01

About Biocon
• In November 1978, Biocon India was formed as a joint venture
between Biocon biochemicals of Ireland and Dr Mazumdar Shaw, an
Indian entrepreneur. Biocon was the first Indian business to
manufacture and export enzymes to the US and Europe in 1979. Its
Indian headquarters are in Bengaluru, with 4886 crores and more
than 11000 employees.
• Biocon eventually developed various products, including statins,
large-scale insulin manufacturing, and other proprietary
pharmaceuticals.
• It formed a Joint Venture with CIMAB to develop and market
BIOMAB in India.

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Introduction

The Global biopharma market is of 80 billion in which the market share of BIOMAb is 10%.
Designed specifically for the head and neck cancer, BIOMAb was the first proprietary drug
released by an Indian company. BIOCON must initially invest 25 million in manufacturing plant
to make BIOMAb. The salvage value of plant after 5 years will be 5 Million.
The number of head and neck cancer patients in india are 190000, out of which only 1% can
afford drug. The number of doses required in treatment are 6 and the price per dose is $4000
with unit variable cost of $300.
This cost is expected to increase at the inflation rate in the subsequent years. BIOCON’s tax rate
is expected to be 22% and Annual inflation is expected to remain stable at around 4.88% as per
the RBI report and experts. The market is expected to grow at 7.32% annually.
The net working capital requirements will be 20% of sales. The Capital gains tax rate is 20%
and the cost of capital for biocon is 9.33%.
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Solution

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SENSITIVITY ANALYSIS

● WACC is increasing showing we have been taking additional capital to fund the
project.
● The NPV is also increasing but after a point there are diminishing marginal returns
the projected cash flows are get discounted as a faster rate.
● At WACC 8.33% we see that the NPV starts to decrease so we should not be raising
additional funds and that point is called optimal capital budget.
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Conclusion
● The NPV of the project has come out to be positive and hence the project has the potential to
qualify for selection because the projected earnings generated by BIOCON exceeds the anticipated
costs.
● The internal rate of return (IRR) is a metric used in financial analysis to estimate the profitability of
potential investments. Since, we have a higher IRR of 53.79%, the more desirable an investment is
to undertake. With such higher IRR, BIOCON also has an option of repurchasing its stocks.
● An investment project with a short payback period promises the quick inflow of cash. It is therefore,
a useful capital budgeting method for cash poor firms. And we have payback as low as 2 in this case
which is a positive point for any project.
● Discounted payback period is used to evaluate the profitability and timing of cash inflows of a
project or investment. And with Discounted payback 3, profitability is ensured for the project.
● The modified internal rate of return (MIRR) for BIOCON has been calculated as 35.96% which is
greater than the cost of capital (9.33%) and hence the investment should be gone ahead with.
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 Castrol india Limited
Introduction:-Castrol India Limited is a manufacturer Conclusion:-The weighted average cost of capital for Castrol India
of automotive and industrial lubricants. Castrol India is is 34.91 percent. Castrol India earns a better rate of return on
the second largest manufacturer of automotive and investment than it costs the company to raise the necessary funds.
industrial lubricants in the Indian lubricant market, with It's making a lot of money. A company's worth will rise as growth
a market share of approximately 20%. Castrol Limited increases if it expects to generate positive excess returns on
UK owns and operates it. additional investments in the future.

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Power Finance Corporation
Ltd.
● The Ministry of Power, Government of India, owns Power Finance
Corporation Ltd., an Indian financial institution.

● It is the financial backbone of the Indian power sector, having been

established in 1986. PFC has a net worth of INR 383 billion as of
September 30, 2018.

● The current share price is 120.2. It currently has a market capitalization

of Rs 31733.78 crore. The company reported gross sales of Rs. 372259.2
crores and total income of Rs. 373710.6 crores in the most recent
quarter.
● PFC’s unlevered beta of 1.12 indicates that it is more volatile than the
market. This means it gives 11% more returns when the market rises by
10%. Additionally, it has a 5-year levered beta of 0.12, which is lower than
its counterparts in the industry.

● The WACC of the Power Finance Corporation Ltd is approximately 5.58%

which means investors will expect a minimum return of 5.58% before
investing in the firm.

● The stock is currently priced at 0.56 times its book value, with an 9
excellent dividend yield of 8.32 percent.
Dish TV India Ltd.
● Dish TV India Ltd. was incorporated in the year 1988.
● DishTV India is an Indian direct broadcast satellite service
provider in India with Yes Bank as biggest stake owner.
● Its today's share price is 19.6. Its current market capitalizations
stands at Rs 3608.86 Cr. In the latest quarter, company has
reported Gross Sales of Rs. 16039.6 Cr.
● Company has a low return on equity of -1.57% for last 3 years.
● Promoters have pledged 39.82% of their holding. Company's
cost of borrowing seems high.
● Total Income (2021): Rs.17441.5 Cr.
● The WACC of Dish tv India Ltd is approximately 3.63% which
means investors will expect a minimum return of 3.63% before
investing in the firm.
● Its unlevered beta of -0.13 indicates that when market
performance is poor then stock prices will fall down, and
investor may invest then.
● Beta has come out to be Negative which makes it less volatile
than the overall market.
● Overall Dish TV India Ltd seems to be on the path to recovery,
with the help of government also , where investors are being
requested to have a consideration for this company.

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IDBI Bank
● IDBI bank, also Industrial Development Bank Ltd. was formed under the
Industrial Development Bank of India Act 1964 as a Development Financial
Institution.
● It is classified as a private sector bank by RBI for regulatory purposes from
January 2019 when the Life Insurance Corporation of India acquired a 51%
total paid-up equity share capital of the bank.
● The bank operates in Retail banking, Wholesale banking, Treasury services
and other banking operations.
● As of March 31st, 2020, the bank had a network of 1892 branches and 3683
ATMs.

➔ Net profit (2021): Rs. 40.09 Crores

➔ Unlevered beta of 0.74: It is a relatively less volatile stock. The levered beta
is 0.91, comparatively lower than industry peers SBI (β=1.00), Axis Bank
(β=1.36); ICICI Bank (β=1.02); IndusInd Bank (β=1.92); Federal Bank (β=1.10).
➔ WACC: 17.5%. Investors will demand a minimum of 17.5% return to be willing
to invest in the bank.
➔ Stock prices were initially high in the years 2015-2016 but steadily declined
until mid-2020. Since then, stock prices have seen an upward trend.
➔ Overall IDBI Bank seems to be on the path to recovery after the pandemic
and maybe considered for investment in part due to the low stock volatility
of the bank. 11
Zee Entertainment Enterprises Ltd
● Zee Entertainment Enterprises (formerly Zee Telefilms) is an
Indian media group. Headquartered in Mumbai, the company
operates television, printed matter, web, movies, mobile
content, and related businesses
● They operate 45 channels around the world.
● The company was founded on December 15, 1991, as Zee
Telefilms and the brand name was maintained until 2006.
● The current stock price for ZEEL is 321.50 INR. It has a PE Ratio
of 19.89 and a market cap of 31024.66 Cr.
➔ Company is almost debt free.
➔ The unlevered beta for ZEEL is slightly more than 1 which implies
that it is comparatively more volatile than the market. Considering
its peers, It is more volatile than PVR (0.28) and Saregama Pvt Ltd
(0.84) and less volatile than Sony TV pvt ltd. (1.22)
➔ ZEEL has a WACC of about 14.03% which means the investors will
demand a minimum of 14.03% return to be willing to invest in the
bank.
➔ ZEEL Stock prices were initially on a slow rising trend during
2016-2018 and then began to steadily decline to drop 30+% in these 5 12
years.
ORACLE
● Oracle Financial Services Software Ltd provides financial software, custom application development, consulting, IT infrastructure
management, and outsourced business processing services to the financial services industry. The company was incorporated in 1989
and is based in Mumbai, India. Oracle Financial Services Software Limited is a subsidiary of Oracle Global (Mauritius) Limited.
● Net profit of Oracle Financial Services Software was Rs 460.31 crore in quarter end of march 2021 which was 70.97% higher than
the previous years 269.23 crores in previous year quarter end of march 2020.
● The unlevered beta of 0.001767967 shows that Oracle have zero correlation with market movements, given that its expected return
equals the risk-free rate or a relatively low rate of return compared to higher-beta portfolios.
● Oracle has a WACC of about 5.0% Thus, investors will demand a minimum of 5.0% return to be willing to invest.
● Along with annual revenue of over 40 billion U.S. dollars which is its highest revenue figure to date, Oracle is doing really good.

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Lux Industries
● P&L projections shows that Lux could increase its sales at a steady rate after taking into account the percentage change and its average.
● Based on the past trends the expenses projected are around 80% of the sales.
● For the Other Income GDP growth rate of 5% was considered.
● Depreciation is considered as 80% of the Net block based on past trends.
● Interest is hovering at 10.21% which is 8% of the borrowings.
● Tax rate for lux industries was taking from an equity report which averaged at 25%.

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Lux Industries

● The Beta is 1.027116208 which means the stock stands

more volatile than the market.

● There is not much between unlevered and levered beta for

Lux Industries since , its exposure to debt is miniscule.

● This is why WACC is leaning more towards cost of equity.

● Since WACC is just 8.06 company can very well undertake

new projects at a supposedly lower cost of capital.
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ABB India limited
ABB Ltd. is a global leader in power automation technologies that enable utility and industry customers to improve their performance
while lowering environmental impact. Product range of the company includes Power Products, Power Systems, Automation Products ,
Process Automation & Robotics. The company is also in the business segment of Power Systems, Power Products, Process Automation,
Low Voltage Products, Discrete Automation and Motion.

For the quarter ended 30-09-2021, the company has reported a Standalone Total Income of Rs 1,803.20 Crore, up 24.34 % from last
quarter Total Income of Rs 1,450.17 Crore and up 10.47 % from last year same quarter Total Income of Rs 1,632.27 Crore. Company has
reported net profit after tax of Rs 119.92 Crore in latest quarter.The company’s top management includes Mr.Morten Wierod,
Mr.Sanjeev Sharma, Mr.Darius E Udwadia, Mrs.Renu Sud Karnad, Mr.V K Viswanathan, Mr.Maria Rosaria Varsellona. Company has BSR &
Co. LLP as its auditors. As on 30-09-2021, the company has a total of 21.19 Crore shares outstanding.

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Conclusion:
Unlevered beta is almost always equal to or lower than levered beta given that debt will most often be zero or positive, from the above
table the values of beta are calculated on excel and we can depict that unlevered beta is positive, investors will invest in the company's
stock when prices are expected to rise.
It is better to use an unlevered data over a levered beta when a company or investor wishes to measure a publicly-traded security's
performance in relation to market movements without the effects of that company's debt factor.

If a company has a higher WACC, it suggests the company is paying more to service their debt or the capital they are raising. As a
result, the company's valuation may decrease and the overall return to investors may be lower.
The company has lower cost to capital it suggests that the company is spending less on their debt. As a result the overall return to
investors may be higher as the valuation increases.
The investor will look at the cost of equity to estimate the value of his investment but usually healthy companies have consistently
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low costs of capital and equity to have less risk.
Thank you!
BY GROUP 1

Avinash Menon M340-21

Naman Vinayak M373-21
Nikita M377-21
Noopur Lakra M380-21
Rakshita Singh M389-21
Thanpam Kasomhung M415-21
Thejavathu Cheena Sri Komal Naik M416-21
Ukey Sakshit Vinesh M417-21
Esha Upadhyay D010-21
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