For the remaining ~53% the ownership is very diversified. These are more long term investors and would not churn out a high quality stock so soon.įor comparison, promoters’ ownership in Page Industries is ~47% and there is no lock-in. Further of the remaining ~15%, 14 mutual funds own ~8.4% (SBI MF is the largest holder with ~4.3%) and FPIs and AIFs together own ~4%. ~85% of the shares are held by promoters which would be in lock-in (I do not think promoters plan to sell post lock-in period but no way to tell).
Value derived using DCF are very sensitive to terminal growth rate and discount rateįloat could also be a reason why the stock has done well even from the IPO pop level This is what the market appears to be believe We arrive at a value per share of INR 875 which is a 19% discount to the CMP (current market price) of INR 1082īut who knows the Company may continue to grow its cash flow at a much faster rate even beyond the 12th year. Further, let us assume discount rate at 12% (low?) After that we can gradually decrease the FCFF to 12% over the next 5 years, and terminal growth rate at 10%. Overall, we can build a case for high teens FCFF CAGR for the next 7 years. It is reasonable to assume that VFL will continue to be capital efficient in terms of capex, and also improve its working capital modestly Over this time frame let us assume EBITDA margin to gradually decline and settle at 43%
For the purpose of simplicity let us assume it to be linear YoY (year on year) 18-20% growthĮBITDA margin however is at peak and could decline by 4-5% points in this time period.
We would also discounted cash flow valuation and discuss the trading multiples of peers.Īs reasoned previously, there are reasons to believe that VFL can grow its topline at high-teens CAGR (18%) over the medium-term (5-7 years). Let us do some very high level quick and dirty financial modelling to understand how the earnings and free cash flow can grow.
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