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IntrinsicValueEstimation - Patni Computers

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Shivraj Aryan
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6 views2 pages

IntrinsicValueEstimation - Patni Computers

Uploaded by

Shivraj Aryan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Intrinsic Value Estimation for Patni Computers

Discounted Cash Flow (DCF) Analysis


The Discounted Cash Flow (DCF) analysis is used to estimate the intrinsic value of Patni
Computers by projecting future cash flows and discounting them to present value. The
following assumptions and calculations are used in the analysis.

Assumptions:
Growth Rate: 10% for the next 5 years
Terminal Growth Rate: 3%
Discount Rate (WACC): 17.48%

Cost of Equity Calculation:


The cost of equity is calculated using the Capital Asset Pricing Model (CAPM):
Cost of Equity = Risk-Free Rate + Beta * Market Risk Premium
Given:
- Risk-Free Rate (Rf): 7.98%
- Market Risk Premium: 9.5%
- Beta (β): Assumed to be 1
Cost of Equity = 7.98% + 1 * 9.5% = 17.48%

Projected Cash Flows:


Net Profit (2008): INR 4,380.3 million
Projected Cash Flows for 2009-2013 calculated with a 10% growth rate.

Terminal Value:
Terminal Value is calculated using the formula:
Terminal Value = (Year 5 Cash Flow * (1 + g)) / (WACC - g)

Present Value Calculation:


The present value of projected cash flows and terminal value is calculated using the
discount rate.

Intrinsic Value per Share:


Intrinsic Value = Total PV / Shares Outstanding

Asset-Based Valuation

Net Asset Value Calculation:


Total Assets: INR 28,416.9 million
Total Liabilities: INR 9,355.3 million
Net Asset Value = Total Assets - Total Liabilities
NAV per Share:
NAV per Share = Net Asset Value / Shares Outstanding

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