Valuation of Himadri

Specialty Chemical
Ltd.
Presented by
Ankita Das Podder (2021BLP008)
Arnab Chakraborty (2021BLP013)
Kaustav Palit (2021BLP025)

http://www.free-powerpoint-templates-design.com
About
Himadri Speciality Chemical Ltd
(HSCL) is the largest coal tar pitch
manufacturer in India with >70%
market share in the space
Leverages on its deep knowledge of one
of the most versatile substances –
Carbon
The company has established itself as
one of the world's most extensive value
chains in the Carbon segment. 
Competitors: Deepak Nitrate, Nocil Ltd,
Solar industries, Bhansali Engg etc
 DCF
By applying DCF method, the total valuation of the company came out as Rs.
3002,18,63,652.05
Change in ke kd
Year Time Growth Rate EBIT NOPAT Depreciation CAPEX FCFF D/E WACC TV PV
WC
2020 0 ₹ 24,905.87 ₹ 16,203.76 ₹ 3,924.38 ₹ 24,671.60
2021 1 9.30% ₹ 27,222.12 ₹ 17,710.71 ₹ 4,002.87 ₹ 168.68 ₹ 8,223.87 ₹ 13,321.03 12.05% 6.47% 0.48 8.29% ₹ 12,301.76
2022 2 9.30% ₹ 29,753.77 ₹ 19,357.80 ₹ 4,082.92 ₹ 184.37 ₹ 8,223.87 ₹ 15,032.49 12.05% 6.47% 0.23 10.24% ₹ 12,368.52
2023 3 9.30% ₹ 32,520.87 ₹ 21,158.08 ₹ 4,164.58 ₹ 201.52 ₹ 8,223.87 ₹ 16,897.28 12.05% 6.47% 0.00 12.05% ₹ 12,012.15
2024 4 9.30% ₹ 35,545.31 ₹ 23,125.78 ₹ 4,247.88 ₹ 220.26 ₹ 8,223.87 ₹ 18,929.53 12.05% 6.47% 0.00 12.05% ₹ 12,010.06
2025 5 9.30% ₹ 38,851.03 ₹ 25,276.48 ₹ 4,332.83 ₹ 240.74 ₹ 8,223.87 ₹ 21,144.70 12.05% 6.47% 0.00 12.05% ₹ 11,973.14
2026 6 9.30% ₹ 42,464.17 ₹ 27,627.19 ₹ 4,419.49 ₹ 263.13 ₹ 8,223.87 ₹ 23,559.69 12.05% 6.47% 0.00 12.05% ₹ 11,906.32
2027 7 8.86% ₹ 46,227.56 ₹ 30,075.65 ₹ 4,507.88 ₹ 274.07 ₹ 8,223.87 ₹ 26,085.59 12.05% 6.47% 0.00 12.05% ₹ 11,765.49
2028 8 8.43% ₹ 50,122.23 ₹ 32,609.53 ₹ 4,598.04 ₹ 283.63 ₹ 8,223.87 ₹ 28,700.06 12.05% 6.47% 0.00 12.05% ₹ 11,552.96
2029 9 7.99% ₹ 54,125.75 ₹ 35,214.21 ₹ 4,690.00 ₹ 291.56 ₹ 8,223.87 ₹ 31,388.78 12.05% 6.47% 0.00 12.05% ₹ 11,276.81
2030 10 7.55% ₹ 58,212.24 ₹ 37,872.88 ₹ 4,783.80 ₹ 297.60 ₹ 30,000.00 ₹ 12,359.08 12.05% 6.47% 0.00 12.05% ₹ 3,962.77
2031 11 7.11% ₹ 62,352.59 ₹ 40,566.59 ₹ 4,879.47 ₹ 301.52 ₹ 10,000.00 ₹ 35,144.54 12.05% 6.47% 0.00 12.05% ₹ 10,057.09
2032 12 6.68% ₹ 66,514.62 ₹ 43,274.41 ₹ 4,977.06 ₹ 303.10 ₹ 10,000.00 ₹ 37,948.37 12.05% 6.47% 0.00 12.05% ₹ 9,691.90
2033 13 6.24% ₹ 70,663.47 ₹ 45,973.66 ₹ 5,076.60 ₹ 302.14 ₹ 10,000.00 ₹ 40,748.12 12.05% 6.47% 0.00 12.05% ₹ 9,288.05
2034 14 5.80% ₹ 74,761.95 ₹ 48,640.13 ₹ 5,178.14 ₹ 298.47 ₹ 10,000.00 ₹ 43,519.79 12.05% 6.47% 0.00 12.05% ₹ 7,43,239.00 ₹ 1,60,051.61
2035 15 5.80% ₹ 79,098.15 ₹ 51,461.25 ₹ 5,281.70 ₹ 315.79 ₹ 10,000.00 ₹ 46,427.17 12.05% 6.47% 0.00 12.05%    
 Value of Company    ₹ 3,00,218.64

*All Figueres in Lakhs

 Working Capital Calculation
Year Revenues WC (1% of sales) Change in WC
2020 ₹ 1,81,378.53 ₹ 1,813.79
2021 ₹ 1,98,246.73 ₹ 1,982.47 ₹ 168.68
2022 ₹ 2,16,683.68 ₹ 2,166.84 ₹ 184.37
2023 ₹ 2,36,835.26 ₹ 2,368.35 ₹ 201.52
2024 ₹ 2,58,860.94 ₹ 2,588.61 ₹ 220.26
2025 ₹ 2,82,935.01 ₹ 2,829.35 ₹ 240.74
2026 ₹ 3,09,247.96 ₹ 3,092.48 ₹ 263.13
2027 ₹ 3,36,655.07 ₹ 3,366.55 ₹ 274.07
2028 ₹ 3,65,018.25 ₹ 3,650.18 ₹ 283.63
2029 ₹ 3,94,174.09 ₹ 3,941.74 ₹ 291.56
2030 ₹ 4,23,934.23 ₹ 4,239.34 ₹ 297.60
2031 ₹ 4,54,086.55 ₹ 4,540.87 ₹ 301.52
2032 ₹ 4,84,396.83 ₹ 4,843.97 ₹ 303.10
2033 ₹ 5,14,611.08 ₹ 5,146.11 ₹ 302.14
2034 ₹ 5,44,458.53 ₹ 5,444.59 ₹ 298.47
2035 ₹ 5,76,037.12 ₹ 5,760.37 ₹ 315.79

*All Figueres in Lakhs

 Assumptions
Parameter Percentage Source
Growth Rate 9.30% https://www.ibef.org/industry/chemical-industry-india.aspx
https://economictimes.indiatimes.com/news/economy/indicators/india-to-
become-5th-largest-economy-in-2025-3rd-largest-by-
GDP (2035) 5.80%
2030/articleshow/79964750.cms?from=mdr#:~:text=%22Growth%20will
%20naturally%20slow%20as,in%202030%2C%22%20it%20said
Tax Rate 34.94% Financial Report
Risk Free Rate of
6.03% Financial Report
Return (Rf)
Market premium
8.98% Damodaran
(Rm-Rf)
https://www.moneycontrol.com/india/stockpricequote/chemicals/himadrisp
Beta 0.67
ecialitychemical/HCI01
Capex 1/3rd of year 0 investment till 2029. Industry standard

the company is trying to get debt free. After

applying regression, it is observed that there is
D/E ratio a strong relation between time and D/E ratio.  
Predicted the D/E ratio for 2021 and 2022 and
then took the value for subsequent years

Working Capital 1% of sales Industry standard

 Relative Valuation
Using the method the company valuation came as Rs. 23,09,81,21,511.69
NOCI Bhansali
Valuation ratios Deepak Nitrite Solar Industries Industry Average Value for Himadri Weights Weighted Average
L Engg
ROA 0.27 0.09 0.15 0.10 0.15 ₹ 2,78,46,13,881.83 0.35 ₹ 97,46,14,858.64

P/E 8.59 8.34 30.94 7.14 13.75 ₹ 28,27,99,01,247.80 0.18 ₹ 4,94,89,82,718.36

P/B 0.92 0.92 5.97 1.34 2.29 ₹ 39,65,84,74,425.00 0.30 ₹ 11,89,75,42,327.50

P/S 1.25 1.29 3.68 0.43 1.66 ₹ 30,15,41,80,612.50 0.18 ₹ 5,27,69,81,607.19

Value of Company ₹ 23,09,81,21,511.69

Revenue ₹ 18,13,78,53,000
Himadri Speciality Chemical Ltd
EPS ₹ 4.91
ROA 0.03
Number of Shares 418807782 P/E 6
Total Equity ₹ 17,33,70,38,000 P/B 0.71
BVPS ₹ 41.40 P/S 0.69
Earnings
₹ 2,05,63,46,209.62
 APV
Using APV method, the valuation of the company came as Rs. 42588604812.49
Change in ke unlevered kd
Year Time Growth Rate EBIT NOPAT Depreciation CAPEX FCFF D/E WACC TV PV
WC

2020 0 ₹ 24,905.87 ₹ 16,203.76 ₹ 3,924.38 ₹ 24,671.60

2021 1 9.30% ₹ 27,222.12 ₹ 17,710.71 ₹ 4,002.87 ₹ 168.68 ₹ 8,223.87 ₹ 13,321.03 10.61% 6.47% 0.48 7.54% ₹ 12,042.72
2022 2 9.30% ₹ 29,753.77 ₹ 19,357.80 ₹ 4,082.92 ₹ 184.37 ₹ 8,223.87 ₹ 15,032.49 10.61% 6.47% 0.23 9.14% ₹ 12,285.83
2023 3 9.30% ₹ 32,520.87 ₹ 21,158.08 ₹ 4,164.58 ₹ 201.52 ₹ 8,223.87 ₹ 16,897.28 10.61% 6.47% 0.00 10.61% ₹ 12,484.67
2024 4 9.30% ₹ 35,545.31 ₹ 23,125.78 ₹ 4,247.88 ₹ 220.26 ₹ 8,223.87 ₹ 18,929.53 10.61% 6.47% 0.00 10.61% ₹ 12,644.06
2025 5 9.30% ₹ 38,851.03 ₹ 25,276.48 ₹ 4,332.83 ₹ 240.74 ₹ 8,223.87 ₹ 21,144.70 10.61% 6.47% 0.00 10.61% ₹ 12,768.36
2026 6 9.30% ₹ 42,464.17 ₹ 27,627.19 ₹ 4,419.49 ₹ 263.13 ₹ 8,223.87 ₹ 23,559.69 10.61% 6.47% 0.00 10.61% ₹ 12,861.44
2027 7 8.86% ₹ 46,227.56 ₹ 30,075.65 ₹ 4,507.88 ₹ 274.07 ₹ 8,223.87 ₹ 26,085.59 10.61% 6.47% 0.00 10.61% ₹ 12,873.82
2028 8 8.43% ₹ 50,122.23 ₹ 32,609.53 ₹ 4,598.04 ₹ 283.63 ₹ 8,223.87 ₹ 28,700.06 10.61% 6.47% 0.00 10.61% ₹ 12,804.91
2029 9 7.99% ₹ 54,125.75 ₹ 35,214.21 ₹ 4,690.00 ₹ 291.56 ₹ 8,223.87 ₹ 31,388.78 10.61% 6.47% 0.00 10.61% ₹ 12,660.61
2030 10 7.55% ₹ 58,212.24 ₹ 37,872.88 ₹ 4,783.80 ₹ 297.60 ₹ 30,000.00 ₹ 12,359.08 10.61% 6.47% 0.00 10.61% ₹ 4,506.64
2031 11 7.11% ₹ 62,352.59 ₹ 40,566.59 ₹ 4,879.47 ₹ 301.52 ₹ 10,000.00 ₹ 35,144.54 10.61% 6.47% 0.00 10.61% ₹ 11,585.41
2032 12 6.68% ₹ 66,514.62 ₹ 43,274.41 ₹ 4,977.06 ₹ 303.10 ₹ 10,000.00 ₹ 37,948.37 10.61% 6.47% 0.00 10.61% ₹ 11,309.24
2033 13 6.24% ₹ 70,663.47 ₹ 45,973.66 ₹ 5,076.60 ₹ 302.14 ₹ 10,000.00 ₹ 40,748.12 10.61% 6.47% 0.00 10.61% ₹ 10,978.29
2034 14 5.80% ₹ 74,761.95 ₹ 48,640.13 ₹ 5,178.14 ₹ 298.47 ₹ 10,000.00 ₹ 43,519.79 10.61% 6.47% 0.00 10.61% ₹ 9,64,256.16 ₹ 2,45,458.31
2035 15 5.80% ₹ 79,098.15 ₹ 51,461.25 ₹ 5,281.70 ₹ 315.79 ₹ 10,000.00 ₹ 46,427.17 10.61% 6.47% 0.00 10.61%    
                            ₹ 3,97,264.31

*All Figueres in Lakhs ₹

39,72,64,31,178.08
 APV Contd..
Growth Rate 9.30%
GDP 5.80%
Tax 34.94%
Rf 6.03%
Rm-Rf 8.98%
b 0.67
ke 12.05%
kd 6.47%
b unlevered 0.51
ke unlevered 10.61%

PV of Tax Benefits on
debt ₹ 28,955.44
Bond Rating AA
Probability of
Bankruptcy 0.28%
Expected BCs 30%
Expected BCs ₹ 333.70
*All Figueres in Lakhs
APV ₹ 4,25,886.05
 Reason behind choosing DCF model
Manufacturing business valuations are based upon 2 main criteria:
• Based on the historical cash flow
• Based on the income producing assets
• Howsoever, in this case we choose DCF model over the other models because-
• Manufacturing firms invest heavily in developing new products and processes.
• The levels of capital investment needed, and the accuracy of sales projection make a
major difference to the manufacturing firm’s income prospects.
• Therefore, it is essential to capture these elements in the cash flow forecast and
business risk assessment.
-So, we consider the DCF model of valuation.
 Analysis
•From the time of inception into the stock market the stock price of Himadri has grown
steadily y-o-y till 2016. After that it experienced a steep growth during 2016-18.
•After that it again started to fall after 2018. Especially the stock price has started
falling steeply due to the pandemic in 2020.
•This is due to the fall in the international trade due to which the carbon black division
was highly affected. Carbon black is one of the most important verticals contributing to
their revenues.
•Therefore, in the subsequent years, the stock price of Himadri may increase due to the
increased demand of carbon black which would be mainly consumed due to the
potential increase of lithium ion batteries for the EV.
THANK YOU