Project on

Discounted cash flows for NTPC company

SYMBIOSIS INSTITUTE OF BUSINESS MANAGEMENT(Hyderabad)

Submitted to

Prof.Prabhakar Sir

Shreya Banerjee Shahid Hassan

Balance SheetMar '14 Mar '13 Mar '12 Mar '11 Mar '10

Sources Of FundsTotal Share Capital 8,245.46 8,245.46 8,245.46 8,245.46 8,245.50Equity Share Capital 8,245.46 8,245.46 8,245.46 8,245.46 8,245.50Share Application Money 0 0 0 0 0Preference Share Capital 0 0 0 0 0Reserves 77,569.86 72,142.05 65,045.71 59,646.79 55,478.60Networth 85,815.32 80,387.51 73,291.17 67,892.25 63,724.10Secured Loans 12,311.00 9,404.05 9,156.30 30,558.47 9,079.90Unsecured Loans 50,094.75 43,849.61 36,751.97 9,177.21 28,717.10Total Debt 62,405.75 53,253.66 45,908.27 39,735.68 37,797.00Total Liabilities 1,48,221.07 1,33,641.17 1,19,199.44 1,07,627.93 1,01,521.10Application Of FundsGross Block 1,16,855.56 1,03,124.82 81,723.48 72,665.61 66,663.80Less: Revaluation Reserves 0 0 0 0 0Less: Accum. Depreciation 44,744.73 40,188.72 36,465.12 33,429.65 32,088.80Net Block 72,110.83 62,936.10 45,258.36 39,235.96 34,575.00Capital Work in Progress 44,888.67 37,109.42 41,827.86 35,495.33 32,290.60Investments 9,757.86 10,760.10 11,206.38 12,344.84 14,807.10Inventories 5,373.35 4,057.19 3,702.85 3,639.12 3,347.70Sundry Debtors 5,220.08 5,365.49 5,832.51 1,434.96 6,651.40Cash and Bank Balance 15,311.37 16,867.70 16,146.11 16,185.26 634Total Current Assets 25,904.80 26,290.38 25,681.47 21,259.34 10,633.10Loans and Advances 26,892.02 24,020.46 16,863.73 17,403.41 6,357.10Fixed Deposits 0 0 0 0 13,825.50Total CA, Loans & Advances 52,796.82 50,310.84 42,545.20 38,662.75 30,815.70Deferred Credit 0 0 0 0 0Current Liabilities 23,151.15 19,730.83 17,819.04 15,358.52 7,896.80Provisions 8,181.96 7,744.46 3,819.32 2,752.43 3,070.50Total CL & Provisions 31,333.11 27,475.29 21,638.36 18,110.95 10,967.30Net Current Assets 21,463.71 22,835.55 20,906.84 20,551.80 19,848.40Miscellaneous Expenses 0 0 0 0 0Total Assets 1,48,221.07 1,33,641.17 1,19,199.44 1,07,627.93 1,01,521.10Contingent Liabilities 81,582.53 73,660.54 53,173.05 44,055.80 40,044.00Book Value (Rs) 104.08 97.49 88.89 82.34 77.28

Balance Sheet (Contd..)Mar '09 Mar '08 Mar '07 Mar '06 Mar '05

Sources Of FundsTotal Share Capital 8,245.50 8,245.50 8,245.50 8,245.50 8,245.50Equity Share Capital 8,245.50 8,245.50 8,245.50 8,245.50 8,245.50Share Application Money 0 0 0 0 0Preference Share Capital 0 0 0 0 0Reserves 50,749.40 46,021.90 40,351.30 36,713.20 33,530.80Networth 58,994.90 54,267.40 48,596.80 44,958.70 41,776.30Secured Loans 8,969.60 7,314.70 7,479.60 6,173.50 4,778.10Unsecured Loans 25,598.20 19,875.90 17,661.50 14,464.60 12,647.10Total Debt 34,567.80 27,190.60 25,141.10 20,638.10 17,425.20Total Liabilities 93,562.70 81,458.00 73,737.90 65,596.80 59,201.50Application Of FundsGross Block 62,353.00 53,368.00 50,604.20 45,917.60 42,996.10Less: Revaluation Reserves 0 0 0 0 0Less: Accum. Depreciation 29,415.30 27,274.30 25,079.20 22,950.10 20,791.40Net Block 32,937.70 26,093.70 25,525.00 22,967.50 22,204.70Capital Work in Progress 26,404.90 22,478.30 16,962.30 13,756.00 10,038.60Investments 13,983.50 15,267.20 16,094.30 19,289.10 20,797.70Inventories 3,243.40 2,675.70 2,510.20 2,340.50 1,777.70Sundry Debtors 3,584.20 2,982.70 1,252.30 867.8 1,374.70Cash and Bank Balance 271.8 473 750.1 176.8 367.3Total Current Assets 7,099.40 6,131.40 4,512.60 3,385.10 3,519.70Loans and Advances 7,826.10 9,936.20 8,781.70 6,555.10 5,491.10Fixed Deposits 15,999.80 14,460.20 12,564.50 8,294.60 5,711.00Total CA, Loans & Advances 30,925.30 30,527.80 25,858.80 18,234.80 14,721.80Deferred Credit 0 0 0 0 0Current Liabilities 7,439.20 5,548.40 5,422.20 4,910.30 5,884.60Provisions 3,249.50 7,360.60 5,280.30 3,740.30 2,676.70Total CL & Provisions 10,688.70 12,909.00 10,702.50 8,650.60 8,561.30Net Current Assets 20,236.60 17,618.80 15,156.30 9,584.20 6,160.50Miscellaneous Expenses 0 0 0 0 0Total Assets 93,562.70 81,458.00 73,737.90 65,596.80 59,201.50Contingent Liabilities 66,083.20 29,361.80 25,218.80 16,429.80 16,680.00Book Value (Rs) 71.55 65.81 58.94 54.53 50.67

Profit and LossMar '14 Mar '13 Mar '12 Mar '11 Mar '10

Income

Sales Turnover 72,018.93 65,673.93 62,052.23 55,062.65 46,623.60

Excise Duty 0 0 0 0 245.9

Net Sales 72,018.93 65,673.93 62,052.23 55,062.65 46,377.70

Other Income 2,688.89 4,785.69 2,778.42 2,344.65 2,872.80

Stock Adjustments 0 0 0 0 0

Total Income 74,707.82 70,459.62 64,830.65 57,407.30 49,250.50

Expenditure

Raw Materials 47.6 46.35 45.24 31.33 31.1

Power & Fuel Cost 46,510.29 41,661.34 42,171.65 35,796.37 29,689.10

Employee Cost 3,867.99 3,360.12 3,090.48 2,789.71 2,946.80

Other Manufacturing Expenses 0 0 0 0 1,096.60

Selling and Admin Expenses 0 0 0 0 578.5

Miscellaneous Expenses 3,815.67 3,521.78 3,007.36 4,472.36 436.4

Preoperative Exp Capitalised 0 0 0 0 -866.9

Total Expenses 54,241.55 48,589.59 48,314.73 43,089.77 33,911.60

Operating Profit 17,777.38 17,084.34 13,737.50 11,972.88 12,466.10

PBDIT 20,466.27 21,870.03 16,515.92 14,317.53 15,338.90

Interest 2,406.59 1,924.36 1,711.64 1,420.96 1,861.90

PBDT 18,059.68 19,945.67 14,804.28 12,896.57 13,477.00

Depreciation 4,142.19 3,396.76 2,791.70 2,485.69 2,650.10

Other Written Off 0 0 0 0 4.3

Profit Before Tax 13,917.49 16,548.91 12,012.58 10,410.88 10,822.60

Extra-ordinary items -12.84 29.72 313.58 1,638.72 616.1

PBT (Post Extra-ord Items) 13,904.65 16,578.63 12,326.16 12,049.60 11,438.70

Tax 2,929.91 3,959.24 3,102.43 2,947.01 2,682.70

Reported Net Profit 10,974.74 12,619.39 9,223.73 9,102.59 8,728.20

Total Value Addition 54,193.95 48,543.24 48,269.49 43,058.44 33,880.50

Preference Dividend 0 0 0 0 0

Equity Dividend 4,741.15 4,741.16 3,298.19 3,133.26 3,133.20

Corporate Dividend Tax 804.74 781.87 527.92 514.77 527.6

Per share data (annualised)

Shares in issue (lakhs) 82,454.64 82,454.64 82,454.64 82,454.64 82,454.64

Earning Per Share (Rs) 13.31 15.3 11.19 11.04 10.59

Equity Dividend (%) 57.5 57.5 40 38 38

Book Value (Rs) 104.08 97.49 88.89 82.34 77.28

Profit and Loss statement(Contd..)Mar '09 Mar '08 Mar '07 Mar '06 Mar '05

IncomeSales Turnover 42,196.80 37,302.40 32,817.30 26,318.60 22,565.00Excise Duty 221.6 211.4 185.6 175.7 0Net Sales 41,975.20 37,091.00 32,631.70 26,142.90 22,565.00Other Income 3,012.80 3,119.70 2,875.60 2,897.90 2,438.60Stock Adjustments 0 0 0 0 0Total Income 44,988.00 40,210.70 35,507.30 29,040.80 25,003.60ExpenditureRaw Materials 31 26.8 23.7 25 17.9Power & Fuel Cost 27,292.30 22,160.70 19,947.60 16,497.10 13,804.10Employee Cost 2,897.60 2,229.30 1,362.60 1,137.50 997.1Other Manufacturing Expenses 940 920 842.9 705.1 586.7Selling and Admin Expenses 473.2 389.8 410.8 353.2 -284.9Miscellaneous Expenses 394.9 368.2 292.4 247.2 205.8Preoperative Exp Capitalised -637.4 -544.7 -418.4 -256.4 -74.8Total Expenses 31,391.60 25,550.10 22,461.60 18,708.70 15,251.90Operating Profit 10,583.60 11,540.90 10,170.10 7,434.20 7,313.10PBDIT 13,596.40 14,660.60 13,045.70 10,332.10 9,751.70Interest 1,737.00 1,982.20 2,055.70 2,004.60 1,701.60PBDT 11,859.40 12,678.40 10,990.00 8,327.50 8,050.10Depreciation 2,364.50 2,138.50 2,075.40 2,047.70 1,958.40Other Written Off 3.6 3.1 9.9 1.3 0.4Profit Before Tax 9,491.30 10,536.80 8,904.70 6,278.50 6,091.30Extra-ordinary items 1,305.20 -114 134.2 633.7 574.7PBT (Post Extra-ord Items) 10,796.50 10,422.80 9,038.90 6,912.20 6,666.00Tax 2,554.70 2,994.20 2,163.70 1,082.40 834.8Reported Net Profit 8,201.30 7,414.80 6,864.70 5,820.20 5,807.00Total Value Addition 31,360.60 25,523.30 22,437.90 18,683.70 15,234.00Preference Dividend 0 0 0 0 0Equity Dividend 2,968.30 2,885.90 2,638.50 2,308.70 1,979.00Corporate Dividend Tax 501.7 490.5 389.6 323.8 268

Shares in issue (lakhs) 82,454.64 82,454.64 82,454.64 82,454.64 82,454.64Earning Per Share (Rs) 9.95 8.99 8.33 7.06 7.04Equity Dividend (%) 36 35 32 28 24

Book Value (Rs) 71.55 65.81 58.94 54.53 50.67

Cash Flow Statements

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

Net Profit Before Tax 13904.65 16578.63 12326.16 12049.6 10807.6

Net Cash From Operating Activities 15732.18 15495.17 13866.57 11085.03 10594.2

Net Cash (used in)/from

Investing Activities -13979.7 -14016.9 -11036.6 -7655.69-

10497.7

Net Cash (used in)/from Financing Activities -3308.99 -752.41 -2869.11 -1703.56 -1908.6

Net (decrease)/increase In Cash and Cash Equivalents -1556.33 725.87 -39.15 1725.78 -1812.1

Opening Cash & Cash Equivalents 16867.7 16141.83 16185.26 14459.48 16271.6

Closing Cash & Cash Equivalents 15311.37 16867.7 16146.11 16185.26 14459.5

Mar '09 Mar '08 Mar '07 Mar '06 Mar '05

Net Profit Before Tax 9467.8 10529.4 8896.5 6271.2 6068

Net Cash From Operating Activities 9688.1 10171.1 8065.3 6206.4 5047.3

Net Cash (used in)/from

Investing Activities -7500.4 -6203.8 -3145.8 -2713.6 -6417.9

Net Cash (used in)/from Financing Activities -849.3 -2348.7 -76.3 -1099.7 813.8

Net (decrease)/increase In Cash and Cash Equivalents 1338.4 1618.6 4843.2 2393.1 -556.8

Opening Cash & Cash Equivalents 14933.2 13314.6 8471.4 6078.3 6635.1

Closing Cash & Cash Equivalents 16271.6 14933.2 13314.6 8471.4 6078.3

Financial Modelling

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

Sales Turn Over72,018.9

365,673.9

362,052.2

355,062.6

546,623.6

0

Year on Year Growth 10% 6% 13% 18% 10%

Total Expenses54,241.5

548,589.5

948,314.7

343,089.7

733,911.6

0

Total Expenses/Sales 75% 74% 78% 78% 73%

Year On Year Growth of Expenses 12% 1% 12% 27% 8%

Net Fixed Assets72,110.8

362,936.1

045,258.3

639,235.9

634,575.0

0

Net Fixed Assets/Sales 100% 96% 73% 71% 74%

Depreciation 4,142.19 3,396.76 2,791.70 2,485.69 2,650.10Depreciation is how much upon netfixed assets 6% 5% 6% 6% 8%

Current Assets25,904.8

026,290.3

825,681.4

721,259.3

410,633.1

0

percentage of current assets upon sales 36% 40% 41% 39% 23%

39%

Current Liabilities23,151.1

519,730.8

317,819.0

415,358.5

2 7,896.80

percentage of current Liabilities upon sales 32% 30% 29% 28% 17%

32%

Working Capital 2,753.65 6,559.55 7,862.43 5,900.82 2,736.30

Net Profit10,974.7

412,619.3

9 9,223.73 9,102.59 8,728.20

15% 19% 15% 17% 19%

15%

Mar '09 Mar '08 Mar '07 Mar '06 Mar '05

Sales Turn Over 42,196.80 37,302.40 32,817.30 26,318.60 22,565.00

Year on Year Growth 13% 14% 25% 17%

Total Expenses 31,391.60 25,550.10 22,461.60 18,708.70 15,251.90

Total Expenses/Sales 74% 68% 68% 71% 68%

Year On Year Growth of Expenses 23% 14% 20% 23%

Net Fixed Assets 32,937.70 26,093.70 25,525.00 22,967.50 22,204.70

Net Fixed Assets/Sales 78% 70% 78% 87% 98%

Depreciation 2,364.50 2,138.50 2,075.40 2,047.70 1,958.40Depreciation is how much upon netfixed assets 7% 8% 8% 9% 9%

Current Assets 7,099.40 6,131.40 4,512.60 3,385.10 3,519.70

percentage of current assets upon sales 17% 16% 14% 13% 16%

Current Liabilities 7,439.20 5,548.40 5,422.20 4,910.30 5,884.60

percentage of current Liabilities upon sales 18% 15% 17% 19% 26%

Working Capital -339.80 583.00 -909.60 -1,525.20 -2,364.90

Net Profit 8,201.30 7,414.80 6,864.70 5,820.20 5,807.00

19% 20% 21% 22% 26%

Predicted Performance Of the Company

2015 2016 2017 2018 2019 2020

Estimated Sales 79941.01 87135.7 97591.99 107351.2 120233.3 133459

Estimated Year on Year Growth 11% 9% 12% 10% 12% 11%

Expected Expenses 60208.12 65626.85 73502.07 80852.28 90554.55 100515.6

EBITDA 19732.89 21508.85 24089.91 26498.91 29678.77 32943.44

How much % EBITDA of Estimated Sales 25% 25% 25% 25% 25% 25%

Expected Net Fixed Assets 69762.27 76040.87 85165.78 93682.35 104924.2 116465.9

Expected Depreciation 4303.19 4690.477 5253.334 5778.668 6472.108 7184.04

EBIT 65459.08 71350.39 79912.44 87903.69 98452.13 109281.9

Expected Current Assets 31176.99 33982.92 38060.88 41866.96 46891 52049.01

Expected Current Liabilities 25581.12 27883.43 31229.44 34352.38 38474.67 42706.88

Expected Working Capital 5595.871 6099.499 6831.439 7514.583 8416.333 9342.13

Expected Net Profit 11991.15 13070.36 14638.8 16102.68 18035 20018.85

Change in working Capital 503.6284 731.9399 683.1439 901.75 925.7966

Discounted Cash Flows

Lets us see the formulas to calculate Discounted Cash flows

Effective Tax rate 26%

Tax Shield = Interest Expense X Effective Tax Rate

Free Cash Flow = Net Income + Interest Expense - Net Capex - Changes in working Capital - Tax Shield

PV of FCF =FCF/(1+r)^t

WACC 9%

Terminal Growth rate 8%

TV = FCF in Last Year(1+ Terminal GrowthRate)/(WACC-Terminal GrowthRate)

PV of Terminal Value=Terminal Value/Last year Discounting Factor

DCF Value of Company=PV of Terminal Value+Sum of PV Of terminal Value

No of outstanding Shares=PAT/EPS824.548

5

DCF Per Share=DCF Value of a company/No of outstanding shares

Market Price 152.4

DCF Per Share = DCF Value of Company /No of Outstanding Shares

1)What is a Free Cash Flow?

A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base.

2) What is a Terminal Value?

The terminal value (continuing value or horizon value) is the present value at a future point in time of all future cash flows when we expect stable growth rate forever.

3)What is DCF Value of a Company?

Discounted cash flow (DCF) analysis uses future free cash flow projections and discounts them (most often using the weighted average cost of capital) to arrive at a present value, which is used to evaluate the potential for investment. If the value arrived at through DCF analysis is higher than the current cost of the investment, the opportunity may be a good one.

Discounted Cash Flow Working

2015 2016 2017 2018 2019

1 2 3 4 5

Sales 79941.01 87135.7 97591.99 107351.2 120233.3

Net Profit 11991.15 13070.36 14638.8 16102.68 18035

Interest Expense 2165.48 2210.5 2405.2 2410.54 2510.4

Net Capital Expenditure 12055.69 12036.61 13016.89 14979.71 15020.31

Change in Working Capital 503.6284 731.9399 683.1439 901.75 925.7966

Tax Shiled 563.0248 574.73 625.352 626.7404 652.704

Free Cash Flow 1034.289 1937.576 2718.612 2005.018 3946.589

Discounting Factors (1+r)^t 1.09 1.1881 1.295029 1.411582 1.538624

PV of Future FCF 948.8887 1630.819 2099.267 1420.405 2565.012

Sum of PV of FCF 8664.392

Terminal Value 277021.3

PV of Terminal Value 180044.8

DCF Value of Company 188709.2

No of Outstanding Shares Crores 824.5485

DCF Per Share 228.8637

As the Value arrived through DCF analysis is higher than the Market Price ,the Opportunity may be good

The above Calculation has been recorded in Xlsheet and is attached below for your reference