DCF Studio

    SBILIFE.NS · NSI · Financial Services

    SBI Life Insurance Company Limited

    Also onConsensus Drift

    Implied value per share

    INR 310.69

    Market price

    INR 1731.00

    Implied upside

    -82.1%

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

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.
    AdjustedSome line items were not reported and have been derived. Each one is labelled in the workings below.
    AdjustedReported capital expenditure averages just 0.11% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 1.00% of revenue so the forecast is not handed free growth. The accounts do not separate depreciation from amortisation, so the combined charge is used - if a large part of it is amortisation of an acquisition, the reported capex is probably right and this substitution is not. Override it if the reported figure is right.
    AdjustedCapital expenditure runs at 1.0% of revenue against depreciation of 0.1%. 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.

    Current EV/EBITDA of 64.1x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    INR 310.69-82.1%
    Exit multiple
    INR 581.98-66.4%
    Market price
    INR 1731.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (INR). Outflows negative.

    0bn10bn19bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayINR
    LineFY27FY28FY29FY30FY31CAGR
    RevenueINR 1227.0bnINR 1362.8bnINR 1513.6bnINR 1681.1bnINR 1867.1bn+11.1%
    EBITINR 24.9bnINR 27.7bnINR 30.7bnINR 34.1bnINR 37.9bn+11.1%
    NOPATINR 24.3bnINR 27.0bnINR 29.9bnINR 33.3bnINR 36.9bn+11.1%
    Add depreciation & amortisationINR 979.6mINR 1.1bnINR 1.2bnINR 1.3bnINR 1.5bn+11.1%
    Less capital expenditureINR -12.3bnINR -13.6bnINR -15.1bnINR -16.8bnINR -18.7bn+11.1%
    Less increase in working capitalINR -238.4mINR -264.8mINR -294.1mINR -326.7mINR -362.8m+11.1%
    Free cashflow to firmINR 12.7bnINR 14.2bnINR 15.7bnINR 17.5bnINR 19.4bn+11.1%
    Discount factor0.94780.85140.76480.68700.6172-
    Present valueINR 12.1bnINR 12.1bnINR 12.0bnINR 12.0bnINR 12.0bn-0.2%
    Present Value Of The ForecastINR 60.1bn

    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
    Beta0.565Reported 0.351, pulled toward 1.0 (Blume)
    Cost of equity11.32%Risk-free + beta x equity risk premium
    Cost of debt8.80%Assumed: risk-free + 2bp (interest expense not reported)
    Market capitalisationINR 1736.9bn100.0% of capital
    Total debtINR 0.000.0% of capital, book value as a proxy
    Tax rate2.6%Effective, capped at statutory
    WACC11.32%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 310.69

    78% of EV

    Forecast FCFF, final year
    INR 19.4bn
    Capex at depreciation, working capital in reinvestment
    INR 36.9bn
    Less reinvestment at g/ROIC (19.1% of NOPAT)
    INR -7.1bn
    Capitalised
    INR 29.9bn
    ROIC (reported)
    13.1%
    Terminal value, undiscounted
    INR 347.0bn
    Terminal value, discounted
    INR 214.2bn
    Enterprise value
    INR 274.3bn
    Less net debt
    INR -37.4bn
    Equity value
    INR 311.7bn

    Exit at 20.0x EBITDA

    Value per shareINR 581.98

    89% of EV

    Terminal value, undiscounted
    INR 788.1bn
    Terminal value, discounted
    INR 486.4bn
    Enterprise value
    INR 546.5bn
    Less net debt
    INR -37.4bn
    Equity value
    INR 583.9bn

    Spread between methods: 61%.

    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%
    9.32%383.20390.88399.54409.43420.85
    10.32%339.59344.22349.33355.02361.40
    11.32%305.07307.78310.69313.85317.31
    12.32%277.10278.56280.07281.66283.34
    13.32%254.43255.22256.00256.79257.58

    Outlined: this model. Green text: above today's price of 1731.00. 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
    Revenue growth, every year11.1%63.7%+52.6pp
    EBIT margin2.0%10.8%+8.8pp
    Discount rate11.3%4.1%-7.2pp
    Download as Excel

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    Yahoo Finance and RBA data. General information, not advice. Methodology.