DCF Studio

    TECHM.NS · NSI · Technology

    Tech Mahindra Limited

    Also onConsensus Drift

    Implied value per share

    INR 752.69

    Market price

    INR 1537.10

    Implied upside

    -51.0%

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

    NoteRisk-free rate is an assumption: INR assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    INR 752.69-51.0%
    Exit multiple
    INR 1196.11-22.2%
    Market price
    INR 1537.10

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (INR). Outflows negative.

    0bn28bn56bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayINR
    LineFY27FY28FY29FY30FY31CAGR
    RevenueINR 580.4bnINR 592.9bnINR 605.7bnINR 618.8bnINR 632.2bn+2.2%
    EBITINR 59.6bnINR 60.9bnINR 62.2bnINR 63.5bnINR 64.9bn+2.2%
    NOPATINR 44.6bnINR 45.5bnINR 46.5bnINR 47.5bnINR 48.5bn+2.2%
    Add depreciation & amortisationINR 20.3bnINR 20.7bnINR 21.2bnINR 21.6bnINR 22.1bn+2.2%
    Less capital expenditureINR -8.4bnINR -8.6bnINR -8.7bnINR -8.9bnINR -9.1bn+2.2%
    Less increase in working capitalINR -4.8bnINR -4.9bnINR -5.0bnINR -5.1bnINR -5.2bn+2.2%
    Free cashflow to firmINR 51.7bnINR 52.8bnINR 54.0bnINR 55.1bnINR 56.3bn+2.2%
    Discount factor0.95250.86410.78390.71120.6452-
    Present valueINR 49.3bnINR 45.6bnINR 42.3bnINR 39.2bnINR 36.3bn-7.3%
    Present Value Of The ForecastINR 212.7bn

    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
    Beta0.436Reported 0.158, pulled toward 1.0 (Blume)
    Cost of equity10.29%Risk-free + beta x equity risk premium
    Cost of debt8.80%Implied cost of debt of 16.0% is not a credible funding cost, so risk-free + 2bp is assumed instead. Interest expense and reported debt are measuring different things - common for banks, whose interest expense includes deposits that total debt excludes.
    Market capitalisationINR 1361.8bn98.4% of capital
    Total debtINR 21.9bn1.6% of capital, book value as a proxy
    Tax rate25.2%Effective, capped at statutory
    WACC10.23%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 752.69

    65% of EV

    Forecast FCFF, final year
    INR 56.3bn
    Capex at depreciation, working capital in reinvestment
    INR 55.2bn
    Less reinvestment at g/ROIC (16.8% of NOPAT)
    INR -9.3bn
    Capitalised
    INR 45.9bn
    ROIC (reported)
    14.9%
    Terminal value, undiscounted
    INR 609.2bn
    Terminal value, discounted
    INR 393.0bn
    Enterprise value
    INR 605.8bn
    Less net debt
    INR -62.4bn
    Equity value
    INR 668.2bn

    Exit at 14.0x EBITDA

    Value per shareINR 1196.11

    79% of EV

    Terminal value, undiscounted
    INR 1219.3bn
    Terminal value, discounted
    INR 786.7bn
    Enterprise value
    INR 999.4bn
    Less net debt
    INR -62.4bn
    Equity value
    INR 1061.8bn

    Spread between methods: 46%.

    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%
    8.23%911.63938.22969.201005.821049.88
    9.23%808.87825.78844.99867.07892.75
    10.23%729.54740.49752.70766.40781.94
    11.23%666.40673.54681.35689.94699.49
    12.23%614.94619.55624.50629.85635.67

    Outlined: this model. Green text: above today's price of 1537.10. 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 year2.2%28.8%+26.6pp
    EBIT margin10.3%23.8%+13.5pp
    Discount rate10.2%5.9%-4.3pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

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