NISM Certifications · NISM-Series-XV: Research Analyst · Valuation Principles
Company X has EBITDA of Rs 500 crore, net debt of Rs 800 crore, minority interest of Rs 100 crore and 20 crore shares. Peers trade at an EV/EBITDA of 10x. Using this multiple, what is the implied equity value per share attributable to the shareholders of Company X?
The implied value is Rs 205 per share. Enterprise value is 10 times Rs 500 crore, or Rs 5,000 crore; subtracting net debt of Rs 800 crore and minority interest of Rs 100 crore leaves Rs 4,100 crore, which divided by 20 crore shares gives Rs 205.
- ARs 205Correct
- BRs 210
- CRs 250
- DRs 225
Explanation
EV = 10 x 500 = Rs 5,000 crore. Equity value = EV - net debt - minority interest = 5,000 - 800 - 100 = Rs 4,100 crore. Per share = 4,100/20 = Rs 205. Rs 210 forgets minority interest, Rs 250 ignores both, Rs 225 deducts only the minority wrongly with half debt.
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