All Values in Crores
Step 1: Determing Purchase Price
Diluted Shares(In Crores) 57.21
Share price as on 11/02/2020 162.00
Offer Premium 12.00%
Offer price per share 181.44
Diluted Equity Value(In Crores) 10380.18 Crores
Less:Cash and Cash Equivalents 217.57
Plus:Debt 2436.36
Enterprise Value 12599 Crores
Calculating EV/EBITDA
Transaction Enterprise Value 12598.97
Trailing
TTM EBITDA 2082
Purchase Multiple EV/EBITDA (TTM) 6.0513805956
Peer group EV/EBITDA
JK Tyre Ind 6.53
Ceat 9.22
Goodyear 6.35
TVS Srichakra 7.49
Average 7.3975
Step 5: Projected Income Statement
Income Statement Yr.1
Particulars
11%
Sales 13697.86
EBITDA Margin 19.4% 2662.687
Depreciation 500
EBIT 2162.687
Interest Expense 755.94
EBT 1406.75
Taxes 25% 351.6871
EAT 1055.06
Step 6: FCFF Calculation
EAT 1055.06
Depreciation 500
Capital Expenditure 1700
Increase in net working capital 500
FCFF -644.9388
Step 2: Calculating amount of Debt & Equity 60%
Debt 7559
DEBT/EBITDA 3.63
Capital Structure includes 60% debt & 40% equity
Debt 7559
Equity 5040
Total 12599
Step 3: Sources and Use
Sources
Bank Debt 2500
Non-convertible debentures(NCD) 4000
External Commercial borrowings from banks 1059.38
Sponsor's Equity 5039.59
Total 12599
Step 4: Projections
Revenue Estimate
Based on Historical data
Revenue growth 2019
Revenue 12,353.77
Historical YOY Growth 15.91%
Average of last 3 years 10.88%
We are assuming that Apollo Tyres revenue would grow by only by 11% in 2020 because of
economy. But afor 2021 and 2020 the revenue would grow by 13%. And for next
Historical EBITDA 2019
EBITDA 2082
EBITDA Margin 16.85%
Assuming Average EBITDA Margin 19.44%
Historical Depereciation 2019
Depereciation 446.33
Average 322.166
We are assuming Depereciation of 500 crores every year.
Historical CAPEX 2019
CAPEX 1,140.00
Average 1548.38
Projections for 2020 and 2021 year 2020
Based on Analyst&CFO Gaurav Kumar(The Hindu) 1700
Average interest rate 755.94
Tax Rate 25%
Increase in working capital every year by 500 Crores
Yr.2 Yr.3 Yr.4 Yr.5
13% 13% 10% 10%
15478.58 17490.7976587344 19239.8774246078 21163.86517
3008.836 3399.98465747971 3739.98312322768 4113.981436
500 500 500 500
2508.836 2899.98465747971 3239.98312322768 3613.981436
755.94 755.94 755.94 755.94
1752.90 2144.05 2484.04 2858.04
438.2244 536.011548369928 621.011164806921 714.5107429
1314.67 1608.03 1863.03 2143.53
1314.67 1608.03 1863.03 2143.53
500 500 500 500
1700 1500 1500 1500
500 500 500 500
-385.3269 108.034645109783 363.033494420762 643.5322287
Assuming a debt structure of 60% and equity of 40%. At this capital structure
70% 80% the debt/EBITDA ration becomes 3.63 times. Increasing debt beyond that
8819.28208 10079.17952 would increase this Debt/EBITDA Multiple and would lead to negative cash
flow.
4.235966416907 4.841104476
Use
Purchase Price 12598.9744
Assuming Average Interest Rate of 10%.(AA+ Rating for long term by
CRISIL. A1+ for short term)
12598.9744
Reasons for futu
1) Apollo has ho
other hand has
2) It aims to exp
3)Replacement
2018 2017 2016 increase its shar
10,388.13 9,924.00 8,706.10 4)With the ons
4.47% 12.27% efficient radial t
5) Apollo is also
financial year
y by 11% in 2020 because of the sluggish growth in FY20 in 6) Apollo tyres l
grow by 13%. And for next 2 years it will be 10%.
2018 2017 2016
vehicle tyres. Th
7) huge investm
1768 2001 2065
17.02% 20.16% 23.72%
2018 2017 2016 2015
364.38 288.2 265.14 246.78
2018 2017 2016 2015
1314.09 1794.81 1793 1700
2021
1700 Crores Greenfield project in fifth Indian facility in Andhra Pradesh in which they will manufacture p
10%
Step 7
Yr.6 Forward EBITDA (Year 6) 4114
Exit Multiple 6.05
Ending TV 24895
21163.86516707 Beginning Debt 7559
4113.98143555 Cash Generated (Cumulative FCFF) 84
500 Net Debt 7475
3613.98143555 Ending Equity Value 17420
755.94 Beginning Equity value 5040
2858.04
714.5107428876 EV Multiple 3.46
2143.53 IRR 28%
2143.53
500
1500
500
643.5322286628
structure
d that
tive cash
Reasons for future growth in revenue
1) Apollo has however led the domestic tyre market in terms of growth in the last 3 years with a CAGR o
other hand has witnessed a decline of 6.6% during the period.
2) It aims to expand the share in the two wheeler space.
3)Replacement market accounts for nearly 70 percent of the tyre business for passenger vehicles in India
increase its share in this segment to 20 percent over the next 2 years.
4)With the onset of BS VI emission norms from April 1, 2020, will turn the attention of manufacturers t
efficient radial tyres against traditional bias tyres.
5) Apollo is also planning to expand its T&B capacity at the Chennai plant which is expected to commenc
financial year
6) Apollo tyres laid foundation for their fifth Indian facility in Andhra Pradesh which they will manufactu
vehicle tyres. The facility is expected to commence operation in two years from now.
7) huge investment in capacity creation
hey will manufacture passenger vehicle tyres.
last 3 years with a CAGR of 12.6%. MRF on the
passenger vehicles in India. Apollo wants to
ention of manufacturers towards more
h is expected to commence operations in this
which they will manufacture passenger
m now.
Step 1: Determing Purchase Price
Forward EBITDA 6.05
EBITDA 2665.57
Purchase Price 16130.37
Keeping all assumptions same we are now going through LBO Route using
12 Month forward EBITDA.
EBITDA Multiple: 6.05
Step 5: Projected Income Statement
Income Statement Yr.1
Particulars
11%
Sales 13712.68
EBITDA Margin 19.4% 2665.568
Depreciation 500
EBIT 2165.568
Interest Expense 967.82
EBT 1197.75
Taxes 25% 299.4366
EAT 898.31
Step 6: FCFF Calculation
EAT 898.31
Depreciation 500
Capital Expenditure 1700
Increase in net working capital 300
FCFF -601.6903
Step 2: Calculating amount of Debt & Equity 60%
Debt 9678
Capital Structure includes 60% debt & 40% equity
Debt 9678
Equity 6452
Total 16130
Step 3: Sources and Use
Sources
Bank Debt 2500
Non-convertible debentures(NCD) 3000
External Commercial borrowings from banks 2497
Sponsor's Equity 6452.15
Total 14449
Step 4: Projections Estimate
Revenue Estimate
Revenue growth 2019
Revenue 12,353.77
Historical YOY Growth 15.91%
Average 10.88%
Historical EBITDA 2019
EBITDA 2082
EBITDA Margin 16.85%
Average 19.44%
Historical Depereciation 2019
Depereciation 446.33
Average 322.166
Historical CAPEX 2019
CAPEX 1,140.00
Average 1548.38
Projections for 2020 and 2020 2020
Based on Analyst&CFO Gaurav Kumar(The Hindu) 1700
Average interest rate 967.82
Tax Rate 25%
Increase in working capital every year by 500 Crores
Yr.2 Yr.3 Yr.4 Yr.5
16% 16% 13% 13%
15906.71 18451.78853232 20850.5210415216 23561.08878
3092.059 3586.78884388212 4053.0713935868 4579.970675
500 500 500 500
2592.059 3086.78884388212 3553.0713935868 4079.970675
967.82 967.82 967.82 967.82
1624.24 2118.97 2585.25 3112.15
406.0593 529.741677264578 646.312314690747 778.037135
1218.18 1589.23 1938.94 2334.11
1218.18 1589.23 1938.94 2334.11
500 500 500 500
1700 1500 1500 1500
300 500 500 500
-281.8221 89.2250317937342 438.93694407224 834.1114049
Use
Purchase Price 16130.3689137302
Assuming Average Interest Rate of 10%.
16130.3689137302
2018 2017 2016
10,388.13 9,924.00 8,706.10
4.47% 12.27%
2018 2017 2016
1768 2001 2065
17.02% 20.16% 23.72%
2018 2017 2016 2015
364.38 288.2 265.14 246.78
2018 2017 2016 2015
1314.09 1794.81 1793 1700
2021
1700
9.75%
Step 7
Forward EBITDA (Year 6)
Yr.6 Exit Multiple
Ending TV
Beginning Debt
23561.0887769194 Cash Generated (Cumulative FCFF)
4579.97067475308 Net Debt
500 Ending Equity Value
4079.97067475308 Beginning Equity value
967.82
3112.15 EV Multiple
778.037134982318 IRR
2334.11
2334.11
500
1500
500
834.111404946953
4579.97067475308
6.05
27715.1456695316
9678.2213482381
478.760992406759
9199.46035583134
18515.6853137003
6452.15
2.87
24%
Interest Rate
8.65
8.65
8.65
7.8
7.5
7.8
7.5
7.8
7.5
Average 7.9833333333
Group Members
Prachi Patel 80303180141
Anurag Sharma 80303180172
Gaurav Nigam 80303180132
