CF_F_1_PGDM_14-16

INSTITUTE OF MANAGEMENT TECHNOLOGY,GHAZIABAD

TERM: IIICOURSE NAME: Corporate FinanceNAME OF THE

FACULTY:Dr Puja Aggarwal

TOPIC/TITLE: Valuation CompanyORIGINAL OR

REVISED WRITE-UP:ORIGINAL

SECTION: FGROUP NUMBER: 1

CONTACT NUMBER AND EMAIL ID OF

GROUP COORDINATOR:

PHN: +91-9643989549EMAIL: [email protected]

GROUP MEMBERS:Serial Number Roll Number Name

1 140101045 Chandni Nigam2 140102030 Arnab Saha3 140102128 Sovan Satyaprakash4 140103027 Anushka Gulati5 140103116 Nitin Jain6 140103019 Anand Dubey

CONTENTExecutive Summary……………………………………………………………………….…3

About the Company …………………………………………………………………………4

Infosys Ltd

Mahindra & Mahindra Ltd

Dr Reddy’s Laboratories

Discounted Cash Flows……………………………………………………………………..5

Valuation Models……………………………………………………………………………..6

Valuation of Infosys Ltd

Using DDM…………………………………………………………………………..9

Using FCFE…………………………………………………………………………10

Using FCFF…………………………………………………………………………11

Findings & Recommendation…………………………………………………..12

Valuation of Mahindra & Mahindra Ltd

Using DDM………………………………………………………………………….13

Using FCFE…………………………………………………………………………14

Using FCFF…………………………………………………………………………15


Valuation of Dr Reddy’s Laboratories Ltd

Using DDM………………………………………………………………………….17

Using FCFE…………………………………………………………………………18

Using FCFF…………………………………………………………………………19


Exhibit A: Infosys Chart – Past 1 Year………………………………………………….21

Exhibit B: Mahindra & Mahindra Chart – Past 1 Year………………..…………….22

Exhibit C: Dr Reddy’s Laboratories Chart – Past 1 Year..………………………….23

Bibliography…………………………………………………………………………………..24

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EXECUTIVE SUMMARYThe project includes a comprehensive analysis of the cash flows of three Indian companies namely, Infosys Limited, Mahindra & Mahindra Limited and DR Reddy’s Laboratories, for arriving at the intrinsic value of the share of the respective company. The project aims to gauge whether the share of the company is undervalued or overvalued based on the fundamental values of the company and the market price. This analysis will help in providing us with a buy or sell recommendation to the investor. The following discount cash flow models have been used to arrive at the value of the firm

Dividend Discount Free Cash Flow to Equity (FCFE) Free Cash Flow to Firm (FCFF)

We have used the cash flows of the company from FY 2009-10 to FY 2013-14 for the analysis purpose. The Gordon Growth assumption has been made in the used discounted cash flow models ie it has been assumed that cash flows of the firm will continue to grow indefinitely at the sustainable growth rate (g). Also, since the data availed is till March 31, 2014, all valuations have been done with respect to this date.

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About the Company

Infosys Ltd.Infosys Ltd is an Indian multinational corporation that provides business consulting, information technology, software engineering and outsourcing services. Headquartered in Bangalore, Karnataka, Infosys serves worldwide. It is third largest India based IT services company by 2014 revenues. On March 31st

2014, its market capitalisation was INR 188,510 crores making it India’s fifth largest publicly traded company. Its revenues for the FY 2013-14 were INR 50,133 crore with a net profit of INR 10,648 crores. Infosys shares are listed in Bombay Stock Exchange where it is constituent of BSE SENSEX Index and the National Stock Exchange as a constituent of S&P CNX NIFTY.

Mahindra & Mahindra Ltd.Mahindra & Mahindra Limited is an Indian multinational automobile manufacturing corporation headquartered in Mumbai, Maharashtra. It is one of the largest vehicle manufacturers by production in India and the largest seller of tractor across the world. It is a part of Mahindra Group an Indian conglomerate. It was ranked as the 10th most trusted brand in India, by The Brand Trust Report, India Study 2014. Its revenues for the FY 2013-14 were INR 4921 crore with a net profit of INR 887 crores. M&M shares are listed in Bombay Stock Exchange where it is constituent of BSE SENSEX Index.

Dr Reddy’s LaboratoriesDr Reddy’s Laboratories Ltd is a pharmaceutical company based in Hyderabad, Telangana. Dr Reddy’s manufactures and markets a wide range of pharmaceutical in India and overseas. The company has over 190 medications, 60 active pharmaceutical ingredients (APIs) for drug manufacture, diagnostic kits, critical care and biotechnology products. Its revenue for the FY 2013-14 was INR 9728 crores with a net profit of INR 1932 crores. Dr Reddy’s Laboratories shares are listed in Bombay Stock Exchange and in National Stock Exchange.

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Discounted Cash FlowThe discounted cash flow approach finds the value of an asset using its expected return and the present values of future cash flows. They interpret a firm’s value as the present value of cash-flow generated by the firm in a specified future period. Future cash-flow should be discounted at an appropriate discount rate, but these methods require a very careful forecast of the flows for each future period. To find the discounted present value of an asset, it is necessary to sum the discounted present value of each future cash flow (FV) at any time period (t) in years from the present time, using the appropriate interest rate (i). The formula used to calculate the present value is:

Some key points to note in DCF approach are In the DCF approach, all future expected cash flows associated with the

asset are discounted in order to find their present values. To determine the value of the asset, the present values of all expected

cash flows are summed. When future cash flows are infinite or extend past a certain period, a

terminal value can be found and discounted back to the present. Comparing a value found using the DCF approach with the actual price of

an asset determines if an asset is undervalued, overvalued, or correctly priced.

Two of the most common methods of discounted cash flows are: Net Present Value Internal Rate of Return

Net Present ValueThe NPV is the sum of the present values of all the expected incremental cash flows if a project is undertaken. The discount rate used is the firm's cost of capital, adjusted for the risk level of the project. For a normal project, with an initial cash outflow followed by a series of expected after-tax cash inflows, the NPV is the present value of the expected inflows minus the initial cost of the project. The formula for calculating the same is:

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Internal Rate of ReturnInternal rate of return (IRR) is the discount rate that makes the present value of the expected incremental after-tax cash inflows just equal to the initial cost of the project. More generally, the IRR is the discount rate that makes the present values of a project's estimated cash inflows equal to the present value of the project's estimated cash outflows. The IRR is also the discount rate for which the NPV of a project is equal to zero:

Valuation Models

Valuation Models are used to calculate the fundamental value of a company for purposes such as mergers and acquisitions, sale of securities, and taxable events. Before the value of a business can be measured, the valuation assignment must specify the reason for and circumstances surrounding the business valuation. These are formally known as the business value standard and premise of value. The standard of value is the hypothetical conditions under which the business will be valued. The premise of value relates to the assumptions, such as assuming that the business will continue forever in its current form (going concern), or that the value of the business lies in the proceeds from the sale of all of its assets minus the related debt (sum of the parts or assemblage of business assets).

Business valuation results can vary considerably depending upon the choice of both the standard and premise of value. In an actual business sale, it would be expected that the buyer and seller, each with an incentive to achieve an optimal outcome, would determine the fair market value of a business asset that would compete in the market for such an acquisition. The project covers three methods of company valuation. They are:

Dividend Discount Model Free Cash Flow to Equity (FCFE) Free Cash Flow to Firm (FCFF)

Dividend Discount ModelThe dividend discount model (DDM) is a method of valuing a company's stock price based on the theory that its stock is worth the sum of all of its future

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dividend payments, discounted back to their present value. In other words, it is used to value stocks based on the net present value of the future dividends. Under this model, if dividends are expected to grow at a constant rate, g, then the current value of the stock is given by the dividend growth model:

where:D1 = next year's dividendkce = required rate of return on common equityg = firm's expected constant growth rate

Free Cash Flow to Firm (FCFF) ModelCash flows into the firm in the form of revenue as it sells its products, and cash flows out as it pays its cash operating expenses (eg. salaries and taxes but not interest expense as it is a financing cash flow). The firm takes the cash that is left over and makes short-term net investments in working capital (eg. inventory and receivables) and long term investment in property plant and equipment. The cash that is left is paid out to firm’s debt holders and equity holders. This pile of remaining cash is called free cash flow to firm (FCFF) because it is free to pay out to the firm’s investors. The formal definition of FCFF is the cash available to all of the firm’s investors, including stockholders and bondholders, after the firm buys and sells products, provides services, pays in cash operating expenses, and makes short-term and long-term investments.

Calculation of FCFF

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FCFF is calculated from net income using the following formulaFCFF = Net Income + Non-Cash Charges + Interest (1-tax) – Fixed

Capital Investment – Working Capital Investment

Free Cash Flow to Equity (FCFE) ModelThe firm uses FCFF to make payment to its debt and bond holders. This amount that is left after the firm has met all its obligations to other investors is called free cash flow to equity. However, the board of directors still has discretion over what to do with that money. It could pay it all out in dividends to common shareholders, but it might decide to only pay out some of it and put the rest in a bank to save for the next year. So, FCFE is the cash available to common shareholders after funding capital requirements, working capital needs, and debt financing requirements.

Calculation of FCFEFCFE is calculated using the following formula:

FCFE = FCFF – Interest (1-tax) + Net Borrowings

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Valuation of Infosys Ltd. Using DDMInfosys Ltd. has been a consistent payer of dividend to its shareholders. The company is one of the largest profit making and tax & dividend paying enterprise in India. In 2014, the company paid an annual dividend of Rs. 63 per share vis-à-vis Rs. 25 paid in 2010.

To value Infosys using the dividend discount model, following parameters will be required:

D1 = Expected dividend to be paid in the next yearKe = Required Rate of Return on Equityg = Sustainable growth rate of dividend

To calculate the sustainable growth rate of dividend, CAGR from 2010 to 2014 was calculated as follows:

CAGR for 5 growth periods = (63/25) ^ (1/5) = 20.3%

Ke was calculated using the Capital Asset Pricing Model (CAPM)According to CAPM

Ke = Rf + β(Rm – Rf)Where,

Rf = Risk Free Rate of ReturnRm = Return on Marketβ = Beta – a measure of Systematic Risk

Data for the above mentioned parameters was obtained from BSE website. The comparable risk free rate of return taken for calculation of CAPM is the return on a 10 year government bond.

Calculation of Required Rate of Return on Equity Using CAPMBeta (β) 0.32

Risk Free Return (10 Year Govt Bond) 8.81%Return on Market (BSE Sensex) 16%

Putting the above values in CAPM formula we getKe = 8.81 + 0.32 (16 – 8.81)

= 11.11%An inherent assumption of the dividend discount model is that Ke> g. However, the above calculations show that in case of Infosys Ltd. the required rate of return on equity is less than the sustainable growth rate. Therefore, the model is

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struck by its inherent limitation and the fundamental value of the share cannot be calculated using this model.

Valuation of Infosys Ltd. Using FCFEAs compared to dividends, the free cash flows of Infosys have grown at a slower rate. To calculate FCFE for Infosys Ltd., Cash Flow from Operations have been used. Since we know that Cash Flow from Operations are calculated using the following formula:

CFO = Net Income + Non-Cash Charges – Working Capital Investment

Accordingly, the formula for FCFE can be modified as:FCFE = CFO – Fixed Capital Investment + Net Borrowings

WhereFixed Capital Investment – Purchase of property, plant and equipment during

the year minus any sale of propertyNet Borrowings – Long-term and short-term debt issues minus long-

term and short-term debt repayments

Using Infosys’s balance sheet, net borrowings were calculated as follows:

Calculation of Net BorrowingsDebt Issued 2009-10 (Rs.

Crores)2013-14 (Rs.

Crores)N/A - -

Debt RepaidN/A - -

Net Borrowings (Debt Issued - Debt Repaid) ₹ 0 ₹ 0

Following the calculation of net borrowings, FCFE was calculated as follows:

Parameter 2009-10 (Rs. Crores)

2013-14 (Rs. Crores)

Cash Flow From Operations ₹ 5876 ₹ 9148Less: Fixed Capital Investment ₹ 581 ₹ 2490

Add: Net Borrowings ₹ 0 ₹ 0Free Cash Flow to Equity (FCFE) ₹ 5295 ₹ 6658

Following calculation of FCFE for 2009-10 and 2013-14, CAGR for this period was calculated as follows:CAGR for 5 growth periods (g) = (6658/5295) ^ (1/5)

= 4.687%As calculated for the dividend discount model, Ke = 11.11%

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For the Gordon Growth assumption to be true in this case, the required rate of return on equity should be the greater than the sustainable growth rate of free cash flows. In other words, the following condition should be true:

Ke> g

Since, the above condition holds, we can calculate the value of equity using the following formula:Market Value of Equity = FCFE (1 + g)/(Ke – g)

= 6658 (1 + 0.04687)/(0.1111 – 0.04687)= Rs. 108515.845 Crores

To calculate the market price of the share, we have to divide the market value of equity by the total number of shares in issue.Intrinsic Value of a Share = Market Value of Equity/Number of Shares Issued

= 1,08,515.845/57.4236166= Rs. 1889.742

Comparing this value with the market price of the stock as on March 31, 2014, which was Rs. 1639.43 we can conclude that the share is undervalued and hence its price is expected to gain in the future.

Valuation of Infosys Ltd. Using FCFF

The Free Cash Flow to Firm approach has been used to calculate the value of Infosys Ltd. Likewise FCFE, the FCFF also grew at a very slow rate from the period 2010 to 2014. The following table summarises the calculation of FCFF using CFO:

Parameter 31-03-2010 (Rs. Crores)

31-03-2014 (Rs. Crores)

CFO ₹5876 ₹ 9148Less: Fixed Capital Investment ₹ 581 ₹ 2490 Free Cash Flow to Firm ₹ 5295 ₹ 6658

Following calculation of FCFF for 2009-10 and 2013-14, CAGR for this period was calculated as follows:

CAGR for 5 growth periods (g) = (6658/5295) ^ (1/5)= 4.687%

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Since FCFF gives the value of the firm, it is discounted using the Weighted Average Cost of Capital. WACC for the company has been calculated using the debt-equity ratio as given in the annual report 2014. The cost of debt has been calculated by taking the percentage of the total interest paid during the year with the total debt outstanding at the beginning of the year. The cost of equity has previously been calculated using the CAPM. Following calculation of Cost of Debt (Kd) and Cost of Equity (Ke), WACC has been calculated using the following formula:

WACC = (D/C) x (Cost of Debt) x (1 – tax) + (E/C) x (Cost of Equity)= (0) x (0) x (1 – 0.30) + (1) x (11.11)= 11.11%

WhereD = Debt C = Capital Employed E = Equity

The following table summarises the results:

WACC CalculationDebt Equity Ratio (as given in annual report 2013-14) 0

Debt Outstanding (crores, beginning of year 2014) ₹0Interest Paid in 2014 (crores) ₹0

Cost of Debt (Kd) 0%WACC 11.11%

Since the Gordon Growth assumption holds in this case also, we can calculate the value of the firm using the following formula:

Market Value of Firm = FCFF (1 + g)/(WACC – g)= 6658 (1 + 0.04687)/(0.1111 – 0.04687)= Rs. 108515.845 Crores

Findings & RecommendationsBased on the Free Cash Flow to Equity approach we observe that the Infosys’s stock is undervalued and is expected to gain in the near future. Hence, we would like to issue a “BUY” recommendation on the stock (Exhibit A).

The same can also be observed from the CAGR of Dividends, FCFF and FCFE. Whereas the company’s dividends have been growing at a compounded growth of 20.3%, the FCFF and FCFE have only registered a single digit growth of close to 4.687% for the same period.

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The company has also substantially increased its dividend payments. This shows that the company does not have any growth opportunities in the future and would like to be a “cash cow” in the foreseeable future.

Valuation of Mahindra & Mahindra Ltd. Using DDMM&M Ltd. has been a consistent payer of dividend to its shareholders. The company is one of the largest profit making and tax & dividend paying enterprise in India. In 2014, the company paid an annual dividend of Rs. 13 per share vis-à-vis Rs. 5 paid in 2010.

To value M&M using the dividend discount model, following parameters will be required:



CAGR for 5 growth periods = (13/5) ^ (1/5)= 21.06%


Ke = Rf + β(Rm – Rf)Where,Rf = Risk Free Rate of ReturnRm = Return on Marketβ = Beta – a measure of Systematic Risk

Calculation of Required Rate of Return on Equity Using CAPMBeta (β) 0.85Risk Free Return (10 Year Govt Bond) 8.81%Return on Market (BSE Sensex) 16%


= 14.9215%

An inherent assumption of the dividend discount model is that Ke> g. However, the above calculations show that in case of Infosys Ltd. the required rate of

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return on equity is less than the sustainable growth rate. Therefore, the model is struck by its inherent limitation and the fundamental value of the share cannot be calculated using this model.

Valuation of Mahindra & Mahindra Ltd. Using FCFEAs compared to dividends, the free cash flows of M&M have grown at a slower rate. To calculate FCFE for M&M Ltd., Cash Flow from Operations have been used. Since we know that Cash Flow from Operations are calculated using the following formula:






Using M&M’s balance sheet, net borrowings were calculated as follows:


Crores)2013-14 (Rs.

Crores)Proceeds from borrowing ₹ 436.32 ₹ 620.4

Debt RepaidRepayment of borrowings ₹ 543.98 ₹ 473.99

Net Borrowings (Debt Issued - Debt Repaid) ₹ -107.66 ₹ 146.41




Cash Flow From Operations ₹ 2336.49 ₹ 3727.64Less: Fixed Capital Investment ₹967.06 ₹ 1704.3

Add: Net Borrowings ₹ -107.66 ₹146.41Free Cash Flow to Equity (FCFE) ₹ 1261.77 ₹ 2169.75

Following calculation of FCFE for 2009-10 and 2013-14, CAGR for this period was calculated as follows:

CAGR for 5 growth periods (g) = (2169.75/1261.77) ^ (1/5)= 11.451%

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As calculated for the dividend discount model, Ke = 14.9215%For the Gordon Growth assumption to be true in this case, the required rate of return on equity should be the greater than the sustainable growth rate of free cash flows. In other words, the following condition should be true:

Ke> g


= 2169.75 (1 + 0.11451)/(0.149215 – 0.11451)= Rs. 69689.2105 Crores


= 69689.2105/61.5892384= Rs. 1131.51


Valuation of Mahindra & Mahindra Ltd. Using FCFF

The Free Cash Flow to Firm approach has been used to calculate the value of M&M Ltd. Likewise FCFE, the FCFF also grew at a very slow rate from the period 2010 to 2014. The following table summarises the calculation of FCFF using CFO:


31-03-2014 (Rs. Crores)

CFO ₹2336.49 ₹ 3727.64Less: Fixed Capital Investment ₹967.06 ₹1704.30

Free Cash Flow to Firm ₹1369.43 ₹ 2023.34



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Since FCFF gives the value of the firm, it is discounted using the Weighted Average Cost of Capital. WACC for the company has been calculated using the debt-equity ratio as given in the annual report 2014. The cost of debt has been calculated by taking the percentage of the total interest paid during the year with the total debt outstanding at the beginning of the year. The cost of equity has previously been calculated using the CAPM. Following calculation of Cost of Debt (Kd) and Cost of Equity (Ke), WACC has been calculated using the following formula:

WACC = (D/C) x (Cost of Debt) x (1 – tax) + (E/C) x (Cost of Equity)= (0.52381) x (6.922835) x (1 – 0.30) + (.47619) x (14.9215)= 9.6438%



WACC CalculationDebt Equity Ratio (as given in annual report 2013-14) 1.1

Debt Outstanding (crores, beginning of year 2014) ₹3744.42Interest Paid in 2014 (crores) ₹259.22

Cost of Debt (Kd) 6.922835%WACC 9.6438%


Market Value of Firm = FCFF (1 + g)/(WACC – g)= 2023.34 (1 + 0.0812)/(0.096438 – 0.0812)= Rs. 143554.36 Crores

Findings & RecommendationsBased on the Free Cash Flow to Equity approach we observe that the Mahindra & Mahindra’s stock is undervalued and is expected to gain in the near future. Hence, we would like to issue a “BUY” recommendation on the stock (Exhibit B).

The same can also be observed from the CAGR of Dividends, FCFF and FCFE. Whereas the company’s dividends have been growing at a compounded growth

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of 21%, the FCFF and FCFE have only registered a growth of close to 11.45% for the same period.

Valuation of Dr Reddy’s Laboratories Ltd. Using DDMDr Reddy’s Lab Ltd. has been a consistent payer of dividend to its shareholders. In 2014, the company paid an annual dividend of Rs. 15 per share vis-à-vis Rs. 6.25 paid in 2010.

To value Dr Reddy’s using the dividend discount model, following parameters will be required:



CAGR for 5 growth periods = (15/6.25) ^ (1/5) = 19.136%


Ke = Rf + β(Rm – Rf)Where,Rf = Risk Free Rate of ReturnRm = Return on Marketβ = Beta – a measure of Systematic Risk

Calculation of Required Rate of Return on Equity Using CAPMBeta (β) 0.35

Risk Free Return (10 Year Govt Bond) 8.81%Return on Market (BSE Sensex) 16%


= 11.3265%An inherent assumption of the dividend discount model is that Ke> g. However, the above calculations show that in case of Infosys Ltd. the required rate of return on equity is less than the sustainable growth rate. Therefore, the model is

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struck by its inherent limitation and the fundamental value of the share cannot be calculated using this model.

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Valuation of Dr Reddy’s Laboratories Ltd. Using FCFEAs compared to dividends, the free cash flows of Dr Reddy’s have grown at a slower rate. To calculate FCFE for Dr Reddy’s, Cash Flow from Operations have been used. Since we know that Cash Flow from Operations are calculated using the following formula:






Using Dr Reddy’s balance sheet, net borrowings were calculated as follows:


Crores)2013-14 (Rs.

Crores)Proceeds from long term borrowing ₹ 0 ₹ 1010Proceeds from short term borrowing ₹ 730.5 ₹ 0

Debt RepaidRepayment of short term borrowings ₹ 746.9 ₹ 91.7Repayment of long term borrowings ₹ 2.2 ₹ 20.7

Redemption of bonds ₹ 0 ₹ 507.8Net Borrowings (Debt Issued - Debt

Repaid) ₹ -18.6 ₹ 389.8




Cash Flow From Operations ₹ 1253.2 ₹ 1969.7Less: Fixed Capital Investment ₹ 383 ₹ 1083.1

Add: Net Borrowings ₹ -18.6 ₹ 389.8Free Cash Flow to Equity (FCFE) ₹ 851.6 ₹ 1276.4

Following calculation of FCFE for 2009-10 and 2013-14, CAGR for this period was calculated as follows:


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As calculated for the dividend discount model, Ke = 11.3265%For the Gordon Growth assumption to be true in this case, the required rate of return on equity should be the greater than the sustainable growth rate of free cash flows. In other words, the following condition should be true:

Ke> g


= 1276.4 (1 + 0.0843)/(0.113265 – 0.0843)= Rs. 47785.0832 Crores


= 47785.0832/17.0108868= Rs. 2809.0833


Valuation of Dr Reddy’s Laboratories Ltd. Using FCFF

The Free Cash Flow to Firm approach has been used to calculate the value of Dr Reddy’s. Likewise FCFE, the FCFF also grew at a very slow rate from the period 2010 to 2014. The following table summarises the calculation of FCFF using CFO:


31-03-2014 (Rs. Crores)

CFO ₹ 1253.00 ₹ 1969.7Less: Fixed Capital Investment ₹383 ₹1083.1

Free Cash Flow to Firm ₹870.2 ₹ 886.6



Since FCFF gives the value of the firm, it is discounted using the Weighted Average Cost of Capital. WACC for the company has been calculated using the

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debt-equity ratio as given in the annual report 2014. The cost of debt has been calculated by taking the percentage of the total interest paid during the year with the total debt outstanding at the beginning of the year. The cost of equity has previously been calculated using the CAPM. Following calculation of Cost of Debt (Kd) and Cost of Equity (Ke), WACC has been calculated using the following formula:

WACC = (D/C) x (Cost of Debt) x (1 – tax) + (E/C) x (Cost of Equity)= (0.224806) x (8.686633) x (1 – 0.30) + (.775194) x (11.3265)= 10.1471989%



WACC CalculationDebt Equity Ratio (as given in annual report 2013-14) 0.29

Debt Outstanding (crores, beginning of year 2014) ₹901.5Interest Paid in 2014 (crores) ₹78.31

Cost of Debt (Kd) 8.686633%WACC 10.1471989%


Market Value of Firm = FCFF (1 + g)/(WACC – g)=886.6 (1 + 0.00374115)/(0.101471989 –

0.00374115)=Rs. 9105.79428 Crores

Findings & RecommendationsBased on the Free Cash Flow to Equity approach we observe that the Dr Reddy’s stock is undervalued and is expected to gain in the near future. Hence, we would like to issue a “BUY” recommendation on the stock (Exhibit C).

The same can also be observed from the CAGR of Dividends, FCFF and FCFE. Whereas the company’s dividends have been growing at a compounded growth of 19.136%, the FCFF and FCFE have only registered a single digit growth of close to 8.43% for the same period.

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The company has also substantially increased its dividend payments. This shows that the company does not have any growth opportunities in the future and would like to be a “cash cow” in the foreseeable future.

EXHIBIT A: INFOSYS CHART – Past 1 Year

The share price of Infosys Ltd has gained from its level on 31st March 2014, and reached the intrinsic value of the company in October. Initially it obtained resistance at the level on upside. After the level was broken, the share price rose to a new high but the intrinsic value became a good support for the share on downside and has held on since. The limitation of this method is the macro factors surrounding the organization. The call of going long has to be monitored carefully with a stop loss cause change in macro factors would affect the movement of share price.

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EXHIBIT B: MAHINDRA & MAHINDRA CHART – Past 1 Year

The share price of M&M Ltd has gained from its level on 31st March 2014, and reached the intrinsic value of the company in June. The share price rose to a new high but the intrinsic value became a good support for the share on downside. The limitation of this method is the macro factors surrounding the organization. The call of going long has to be monitored carefully with a stop loss cause change in macro factors would affect the movement of share price.

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EXHIBIT C: DR REDDY’S LABORATORIES CHART – Past 1 Year

The share price of Infosys Ltd has gained from its level on 31st March 2014, and reached the intrinsic value of the company in October. Initially it obtained resistance at the level on upside. The limitation of this method is the macro factors surrounding the organization. The call of going long has to be monitored carefully with a stop loss cause change in macro factors would affect the movement of share price.

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Bibliography

Annual Report Infosys Ltd 2013-14 and 2009-10

Annual Report Mahindra & Mahindra Ltd 2013-14 and 2009-10

Annual Report Dr Reddy’s Laboratories Ltd 2013-14 and 2009-10

http://www.nseindia.com/archives/indices/update/indup.pdf

http://www.investing.com/rates-bonds/india-10-year-bond-yield-historical-data

http://www.gurufocus.com/global-market-valuation.php?country=IND

http://www.irjcjournals.org/ijmssr/May2013/9.pdf

http://www.moneycontrol.com/stock-charts/infosys/charts/IT

http://www.moneycontrol.com/stock-charts/drreddyslaboratories/charts/DRL

http://www.moneycontrol.com/india/stockpricequote/autocarsjeeps/mahindramahindra/MM

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http://www.moneycontrol.com/stock-charts/drreddyslaboratories/charts/DRL

http://www.moneycontrol.com/stock-charts/infosys/charts/IT

http://www.irjcjournals.org/ijmssr/May2013/9.pdf

http://www.gurufocus.com/global-market-valuation.php?country=IND

http://www.investing.com/rates-bonds/india-10-year-bond-yield-historical-data

http://www.nseindia.com/archives/indices/update/indup.pdf

CF_F_1_PGDM_14-16

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