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Financial Analysis

The document compares the financial metrics of a company under two scenarios: the present situation and a share repurchase situation. Key findings include a decrease in net income and equity in the share repurchase scenario, but an increase in earnings per share (EPS) and return on equity (ROE). Overall, the valuation increased by 6.53% due to the share buyback, despite a rise in debt and changes in capital structure.

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6 views5 pages

Financial Analysis

The document compares the financial metrics of a company under two scenarios: the present situation and a share repurchase situation. Key findings include a decrease in net income and equity in the share repurchase scenario, but an increase in earnings per share (EPS) and return on equity (ROE). Overall, the valuation increased by 6.53% due to the share buyback, despite a rise in debt and changes in capital structure.

Uploaded by

b24071
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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TABLE 1

Particulars/Variables Present SituationShare Repurchase Situation


EBITDA 73860 73860
Depreciation and Amortization 9914 9914
EBIT 63946 63946
Interest 0 3375
Other income 13506 13506
EBT 77451 74077
Taxes 23821 22783.29
Net Income 53630 51293.71

TABLE 2
Particulars/Variables Present SituationShare Repurchase Situation
Market Rate (Rm) 10% 10%
Debt Rate (Rd) NA 6.75%
Risk Free Rate (Rf) 4.91% 4.91%
Return on stock (Rs) 7.76% 7.86%
Unlevered Beta (BU) 0.56 0.56
Levered Beta (BL) NA 0.58
Tax Rate = 30.76% 0.31 0.31
Weighted average of debt (Wd) 0.00 0.051
Weighted average of equity (We) 1.00 0.95
WACC 7.76% 7.64%

TABLE 3
Particulars/Variables Present SituationShare Repurchase Situation
Asset 592253 383253
Liability 103890 153890
Equity 488363 229363

TABLE 4
Particulars/Variables Present SituationShare Repurchase Situation
Number of Shares Outstanding 59052 45052
Debt 0 50000
Equity 488363 229363
D/E Ratio 0 0.22

TABLE 5
Particulars/Variables Present SituationShare Repurchase Situation
EPS 0.91 1.14
ROE 10.98% 22.36%
INTEREST COVERAGE NA 18.95
DEBT RATIO 0 0.13
Family Shareholding 62% (Given in the case) 81.27%
Non Family shareholding 38% 18.73%

TABLE 6
Particulars/Variables Present SituationShare Repurchase Situation
CASH FLOW FROM OPERATION 50039 51076.71
Valuation = CF(1+g)/WACC-g 1082685.7 1153391.1
% increase in valuation 0 6.53%
Remarks, if any

Rate= 6.75% for 50 Mn debt

Decreased because of interest


Tax Rate= 30.76%
Decreased because of interest payment.

Remarks, if any
Average return for S&P 500 was 10% during 2004 to 2006.
Rate of interest for debt.
Considering 5 years U.S Treasury Securities.
Rs = Rf + BL (Rm - Rf)

BL = Bu (1 + (1-T)Wd/We)
30.76% for 200; 40% will be from 2007
**Considering market value of equity (no. of shares * current market price($20.36)) = 50000/50000+917258.72**
**Considering market value of equity = 917258.72/(50000+917258.72)**
WACC = Rs * We + Rd * Wd * (1-Tax)

Remarks, if any
Decreased by $209 Mn
Increased by $50 Mn due to loan
Decreased by $259 Mn due to share buyback

Remarks, if any
Decreased by 14 Mn due to shares buyback.
Took a loan of $50 Mn for share buyback
Decreased by $259 Mn due to buyback
Capital structure changed due to buyback

Remarks, if any
Increased since outstanding shares decreased due to buyback with minor change in net income.
Increased since equity decreased with minor change in net income.
Quite high, good for the company.
Debt/ Total Asset, 0.13 is quite good for the company. Credit rating will be good for the company.
Family shares / Total outstanding shares; Non family shares decreased due to buy back of 14mn
Non family shares / Total outstanding shares decreased due to buyback of 14 Mn shares

Remarks, if any
EBITDA-Tax
Using 3% as growth rate, valuation has increased.
Valuation has increased by 6.53% due to shares buyback
+917258.72**

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