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CA Final · Advanced Financial Management · Business Valuation

Sundaram Textiles Ltd has a profit after tax of Rs 12 crore and 2 crore equity shares outstanding. A comparable listed peer trades at a P/E multiple of 15. Using the peer P/E, what is the estimated value per share of Sundaram Textiles?

The value per share is Rs 90. EPS is Rs 6 (Rs 12 crore divided by 2 crore shares), and applying the peer P/E multiple of 15 to this EPS gives Rs 90 per share under the earnings-multiple approach.

  1. ARs 80
  2. BRs 90Correct
  3. CRs 100
  4. DRs 120

Explanation

EPS = 12 crore / 2 crore = Rs 6. Value per share = EPS x P/E = 6 x 15 = Rs 90. Rs 80 would result from using a wrong multiple (about 13.3), and Rs 180 would come from multiplying total PAT by shares incorrectly; Rs 120 applies a multiple of 20 not given.

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