Free cashflows to firms( FCFF) Model

(EBIT(1-tax)+Dep&Ammo-Change in working capital)- capex

Cash flow from operating activities after wc changes and tax

Discounted rate= Coast of capital/WACC

Vt/(1+k)^t Terminal value

0.842975207
0.7
0.3528
1.195775207

Manish detergents case Study

1 2 3 4 5
Revenue 950 1000 1200 1450 1660
PBIT 140 115 130 222 245
tax @ 35% 49 40.25 45.5 77.7 85.75
PAT 91 74.75 84.5 144.3 159.25
Depri 55 85 80 83 85
NOPAT 146 159.75 164.5 227.3 244.25
Gross Investments(Capex) 100 250 85 100 105
Investments in current assets 10 15 70 70 70
FCFF 36 -105.25 9.5 57.3 69.25

WACC weights
Cost of debt 0.078 0.4 0.0312
Cost of Equity 0.1648 0.6 0.09888
0.13008 Discount rate

PV of FCFF
Years PVIF@13%
 1 36 0.884893105 31.85615178
2 -105.25 0.783035807 -82.4145187
3 9.5 0.692902987 6.582578373
4 57.3 0.613145075 35.13321281
5 69.25 0.542567849 37.57282357
6 99.55 0.480114549 47.79540334
76.52565117 PV of cfs during projection
PV of cashflow during exolicit forecast period
3650.166667 FCFF6(1+g)/WACC-g
PV of terminal value ₹ 1,752.50

Enterprise value ₹ 1,829.02

Free Cash Flow to Equity ₹ 1,629.02
Value per share ₹ 162.90 Fair value of share today

Fair Value of company by projecting 6 years

 6
1770
287
100.45
186.55
87
273.55
120
54
99.55
AUROBINDO PHARMA
Op after WC Direct Tax
2014 990.23 -343.95
2015 1732.4 -495.59
2016 2152.39 -732.63
2017 4052.28 -773.7
2018 2653.08 -698.56

SALES Growth Rate

2014 8259.16
2015 12272.53 1.485929562
2016 13955.22 1.137110278
2017 15089.86 1.081305777
2018 16499.83 1.093438243

CAGR 0.188874187

This is a zero debt company because

So only cost of equity

FCFF cash from operating - capex(net capex)

FCFE FCFF-Intrest(1-t)-Net increase income in debt

0.206400138
FCFE
FCFF interest*(1-t)
272.23 245.0264 27.2036
490.91 126.2973 364.6127
90.51 202.793 -112.283
1593.97 52.7088 1541.2612
713.89 61.3988 652.4912

1) DDM Model
EPS 40.36
DPS 2.5
Payout ratio 0.061942517
ROE 0.735146622
b 0.938057483
growth=ROE*b 0.68960979
 FCFF before CAPEX Purchase Sales Net CAPEX FCFF HPR
646.28 -390.48 16.43 -374.05 272.23
1236.81 -768.29 22.39 -745.9 490.91 1.8032913345
1419.76 -1447.46 118.21 -1329.25 90.51 0.1843718808
3278.58 -1694.15 9.54 -1684.61 1593.97 17.6109822119
1954.52 -1529.92 289.29 -1240.63 713.89 0.4478691569

CAGR 0.2725469923

2019 906.6403
2020 1151.433181
2021 1462.32013987
2022 1857.14657763
2023 2358.5761536

Termnal Value
Treasury bill yield 6.50%
Market risk pre 7.27%
Growth rate 0.055
is is a zero debt company because all the term loans are for working capital
only cost of equity

breakup of net cash used in financial activities

Net Debt
267.46 294.6636
340.77 705.3827 2.393857606
603.32 491.037 0.696128499
-1727.91 -186.6488 -0.38011148
1202.22 1854.7112 -9.93690396
 27% WACC 0.141335 STEPS:
PVIF@14% 1
906.6403 0.8771929825 795.2985088 2
1151.433181 0.7694675285 885.990444 3
1462.32014 0.6749715162 987.024442 4
1857.146578 0.5920802774 1099.579861 5
2358.576154 0.5193686644 1224.970547

4992.863802
29274.09226 15204.0461971 15204.0462
20196.91
Intrinsic Value 344.715992

SENSITIVITY ANALYSIS
CAGR OF FCFF
Forecasting 5 Years
WACC
PVIF
Terminal Value