“A study on Valuation of Maruti Suzuki India Ltd using DCF

Valuation Method”

Presented By:
Prachi Navghare
MMS II (Finance)
St. John College of Engineering and Management
Objectives

• To value a Maruti Suzuki India Ltd to give owners, potential buyers and other interested
stakeholders an approximate value of what a company is worth

• To find out Whether the company is overvalued or undervalued using DCF valuation method

• To use Discounted Cash flow method technique to predict a scenario analysis is conducted to
examine the effects of changes in the underlying assumptions

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 Maruti Suzuki India Ltd
• Maruti Suzuki is one of the leading automobile manufacturers of India, and is the leader in the car segment both in terms of
volume of vehicle sold and revenue earned

• It was established in February, 1981 as Maruti Udyog Ltd. (MUL)

• Actual production started in 1983 with the Maruti 800 (based on the Suzuki Alto kei car of Japan), which was the only
modern car available in India at that time

• Previously, the Government of India held a 18.28% stake in the company, and 54.2% was held by Suzuki of Japan.

Net Sales and PAT

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 Maruti Suzuki India Ltd
◉ Vision- ―To be a leader in the Indian automobile industry creating customer delight and
shareholder wealth, a pride of India

MR. R. C. BHARGAV MR. KENICHI AYUKAWA Mr. OSAMU SUZUKI

Chairman Mr. TOSHIHIRO SUZUKI
MD & CEO Director Director

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 Sales

Market Q3 FY’19 9M FY’19

Number Growth Number Growth
Domestic 405,597 1.3 % 1,324,837 8.0 %
Exports 23,046 (24.5) % 79,133 (13.4) %
Total Sales 428,643 (0.6) % 1,403,970 6.5 %

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 Financial Modeling
◉ A financial model is simply a tool that’s built in Excel to forecast a business’ financial performance into the future
◉ The forecast is typically based on the company’s historical performance, assumptions about the future, and requires
preparing an income statement, balance sheet, cash flow statement and supporting schedules (known as a 3
statement model)

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 Discounted Cash Flow
◉ A DCF model is a specific type of financial model used to value a business. DCF
stands for Discounted Cash Flow, so a DCF model is simply a forecast of a
company’s unlevered free cash flow discounted back to today’s value, which is called
the Net Present Value (NPV)

◉ The DCF method values the company on basis of the net present value (NPV) of its
future free cash flows which are discounted by an appropriate discount rate

Cash Flow

◉ There are two ways of using cash flows for the DCF valuation. You can either use the
free cash flow to the firm (FCFF) which is the cash flow that is available to debt- and
equity holders, or you can use the free cash flow to equity (FCFE) which is the cash
flow that is available to the company’s equity holders only

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Discounted Cash Flow Valuation
Process

1. Collecting Historical Data (Profit & Loss Statement, Balance Sheet, Cash Flow)
2. Forecasting Revenue
3. Forecasting Expenses
4. Forecasting Capital Asset
5. Forecasting Capital Structure
6. Calculate Beta
7. FCFF
8. WACC
9. DCF Enterprise Value
10. Terminal Value
11. DCF Equity Value
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 9

◉ Excel Sheet

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 Conclusion
◉ Conclude that using the DCF method is an effective approach to obtain a realistic range of appropriate company values

◉ This combination technique is indeed the method that most companies and investment banks use today

◉ Weightage of debt to capital is just 0.2%, while 99.8% is of equity

◉ The company is highly depended on equity in 2017 so Debt to equity Ratio is 0.00

◉ Beta of Company when calculated is 0.4 which indicates company is not volatile but stable

◉ Interest Rate are bit high for company at 18%, effecting the overall value of company

◉ WACC is higher then Company long term growth rate it means company has high cost of capital

◉ Company is Undervalued in the Market because company intrinsic value stands at 13,350

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 Scope of Study

◉ There has always been, and continues to be, vigorous debate on the importance of shareholder value relative to other measures such as
employment, social responsibility, and the environment. The goal of valuation of Maruti Suzuki using DCF model is to give owners,
potential buyers and other interested stakeholders an approximate value of what a company is worth.

◉ By helping to understand whether company is overvalued or undervalued

◉ The company valuation using discounted cash flows is a valid method to assess the company’s value if special precaution is put on the
validity of the underlying assumptions.

◉ As with all other financial models, the validity of the DCF method almost completely depends on the quality and validity of the data
that is used as input.

◉ If used wisely, the discounted cash flow valuation is a powerful tool to evaluate the values of a variety of assets and also to analyze the
effects that different economic scenarios have on a company’s value.

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 Research Methodology

◉ Secondary Data is been used for this project, scanned lot of sources to get an access to secondary
data which have formed a reference base to compare the research findings. Secondary data in this
study has provided an insight and forms an outline for the core objectives established.
◉ Different Sources:
◉ Website
○ SIAM
○ KPMG
○ CII
○ Company website
◉ Annual report (2013-2018)
◉ Research Papers

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 References

◉ F. Steiger, 2008,”The validity of company valuation using discounted cash flow methods” European business school.6-13

◉ N.French and L.Gabrielli, 2005”Discounted cash flow: accounting for uncertainty”, 1-5.16

◉ L. P. Jennergren,, 2006, “A tutorial on the discounted cash flow model for valuation of companies”

◉ N. Schmidlin, “ the art of company valuation and financial statement analysis”

◉ http://www.siam.in/statistics.aspx?mpgid=8&pgidtrail=9
◉ http://gen.lib.rus.ec/search.php?req=valuation+of+company&open=0&res=25&view=simple&phrase=1&column=def
◉ https://www.marutisuzuki.com/corporate/investors/company-reports
◉ https://home.kpmg/xx/en/home.html

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Thank You!

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