CORPORATE ANALYSIS AND

VALUATION
PROJECT

COMPANY - NEW MINERAL DEVELOPMENT

CORPORTION(NMDC)

By:
VAIBHAV BHANSALI
B.M.S (V Semester)
13/MG/4568

NEW MINERAL DEVELOPMENT CORPORTION

(NDMC)

The National Mineral Development Corporation Limited is a state

controlled mineral producer of Government of India. Until 28th September, it
was a part NIFTY 50 stocks, which was therein replaced by Adani Ports.
It is India's largest iron ore producer and exporter producing about 30 million
tons of iron ore from 3 fully mechanised mines in Chhattisgarh and Karnataka.
It also operates the only mechanised diamond mine in the country
at Panna in Madhya Pradesh.

BALANCE SHEET OF NMDC FOR THE AY 2014-15

STOCK MARKET PERFORMANCE OF NMDC IN PAST 2 YEARS

(as on 13th october, 2015)

Adjusted prices NMDC for 2013-14 and and 2014-15

CALCULATION OF UNLEVERED BETA AND COST OF EQUITY

Calculation of Unlevered beta

CALCULATING IMPLIED COST OF EQUITY AND DIVIDEND

GROWTH

After taking into account the dividends paid by the company during the period mentioned the
following growth in dividend and implied cost of equity has been calculated through MS
Excel.

Implied cost of equity

CALCULATION OF REINVESTMENT RATIO, RETURN OF EQUITY

AND GROWTH RATE

The following is a summary of an in-depth corporate analysis of the firm.

Calculation of Beta:
Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in
comparison to the market as a whole. A beta of 1 indicates that the firms security will move
with the market. A beta of greater than 1 indicates that the security price will be more volatile
than the market. In our case, the beta values came as follows:

In years where 1 year beta> 2 year beta, it suggest that NMDC shares have become more
volatile in the recent period. Moreover,
Unlevered beta=levered beta
Which means the firm doesnt have debt and is solely reliable on equity.

Country Risk Premium:

NMDC, being a company which curtails its business in India itself, has 0 country risk.

Cost of Equity:

CAPM:

Using the data calculated above and Market Rate (Rm) and Risk Free Rate (Rf) which
were taken to be 9.499 & 7.063, CAPM model was applied to determine the COST
OF EQUITY:
Re = rf + (rm rf + CRP) *
=9.27853046

Implied Cost of Equity:

By working backward using the growth rate (0.005882353), current share price
(99.10) and dividend(8.55) the implied cost of equity is 9.215884134.

Cost of Debt:
Cost of borrowing debt in case of NMDC is 0 because it is a zero debt firm and reliable only
on equity.

Weighted Average Cost of Capital:

WACC = (E/V)*Re + (D/V)*Rd*(1-Tc) = 36.78659
Re = cost of equity
Rd = cost of debt
E = market value of the firm's equity
D = market value of the firm's debt
V = E + D = total market value of the firms financing (equity
and debt)
E/V = percentage of financing that is equity
D/V = percentage of financing that is debt
Tc = corporate tax rate

0.092785
0
396.47
0
396.47
1
0
30%

Forecasting Ratios:
Earning Measure Ratios
1) Earnings Per Share (EPS)
2) Net Income From Non Cash Assets (In crores)
3) Operating Income (In crores)

16.2
3,771.13
7,778.35

Reinvestment Measure Ratios

1) Retention Ratio
2) Equity Reinvestment Rate
3) Reinvestment Rate

47.21%
19.68%
19.68%
Return Measure Ratios

1) Return on Equity (ROE)

2) Non Cash ROE
3) Return on Capital

19.86%
15.45%
26.31 %

Since the return ratios are greater than the industry average and the company has retained
almost 50% of its earnings, it is a clear signal of growth in future. The company has a lot of
cash reserves and no debt, thus minimal risk.

REVIEW OF LITERATURE

https://www.nmdc.co.in/Financial%20Information/Handlers/DownloadFi
le.ashx?FinancialYear=2014-15&Quadrant=Q4

http://www.moneycontrol.com/india/stockpricequote/miningminerals/nmdc/NMD02

https://www.google.co.in/webhp?sourceid=chromeinstant&ion=1&espv=2&ie=UTF8#q=NMDC+STOCK+PRICE+FOR+2+YEARS

Company Valuations
Alex W. Howard, CFA, ASA, and Alan B. Harp, Jr., CFA, ASA

THANK YOU