Mr SP Tulsian wrote on Moneycontrol about Essar Steel valuation: and I quote“The promoters of Essar brace undergo proposed to alter an change state furnish to acquire 14.72 crore equity shares of the affiliate (being 12.92 per cent equity) with a believe to get rid of the affiliate and have fixed a floor determine of Rs.38 per overlap. The bidding by shareholders will be held between 24th September and 28th September. The promoters are presently holding 87.08 per cent stake of the company which has its show equity of Rs.1139.81 crores divided into 113.98 crore equity shares of Rs.10 each.
Let’s us try and see as to what is the correct valuation of Essar brace. The company could be valued on different parameters desire book-value enterprise determine peer valuations replacement be and discounted cash move etc. Book-value of a share as on 31-03-07 was at Rs.37 and in view of an expected EPS of Rs.8 plus for FY 08 the book-value of share could be presumed at Rs.41 as on 30-09-07. Under the replacement be method the cost of setting up an integrated steel communicate is about Rs.3,000 crores per million tonne. Since the capacity of the company is (largest gas based brace plant) of 4.60 million tonne the same is valued at Rs.13,800 crores. Since the debt (net off change) is about Rs.4,000 crores the net value works out to Rs.9,800 crores resulting in value per share at Rs.85. The company has reported its quarterly results for quarter ended June 07 wherein net sales was at Rs.2,565 corres with EBITDA of Rs.642 crores and PAT of Rs.231 crores. Annualised EBITDA can be estimated at Rs.2,500 crores in view of robust steel industry prospects. The recent acquisitions were made at EV/EBITDA of 7 times and hence company can be estimated at 5 times which translates into an EV of Rs.12,500 crores. By deducting debt of Rs.4,000 crores net EV works out to Rs.8,500 crores giving determine per overlap at Rs.75.
565 corres with EBITDA of Rs.642 crores and PAT of Rs.231 crores. Annualised EBITDA can be estimated at Rs.2,500 crores in view of robust brace industry prospects. The recent acquisitions were made at EV/EBITDA of 7 times and hence affiliate can be estimated at 5 times which translates into an EV of Rs.12,500 crores. By deducting of Rs.4,000 crores net EV works out to Rs.8,500 crores giving value per overlap at Rs.75. The estimated net profit for FY 08 is expected to be close to Rs.1,000 crores resulting in an EPS of Rs.8.80. The large integrated brace players are discounted at send earning by about 6 to 7 times when compared to Tata Steel and JSW Steel. Hence average PE multiple of 6.5 gives determine per share at Rs.57.
565 corres with EBITDA of Rs.642 crores and PAT of Rs.231 crores. Annualised EBITDA can be estimated at Rs.2,500 crores in believe of robust brace industry prospects. The recent acquisitions were made at EV/EBITDA of 7 times and hence affiliate can be estimated at 5 times which translates into an EV of Rs.12,500 crores. By deducting of Rs.4,000 crores net EV works out to Rs.8,500 crores giving value per overlap at Rs.75. The estimated net acquire for FY 08 is expected to be close to Rs.1,000 crores resulting in an EPS of Rs.8.80. The large integrated brace players are discounted at forward earning by about 6 to 7 times when compared to Tata brace and JSW brace. Hence average PE multiple of 6.5 gives value per share at Rs.57. Cash profit of the affiliate for June 07 accommodate was at Rs.518 crores (net acquire Rs.231 crores plus depreciation Rs.187 crores plus deferred tax Rs.100 crores) and hence annualised affix tax change earning is estimated at Rs.2,000 crores. The same can be multiplied with 6 which gives a bring in valuation of Rs.12,000 crores. Deducting debt of Rs.4,000 crores net valuation comes to Rs.8,000 crores giving a valuation per share of Rs.70.
565 corres with EBITDA of Rs.642 crores and PAT of Rs.231 crores. Annualised EBITDA can be estimated at Rs.2,500 crores in view of robust steel industry prospects. The recent acquisitions were made at EV/EBITDA of 7 times and hence company can be estimated at 5 times which translates into an EV of Rs.12,500 crores. By deducting of Rs.4,000 crores net EV works out to Rs.8,500 crores giving determine per overlap at Rs.75. The estimated net acquire for FY 08 is expected to be close to Rs.1,000 crores resulting in an EPS of Rs.8.80. The large integrated brace players are discounted at send earning by about 6 to 7 times when compared to Tata brace and JSW brace. Hence add up PE multiple of 6.5 gives determine per share at Rs.57. change acquire of the company for June 07 accommodate was at Rs.518 crores (net profit Rs.231 crores plus depreciation Rs.187 crores plus deferred tax Rs.100 crores) and hence annualised post tax change earning is estimated at Rs.2,000 crores. The same can be multiplied with 6 which gives a bring in valuation of Rs.12,000 crores. Deducting debt of Rs.4,000 crores net valuation comes to Rs.8,000 crores giving a valuation per share of Rs.70. When compared with peers like JSW brace which has a market capitalization of Rs.11,000 crores and Rs.4,000 crore of debt added for a capacity of 5 million tonnes gives a valuation of Rs.3,000 crores per million tonne. Since the company is into process of expanding its capacity from 3.60 million tonne to about 6.80 million tonne by walk 09 the same is presumed at 5 million tonne. change surface Tata brace has a merchandise capitalization of Rs.42,200 crores. On consolidated basis capacity of 26 million tonnes with debt of about Rs.45,000 crores valuation comes to about Rs.3,300 crores per million tonne.
Also in inspect of delisting a premium of 15% to 20% should be offered to the existing shareholders on bring together determine. So a valuation range of Rs.60 to Rs.80 per overlap is worked out under different methods. The same can be taken safely at Rs.72 per share (Rs.60 at the lowest of various method plus 20% thereon) which should be the asking price by the existing shareholders.
It is against the principle of natural justice that between 2003 & 2006 when Essar brace was growing by leaps & bounds the promoters increased their ownership ratio from 34% (approx) to 87% while the ratio of Public Share holders was reduced to 13 % only. Hence IT IS NOT JUST THE CASE OF INSIDER TRADING BUT ALSO GROSS FRAUD BY THE PROMOTERS AGAINST THE PUBLIC This was done merely with the objective of becoming 100% owners of Essar brace by illegally and fraudulently squeezing out Public overlap Holders from the wealth being created by Essar brace.
In the Balance Sheet that we downloaded from their website. Essar brace has mentioned that unsecured loan of promoters and assort Companies was converted in to equity at par as a part of RBI sanctioned Corporate Debt Restructuring Scheme This is a false statement given in the disclosure. Further they have tried to give the impression that it has the approval of High act. We would like to have in mind here that ,conversion of promoters give into equity at par in July 2003 as come up as issuing of optionally convertible preference shares in 2004 to Essar Power Limited,has not been ratified by any High act as is evident from the following paras :-
i) The Co went to the High act for ratification in bespeak No.176 of 2003 to apparently alter the CDR plot binding on promoters and lenders. But the hidden agenda was to convert certain schedule entries into equity at the cost of the public overlap holder camouflaged in the CDR scheme by the Promoters intentionally.
ii) They converted their give into equity in July 2003 ,change surface while ratification.
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