit Margin Operating Profit Margin EBITDA Margin EBT Margin Net profit Margin Contribution Margin Return on Asset Return on common equity 43.80% Return on Total Equity 43.80% Return on Total Capital 82.19%Table 3

EBIT as percentage of sales is good and there has been significant change in it during last 4 years from 13.41 in 2005 to 17.75 in 2009. There has been a significant change in operating Margin as compared to the last 4 years, inyear 2009 it is 18.44% as compared to 2005 when it was 14.73%. The profit generating ability is not so good as visible from the fall in ROCE to 59.02% in year 2009 from 68.06% in 2008, perhaps because of the increased in debt (change in capital structure) and decreased in current liability (non interest bearing item).

Market Based Return48 Richa Agarwal, PGDM Finance (09-11)



2010

Mar05 Avg. P/E Ratio Avg. Market Cap (Rs. Crore) Price to Book Value EPSTable 4

Mar06

Mar07 28.9 8154.2 17.7 3.3

Mar08 26.7 8899.4 14.7 3.9

Mar09 20.7 8131.8 10 4.5

PER ratio for Dabur is not so good with values over 25 in the year 2007 and 2008. But for this financial year it is 20.7 that mean it is decreasing the P/E ratio which is not a good symbol. Market capitalization of Dabur has decreased from 2008 which was 8899.4 to 8131.8 in 2009 therefore Management need to look forward to increase their market capitalization.

3.5 Share Price Analysis (20 DMA and 50 DMA)

From the above Moving Average Chart we can see that in the month of January to June Daburprice line has shown upward trend as the price was moving along with 20 days moving average. In the mid of march, 20 days moving average is suppose to cut 50 days moving average but it does not happen if suppose it has cut the 50 days moving average then the price should have fall. As from April the gap between 20 days moving average and 50 days moving average goes on increasing therefore from April to June price of Dabur stock has also gone up. But in the month of October 09, February 10 and April 10, we could see 20 days average and 50 days average line intersecting each other causing decrease in price in those periods. But the upward trend in the month of May 10 can forecast that the stock price of Dabur is going to raise further and it is seems that it will go further up recommending the buying of the stock of Dabur.

49




2010

P MERGER & ACQUISITION SIMULATION A Amrutanjan Healthcare Ltd. An Introduction R Merger Rationale Valuations T Valuation post merger Conclusion

3

50




2010

1. AARJN:IN LAST (INR)(as on 2010)

MRUTANJAN HEALTHCARE LTD. An Introduction

Amrutanjan Healthcare Ltd. with revenue of Rs. Rs 96.07 Crore (FY09) started in the year 1893 by the social reformer, journalist and freedom fighter,SENSEX:IND

Desodharaka" Sri.Nageswara Rao Pantulu Garu, and today it is one of the household names in South India. The Company's OTC (Over The Counter)segment's Gross Sales is higher by 12.5% atRs. 88.06 crores

PRICEJune 4,

Rs. 763

BSE Code NSE Code Bloomberg Code

590006 AMRUTANJ AN ARJN IN

while Company's FGD (FineChemicals Division) segment's sales is higher by8.6% at Rs.8.01 crores. Profit before extraordinary items is at Rs.

18.72crores, which is higher by 88% when compared tothe previous year. This achievement was possibleon account of higher interest income

FUNDAMENTALS

earnedon year.

investment

of

surplus

monies

and

betteroperational efficiency achieved during theShares (Millions) Market Cap(Millions) Earnings Price/Earnings ROE Beta vs. Sensex 3.03 2,330.4 290.5 2.65 154.8 0.648

While Amrutanjan Pain Balm (Yellow Balm) is the flagship brand of the company with a rich heritage of over 100 years.With a wide range of ayurvedic and allopathic products, Amrutanjan has helped millions of people relieve themselves from the pain and discomfort of headaches, colds, sprains, muscular pains, rheumatic pains and stands a real

51




2010

pain management specialist for its loyal customers.

52




2010

2. M

ERGER RATIONALE

One plus one makes three: this equation is the special alchemy of a merger or an acquisition.A merger happens when two firms agree to go forward as a single new company rather than remain separately owned and operated. This kind of action is more precisely referred to as a "merger of equals". The firms are often of about the same size. Both companies' stocks are surrendered and new company stock is issued in its place. For example, in the 1999 merger of Glaxo Wellcome and SmithKline Beecham, both firms ceased to exist when they merged, and a new company, GlaxoSmithKline, was created. In practice, however, actual mergers of equals don't happen very often. Usually, one company will buy another and, as part of the deal's terms, simply allow the acquired firm to proclaim that the action is a merger of equals, even if it is technically an acquisition. The key principle behind buying a company is to create shareholder value over and above that of the sum of the two companies. Two companies together are more valuable than two separate companies - at least, that's the reasoning behind M&A. This rationale is particularly alluring to companies when times are tough. Strong companies will act to buy other companies to create a more competitive, cost-efficient company. The companies will come together hoping to gain a greater market share or to achieve greater efficiency. Because of these potential benefits, target companies will often agree to be purchased when they know they cannot survive alone. Working on the same lines, following are the key rationales behind Acquisition of Amrutanjan Healthcare Ltd.

Synergy:After acquiring the firm, Dabur would have a greater value than the sum of its parts as a result of enhanced revenues and the cost base.

53




2010

Cost Reduction: Dabur would be able to reduce its fixed costs by removing duplicate departments or operations, lowering the costs of the company relative to the same revenue stream, thus increasing profit margins.

Entry to New Markets / Geographical Diversification:This would enable Dabur to expand regional presence as55% of Amrutanjans revenueis from south. These would complement Dabur's regional saliency, as Dabur has a higher revenues share coming from the markets in the north and the east.

Cross Selling: Following the strategy of pushing new products to current customers based on their past purchases, it is designed to widen the customer's reliance on the company and decrease the likelihood of the customer switching to a competitor.

Increase Product Range:By acquiring Dabur would be able to have the technical knowhow of pain relieving ointments hence would be able to increase their product range and add another segment to their product portfolio.

The acquisition also marks Dabur's entry into niche segments of pain relieving product segment providing it completely new area of growth which could be capitalized on in the future.

Empire Building: A bigger company to manage and hence more power.

54




2010

3. Vin Rs. Crores 200 7A Revenue 73.4

ALUATIONS

3.1 Financial Projections 3.1.1 Amrutanjan Healthcare Ltd.200 8A 200 9A 201 0E 113. 4 16. 2% 201 1E 131. 8 16.2 % 2012 E 153. 1 16.2 % 2013 E 177. 9 16.2 % 2014 E 206. 7 16.2 % 2015 E 237. 7 15.0 % 2016 E 273. 4 15.0 % 2017 E 314. 4 15.0 % 2018 E 361. 6 15.0 % 2019 E 415. 8 15.0 %

75.0

97.6 30.2 %

Growth (YoY) %

2.2%

Personnel Expenses Operating and Other Expenses EBITDA

9.0

9.4

10.9

12.7

14.8

17.2 104. 0 30.4 19.8 % 2.1 28.2 18.4 %

19.9 120. 9 35.3 19.8 % 2.3 33.0 18.5 %

23.2 140. 4 41.0 19.8 % 2.5 38.5 18.6 %

26.6 161. 5 47.1 19.8 % 2.6 44.5 18.7 %

30.6 185. 7 54.2 19.8 % 3.0 51.2 18.7 %

35.2 213. 6 62.3 19.8 % 3.2 59.2 18.8 %

40.5 245. 6 71.7 19.8 % 3.3 68.4 18.9 %

46.6 282. 5 82.5 19.8 % 3.8 78.6 18.9 %

48.0 16.4 22.4 % 1.5 14.9

53.3 12.2 16.3 % 1.5 10.7 14.3 %

66.3 20.4 20.9 % 1.5 18.9 19.3 %

77.0 22.5 19. 8% 1.8 20.7 18.3 %

89.5 26.1 19.8 % 1.9 24.3 18.4 %

EBITDA margin (%) Depreciation EBIT

EBIT margin (%) Transfer to Revaluation Reserve

0

0.0 0.74 7

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Financial Expenses Financial Expenses/ Revenue PBT Taxes Effective Tax Rate

0.54

0.15

0.7 0.6 % 20.0 7.0 34.9

0.8 0.6 % 23.5 8.3 35.4

0.7

1.0

1.1

1.2

1.5

1.7

1.9

2.2

0.7% 14.3 4.8 33.3

1.0% 10.0 3.7 36.5

0.2% 18.7 6.5 34.9

0.5% 27.5 9.7 35.1

0.6% 32.0 11.2 35.1

0.5% 37.4 13.2 35.2

0.5% 43.3 15.2 35.1

0.5% 49.7 17.5 35.2

0.5% 57.5 20.2 35.2

0.5% 66.5 23.4 35.2

0.5% 76.4 26.9 35.2

55




2010

% PAT 9.6 13.0 %

% 6.3

% 12.2 12.5 %

% 13.0 11.5 %

% 15.2 11.5 %

% 17.9 11.7 %

% 20.7 11.7 %

% 24.2 11.7 %

% 28.1 11.8 %

% 32.2 11.8 %

% 37.3 11.9 %

% 43.1 11.9 %

% 49.5 11.9 %

Net Income margin (%)

8.5%

Table 5

3.1.2 Dabur India Ltd.in Rs. Crores 2007 A 2,069. 0 2008 A 2,395. 1 2009 A 2,852. 3 2010 E 3,422. 7 20.0 % 2011 E 4,107. 3 2012 E 4,928. 7 2013 E 5,914. 5 2014 E 7,097. 4 2015 E 8,303. 9 17.0 % 2016 E 9,715. 6 2017 E 11,367 .2 2018 E 13,299 .7 2019 E 15,560 .6

Revenue

Growth (YoY) %

15.8%

19.1%

20.0%

20.0%

20.0%

20.0%

17.0%

17.0%

17.0%

17.0%

Personnel Expenses Operating and Other Expenses

166.7 1,533. 2

199.3 1,758. 1

234.7 2,104. 7

281.6 2,525. 6

338.0 3,030. 7

405.6 3,636. 8

486.7 4,364. 2 1,066 .6

584.0 5,237. 1 1,279 .9

683.3 6,127. 4 1,497 .5

799.4 7,169. 0 1,752 .0

935.4 8,387. 7 2,049 .9

1,094. 4 9,813. 6 2,398 .3

1,280. 4 11,482 .0 2,806. 1

EBITDA EBITDA margin (%) Depreciation

369.2

437.7

512.9

617.2 18.0 % 54.3

740.7

888.8

17.8% 34.3

18.3% 36.4

18.0% 44.9

18.0% 62.8

18.0% 72.1

18.0% 82.0

18.0% 103.6 1,176 .3 16.6%

18.0% 114.8 1,382 .7 16.7%

18.0% 126.4 1,625 .6 16.7%

18.0% 138.5 1,911 .3 16.8%

18.0% 162.2 2,236 .2 16.8%

18.0% 189.7 2,616. 3 16.8%

EBIT EBIT margin (%) Transfer to Revaluation Reserve Financial Expenses Financial / Revenue

334.9 16.2%

401.3 16.8%

468.1 16.4%

562.9 16.4%

677.9 16.5%

816.7 16.6%

984.6 16.6%

0.0 15.4 0.7%

0.0 16.8 0.7%

0.0 23.2 0.8%

0.0 25.8 0.8%

0.0 31.0 0.8%

0.0 38.2 0.8%

0.0 45.0 0.8%

0.0 54.2 0.8% 1,122 .0 139.5

0.0 63.6 0.8% 1,319 .0 163.5

0.0 74.2 0.8% 1,551 .4 192.6

0.0 86.9 0.8% 1,824 .4 226.5

0.0 101.7 0.8% 2,134 .4 264.9

0.0 118.9 0.8% 2,497. 4 310.0

PBT Taxes Effective Tax Rate

319.5 37.3

384.5 50.6

444.8 54.0

537.1 66.2

646.8 81.2

778.5 96.1

939.5 116.6

11.7%

13.2%

12.1%

12.3%

12.6%

12.3%

12.4%

12.4%

12.4% 1,155 .5

12.4% 1,358 .8

12.4% 1,597 .9

12.4% 1,869 .6

12.4% 2,187. 4

PAT Net Income margin (%)

282.2

333.8

390.8

470.9

565.6

682.4

822.9

982.5

13.6%

13.9%

13.7%

13.8%

13.8%

13.8%

13.9%

13.8%

13.9%

14.0%

14.1%

14.1%

14.1%

56




2010

Table 6

3.2 Beta Calculation

Company HUL Marico Godrej Colgate GSK P&G Emami DABUR

Levered Beta 0.541 0.492 0.501 0.358 0.578 0.519 0.628 0.605

Debt 421.9 5 308.5 3 62.89 4.69 0 0 440.0 8 138.9 8

Equity 2,061. 51 367.68 536.92 216.3 905.1 440.04 296.03 818.80 9

D/E Ratio 0.20 0.84 0.12 0.02 0.00 0.00 1.49 0.17

Unlevered Beta 0.46 0.29 0.46 0.35 0.58 0.52 0.29 0.53 0.44 0.62

Levered Beta

0.49

Sectoral Unlevered Beta Adjusted betaTable 7

3.3 WACC Calculation 3.3.1. Amrutanjan Healthcare Ltd.12.7 % 7.6% 4.5% 4.5%

Cost of Equity Risk free rate (Yield on 10 - yr Govt. of India bond) Equity Risk Premium for U.S. India - Country Risk Premium57 Richa Agarwal, PGDM Finance (09-11)



2010

India - Equity Risk Premium Unlevered Beta Levered Beta Effective Cost of Debt Cost of Debt Tax Rate D/E Ratio (FY 2009)

9.0% 0.4 0.6 5.8% 7.3% 20.0% 0.36x 10.9 %

WACCTable 8

3.3.2 Dabur India Ltd.12.5 % 7.6% 4.5% 4.5% 9.0% 0.4 0.5 8.2% 10.2 % 20.0% 0.32x 11.4 %

Cost of Equity Risk free rate (Yield on 10 - yr Govt. of India bond) Equity Risk Premium for U.S. India - Country Risk Premium India - Equity Risk Premium Unlevered Beta Levered Beta Effective Cost of Debt Cost of Debt Tax Rate D/E Ratio (FY 2009)

WACCTable 9

58




2010

3.4 CAPEX and Net working capital Projection 3.4.1 Amrutanjan Healthcare Ltd.

59




2010

in Rs. Crores Debt Cash and Cash Equivalents Current Assets Current Liabilities Net Working Capital Shareholder s' Equity Net Working Capital Turnover Net Working Capital Days Table 10 a

2007 A 9.8

200 8A 12.5

200 9A 34.2

201 0E

201 1E

201 2E

201 3E

201 4E

201 5E

201 6E

201 7E

201 8E

201 9E

7.8 25.8 8.2 19.6 23.2

2.7 25.2 9.5 25.4 25.5

67.5 92.4 13.8 45.3 93.8 52.7 61.2 71.1 82.6 96.0 110. 4 127. 0 146. 0 168. 0 193. 1

3.7 97.5

2.9 123. 7

2.2 169. 5

2.2 169. 5

2.2 169. 5

2.2 169. 5

2.2 169. 5

2.2 169. 5

2.2 169. 5

2.2 169. 5

2.2 169. 5

2.2 169. 5

2.2 169. 5

in Rs. Crores Net PPE/rev enue (%) Net PPE Depreci ation/n et PPE Depreci ation CAPEX

20 07 A

20 08 A

20 09 A

20 10 E

20 11 E

20 12 E

20 13 E

20 14 E

20 15 E

20 16 E

20 17 E

20 18 E

20 19 E

17. 1% 12. 6 12. 1% 1.5 14.

25. 7% 19. 3 7.6 % 1.5 8.2

16. 3% 15. 9 9.3 % 1.5 -

16. 3% 18. 5 9.7 % 1.8 4.4

16. 0% 21. 1 8.8 % 1.9 4.5

15. 0% 23. 0 9.3 % 2.1 4.0

14. 0% 24. 9 9.3 % 2.3 4.2

13. 0% 26. 9 9.1 % 2.5 4.4

12. 0% 28. 5 9.2 % 2.6 4.3

12. 0% 32. 8 9.2 % 3.0 7.3

11. 0% 34. 6 9.2 % 3.2 5.0

10. 0% 36. 2 9.2 % 3.3 4.9

10. 0% 41. 6 9.2 % 3.8 9.2

60




2010

1Table 10 b

1.9

3.4.2 Dabur India Ltd.in Rs. Crores 200 7A 200 8A 200 9A 20 10 E 20 11 E 20 12 E 20 13 E 20 14 E 20 15 E 20 16 E 201 7E 201 8E 201 9E

Debt Cash and Cash Equivalents Current Assets Current Liabilities Net Working Capital Shareholde rs' Equity Net Working Capital Turnover Net Working Capital Days

185. 8

126. 4

258. 1

60.7 640. 5 451. 8

76.6 773. 9 732. 1

148. 4 950. 8 807. 6 1,0 07. 5 1,1 78. 7 1,3 79. 1

313. 8 479 .6

91.7 617 .6

252. 8 818. 8

30 3.4

36 4.0

43 6.8

52 4.2

62 9.0

73 6.0

86 1.1

6.6

26. 1

11.3

11. 3

11. 3

11. 3

11. 3

11. 3

11. 3

11. 3

11. 3

11. 3

11. 3

55. 4

14. 0

32.3

32. 3

32. 3

32. 3

32. 3

32. 3

32. 3

32. 3

32. 3

32. 3

32. 3

Table 11 a

in Rs. Crores

20 07 A

200 8A

20 09 A

201 0E

20 11 E

201 2E

201 3E

201 4E

201 5E

201 6E

201 7E

201 8E

201 9E

61




2010

Net PPE/re venues

18. 3%

19.4 %

19. 6%

19. 1%

19. 0%

18. 0%

17. 0% 1,0 05. 5

18.0 %

17.0 %

16.0 %

15.0 %

15. 0% 1,9 94. 9

15. 0% 2,3 34. 1

Net PPE Deprec iation/ net PPE Deprec iation

37 9.2

465. 3

55 9.2

654 .4

78 0.4

887 .2

1,27 7.5

1,41 1.7

1,55 4.5

1,70 5.1

9.0 % 34. 3

7.8%

8.0 % 44. 9

8.3 % 54. 3

8.0 % 62. 8

8.1 % 72. 1

8.2 % 82. 0

8.1% 103. 6

8.1% 114. 8

8.1% 126. 4

8.1% 138. 5

8.1 % 162 .2

8.1 % 189 .7

36.4

Table 11 b

3.5 DCF Valuation 3.5.1 Amrutanjan Healthcare Ltd.

in Rs. Crores EBIT Less: Taxes Add: Depreciation and Amortization Less: Increase in Net Working Capital Less: Capex FCF

20 07 A 15 5

20 08 A 11 4

20 09 A 19 7

20 10 E 21 4

20 11 E 24 5

20 12 E 28 6

20 13 E 33 7

20 14 E 39 8

20 15 E 45 9

20 16 E 51 10

20 17 E 59 12

20 18 E 68 14

201 9E 79 16

2

1

1

2

2

2

2

2

3

3

3

3

4

20 14 -22

6 8 -5

20 -2 -4

7 4 7 1.0 0 7

9 4 8 0.9 0 7

10 4 11 0.8 1 9

12 4 13 0.7 3 9

13 4 15 0.6 6 10

14 4 20 0.6 0 12

17 7 20 0.5 4 11

19 5 27 0.4 9 13

22 5 31 0.4 4 14

25 9 32

Discount Factor Discounted FCF

0.40 13

62




2010

Sum of Discounted FCF (1)

10 4

Terminal Growth Rate

5.0 % 57 9 22 9

Terminal Value Discounted Terminal Value (2)

Valuation in Rs. Crores (1) + (2)

33 3 36 6. 5 68. 7%

Equity Value Terminal Value as a % of Overall Value

Table 12

3.5.2 Dabur India Ltd.2007 A 2008 A 200 9A 2010 E 20 11 E 201 2E 201 3E 201 4E 1,17 6 235 201 5E 1,38 3 276 201 6E 1,62 6 324 201 7E 1,91 1 381 201 8E 2,23 6 446 201 9E 2,61 6 522

in Rs. Crores

EBIT Less: Taxes Add: Depreciation and Amortization Less: Increase in Net Working Capital Less: Capex

335 37

401 51

468 54

563 112

678 135

817 163

985 196

34

36

45

54

63

72

82

104

115

126

139

162

190

314 413

-222 123

161 139

51 150

61 189

73 179

87 200

105 376

107 249

125 269

146 289

171 452

200 529

63




2010

FCF

-395

487

159

305

35 6 0.9 0 32 0

474

582 0.7 2

565

866

1,0 33

1,2 33

1,3 29

1,5 55

Discount Factor

1.00

0.81

0.65

0.58

0.52

0.47

0.42

0.38

Discounted FCF Sum of Discounted FCF (1)

305

382

421

367

505

541

580

561

589

4,571

Terminal Growth Rate

5.0% 25,56 9

Terminal Value Discounted Terminal Value (2)

9,689

Valuation in Rs. Crores (1) + (2)

14,25 9 14149 .8 67.9 %

Equity Value Terminal Value as a % of Overall Value

Table 13

4. V64

ALUATION AFTER MERGER




2010

4.1 Financial Projectionsin Rs. Crores Revenue (Acquirer) Revenue (Target) 2007 A 2,069 .0 73.4 2,142 .4 5.0% 107.1 2,24 9.5 1,699 .9 57.0 1,756 .9 10.0 % 175.7 1,58 1.2 668. 4 29.7 % 632. 6 28.1 % 15.4 0.5 15.9 0.7% 616. 6 37.3 4.8 42.1 6.8% 574. 6 2008 A 2,395 .1 75.0 2,470 .0 5.0% 123.5 2,59 3.5 1,957 .4 62.8 2,020 .1 10.0 % 202.0 1,81 8.1 775. 4 29.9 % 737. 5 28.4 % 16.8 0.7 17.5 0.7% 720. 0 50.6 3.7 54.3 7.5% 665. 7 2009 A 2,852 .3 97.6 2,949 .9 5.0% 147.5 3,09 7.4 2,339 .4 77.3 2,416 .6 10.0 % 241.7 2,17 4.9 922. 4 29.8 % 876. 1 28.3 % 23.2 0.2 23.4 0.8% 852. 7 54.0 6.5 60.6 7.1% 792. 2 71.7 7.2% 930. 5 85.7 7.3% 1,09 3.6 99.2 7.2% 1,28 3.7 117. 2 7.2% 1,51 1.1 138. 3 7.2% 1,77 9.2 159. 1 7.2% 2,05 2.0 183. 2 7.2% 2,35 9.8 25.9 0.7% 1,00 2.2 30.5 0.7% 1,17 9.3 36.4 0.7% 1,38 2.9 42.2 0.7% 1,62 8.3 49.7 0.7% 1,91 7.5 57.3 0.7% 2,21 1.1 65.7 0.7% 2,54 3.0 75.6 0.7% 2,924. 5 87.0 0.7% 3,363. 0 100.0 0.7% 3,878. 9 2010 E 3,349 .2 113.4 3,462 .6 5.0% 173.1 3,63 5.8 2,807 .2 89.8 2,897 .0 10.0 % 289.7 2,60 7.3 1,08 3.3 29.8 % 1,02 8.1 28.3 % 2011 E 3,932 .8 131.8 4,064 .6 5.0% 203.2 4,26 7.8 3,368 .7 104.3 3,473 .0 10.0 % 347.3 3,12 5.7 1,27 1.8 29.8 % 1,20 9.8 28.3 % 2012 E 4,618 .0 153.1 4,771 .1 5.0% 238.6 5,00 9.7 4,042 .4 121.2 4,163 .6 10.0 % 416.4 3,74 7.2 1,49 2.9 29.8 % 1,41 9.3 28.3 % 2013 E 5,422 .6 177.9 5,600 .5 5.0% 280.0 5,88 0.6 4,850 .9 140.8 4,991 .7 10.0 % 499.2 4,49 2.5 1,75 2.4 29.8 % 1,67 0.5 28.4 % 2014 E 6,367 .4 206.7 6,574 .1 5.0% 328.7 6,90 2.9 5,821 .1 163.6 5,984 .7 10.0 % 598.5 5,38 6.2 2,05 7.1 29.8 % 1,96 7.2 28.5 % 2015 E 7,322 .5 237.7 7,560 .3 5.0% 378.0 7,93 8.3 6,810 .6 188.2 6,998 .8 10.0 % 699.9 6,29 8.9 2,36 5.6 29.8 % 2,26 8.4 28.6 % 2016 E 8,420 .9 273.4 8,694 .3 5.0% 434.7 9,12 9.0 7,968 .4 216.4 8,184 .8 10.0 % 818.5 7,36 6.3 2,72 0.5 29.8 % 2,60 8.7 28.6 % 2017 E 9,684. 0 314.4 9,998. 5 5.0% 499.9 10,49 8.4 9,323. 1 248.8 9,571. 9 10.0% 957.2 8,614. 7 3,128. 5 29.8% 3,000. 1 28.6% 2018 E 11,136 .7 361.6 11,498 .2 5.0% 574.9 12,07 3.1 10,908 .0 286.2 11,194 .2 10.0% 1,119. 4 10,07 4.7 3,597. 8 29.8% 3,450. 0 28.6% 2019 E 12,807 .2 415.8 13,223 .0 5.0% 661.1 13,88 4.1 12,762 .4 329.1 13,091 .4 10.0% 1,309. 1 11,78 2.3 4,137. 5 29.8% 3,978. 9 28.7%

Revenue Synergie Revenue synergie Cost (Acquirer) Cost (Target)

Cost Synergie Cost Synergie EBITDA EBIDTA Margin % EBIT EBIT Margin % Financial Expense (Acquirer) Financial Expense (Target) Financial Expense Financial Expense / Revenue PBT Tax (Acquirer) Tax (Target) Tax Effective Tax Rate PAT

210.7 7.2% 2,713. 8

242.2 7.2% 3,120. 9

279.4 7.2% 3,599. 5

Table 14

65




2010

4.2 WACC CalculationCost of Equity Risk free rate (Yield on 10 - yr Govt. of India bond) Equity Risk Premium for U.S. India - Country Risk Premium India - Equity Risk Premium Unlevered Beta Levered Beta Effective Cost of Debt Cost of Debt Tax Rate D/E Ratio (FY 2009) WACCTable 15

12.4% 7.6% 4.5% 4.5% 9.0% 0.4 0.5 8.2% 10.2% 20.0% 0.32x 11.4%

66




2010

4.3 CAPEX and Net Working Capital Projectionin Rs. Crores 200 7A 185. 8 9.8 195. 6 60.7 7.8 68.5 640. 5 25.8 666. 3 451. 8 8.2 460. 0 333. 4 6.7 54.1 479. 6 23.2 502. 8 22.3 % 379. 2 12.6 17.4 % 391. 7 34.3 1.5 9.1% 35.8 200 8A 126. 4 12.5 138. 9 76.6 2.7 79.3 773. 9 25.2 799. 1 732. 1 9.5 741. 6 117. 1 22.1 16.5 617. 6 25.5 643. 0 24.8 % 465. 3 19.3 18.7 % 484. 5 36.4 1.5 7.8% 37.9 130. 7 2009 A 201 0E 2011 E 2012 E 2013 E 2014 E 2015 E 2016 E 2017 E 2018 E 2019 E

Debt(Acquirer) Debt(Target) Debt Cash and Cash Equivalents (Acquirer) Cash and Cash Equivalents (Target) Cash and Cash Equivalents Current Assets (Acquirer) Current Assets (Target) Current Assets Current Liabilities (Acquirer) Current Liabilities (Target) Current Liabilities Net Working Capital Net working capital turnover Net working capital days Shareholders' Equity (Acquirer) Shareholders' Equity (Target) Shareholders' Equity Shareholders' Equity / Revenue Fixed Asset (Acquirer) Fixed Asset (Target) Net Fixed Asset/ Revenue Total Fixed Asset Depreciation (Acquirer) Depreciation (Target) Depreciation / total fixed asset Total Depreciation CAPEX

258.1 34.2 292.3 148.4 67.5 215.9 950.8 92.4 1,04 3.2 807.6 13.8 821. 4 298. 1 10.4 35.1 818.8 93.8 912. 6 29.5 % 559.2 15.9 18.6 % 575.1 44.9 1.5 8.1% 46.3 136. 9 18.2 % 662. 5 54.3 1.8 8.3 % 55.2 142. 6 18.0 % 768.2 62.8 1.9 8.1% 62.0 167. 7 18.0 % 901.7 72.1 2.1 8.2% 73.5 207. 1 17.0 % 999.7 82.0 2.3 8.2% 81.9 179. 8 16.0 % 1,104 .5 103.6 2.5 8.1% 89.9 194. 7 15.0 % 1,190 .7 114.8 2.6 8.2% 97.2 183. 5 15.0 % 1,369 .4 126.4 3.0 8.2% 111.8 290. 4 15.0 % 1,574 .8 138.5 3.2 8.2% 128.4 333. 8 15.0 % 1,811 .0 162.2 3.3 8.2% 147.8 384. 0 14.0 % 1,943 .8 189.7 3.8 8.2% 158.6 291. 4 928. 4 25.5 % 1,13 5.1 26.6 % 1,36 2.6 27.2 % 1,55 5.1 26.4 % 1,84 6.3 26.7 % 2,12 7.2 26.8 % 2,43 4.1 26.7 % 2,80 6.8 26.7 % 3,22 7.4 26.7 % 3,70 8.5 26.7 %

351. 0 10.4 35.2

338. 5 12.6 29.0

454. 4 11.0 33.1

522. 5 11.3 32.4

595. 7 11.6 31.5

703. 5 11.3 32.3

802. 6 11.4 32.1

919. 8 11.4 32.0

1,06 3.0 11.4 32.1

1,21 9.9 11.4 32.1

Table 16

67




2010

4.4 DCF Valuationin Rs. Crores EBIT Less: Taxes Add: Depreciation and Amortization Less: Increase in Net Working Capital Less: Capex FCF Discount Factor Discounted FCF Sum of Discounted FCF (1) Terminal Growth Rate Terminal Value Discounted Terminal Value (2) Deal Value Valuation in Rs. Crores (1) + (2) 2007 A 633 42 36 333 0 293 2008 A 738 54 38 -216 131 807 200 9A 876 61 46 181 137 544 2010 E 1,028 205 55 53 143 683 1.00 683 8,917 5.0% 47,70 3 18,09 3 367 26,64 4 2656 7.4 67.9 % 201 1E 1,21 0 241 62 -12 168 875 0.90 786 201 2E 1,41 9 283 74 116 207 887 0.81 715 201 3E 1,67 1 333 82 68 180 1,1 71 0.72 848 201 4E 1,96 7 392 90 73 195 1,3 97 0.65 908 201 5E 2,26 8 453 97 108 183 1,6 22 0.58 946 201 6E 2,60 9 520 112 9

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