Contents

• Executive Summary 2
• 1. Company Background 2
• 2. Market and Competitor Analysis 3
• 3. Delivered Shareholder Value (2004-09) Analysis 5
• Economic Value Added (EVA) Method 5
• Total Shareholder Return (TSR) Method 5
• Dividend Policy Method 8
• 4. Market Value Variations over past year (2008-2009) 8
• 5. Current Valuation of Equity 10
• a. Net Asset Value (NAV) Method 10
• b. Price to Earnings (P/E) Method 11
• c. Discounted Cash Flow (DCF) Method 12
• 1) Estimated revenue growth 13
• 2) Estimated operating margin 14
• 3) Estimated depreciation 14
• 4) Estimated Tax and Interest rates 15
• 5) Estimated Capital Expenditure 16
• 6) Estimated working capital 17
• 7) Cost of Equity 18
• 8) Free Cash Flow Estimates 19
• 9) Terminal Value Calculation 20
• 6. Reconciliation of different valuations 20
• 7. Conclusion 22
• References 23

Description

Corporate valuation may be influenced by the techniques, interests and motivations of the evaluator. In this assignment, an attempt is made to provide an objective evaluation of Ashok Leyland Limited (ALL), a company which is listed on the Bombay Stock Exchange (BSE) of India and operates in the commercial vehicles segment. For this purpose, three basic valuation techniques i.e. NAV, P/E and DCF have been utilized. Differences in valuation figures obtained from different techniques have then been explained.
To put these valuations into perspective, past performance of ALL has been evaluated vis-à-vis its key competitors and its share price movement over the past year has been charted. These inputs enable an objective assessment on how successful ALL has been in the past in delivering value to its shareholders which may (or may not) have been reflected in its share price movement. In addition, share price movement of ALL scrip on the BSE has been charted for the past 12 months to analyze and illustrate how multiple drivers of company news, industry developments and market / country / international news can impact share price movements.