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VALUATION OF ACC LTD.

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Company overview
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• ACC Limited (Formerly The Associated Cement
Companies Limited) is one of the largest producers of
cement in India. It is a subsidiary of the Holcim Group.
On 1 September 2006, the name of The Associated Cement
Companies Limited was changed to ACC Limited. The
company had been established in Mumbai, Maharashtra on
1 August 1936.
• The mission of the company is to create value on a
sustained basis for all stakeholders of India Cements
t h r o u g h l o f t y s t a n d a r d s o f t r a n s p a r e n c y, a c c o u n t a b i l i t y
a n d r e s p o n s i b i l i t y, i n n o v a t i o n a n d l e a d e r s h i p i n c e m e n t
manufacture.
• The vision of the company is to be one of the most
respected companies in India; recognized for challenging
conventions and delivering on our promises.

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Key Points
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• T h e d a t a t a k e n w a s f r o m 2 0 11 - 2 0 2 0
• T h e d a t a w a s t a k e n f r o m w w w. c a p i t a l i n e . c o m
• The Risk free rate(RFR) is taken as 6.17%
which is of 10yr Government Bond
• The high growth rate has been calculated from
net income rather than dividends.

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Macro Master
Micro level title style
Analysis

Macro Level Micro level

• Union budget 2021-22 effect on • Market competition
the industry. • Improving financials
• Broking house and other
research group’s outlook on the
overall cement sectory of india
• Covid-19 impact on the sector
• Increasing demand of big
housing spaces.

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Click to edit
DIVIDEND Master title
DISCOUNT MODELstyle
(DDM)
High Growth Period
• The high growth period is from 2021-2025 and the rate is Year Dividend PVF PV
taken 22% which is derived from the growth in the Net 2021 17.08 0.92174394 15.7433865
2022 20.8376 0.84961189 17.7038727
Profit of the past five years because the growth rate of 2023 25.421872 0.783124611 19.9084936
dividend was not sufficient enough and was less than the 2024 31.0146838 0.721840364 22.3876507
risk free rate so Net Profit is used to derive growth rate for 2025 37.8379143 0.665351981 25.1755312
High Growth Rate.   TOTAL 100.918935

• The company is providing Rs 14 dividend from the past 3

years. The company is a continuously dividend distributing For Stable Growth Period
company. Stable Growth Rate
is taken as =
• If one wants a good dividend income then they can invest     6.17%
in it. According to the DDM the value of firm is coming out
to be 1253 Crore. (The risk free rate
as stable rate)      
• The strategy of the company behind distributing continuous        
dividend so that they may not loose shareholders.
D (2025) = 37.8379    
• If the company’s share price does not give adequate        
returns to the shareholders then the company distributes
Terminal Value=   1731.57  
dividend to the shareholders to retain them or to lure them.
PV of Terminal
Value=   1152.11  

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Click to
FREE editFLOWS
CASH Master title style FCFF

ASSUMPTIONS
 The value of form and value of equity is calculated by adding the
individual values of of the high-growth period and the stable
growth period.
 In this case the high-growth period is assumed to be five years post
March 2020 and the stable growth period is assumed to be the next
year after the high-growth period that is 2025-26.
 The cost of equity is calculated to be 8.49% using the CAPM
model.
 The risk-free rate was taken from the 10 year government bond to
be 6.17%.
 The FCFE over the years has been in the range of 1200-1700
except in year 2018.

Analysis FCFF&FCFE

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Click to VALUATION
RELATIVE edit Master title style
• The enterprise value of ACC limited is quite decent but the
toppers in the comparison are Shree and Ultratech Chart Title
300.00
cement with more than lakh and 2 lakh crore of valuation.
• The P/E of ACC is below the industry average calculated 250.00

on the basis of comparative firms. 200.00

• The highest P/E is of Shree cement. The P/S ratio of ACC 150.00
is below the industry average but it is quite close. The
Price to book value of ACC is again below the industry 100.00

average. 50.00

• EV/Sales of ACC is above the industry average and the

0.00
lowest is of Mangalam cement. EV/EBIT of ACC is above or
p
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industry average and the highest is of Shree cement. rl a
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A ve
Bi JK m am
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• The EV/TA of ACC is below Industry average and the JK an U
ltr In
d
M
highest is of Shree cement.
• The EV/EBDIT of ACC is very close to the industry P/E
EV/EBIT
P/S
EV/total assets
P/BV
EV/EBDIT
EV/Sales

average. According to the calculations the Value of the

firm is Rs 179220.28 Crore and value per share is Rs
2551.28.

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RESIDUAL Master title style
INCOME
• The residual income among the 10 years was
highest for the year end 2011, at Rs. 79.9974 Residual Income
million. This clearly shows that ACC LTD, has 100

met the shareholders’ expectations in the past.

In, 2014 the residual income was at Rs. -5.8675 79.9974770308244
80

million which again rose to Rs. 26.4680 million in

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year end 2015 which was a big jump. But, again 52.0963832923335
in the years 2016 and 2017 the RI was negative 40
which shows inconsistency and its not a trend
shareholders’ look for in a company. 20
26.4680568414855
20.4555045102886

8.15248780425433
• The company made a big jump in the year 2018 0 -2.61059732062763
1 2 3 4 5
-5.86757476517337 6 7 8 9 10
with the Residual income of Rs. 52.09683 million
-3.58694106505546
but later in year 2019 and 2020 the company’s -20
-26.9669050515625
RI was worse among the 10 years. During those -33.8094306954629
years, majority of the amount was deployed into -40

repayment of debt and also the whole economy

was hard-hit by the pandemic in the year 2020.

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ClickASSET
NET to editVALUE
Master(NAV)
title style

• Net asset value or NAV of an investment company is the

company's total assets minus its total liabilities. NAV of ACC
Ltd as per calculations were 12745.42₹crores.
• The company has a total of 18.78 crores shares outstanding. To
calculate the NAV per share, divide the NAV from the total no.
of outstanding shares, in this case the NAV per share of ACC
Ltd comes out to be 678.67₹, but the average market price for
FY 2019-20 was 1620₹.
• Therefore this shows that the share is overvalued and is trading
at a premium of 139%.

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CONCLUSION
• The market value of ACC Ltd on 31 March 2020 is
2242.95 which when compare to the values obtained
CONCLUSION
through valuation methods will suggest if the stock is
NAV PER SHARE 678.67 over priced
under price or overpriced and also if investors should
invest in ACC Ltd.
RELATIVE VALUATION 2551.283 under priced
• Considering the different valuation methods the most
suitable for ACC is relative valuation model this is DDM PER SHARE 1253.03 over priced
because the relative model suggests the performance
of the company in relation to its peers from the same RESIDUAL INCOME SHARE 564.86 over priced
industry.
• Secondly all the other methods either will suggest the FCFF VALUE PER SHARE 4898.06 under priced
value of equity or the value of firm however in
relative valuation method both these values can be FCFE VALUE PER SHARE 4556.39 under priced

obtained using the enterprise value based multiples

and price based multiples. This is the only method
market value per share 2242.95
which gives the fair value of stock as per March 2020.
• Most of the valuation models conclude that ACC Ltd
is and underpriced and therefore it is not good for the
investors to buy. 1010
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Thank You

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