VALUATION OF TATA POWER, BASED ON PROF.

ASWATH DAMODARAN
2019 2020E 2021E 2022E
DCF Base year 1 2 3
Assumptions:
Revenue growth rate 13.0% 13.0% 2.0%
EBIT (Operating) margin 22.0% 22.0% 22.0%
Tax rate 35.0% 35.0% 35.0% 35.0%
Depreciation 8.0% 8.0% 9.0%
Increase in CAPEX + WC as % of sales 16% 16% 16%
Cost of capital 7.5% 7.5% 7.5%

Free cash flow to firm ($ millions):

Revenues 295,586 334,012 377,434 384,982
EBIT 35,400 43,188 52,689 64,281
EBIT(1-tax) 23,010 28,072 34,248 41,783
Depreciation 23,931 26,721
Increase in CAPEX + WC 26,000 6,148 6,947 1,208
FCF 20,941 21,924 27,301 40,575
Terminal value 737,725

Present value:
Cumulative discount factor 0.9302 0.8653 0.8050
PV of FCFF and TV 20,394 23,624 593,840

Value of firm 637,858.1

- Debt 485,060.0
+ Excess Cash 11,960.0
Value of equity 164,758.1
Pre-IPO number of shares (millions) 2,704.0
Estimated value /share $ 60.93
Price talk $ 38.00
Price as % of value 62%
 23168
41700
5689
-30716
7.5% Based on NYU Stern Data average cost of capital in the power industry for emerging markets
 VALUATION OF TATA POWER
2019 2020E 2021E 2022E
DCF Base year 1 2 3
Assumptions:
Revenue growth rate 13.0% 13.0% 13.0%
EBIT (Operating) margin 19.0% 19.0% 19.0%
Tax rate 33.9% 33.9% 33.9%
Depreciation 9% 9% 9%
Increase in CAPEX + WC as % of sales 11% 11% 11%
Cost of capital 7.5% 7.5% 7.5%

Free cash flow to firm ($ millions):

Revenues 295,586 334,012 377,434 426,500
EBIT 43,595 51,878 61,735 73,465
EBIT(1-tax) 28,337 34,291 40,807 48,560
Depreciation 23,931 30,395 34,346 38,812
Increase in CAPEX + WC 17,000 36,741 41,518 46,915
FCF 35,268 27,945 33,636 40,457
Terminal value

Present value:
Cumulative discount factor 0.9302 0.8653 0.8050
PV of FCFF and TV 25,995 29,106 32,566

Value of firm 769,275.8

- Debt 485,060.0 WACC 6.5%
+ Excess Cash 9,544.0 Share Price 138
Value of equity 293,759.8
Number of shares 2,704.0
Estimated value /share $ 108.64
Price talk $ 61.50 9th Sept (NSE)
Price as % of value 57%
TA POWER
2023E 2024E Terminal Year
4 5 5

13.0% 13.0% 2.0%

19.0% 19.0% 10.0%
33.9% 33.9% 33.9%
9% 9% 9%
11% 11% 11%
7.5% 7.5% 7.5%

481,945 544,598 555,490

87,423 104,033 114,436
57,786 68,766 75,642
43,857 49,558 50,550
53,014 59,906 61,104
48,629 58,419 65,088
867,842

0.7488 0.6966 0.6966

36,414 40,692 604,503

7.5% 8.50%
93 58

WACC 7.5%
VALUATION OF TATA POWER, BASED ON PROF. ASWATH DAMODARAN
2019 2012E 2013E 2014E 2015E
DCF Base year 1 2 3 4
Assumptions:
Revenue growth rate 40.0% 40.0% 40.0% 40.0%
EBIT (Operating) margin 5.7% 44.6% 43.5% 42.5% 41.4%
Tax rate 40.0% 40.0% 40.0% 40.0% 40.0%
Increase in CAPEX + WC as % of sales 67% 67% 67% 67%
Cost of capital 11.1% 11.1% 11.1% 11.1%

Free cash flow to firm ($ millions):

Revenues 29,558 41,381 57,934 81,107 113,550
EBIT 1,695 18,459 25,224 34,448 47,015
EBIT(1-tax) 1,017 11,075 15,135 20,669 28,209
Increase in CAPEX + WC 7,922 11,090 15,526 21,737
FCFF 3,154 4,044 5,143 6,473
Terminal value

Present value:
Cumulative discount factor 0.9002 0.8104 0.7295 0.6567
PV of FCFF and TV 2,839 3,278 3,752 4,251

Value of firm 573,667.5

- Debt 1,088.9
+ Excess Cash 1,512.0
Value of equity 574,090.6
- Cost of equity options (after tax) 3,088.5 WACC Equity
Value of common equity 571,002.1 Market values $ 81,247.8
Pre-IPO number of shares (millions) 2,138.1 Weights in WACC 98.7%
Estimated value /share $ 267.06 Cost of Component 11.2%
Price talk $ 38.00
Price as % of value 14%
 2016E 2017E 2018E 2019E 2020E 2021E Terminal
5 6 7 8 9 10 year

40.0% 32.4% 24.8% 17.2% 9.6% 2.0% 2.0%

40.3% 39.3% 38.2% 37.1% 36.1% 35.0% 35.0%
40.0% 39.0% 38.0% 37.0% 36.0% 35.0% 35.0%
67% 67% 67% 67% 67% 67% 100%
11.1% 10.5% 9.8% 9.2% 8.6% 8.0% 8.0%

158,970 210,476 262,674 307,854 337,408 344,157 351,040 29558

64,125 82,654 100,348 114,322 121,695 120,455 122,864 4,170
38,475 50,419 62,216 72,023 77,885 78,296 79,862 29699
30,431 34,509 34,973 30,271 19,801 4,521 6,883 25,529
8,043 15,910 27,243 41,752 58,083 73,774 72,978 4,029
1,216,307

0.5912 0.5352 0.4872 0.4460 0.4106 0.3802 0.3802

4,755 8,515 13,273 18,623 23,852 28,051 462,478

Debt Preferred Capital

$ 1,088.9 $ - $ 82,336.7
1.3% 0.0% 100.0%
2.4% 7.1% 11.1%