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A Report on
DISCOUNTED CASH FLOW
ANALYSIS OF
BAJAJ AUTOMOBILES LIMITED

BY

Balachandra Prabhu

Vasu D Hinsu
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About Bajaj Automobiles

Bajaj auto is a major Indian Automobile manufacture started by a Rajasthani merchant. It is
based in Pune, with plants in Chakan, waluj and in Pantnagar .Bajaj Auto makes and
exports motorscooters, motorcycles and the auto rickshaw. Forbes Global was ranked 1946 in
2005

Over the last decade, the company has successfully changed its image from a scooter
manufacturer to a two wheeler manufacturer. Its product range encompasses scooterettes,
scooters and motorcycles. Its real growth in numbers has come in the last four years after
successful introduction of a few models in the motorcycle segment.

The company is headed by Rahul Bajaj who is worth more than US$1.5 billion.[2]

Bajaj Auto came into existence on November 29, 1945 as M/s Bachraj Trading Corporation
Private Limited. It started off by selling imported two- and three-wheelers in India. In 1959, it
obtained license from the Government of India to manufacture two- and three-wheelers and it
went public in 1960. In 1970, it rolled out its 100,000th vehicle. In 1977, it managed to
produce and sell 100,000 vehicles in a single financial year. In 1985, it started producing at
Waluj near Aurangabad. In 1986, it managed to produce and sell 500,000 vehicles in a single
financial year. In 1995, it rolled out its ten millionth vehicle and produced and sold 1 million
vehicles in a year.

Highlights for 2009-10 versus 2008-09 of Bajaj Auto Ltd

• 2009-10 has been a record year for Bajaj Auto in terms of highest ever sales, exports,
profits and margins.
• Net sales and other operating income grew by 35% to Rs.119.21 billion.
• The year saw record sales of 2.85 million units – over 2.5 million motorcycles and
340,937 three-wheelers.
• Exports rose by 15% to 891,002 units.
• The Company’s operating EBITDA stood at Rs.25.93 billion – a growth of 116%
over last year. The operating EBITDA margin
• was 21.7% of net sales and other operating income for 2009-10.
• Operating profit before tax (PBT) grew by 170% to Rs.22.89 billion.
• Profit after tax (PAT) grew by 160% to Rs.17.03 billion.
• Surplus cash and cash equivalents in the Company’s balance sheet as on 31 March
2010 stood at Rs.32.6 billion, versus Rs.9.3 billion on 31 March 2009.
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DCF Valuation
Mar '11 Mar '12 Mar '13 Mar '14 Mar '15
Income
sales and other income 15,469 20,884 28,402 38,911 53,308
Expenditure
Raw Materials 10,643 13,943 19,101 25,214 34,795
Power & Fuel Cost 91 120 164 217 299
Employee Cost 535 701 961 1,268 1,750
Other Manufacturing Expenses 96 126 172 227 314
Selling and Admin Expenses 551 722 989 1,305 1,801
Miscellaneous Expenses 268 351 481 635 877
Total Expenses 12,185 15,962 21,869 28,867 39,836

PBDIT 3,284 4,921 6,533 10,044 13,472

Interest 18 16 15 13 12
PBDT 3,266 4,905 6,519 10,031 13,460
Depreciation 143 150 158 166 174
Profit Before Tax (PBT) 3,123 4,754 6,361 9,865 13,286
Tax 937 1,426 1,908 2,960 3,986
Net Profit After Tax (PAT) 2,186 3,328 4,453 6,906 9,300
Earnings Available to Eq. Share
Holders 2,186 3,328 4,453 6,906 9,300
Cash Flows( Dep. + PAT) 2329.189 3478.561 4610.495 7071.538 9474.422
Discount Factor @ 9% 0.912 0.823 0.736 0.648 0.592
Present Value 2124.221 2862.856 3393.324 4582.356 5608.858
Total No. of Eq. Shares 1446.84 1446.84 1446.84 1446.84 1446.84
Earning Per Share (Rs) 151.0821 230.0272 307.7422 477.2941 642.799
Market Price of Eq. Shares 1603.8 1764.18 1940.598 2134.658 2348.124
Price earnings multiple 10.62 7.67 6.31 4.47 3.65

Terminal value = Share holders funds (2010) * 100

= 144684*100

= 14468400

PV of 6th year = terminal value*pv

= 14468400*0.502

= 7263136.8
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Value of the company

= [(P.V. of cash flows*avg P/E)]+[terminal value*6th years disc factor*avg P/E multiple]

= 8,32,89,272.13 (Rs. Lakhs)

Assumptions
Above calculation is based on the following assumptions.

 Percentage of increase in production for the F.Y 2010-2011 would remain same.

 Production from April 2012 onwards would be increased.

 Cost of Goods Sold - Increase in proportion to sales.

 Operating Expenses - Increase proportionately to sales.

 The company is following Straight Line method of depreciation over the years.

 Tax rate is assumed at 30%.

 There is no preference dividend.

 Discount Factor is 9%.

 The company has not issued any debentures so we have assumed no new debenture are issued
for the coming years also.

 Secured and Unsecured loans carry an interest rate of 5% and 1.5% respectively.

 The company has not borrowed any secured or unsecured loan for the current year and in the
future.

 Repayment of the previous loans is done timely.