Snap shot of UT Kesoram deal

Pre merger Kesoram shares 31.06

Share swap 52
capacity 10.8 132.5
kesoram Ultratech 64.5
Price 140 9030 52
No. of share 31.06 28.87 0.019231 of ultratech is 1 share of Kesoram
Profit after tax -115 5069
Revenues 3600 61326 1 0.597308 No of shares of Ultratech
Net worth 653 54242 29.46731 No of shares in combined entity
NCL 1771 13710 2 2.03% Diluted
d/e 2.7 0.3
EBITDA 198 10620 3 5393.688
UT paid for Kesoram debt 62 109 5502.688 Adding Debt
Average valuation in industy
EV per tonne ($) for last 20
years 108 83
(@83) Rs/$ 4 13.3558 0.256842 2320.057
Southern region 88
Promoter stake (%) 43
Group work
Analyse the deal - quantitatively
1 How many shares of UT be issued?
2 What would be dilution in UT due to this? Percentage of Kesoram in expanded UTI
How your response differ, if we assume that UT held held 10% in Kesoram.
3 What is the total cost of Kesoram to UT?
4 What was returns to Kesoram promoter?
5 How will you interpret the share price behaviour of UT and Kesoram for fund manager?
6 Comment on opportunity for fund manager | deal was whispered on CNBC 23-11-23 | Deal was formally announce
7 How will you assess the deal for UT and Kesoram shareholders?
8 Analyse the deal as capital budgeting problem: Cost of capital: 14%; Earnings (EBITDA) growth per year 20%; Divide
(consider 198 crores EBITDA currently (zero period) analyse for next five years)

Hints: Broad numbers are expected

 5 Share price behaviour
UT Date
ch is 1 share of Kesoram 8212 28-Oct
8660 23-Nov
res of Ultratech 9030 30-Nov
res in combined entity 9530 11-Dec
You may take prices from any other sources
Prices may marginally vary

1869.812 0.240797

was formally announced: 30-11-23

wth per year 20%; Dividend: 0; Internal return on retained earnings: 15%
 Kesoram
73 112.4931506849
123 70.40650406504
140 64.5
159 59.93710691824
m any other sources
Asset based b t
ABC XYZ
Net assets of the company 4837 727 t/b
No. of shares (in crores) 7.45 7.1 0.157709
649.2617 102.3944

Swap Ratio 6.340796 For every 6 share of XYZ 1 share of ABC will be given
This is not correct way since net assets are not swaped but shares are swaped
Price based
Average weekly price 705 85

EPS 74.22819 11.26761

P/E 9.49774 7.54375
P/E (average) 10 8

Swap Ratio 8.294118 8.3 share of XYZ ia 1 share of ABC

0.120567

Earning Based
PAT 553 80

k 0.18 0.18
g 0.04 0.04

Perpetual valuation 4108 594.2857

551.4094 83.70221

Swap Ratio 6.587752 6.5 share of XYZ ia 1 share of ABC

0.151797
capital budgeting framework
per share 190
No of shares 7.1
Total cash outflow 1349
Cash Inflow 0 1 2 3 4
80 88 96.8 106.48 117.128
Growth 0.1 88 96.8 106.48 117.128
96.8 106.48 117.128
106.48 117.128
117.128
585.64

0.13
0.04
Shareholders wealth analysis
On the basis of P/E
XYZ ABC
PAT of Target 80 553
P/E 8 10
Value of Target 640 5530

No of shares 7.1 7.45

Value per Share 90.14085 742.2819

Exchange Ratio 8.23469 how many shares of bidder is to be given to XYZ

0.121437 0.12 shares of ABC for 1 share of XYZ
? 7.1
0.862206 This Cr shares of ABC

Total share sof ABC 8.312206

10.37% Stake to be given to XYZ by ABC

Shareholders wealth analysis

Total PAT of combined entity 633

No. of shares 7.45 0.862206 8.312206
EPS 76.15307
P/E 10

Price 761.5307

Wealth effect on bidder 8.02%

Wealth effect on Target 92.47837 price of 1 share of XYZ is 0.12 price of share of ABC
8.80%

target Pre merger

0 1 2 3 4
PAT 80 88 96.8 106.48 117.128
Growth 0.1 0.1 0.1 0.1 0.1
No of shares 7.1 7.1 7.1 7.1 7.1
EPS 11.26761 12.39437 13.6338 14.99718 16.4969
P/E 8 8 8 8 8
Price 90.14085 99.15493 109.0704 119.9775 131.9752
TV
 0.121437
0.862206

640

rice of share of ABC

Bidder Pre merger

0 1 2 3 4
PAT 553 608.3 669.13 736.043 809.6473
Growth 0.1 0.1 0.1 0.1 0.1
No of shares 7.45 7.45 7.45 7.45 7.45
EPS 74.22819 81.65101 89.81611 98.79772 108.6775
P/E 10 10 10 10 10
Price 742.2819 816.5101 898.1611 987.9772 1086.775

Bidder Post Merger

0 1 2 3 4
PAT 633 727.95 837.1425 962.7139 1107.121
Growth 0.15 0.15 0.15 0.15 0.15
No of shares 8.312206 8.312206 8.312206 8.312206 8.312206
EPS 76.15307 87.57603 100.7124 115.8193 133.1922
P/E 10 10 10 10 10
Price 761.5307 875.7603 1007.124 1158.193 1331.922

Wealth Effect Bidder 2.6% 7.3% 12.1% 17.2% 22.6%

Wealth Effect target 92.47837 106.3501 122.3026 140.648 161.7452
2.6% 7.3% 12.1% 17.2% 22.6%
 ABC XYZ Target
Net assets of the company 4837 727 Pre Merger
No. of shares (in crores) 7.45 7.1 Pat
P/E (average) 10 8 Growth
PAT 553 80 NO of Shar
Price 705 85 EPS
Asset Based PE
Per Share Value 649.2617 102.3944 Price
0.157709 6.340796
Price Based 0.120567 8.294118

Earning Based
EPS 74.22819 11.26761
PE 10 8
k 0.18 0.18
g 0.04 0.04
Bidder
perpetual 4108 594.2857
Per Share 551.4094 83.70221 Target
Swap Ratio 0.151797 6.587752

PAT 553 80
PE 10 8
Value 5530 640
Value Per Share 742.2819 90.14085
Swap Raatio 0.121437 8.23469
Extra Shares 0.862206
Total Shares 8.312206
Dilution 10.37%
Total PAT of combined entity 633
EPS New 76.15307
PE 10
Price of Merged Entity 761.5307

Bidder Shareholder Wealth Analysis 8.02%

Target Shareholder Wealth Analysis 8.80%
 Target
1 2 3 4 Pre Merger 1 2
80 88 96.8 106.48 Pat 553 608.3
0.1 0.1 0.1 0.1 Growth 0.1 0.1
7.1 7.1 7.1 7.1 NO of Shar 7.45 7.45
11.2676056338028 12.39437 13.6338 14.99718 EPS 74.22819 81.65101
8 8 8 8 PE 10 10
90.1408450704225 99.15493 109.0704 119.9775 Price 742.2819 816.5101

Post Merger
Pat 633 727.95 837.1425 962.7139
Growth 0.15 0.15 0.15 0.15
NO of Shares 8.312206 8.312206 8.312206 8.312206
EPS 76.15307 87.57603 100.7124 115.8193
PE 10 10 10 10
Price 761.5307 875.7603 1007.124 1158.193

Shareholder Wealth Analysis 2.59% 7.26% 12.13% 17.23%

92.47837 106.3501 122.3026 140.648
Shareholder Wealth Analysis 2.59% 7.26% 12.13% 17.23%
 3 4
669.13 736.043
0.1 0.1
7.45 7.45
89.81611 98.79772
10 10
898.1611 987.9772
Total PAT of combined entity 7500
No. of shares #REF! #REF!
EPS #REF!
P/E 25

Price #REF!

Wealth effect on bidder #REF!

Wealth effect on Target #REF! price of 1 share of XYZ is 0.1
#REF!
 #REF!

price of 1 share of XYZ is 0.12 price of share of ABC