Final Report

Corporate Finance

By Group 7

SL.No Company Name Roll No

1 Hindustan Copper Ltd Anupam Tilak Netala M333-21

2 Glenmark Pharmaceuticals Ltd Joshna Lokavarapu M354-21

3 Cummins India Ltd Mahima Nidhi Soreng M363-21

4 J.B. Chemicals & Pharmaceuticals Majmudar Avani M364-21

Limited

5 Blue Dart Express Ltd Bharatam Thatavarti M344-21

Pranav

6 Biocon Ltd. Archit Srivastava M334-21

7 JK Tyres Industries Ltd Garbhapu Roshan M349-21

8 TATA Coffee Sarkar Saunak Kalyan D012-21

Papia

9 Shilpa Medicare Ltd Vasa Triveni Ganga M419-21

Bhavani

10 Ratnamani Metals & Tubes Ltd. Sanya Singh M398-21

 Individual Company Analysis

The companies chosen for individual analysis were the following:

SL.No Company Name Sector

1 Hindustan Copper Ltd Mining

2 Glenmark Pharmaceuticals Ltd Pharmaceutical Industry

3 Cummins India Ltd Manufacturer of diesel and

natural gas engines.

4 J.B. Chemicals & Pharmaceuticals Limited Pharmaceutical Industry

5 Blue Dart Express Ltd Transportation & Distribution

6 Biocon Ltd. Pharmaceutical Industry

7 JK Tyres Industries Ltd Tyre Manufacturers

8 TATA Coffee Consumer Products

9 Shilpa Medicare Ltd Pharmaceutical Industry

10 Ratnamani Metals & Tubes Ltd. Steel and Welding industry

Corporate Governance:
All the companies more or less follow similar governance and all were dedicated
socially valued enterprises, except Hindustan Copper Ltd which has no women directors
which means, the company isn’t fully compliant with the Companies Act,2013 which
directs companies to have at least one female director

Company Name No. of Directors Women Directors

Hindustan Copper Ltd 10 0

Glenmark Pharmaceuticals 10 2
Ltd

Cummins India Ltd 10 2

 J.B. Chemicals & 8 2
Pharmaceuticals Limited

Blue Dart Express Ltd 7 2

Biocon Ltd. 9 2

JK Tyres Industries Ltd 12 2

TATA Coffee 8 1

Shilpa Medicare Ltd 8 1

Ratnamani Metals & Tubes 7 3

Ltd.

Current Valuation:
We tried to find out the P/E Ratios of the company and the industry P/E ratio and
compared the current valuation of the firms with respect to the industries they were
operating in. On comparing the P/E ratios we can in some sense say whether the
company is under/overvalued in terms of the industry standards..

Sl. No Companies Sectors P/E Ratio P/E Valuation

Ratio
sector

1 Hindustan Copper Ltd Mining 64.7 20.6 Overvalued

2 Glenmark Pharmace 15.07 32.93 Under-

Pharmaceuticals Ltd utical valued
Industry

3 Cummins India Ltd Manufactur 14.37 17.5 Under-

er of diesel valued
and natural
gas
engines.

4 J.B. Chemicals & Pharmace 27.37 38.07 Under-

Pharmaceuticals utical Valued
Limited Industry

5 Blue Dart Express Ltd Transporta 45.1 32.1 Over-Valued

tion &
Distribution
 6 Biocon Ltd. Pharmace 67.35 32.93 Over-Valued
utical
Industry

7 JK Tyres Industries Ltd Tyre 6.63 18.72 under-

Manufactur valued
ers

8 TATA Coffee Consumer 28.9 50.17 Under-

Products Valued

9 Shilpa Medicare Ltd Pharmace 30.14 32.93 Under-

utical Valued
Industry

10 Ratnamani Metals & Steel and 32.49 6.60 0ver-valued

Tubes Ltd. Welding
industry

Inference:
Undervalued stock should be preferred as the value would go up in future.
We have four pharmaceutical companies, and three are undervalued, we have good
investment opportunities.
Sectors like mining and steel and welding are overvalued, investing in this sector could
be risky.
Based on the P/E ratio investors can invest in Glenmark, Cummins, J.B. Chemicals &
Pharmaceuticals, JK Tyres, TATA Coffee, and Shilpa Medicare.

Debt to Equity Ratio:

The D/E ratio is the measure that helps to measure how much the company uses its
debt to finance its operations. Higher the value of the ratio indicates higher risks to the
investors.

Sl.No Companies Debt Equity D/E

1 Hindustan 914 1693 0.54

Copper Ltd

2 Glenmark 36108 148095 0.24

 Pharmaceutical
s Ltd

3 Cummins India 39.71 55.44 0.70

Ltd

4 J.B. Chemicals 1546 26440 0.06

&
Pharmaceutical
s Limited

5 Blue Dart 1535.5 14676.0 0.104

Express Ltd

6 Biocon Ltd. 448.11 4273.54 0.105

7 JK Tyres 1188.48 3473 0.342

Industries Ltd

8 TATA Coffee 1983.01 2132.27 0.93

9 Shilpa 723.85 4737.21 0.15

Medicare Ltd

10 Ratnamani 1971.93 89,671.03 0.02

Metals & Tubes
Ltd.

Inference:
● The company that is having a higher ratio makes good use of debt that it has,
this could be helpful in some tax relaxation.
● On the other hand, it is risky that if company performance is hampered due to
some reason, the company would have high time to pay its debt, therefore,
maintaining a balance.
● During this time, lower debt should be preferred to be on the safe side.
● Looking at the data, the pharmaceutical sector can actually move ahead with
increasing more debt as compared to equity.

Beta Calculation:
The market has a beta of 1 and the firm beta helps us to determine the equity value
changes, with respect to the market.

The following are the beta values as calculated taking 5-yr data,
 Sl. Company Sector Beta
No
Unlevered Levered

1 Hindustan Copper Mining 7.6 5.5

Ltd

2 Glenmark Pharmaceutical 0.83 1.49

Pharmaceuticals Industry
Ltd

3 Cummins India Ltd manufacturer of 0.97 0.94

diesel and natural
gas engines.

4 J.B. Chemicals & Pharmaceutical 0.3 0.29

Pharmaceuticals Industry
Limited

5 Blue Dart Express Transportation & 1.94 2.10

Ltd Distribution

6 Biocon Ltd. Pharmaceutical 0.550 0.596

Industry

7 JK Tyres Industries Tyre 3.29 4.15

Ltd Manufacturers

8 TATA Coffee Consumer 0.43 0.78

Products

9 Shilpa Medicare Pharmaceutical 0.85 0.95

Ltd Industry

10 Ratnamani Metals Steel and Welding 0.636 0.96

& Tubes Ltd. industry

Inference:
● If we consider unlevered beta it would give clarity about the risks assumed in the
company because of removal of debt risk.
● Higher the beta higher is the risks appetite for investors, in our case we have
Hindustan Copper and JK Tyres with the highest beta of 5.5 and 4.15
Weighted Average Cost of Capital:

A high WACC states that a firm spends a larger amount of money to raise capital,
indicating a higher level of risk, whereas companies with a low WACC acquire capital
cheaply. WACC is used as the discount rate for calculating the (NPV) of a business. A
high weighted average cost of capital, or WACC, is typically a signal of the higher risk
associated with a firm's operations. Investors tend to require an additional return to
neutralize the additional risk.

Sl. No Company Cost of Debt Cost equity WACC

1 Hindustan 1.43% 18.6%. 16.9%

Copper Ltd

2 Glenmark 7.81% 14.2% 12.9%

Pharmaceutical
s Ltd

3 Cummins India 2.67% 7.68% 7.08%

Ltd

4 J.B. Chemicals 7.47% 13.7% 12.36%

&
Pharmaceutical
s Limited

5 Blue Dart 7.23% 29.68% 27.38%

Express Ltd

6 Biocon Ltd. 12% 12.13% 13%

7 JK Tyres 4.5% 27.46% 21.61%

Industries Ltd

8 TATA Coffee 11.27% 10.53% 9.38%

9 Shilpa 7.23% 6.06% 5.63%

Medicare Ltd

10 Ratnamani 10.23% 4.554% 4.62%

Metals & Tubes
Ltd.

Inference:
 ● Hindustan Copper, Cummins, TATA Coffee and Ratnamani metal have a lower
WACC which would actually attract investors at a lower cost.
● Higher WACC can be seen as a risk and would require to compensate investors
with high returns, we have Blue Dart Express and JK Tyres Industries with the
highest WACC

Projections of EPS:

On making the 5-yr forward projections, the entire sheet is difficult to be shared in this
report. We are thereby updating the 5-Yr forward EPS that we calculated based on our
projections:

Sl. No Company Sector 2021 2022 2023 2024 2025

1 Hindustan Mining 1.6 2.5 4.6 10.3 16.5

Copper Ltd

2 Glenmark Pharmace 32.79 40 41.53 49.37 56.77

Pharmaceuti utical
cals Ltd Industry

3 Cummins Manufactu 24.96 27.96 31.31 35.07 39.28

India Ltd rer of
diesel and
natural
gas
engines.

4 J.B. Pharmace 57.85 29.87 31.76 35.07 37.65

Chemicals & utical
Pharmaceuti Industry
cals Limited

5 Blue Dart Transporta 129 131 139 148 157

Express Ltd tion &
Distributio
n

6 Biocon Ltd. Pharmace 2.36 2.6 2.86 3.14 3.46

utical
Industry

7 JK Tyres Tyre 10.42 11.20 11.33 11.47 11.60

Industries Manufactu
Ltd rers
8 TATA Consumer 2.71 2.83 2.99 3.32 3.39
Coffee Products

9 Shilpa Pharmace 17.85 20.06 20.75 19.99 17.46

Medicare utical
Ltd Industry

10 Ratnamani Steel and 62.38 68.74 75.75 83.47 91.99

Metals & Welding
Tubes Ltd. industry

Inference:
● The absolute value of EPS depends upon the number of shares that have been
issued by the company. Therefore the EPS is likely to grow over the years
● But on comparing we can see that the percent growth of EPS is varying from
company to company and is not fixed.
PART B: Hindustan Copper Ltd

● Hindustan Copper Ltd is a miniratna central public sector Enterprise which has
integrated facilities from mining to beneficiation, smelting,refining and casting of
refined copper metal into downstream saleable products.

● Hindustan Copper Ltd is planning to invest in a special manufacturing system to

produce cast copper rods.

● Main purpose behind this is to reduce the dependence of foreign imports of

coppers for specialty business where these copper rods are required.

● It will be seen as the right step forward towards the government’s initiative of “Atma
Nirbhar Bharat” as it will make use of locally mined copper for domestic purposes.

● These copper rods will be made to international standards and measurement. Its
homogenous structure and fine grain size results in outstanding durability.

● These rods will be produced in diameters of 8,11,12.5,16 and 19mm. HCL is the
only public sector company manufacturing 19mm-diameter copper rods in India.

● The copper rods will be suitable for power and communication cables, house wire,
strips for power and distribution transformers, magnet wires, etc. Their excellent
surface finish will allow them to be used for processing enamelled, coated and
plated wires.

● The invoice price of the system is $280,000. It would require $5,000 in shipping
expenses and $15,000 in installation costs.

● The system has depreciation rates of 33% for the first year, 45% for the second
year and 15% for the third year.

● Hindustan Copper Ltd plans to use the system for four years and it is expected to
have a salvage value of $40,000 after four years of use.

● Hindustan Copper Ltd expects the new system to generate sales of 1,500 ton per
year. The company estimates that the new product will sell for $250 per ton in the
first year with a cost of $150 per ton, excluding depreciation.

● Management projects that both the sale price and the cost per unit will increase by
3% per year due to inflation
 ● Hindustan Copper Ltd net operating working capital would have to increase by
15% of sales revenues to produce the new product. The firm’s marginal tax rate is
40%.

Problem statement

To determine whether investment in the new product is feasible or not.Flow of findings

based on 4 year projections:-

1.) WACC - to find out whether the investment is profitable or not the first step is to
find the cost of capital. Cost of Debt is assumed at 8%.

2.) Project Profitable indicators - NPV is generally used in finding the project
feasibility, NPV deals with the reinvestment rate of intermediary cash flow.

3.) The financial goal of a firm is to maximize market value. The NPV of a project
shows its contribution to the market value of the firm

4.) Sensitivity analysis - is a widely used technique to determine how much a

project’s NPV will change in response to a given change in an input variable,
here sales are taken as input variables.

WACC
NPV 101598.7304