Vishesh Kumar BSE: 500520 | NSE: M&M

FINANCIAL
MODELING
REPORT
(PART - 3)
 TABLE OF
CONTENTS
06 WACC
33

07 Intrinsic Growth

08 DCF Valuation
MAHINDRA & MAHINDRA LTD
NSE: M&M | BSE: 500520

WACC
All figures are in INR unless stated otherwise.

Peer Comps
Debt/ Debt/ Levered Unlevered
Name Country Total Debt Total Equity Tax Rate 1 Equity Capital Beta 2 Beta 3
M&M India ₹ 1,06,625.5 ₹ 3,20,799.4 30.00% 33.24% 24.95% 1.00 0.81
Maruti Suzuki India ₹ 118.6 ₹ 4,08,737.5 30.00% 0.03% 0.03% 0.43 0.43
Tata Motors India ₹ 1,07,262.5 ₹ 3,52,184.8 30.00% 30.46% 23.35% 1.14 0.94
Bajaj Auto India ₹ 1,911.7 ₹ 2,49,815.6 30.00% 0.77% 0.76% 0.61 0.60
Eicher Motors India ₹ 419.4 ₹ 1,33,643.2 30.00% 0.31% 0.31% 0.81 0.80

Average 30.00% 12.96% 9.88% 0.80 0.72

Median 30.00% 0.77% 0.76% 0.81 0.80

Cost of Debt Cost of Equity

Pre-tax Cost of Debt 7.02% Risk Free Rate 6.99%

Tax Rate 30.00% Equity Risk Premium 9.78%
4
After Tax Cost of Debt 4.92% Levered Beta 0.86
Cost of Equity 15.45%

Capital Structure Levered Beta

Current Target Comps Median Unlevered Beta 0.80

Total Debt ₹ 1,06,625.5 24.95% 9.88% Target Debt/ Equity 10.96%
Market Capitalization ₹ 3,20,799.4 75.05% 90.12% Tax Rate 30.00%
Total Capitalization ₹ 4,27,424.9 100.00% 100.00% Levered Beta 0.86

Debt / Equity 33.24% 10.96% Weighted Average Cost of Capital

1. Tax Rate considered as Marginal Tax Rate for the country Cost of Equity 15.45%
2. Levered Beta is based on 5 year monthly data Equity Weight 90.12%
3. Unlevered Beta = Levered Beta/(1+(1-Tax Rate) x Debt/Equity)
3. Levered Beta = Unlevered Beta/(1+(1-Tax Rate) x Debt/Equity) Cost of Debt 4.92%
Debt Weight 9.88%

WACC 14.41%
 MAHINDRA & MAHINDRA LTD
NSE: M&M | BSE: 500520

Intrinsic Growth
# Calculation of ROIC Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23
Current Assets
Inventories ₹ 9,336.0 ₹ 12,200.0 ₹ 11,112.0 ₹ 9,615.0 ₹ 11,596.0 ₹ 16,855.0
Trade receivables ₹ 8,490.0 ₹ 8,678.0 ₹ 6,928.0 ₹ 6,008.0 ₹ 6,374.0 ₹ 7,028.0
Short term loans ₹ 26,213.0 ₹ 30,392.0 ₹ 29,505.0 ₹ 31,407.0 ₹ 31,556.0 ₹ 36,127.0
Other asset items ₹ 39,314.0 ₹ 49,873.0 ₹ 54,504.0 ₹ 47,056.0 ₹ 48,963.0 ₹ 66,619.0
Total Current Assets ₹ 83,353.0 ₹ 1,01,143.0 ₹ 1,02,049.0 ₹ 94,086.0 ₹ 98,489.0 ₹ 1,26,629.0

Current Liabilities
Trade Payables ₹ 18,287.0 ₹ 20,992.0 ₹ 14,985.0 ₹ 15,506.0 ₹ 19,037.0 ₹ 23,836.0
Advance from Customers ₹ 844.0 - - - - -
Other liability items ₹ 16,314.0 ₹ 21,704.0 ₹ 20,977.0 ₹ 18,185.0 ₹ 18,921.0 ₹ 21,119.0
Total Current Liabilities ₹ 35,445.0 ₹ 42,696.0 ₹ 35,962.0 ₹ 33,691.0 ₹ 37,958.0 ₹ 44,955.0

Net Working Capital ₹ 47,908.0 ₹ 58,447.0 ₹ 66,087.0 ₹ 60,395.0 ₹ 60,531.0 ₹ 81,674.0

Non-Curent Assets
Land ₹ 4,285.0 ₹ 4,295.0 ₹ 4,511.0 ₹ 1,712.0 ₹ 1,931.0 ₹ 1,977.0
Building ₹ 8,842.0 ₹ 9,037.0 ₹ 11,956.0 ₹ 8,482.0 ₹ 9,728.0 ₹ 10,862.0
Plant Machinery ₹ 32,713.0 ₹ 35,762.0 ₹ 38,492.0 ₹ 22,386.0 ₹ 26,484.0 ₹ 24,928.0
Equipments ₹ 372.0 ₹ 384.0 ₹ 417.0 ₹ 418.0 ₹ 445.0 ₹ 452.0
Furniture n fittings ₹ 1,059.0 ₹ 1,079.0 ₹ 1,160.0 ₹ 805.0 ₹ 844.0 ₹ 925.0
Vehicles ₹ 788.0 ₹ 847.0 ₹ 1,068.0 ₹ 986.0 ₹ 1,090.0 ₹ 1,238.0
Intangible Assets ₹ 7,216.0 ₹ 9,696.0 ₹ 9,733.0 ₹ 6,932.0 ₹ 7,046.0 ₹ 10,625.0
Other fixed assets ₹ 1,064.0 ₹ 1,113.0 ₹ 1,265.0 ₹ 937.0 ₹ 958.0 ₹ 1,084.0

Gross Block ₹ 56,339.0 ₹ 62,213.0 ₹ 68,602.0 ₹ 42,658.0 ₹ 48,526.0 ₹ 52,091.0

Accumulated Depreciation (₹ 30,157.0) (₹ 33,229.0) (₹ 38,913.0) (₹ 21,278.0) (₹ 22,508.0) (₹ 24,950.0)
Net Non-Current Assets ₹ 26,182.0 ₹ 28,984.0 ₹ 29,689.0 ₹ 21,380.0 ₹ 26,018.0 ₹ 27,141.0

Invested Capital ₹ 74,090.0 ₹ 87,431.0 ₹ 95,776.0 ₹ 81,775.0 ₹ 86,549.0 ₹ 1,08,815.0

EBIT ₹ 9,946.2 ₹ 11,215.7 ₹ 6,791.1 ₹ 8,108.9 ₹ 11,175.4 ₹ 15,928.5

ROIC 13.42% 12.83% 7.09% 9.92% 12.91% 14.64%

# Calculation of Reinvestment Rate Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23

Net Capex ₹ 5,764.0 ₹ 7,238.0 ₹ 5,532.0 ₹ 5,869.0 ₹ 5,902.0 ₹ 6,032.0
Changes in Working Capital - ₹ 10,539.0 ₹ 7,640.0 (₹ 5,692.0) ₹ 136.0 ₹ 21,143.0

EBIT ₹ 9,946.2 ₹ 11,215.7 ₹ 6,791.1 ₹ 8,108.9 ₹ 11,175.4 ₹ 15,928.5

Marginal Tax Rate ₹ 0.3 ₹ 0.3 ₹ 0.3 ₹ 0.3 ₹ 0.3 ₹ 0.3
EBIT(1-Tax) ₹ 7,459.7 ₹ 8,411.8 ₹ 5,093.3 ₹ 6,081.7 ₹ 8,381.5 ₹ 11,946.4

Reinvestment ₹ 17,777.0 ₹ 13,172.0 ₹ 177.0 ₹ 6,038.0 ₹ 27,175.0

Reinvestment Rate 211.33% 258.61% 2.91% 72.04% 227.48%

5 Years Average 154.47%

5 Years Median 211.33%

# Calculation of Growth Rate Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23

Reinvestment Rate 211.33% 258.61% 2.91% 72.04% 227.48%

ROIC 12.83% 7.09% 9.92% 12.91% 14.64%

Intrinic Growth 27.11% 18.34% 0.29% 9.30% 33.30%

5 Years Average 17.67%

5 Years Median 18.34%
MAHINDRA & MAHINDRA LTD
NSE: M&M | BSE: 500520

DCF Valuation
Calculation of PV of FCFF 2023A 2024F 2025F 2026F 2027F 2028F
EBIT ₹ 15,928.5 ₹ 15,539.8 ₹ 15,160.7 ₹ 14,790.7 ₹ 14,429.8 ₹ 14,077.8
Tax Rate 30% 30% 30% 30% 30% 30%
NOPAT ₹ 11,149.9 ₹ 10,877.9 ₹ 10,612.5 ₹ 10,353.5 ₹ 10,100.9 ₹ 9,854.4
Add: D&A ₹ 4,356.8 ₹ 4,250.5 ₹ 4,146.8 ₹ 4,045.6 ₹ 3,946.9 ₹ 3,850.6
Changes in WC ₹ 21,143.0 ₹ 20,627.1 ₹ 20,123.8 ₹ 19,632.8 ₹ 19,153.7 ₹ 18,686.4
Less: Net Capex (₹ 6,032.0) (₹ 5,884.8) (₹ 5,741.2) (₹ 5,601.1) (₹ 5,464.5) (₹ 5,331.1)
Free Cash Flow to Firm (FCFF) ₹ 30,617.7 ₹ 29,870.7 ₹ 29,141.8 ₹ 28,430.8 ₹ 27,737.1 ₹ 27,060.3
Mid Year Convention 0.5 1.5 2.5 3.5 4.5
Discounting Factor 0.935 0.817 0.714 0.624 0.546
PV of FCFF ₹ 27,926.6 ₹ 23,814.2 ₹ 20,307.4 ₹ 17,317.0 ₹ 14,766.9

Expected Growth 1 -2.44%

Terminal Growth 2 6.80%
WACC 14.41% Sensitivity Analysis - Enterprise Value
WACC
Calculation of Terminal Value ₹ 3,06,388.7 12% 14% 16% 16%
6% ₹ 3,34,819.4 ₹ 2,81,216.7 ₹ 2,47,827.5 ₹ 2,47,827.5
FCFF(N+1) ₹ 26,400.0 7% ₹ 3,78,529.2 ₹ 3,06,388.7 ₹ 2,64,284.0 ₹ 2,64,284.0
WACC 14.41% 8% ₹ 4,41,213.1 ₹ 3,39,180.2 ₹ 2,84,564.2 ₹ 2,84,564.2
Terminal Growth 6.80% 9% ₹ 5,38,650.9 ₹ 3,83,667.7 ₹ 3,10,176.3 ₹ 3,10,176.3
Terminal Value ₹ 3,70,633.4 GROWTH

Caculaiton of Equity Value per Share

PV of FCFF ₹ 1,04,132.1 Sensitivity Analysis - Equity Value per Share

PV of Terminal Value ₹ 2,02,256.6 WACC
Enterprise Value ₹ 3,06,388.7 ₹ 1,840.7 12% 14% 16% 16%
6% ₹ 2,069.3 ₹ 1,638.3 ₹ 1,369.8 ₹ 1,369.8
Add: Cash ₹ 11,273.4 7% ₹ 2,420.8 ₹ 1,840.7 ₹ 1,502.1 ₹ 1,502.1
Less: Debt ₹ 88,767.0 8% ₹ 2,924.9 ₹ 2,104.4 ₹ 1,665.2 ₹ 1,665.2
Equity Value ₹ 2,28,895.2 9% ₹ 3,708.5 ₹ 2,462.1 ₹ 1,871.1 ₹ 1,871.1
No of Shares (in Cr.) 124.35 GROWTH

Equity Value per Share ₹ 1,840.7

Share Price ₹ 2,580.0 1. The reinvestment rate and growth rate are taken from the NYU Stern report on the Indian sector, updated in January 2024.
Discount/Premium 1.40x 2. The terminal growth rate is based on India's long term GDP growth rate.