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    GRASIM.NS · NSI · Basic Materials

    Grasim Industries Limited

    Also onConsensus Drift

    Implied value per share

    INR -1416.33

    Market price

    INR 3209.20

    Implied upside

    -144.1%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 11.5% of revenue against depreciation of 4.1%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.
    NoteRisk-free rate is an assumption: INR assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    INR -1416.33-144.1%
    Exit multiple
    INR 3427.66+6.8%
    Market price
    INR 3209.20

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (INR). Outflows negative.

    -422702270561-2113511352810FY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayINR
    LineFY27FY28FY29FY30FY31CAGR
    RevenueINR 1988.0bnINR 2272.3bnINR 2597.3bnINR 2968.7bnINR 3393.3bn+14.3%
    EBITINR 197.2bnINR 225.4bnINR 257.6bnINR 294.5bnINR 336.6bn+14.3%
    NOPATINR 147.5bnINR 168.6bnINR 192.7bnINR 220.3bnINR 251.8bn+14.3%
    Add depreciation & amortisationINR 82.4bnINR 94.2bnINR 107.6bnINR 123.0bnINR 140.6bn+14.3%
    Less capital expenditureINR -228.8bnINR -261.5bnINR -298.9bnINR -341.6bnINR -390.5bn+14.3%
    Less increase in working capitalINR -248.7bnINR -284.3bnINR -325.0bnINR -371.5bnINR -424.6bn+14.3%
    Free cashflow to firmINR -247.6bnINR -283.1bnINR -323.5bnINR -369.8bnINR -422.7bn-14.3%
    Discount factor0.96150.88890.82170.75970.7023-
    Present valueINR -238.1bnINR -251.6bnINR -265.9bnINR -280.9bnINR -296.9bn-5.7%
    Present Value Of The ForecastINR -1333.4bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate6.80%INR assumption - no free live source available for this market (assumption)
    Equity risk premium8.00%Market assumption
    Beta0.575Reported 0.365, pulled toward 1.0 (Blume)
    Cost of equity11.40%Risk-free + beta x equity risk premium
    Cost of debt6.80%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationINR 2176.6bn48.9% of capital
    Total debtINR 2278.4bn51.1% of capital, book value as a proxy
    Tax rate25.2%Effective, capped at statutory
    WACC8.17%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareINR -1416.33

    233% of EV

    Forecast FCFF, final year
    INR -422.7bn
    Capex at depreciation, working capital in reinvestment
    INR 264.7bn
    Less reinvestment at g/ROIC (30.6% of NOPAT)
    INR -81.0bn
    Capitalised
    INR 183.7bn
    ROIC (WACC floor)
    8.2%
    Terminal value, undiscounted
    INR 3321.0bn
    Terminal value, discounted
    INR 2332.4bn
    Enterprise value
    INR 999.0bn
    Less net debt
    INR 1960.9bn
    Equity value
    INR -961.9bn

    Exit at 16.8x EBITDA

    Value per shareINR 3427.66

    131% of EV

    Terminal value, undiscounted
    INR 8005.2bn
    Terminal value, discounted
    INR 5622.1bn
    Enterprise value
    INR 4288.7bn
    Less net debt
    INR 1960.9bn
    Equity value
    INR 2327.9bn

    Sensitivity

    Value per share (INR) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.17%-51.51-27.38-3.2520.8845.01
    7.17%-858.42-838.51-818.61-798.70-778.80
    8.17%-1449.83-1433.07-1416.32-1399.57-1382.81
    9.17%-1897.19-1882.87-1868.55-1854.23-1839.91
    10.17%-2243.82-2231.43-2219.03-2206.64-2194.25

    Outlined: this model. Green text: above today's price of 3209.20. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    EBIT margin9.9%20.3%+10.3pp
    Discount rate8.2%4.2%-4.0pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.