POST SESSION GROUP

ASSIGNMENT-1
Giving weights to different methods and
determining exchange ratio
Vinay Mohan
1521006
Subham Lohani
1521007
Nidhi Sarda
1521040
Supraja Nanduri
1521005
Aditya Tekumalla
1521028
Abhilash Kulkarni
1521016
Raghawendra Pandey 1521013


S.No
.
1
2
3
4
5

Method

SLtd(/ShareinRs.)

P.Ltd.(/ShareinRs.)

Weights

NetAssets
EV/EBITDA
DCF
Marketprice(ason
recentdate)
BookValue

19.53
97.03
43.33
134.58

36.21
96.44
2.06
102.00

2
1
3
2

20.50

23.00

JUSTIFICATIONFORWEIGHTS:
1. WeightforBookvalueisassigned0sincenetassetsvalueisarefinementofthebookvalue
method.WehaveconsideredNetassetsinsteadofbookvaluesincethepricesarebasedonthelatest
valuation.Weightallotted0
2. Consideringthenetassets,wecomputedassetturnoverratioofSLtdandPLtd,whichhavevalues
of0.566and0.689respectively.Weseethatanassetofboththecompaniesareperformingrelatively
closertoeachotherandhenceisanimportantmetrictounderstandtruepictureofvaluation.Weight
allotted2
3. D.C.F.valuationisthebestmethodtounderstandintrinsicvalueofacompanyasitgivesaclear
pictureoffreecashflowsinfuture.Hencewefeelthisparameteristhemostimportantfactortobe
considered.Weightallotted3
4. Marketperceptionisanimportantfactorforalistedcompanyasitpredominantlydefinesthevalue
ofthecompany.Henceitisanimportantfactorforunderstandingtruevalueofthefirm. Weight
allotted2
ValueforS.Ltd.
S.No
.
1
2
3
4
5

Method

SLtd(/ShareinRs.)

Weights

WeightedValue

NetAssets
EV/EBITDA
DCF
Marketprice(ason
recentdate)
BookValue
SUM

19.53
97.03
43.33
134.58

2
1
3
2

39.06
97.03
129.99
269.16

20.50

0
535.24

535.24/8=66.91
ValueforP.Ltd.
S.No
.
1
2
3
4

Method
NetAssets
EV/EBITDA
DCF
Marketprice(ason
recentdate)

P.Ltd.(/ShareinRs.)
36.21
96.44
2.06
102.00

Weights

WeightedValue

2
1
3
2

72.42
96.44
6.18
204

BookValue
SUM

23.00

0
379.04

379.04/8=47.38

S.Ltd/P.Ltd=66.91/47.38=1.412
S.LtdP.Ltd
Shares
1

FaceValue
Rs.1
Shares
1.412

FaceValue
10

14.12

10

50

S/P=1.412

Every1shareofSwithfacevalueofRs.1isequivalentto1.412sharesofPwithfacevalueofRs.10.
RevaluatingthefacevaluefromRs.10toRs.1,weget14.12sharesofPwithfacevalueofRs.1
Similarly,forPLtd,5sharesoffacevalue10canberevaluedas50sharesoffacevalue1.
Finally,1shareoffacevalueRs.1ofS.Ltdisequivalentto14.12sharesoffacevalueRs.1ofP.Ltd
1shareofS14.12sharesofP
?50sharesofP

50/14.12=3.54
1shareofS14.12sharesofP
3.54sharesofS50sharesofP
3.54sharesofSofRs.1isequalto50sharesofPofRs.1OR(5sharesofRs.10)

Forevery5sharesofPLtd.WithfacevalueofRs.10,3.5sharesofSLtd.shouldbe
offeredwithfacevalueofRe.1