We have concluded our coverage of Renata Ltd. with a sell recommendation and valuation of the company. Renata is one of the major players in the Pharmaceutical industry and holds several subsidiaries in other market segments that make it a diversified company. It is the 4th largest pharmaceutical company and the market leader in animal health products. The Pharmaceutical industry has become highly competitive with several major competitors such as Square, Beximco, Incepta, Orion etc who are currently leading the industry by almost 68.5%. After reviewing Renata’s accounting practices we feel highly confident in their financial disclosures. We analyzed several aspects including key accounting policies, accounting flexibility, accounting strategy, quality of disclosures, potential red flags, and screening ratios. While there were a few inconsistencies, the importance of the errors weighted little on our analysis. With the forecasted information, we were able to calculate a value for the firm using DCF model. This was done using the CAPM and the weighted average cost of capital each of which were figured using a calculated levered beta. After valuing the company using the method and comparing it to the price per share that Renata currently trades for on the stock market, we felt that the price per share is currently overstated. Renata’s stocks should be sold at this time.

1. RENATA LIMITED
FIRM VALUATION AND FINANCIAL ANALYSIS
Group 13 1/29/17 Financial Analysis & Control

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A
REPORT ON
Renata Limited Valuation
Financial Analysis & Control
COURSE CODE: FIN-4207
Submitted To:
Md. Hashibul Hassan
Assistant Professor
Department of Finance
Jagannath University
Submitted By: Group-13
NO ID Name
1. B-120203047 Rasel Ahamed
2. B-120203071 Rafsan Shahab
3. B-120203137 Afrin Khan
4. B-110203091 Ehsun Hoque

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Table of Contents
Executive Summary.............................................................................................................. 3
Business Overview................................................................................................................ 4
Industry Analysis .................................................................................................................. 5
Pest Analysis..................................................................................................................... 5
SWOT Analysis of Renata Limited ................................................................................... 6
Porter’s Five Forces Model ............................................................................................... 8
Financial Statement Analysis .............................................................................................. 10
Findings .......................................................................................................................... 10
Z-Score ........................................................................................................................... 10
Red Flags in Financial Statements Renata Ltd..................................................................... 12
Forecasting Methodology.................................................................................................... 13
Income Statement............................................................................................................ 13
Balance Sheet.................................................................................................................. 14
Valuation ............................................................................................................................ 15
Cost of Equity: ................................................................................................................ 15
Cost of Debt:................................................................................................................... 15
Weighted Average Cost Of Capital: ................................................................................ 15
Unlevered Free Cash Flow .............................................................................................. 15
Present value of free cash flow........................................................................................ 16
Terminal Value ............................................................................................................... 16
Enterprise value and Implied Share Price ........................................................................ 16
Sensitivity Analysis......................................................................................................... 16
Monte Carlo Simulation .................................................................................................. 17
Analyst Recommendation ................................................................................................... 18

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Executive Summary
We have concluded our coverage of Renata Ltd. with a sell recommendation and valuation of
the company. Renata is one of the major players in Pharmaceutical industry and holds several
subsidiaries in other market segments that make it a diversified company. It is the 4th largest
pharmaceutical company and the market leader in animal health products.
The Pharmaceutical industry has become highly competitive with several major competitors
such as Square, Beximco, Incepta, Orion etc who are currently leading the industry by almost
68.5%.
After reviewing Renata’s accounting practices we feel highly confident in their financial
disclosures. We analyzed several aspects including: key accounting policies, accounting
flexibility, accounting strategy, quality of disclosures, potential red flags, and screening ratios.
While there were a few inconsistencies, the importance of the errors weighted little on our
analysis.
With the forecasted information, we were able to calculate a value for the firm using DCF
model. This was done using the CAPM and the weighted average cost of capital each of
which were figured using a calculated levered beta. After valuing the company using the
method and comparing it to the price per share that Renata currently trades for on the stock
market, we felt that the price per share is currently overstated. Renata’s stocks should be sold
at this time.

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Business Overview
Renata Limited is the 4th largest pharmaceutical company and the market leader in animal
health products. The company started its business operations in 1972 as Pfizer (Bangladesh)
Limited. In 1993, Pfizer transferred the ownership of its Bangladesh operations to local
shareholders and the name of the company was changed to Renata Limited. Renata Limited
has four core business segments: human pharmaceuticals, animal health products, agro
products and FMCG products. The Company has eight manufacturing facilities spread over
three manufacturing sites. Distribution of products is carried out by 19 depots across the
country. The main competitors of Renata includes Square pharmaceuticals, Beximco
pharmaceuticals, Incepta etc. In addition, Renata products are exported to 18 countries around
the world. The Company is listed on the Dhaka Stock Exchange with market capitalization of
approximately Taka 50 billion.
Company Analysis: Renata Limited
Trading Code RENATA
Last Trading price 1105 Tk. (January 26, 2017)
52 weeks’ Moving Range 1080.00-1285.00
Market Capitalization 67,509.905
Sector Pharmaceuticals and Chemicals
Total no of outstanding Securities 60,896,541
Listing Year 1979
Market Category A
Public Share Holding 10.48%

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Industry Analysis
Pest Analysis
POLITICAL
Governmental regulations are rapidly implemented in pharmaceutical sectors
There are some drawbacks of political interference in this industry
Government is not willing to impose any strict laws in this sector
But still there is no proper budget for pharmaceutical industries from the
government in the fiscal policy
ECONOMIC
The growth rate of pharmaceutical industry is getting higher
Excise duty, custom duty, service TAX ,profession TAX , license fees, income TAX ,
stamp duty , is much higher for pharmaceutical companies
The tax rate is increased by 27% for pharmaceutical products
Cheap labor cost lead to increase profit margin in this industry
Pharmaceutical industry is consistently contributing in the GDP of Bangladesh
Social
The population in Bangladesh is continuously increasing which boost this industry
Conservative lifestyle preferences are still present in this country
In urban area, people are not conscious enough or used to consume drugs without
doctor’s recommendation
Meditation is now becoming popular and it is making an impact on this industry
Technology
Comparing with other sector, pharmaceutical industry is the one of the most advanced
sectors in Bangladesh.
In Bangladesh, no pharmaceutical companies work on drug development, but they
change and modify the formulation for better action
The continuing evaluation of new technologies such as 3-D biological printing, ultra-
high-resolution, analytical instruments, next generation sequencing, desktop
electronic microscopy etc are changing the rules of drug development

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SWOT Analysis of Renata Limited
Strength
Many Product Line: Renata has around 300 human pharmaceuticals products in the market.
Brand Reputation: Renata is one of the market leaders in pharmaceutical industry. It is the
4th largest pharmaceutical company and the market leader in animal health products.
Investment Policy: Renata continues to have a very aggressive investment strategy. The
amount is financed through internal cash generation and bank loans. Renata has high profile
board of directors which give them an advantage in taking loans. For example a director of
Renata also holds the responsibility of Deputy Executive Director of BRAC and another
director is managing director of ICB.
Good Financial Management: After having made several profitable capital investments over
the last decade, they are now in the coveted position of being able to retire debt. In 2014, they
retired a corporate bond worth Taka 100 crores. Moreover, in 2015 and 2016 they hope to repay
similar amounts. This reduction in debt shall add significantly to our earnings growth.
Technology Advancement: Renata introduced online and sms verification of their most
selling product Maxpro. Every strip has code by which consumer can verify its expiry date and
originality.
Weakness
Decline in R&D Innovations: Low investments in innovative R&D continue to be a major
weakness of Renata Ltd.
Poor Marketing Plan: Sales and marketing knowledge is inadequate due to lack of
understanding of international Pharmaceutical marketing/pricing practices and market
environment in various countries. For example- The sales representatives of Renata’s cannot
out perform in comparison to other competitors like Incepta, Square etc.
Inconsistent in Supplying Product: Sometimes they are not able to produce specific products
efficiently; as a result they cannot supply those products to retailers timely.
Opportunities
Potential growth: It has potential growth due to increased market demand for pharmaceutical
drugs.
Widen Product Range: Product line has extension capacity to expand to meet changing
customer needs.
Exempted From The Obligations To Implement Patents: Being a least-developed country,
Bangladesh has been exempted from the obligations to implement patents and data protection
for pharmaceutical products until January 2033 by the World Trade Organization. Major raw
material supplying countries such as India and China are not legally able to produce the
patented raw materials due to the WTO restriction.

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Implementation of API industrial park: The production of API will not only ensure self-
sufficiency but will also offer price competitiveness in the global market,
Threats
Increase Domestic Competition: First level companies like Beximco pharmaceuticals, Square
Pharmaceuticals and Incepta Pharmaceuticals are doing well, and gradually they are gaining
more market shares which is another barrier for Renata Ltd.
Increase in Foreign Competition: In the foreign market competitors, India and China are big
challenge.
Rising Labor Costs: Rapidly increasing costs of skilled manpower such as scientists/
regulatory compliance personnel / pharmaceutical lawyers/ international business development
personnel is pushing up the cost of innovation.

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Porter’s Five Forces Model
Bargaining Power of Suppliers: MODERATELY LOW
Almost 90% of raw materials are now being imported by Bangladesh from various countries
like China, India, Germany, UK, France, Italy etc. The supplier can go for forward integration
to become a pharmaceuticals company. Companies like Orchid Chemicals and Sashun
Chemicals were basically chemical companies, who turned themselves into pharmaceutical
companies. Our pharmaceutical companies have the possibility to enter into suppliers business
after implementation of API Park. The companies in the pharmaceuticals industry can switch
from their suppliers without incurring a very high cost.
Bargaining Power of Buyers: EXTREMELY LOW
In pharmaceutical industry, the buyers are scattered and they do not apply much power in the
pricing of the products. The end consumer do not have the bargaining power as they have no
choice but to buy what Doctor says. The brand identity exists in the market but it is in the hand
of the influencer (doctor). Government with its policies regulates pricing through the NPPA
(National Pharmaceutical Pricing Authority).
Competitive Rivalry: HIGH
Currently there are about 300 companies operating in the pharmaceutical industry and
according to the IMS- Health, the top 10 players took 68.5 percent of the market. In June, 2016
the annual growth rate of this industry was 17.8 percent. When a pharmaceutical company
launches new medicine, existing companies are indirectly enforced to produce the same type
of medicines to take advantage of the opportunity.
Threat of Substitution: LOW
There are few substitutes for medicine. There are different options to the prescribers and
patients in therapeutic situations in Bangladesh. At present, there are 205 ayurvedic, 266 unani,
27 herbal and 79 homeopathic drug manufacturing companies operating in the country.
Threat of New Entrants: MODERATELY LOW
Large established companies with strong brand names such as Square, Incepta, Beximco make
it more difficult to enter the market because new entrants are faced with price competition from
existing pharmaceuticals. To enter into pharmaceuticals industry large capital is needed. Thus,
it takes a pretty much time for a new business to establish in the pharmaceuticals industry.

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From the above, we can conclude that pharmaceutical Industry is a profitable and growing
industry of Bangladesh.

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Financial Statement Analysis
The purpose of Financial Statement Analysis is to evaluate management performance in
Profitability, Efficiency and Risk. Although financial statement information is historical, it is
used to project future performance. Financial Statement Analysis can be done using Three
Methods
1. Vertical Analysis
2. Horizontal Analysis
3. Ratio Analysis
We do all three method in-order-to get a complete picture of the Company.
Findings
1. Finance costs are declining consecutively in past years and it was significantly low in
2015. Because Renata Ltd. paid their loans in past few years, They used free cash flow
to retire debt.
2. In 2014 Cash and cash equivalents decreased because they paid their long term debt.
3. In 2014 Renata’s sales increase 27% than 2013 and their trade receivable increased 67%.
In 2013 Renata’s sales fall because of political usability, their inventory turnover
increased.
4. From the analysis we found that Renata was consistently performing well in their
profitability ratios in past years.
Z-Score
The Altman Z- Score model, weights five variables to compute a bankruptcy score. The Z-
score uses multiple corporate income and balance sheet values to measure the financial health
of a company. The model is as follows:
Z= 1.2 (X ) + 1.4 (X ) +3.3(X ) + 0.6 (X ) + 1.0 (X )
Where,
X = Net working capital/ Total assets
X = Retained earnings/ Total assets
X = EBIT/ Total assets
X = Market value of equity/ Book value of total liabilities
X = Sales/ Total assets
The model predicts bankruptcy when Z<1.81. The range between 1.81 and 2.67 is labeled the
“gray area”. The model predicts safe zone when Z > 2.99. For Renata,

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X = Net working capital/ Total assets
= 836/16,138
= 0.05
X = Retained earnings/ Total assets
= 8,390/16,138
=0.52
X = EBIT/ Total assets
= 2,450/16,138
=0.15
X = Market value of equity/ Book value of total liabilities
= 65,292/6732
= 9.70
X = Sales/ Total assets
= 12,881/16,138
=0.80
So Z score for Renata is:
Z= 1.2 (X ) + 1.4 (X ) +3.3(X ) + 0.6 (X ) + 1.0 (X )
= 1.2*0.05 + 1.4*0.52 + 3.3*0.15 + 0.6*9.70 + 1.0*0.80
= 7.903
The Z score for Renata does not in fall gray area, which means company, is in not in danger of
economic failure in upcoming years. All the variables are good which shows the company is
in good financial health.

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Red Flags in Financial Statements Renata Ltd.
Unusual Accounts Receivables Growth
Renata’s accounts receivables grow at a faster pace than the company's sales, it can indicate
that the company is making bad sales to companies unable or unwilling to pay.
It may also indicate that the company is booking revenues before the proper time, which is one
of the most common practices.
Loan to Subsidiaries
Renata Ltd. lend money to its subsidiary (Renata Agro Industries Limited) without exchanging
any funds. But there is no record in cash flow statement.
Calculating Retained Earnings
While calculating retained earnings Renata ltd provided wrong net profit after tax in 2011,
2012 & 2013 and they also carried forward wrong closing balance in 2014.
Growth in Cash Flows
Renata grew it’s revenues without a corresponding growth in cash flows. Sales are much easier
to manipulate than cash flow but the two should move more or less in tandem over time.
Pariculars 2011 2012 2013 2014 2015
Sales 6,520 7,672 8,757 11,107 12,881
Growth 18% 14% 27% 16%
Trade receivables 640 843 1,143 1,355 1,751
Growth 32% 36% 19% 29%
2011 2012 2013 2014 2015
Loanto Renata Agro Industries Limited 150 100
2011 2012 2013 2014 2015
Net profit after tax for the year 1,088 1,238 1,390 1,711 2,007
Retained earnings
Opening balance 2,512 3,443 4,423 5,531 6,843
Net profit after tax for the year 1,091 1,247 1,394 1,711 2,007
Tax holiday reserve -74 -75 -43 -47 -19
Stock dividend issued -45 -56 -71 -88 -88
Cash dividend paid -108 -136 -169 -265 -353
Tax holiday reserve reversed 67
Depreciation adjustment of revaluation surplus
.636 .636 .636 .636 .636
Closing balance 3,443 4,423 5,535 6,843 8,390
Net profit after tax for the year 1,088 1,238 1,390 1,711 2,007
Growth 14% 12% 23% 17%
Net cash generated fromoperating activities
900 1,087 917 1,716 1,991
Growth 21% -16% 87% 16%

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Forecasting Methodology
In order to determine Renata’s actual worth we will forecast their financial statements. Most
of the forecast for Renata uses assumptions, based on past performance, to determine future
values.
Income Statement
Sales Growth: We assumed the sales growth rate 18% which is 1% less than the average of
past 5 year’s sales growth. The sales growth of 2013 was low because of political instability
and it increased by 13% in 2014 but again fall by 7% in 2015. We assumed the reason behind
this fall is the change in Board of Directors because of the expiration of ‘Founder Chairman’
of Renata in the beginning of 2015. So we settled with a rate below average and forecasted
next 5 year’s sales repeating the rate.
EBIT as % of sales: In case of EBIT as % of sales, we kept the average of past 5 year’s rate
because the rates in last few years did not show much variation from the average 18%.
D&A as % of Sales: Depreciation and Amortization rate as percentage of sales was assumed
to be equal to the average of past years rates which is 13% and the rate is applied in forecasted
5 years.
Cost of Sales: An average of the past five years of costs of sales was taken to get the cost of
sales to revenue ratio and was found to be approximately 49%.
Selling and Administration Expenses: An average of the past five years of was taken to get
the selling and administration expenses and was found to be approximately 25%.
Finance Cost: Finance costs are declining consecutively in past years and it was significantly
low in 2015. So we assume finance cost would be 2.5% which is below the average.
Tax Rate: Tax expense has been made on the basis of the Finance Act, 2014 and the Income
Tax Ordinance, 1984.

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Balance Sheet
Property, plant and equipment at cost/ revaluation less accumulated depreciation had
different trends so a weighted growth rate was established. This method provides the most
accurate forecast because it is based on historical trends within the company. We assume the
growth rate would be 10%.
Capital work-in-progress had different trends. So we used 5.20% growth for forecasting,
which is the average of 2014 and 2015.
Investment in subsidiaries were all calculated using a moving average. Minor fluctuations
existed for the past five years, so the moving average method was used.
Share Capital: Renata’s share capital growth rate for 2016 is projected to be about 20%.
Long term loan - net off current portion: Renata Ltd. used free cash flow to retire debt.
Dividend: We assume that Renata will pay 25% dividend in forecasted years

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Valuation
The purpose of the valuation section of our report is to define and assist in the decision making
activities of present and future investors of Renata Ltd. We have also laid the ground work for
determining Renata’s current cost of equity, cost of debt, and WACC so that we could
potentially examine future intrinsic values and estimates into the future of Renata and their
financials. The intrinsic estimates will aid in the valuation of everything from the company’s
value of equity and debt, to several different possible values for the firm as the company
currently stands. We used DCF (Discounted Cash Flow) method to valuing the company. .
Valuing the price of the firm is important to shareholders as well as potential shareholder so
they are able to determine if the company is worth what they are paying for it. If a company is
overvalued then it is a good time to sell shares as well as vice versa, when it is undervalued it
is a good time to buy shares. This is important to the company as well because they may be
willing to buy back shares when the price is low.
Cost of Equity:
To calculate Renata’s cost of equity, we used the CAPM method. A detailed view of the CAPM
calculations can be found in appendix. Renata has an estimated cost of equity of 12%. This
figure was generated by using a risk free rate of 7.94%.The levered beta used was calculated
using a data regression for the previous twelve months daily price index, which is
approximately 0.4245. The market risk premium was estimated to be 4.84% and size premium
was 2%. The formula applied for cost of equity:
Cost of equity= risk free rate + (levered beta*market risk premium) + size premium
Cost of Debt:
Renata’s cost of debt is estimated to be 14%; this figure was calculated using a weighted
average of short and long term debt. The tax rate was 27.5% and after tax cost of debt was
found 10% using the formula:
After tax cost of debt= cost of debt*(1 – tax rate)
Weighted Average Cost Of Capital:
Renata’s WACC is estimated to be 11.93%, in making these calculations it was determined
that the company is comprised of 3% debt and 97 % equity. Coca Cola has a very low debt to
equity ratio, which frees it from burdening much about debts and interest payments. WACC
was calculated by using the formula:
WACC = (after tax cost of debt*debt to total capitalization) + (cost of equity*equity to total capitalization)
Unlevered Free Cash Flow
Renata’s unlevered free cash flow is the gross free cash flow generated by Renata; it is the free
cash flow available to pay all stakeholders. The unlevered free cash flow computed as follows:
Unlevered Free Cash Flow = EBITDA - CAPEX - Working Capital – Taxes

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Present value of free cash flow
After we calculated unlevered free cash flow for forecasted years 2016 to 2020. We discounted
that future cash flow to get the present value of free cash flow. Free cash flow computed as
follows:
Present value of free cash flow = Unlevered future free cash flow * (1/(1+WACC)) ^discount period
Terminal Value
Renata’s terminal value calculated applying Gordon growth model. Terminal value calculated
as follows:
Terminal value = (Terminal year free cash flow*(1+PerpetuityGrowth Rate))/((WACC-PerpetuityGrowth Rate))
Then terminal value discounted using discount factor to get the present value of terminal value.
Here terminal year free cash flow was 2020.40 million, WACC was 11.93% and Perpetuity
growth 3.53%.
Enterprise value and Implied Share Price
Renata’s enterprise value is 19,229.32 million, which is computed with Present value of free
cash flows from 2016 to 2020 plus Present value of terminal value.
After we calculated enterprise value, we calculated implied equity value. Implied equity value
is calculated using this formula.
Implied equity value = (Enterprise value – Total debt + Cash and cash equivalent)
Renata’s implied equity value is 15,800.78 million with outstanding shares of 52.95 million.
After that we calculated implied share price using this formula:
Implied share price = (Implied equity value / Outstanding shares)
Renata’s implied share price is 298.39 taka per share.
Sensitivity Analysis
From the sensitivity analysis between Perpetuity growth and WACC, we see that Perpetuity
growth is more sensitive than WACC. If WACC is 11% enterprise value will be 21,845 million,
a 1% increase in WACC decrease 10% enterprise value. WACC is used in DCF to discount the
future values, so any increase in WACC will decrease the amount of enterprise value. On the
other hand Perpetuity growth is used to forecast future growth in terminal value, so any increase
in perpetuity growth will increase the amount of enterprise value. The relationship between
Perpetuity growth and WACC is negative. Hence it increases the sensitivity between this two.
The average standard deviation of WACC is 1597; on the other hand the average standard
deviation of perpetuity growth is 4055. Which describe the higher variability of perpetuity
growth rather than WACC.
From the sensitivity analysis between Annual sales growth and WACC, we see sales growth is
more sensitive than WACC. There are negative relationship between Annual sales growth and
WACC. The average standard deviation of WACC is 985, on the other hand the average
standard deviation of annual sales growth is 4128. Which describe the higher variability and
sensitivity of annual sales growth rather than WACC. From this two analysis we can conclude
that we must increase sales to increase the enterprise value, with current financial position.

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Monte Carlo Simulation
From our simulation test of 1000 trials we see that between 17,119,708,803 to 21,000,064,717,
there are 61.7% certainty base on our assumption of sales growth, perpetuity growth rata and
WACC. The variance between total forecast is 21.42. There are 50% possibilities that the
enterprise value will be more than 19,092,577,332. From the sensitivity chart of Monte Carlo
simulation, we can see sales growth is 99% sensitive and perpetuity growth rate is 0.90% and
WACC is 0.10% sensitive. So our recommendation stills same as before. We must increase
sales promotion and enormous advertising strategy to capture more sales in both national and
international market.

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Analyst Recommendation
Renata’s current share price in share market is 1,105 taka per share. According to DCF
valuation share price is 298.39 taka per share, which is 806.61 taka less than market value of
per share.
Our valuation process might have some limitation due to some key assumption. DCF may not
be predicted future exactly. But still we can say the share price is overvalued.
Our final recommendation is to sell Renata because it is overvalued.

20. CAGR
Particulars 2011 2012 2013 2014 2015 2011-2015 2016 2017 2018 2019 2020
Sales 6,520 7,672 8,757 11,107 12,881 15,200 17,935 21,164 24,973 29,469
Sales' growth 18% 14% 27% 16% 19% 18% 18% 18% 18% 18%
Total Cost 5,296 6,340 7,301 9,240 10,431 12,464 14,707 17,354 20,478 24,164
Total Cost % Sales 83% 83% 83% 81%
EBIT 1,224 1,331 1,456 1,867 2,450 2,736 3,228 3,809 4,495 5,304
EBIT AS % of sales 19% 17% 17% 17% 19% 18% 18% 18% 18% 18% 18%
Depreciation & Amortization 663 1,049 1,690 1,333 1,093 1,976 2,332 2,751 3,247 3,831
D&A as % of Sales 10% 14% 19% 12% 8% 13% 13% 13% 13% 13% 13%
EBITDA 1,886 2,380 3,146 3,201 3,543 4,712 5,560 6,561 7,742 9,135
% margin 28.93% 31.02% 35.93% 28.82% 27.50% 31.00% 31.00% 31.00% 31.00% 31.00%
Taxes (27.5%) 27.50% 27.50% 27.50% 27.50% 27.50% 27.50% 27.50% 27.50% 27.50% 27.50%
Taxes (27.5%) 396 471 518 641 751 669 789 931 1,099 1,297
Capex 872 2,721 1,401 349 2,812 1,503 1,697 1,918 2,171
% sales 11.37% 31.07% 12.62% 2.71% 18.50% 8.38% 8.02% 7.68% 7.37%
Increase/Decrease in NWC 1,355 -1,558 1,207 754 1,647 2,021 2,469 3,006 3,647
RENATA LTD.
Actual Forecasted Period

21. Unlevered Free Cash Flow -318 1,465 -49 1,689 -417 1,247 1,463 1,719 2,020
WACC 12%
Discount Period 1 2 3 4 5
Discount Factor 0.893 0.798 0.713 0.637 0.569
Present value of free cash flow -372 995 1,043 1,095 1,150
Terminal Value
Terminal Year Free Cash Flow
2,020
Perpetuity Growth Rate 3.53%
Terminal Year EBITDA 9,135
Terminal Value 26,915
Implied Exit Multiple 3.3x
Discount Period 5
Discount Factor 0.57
Present Value of Terminal Value 15,318
% of Enterprise Value 80%

22. (in million)
Net Working Capital 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Current assets
Inventories 1,585 1,987 2,658 2,761 3,374
Trade and other receivables 640 843 1,143 1,914 2,476
Advances, deposits and prepayments 98 149 168 220 242
Loan to Renata Agro Industries Limited 150 100
Cash and cash equivalents 141 331 240 252 291
Total Current assets 2,464 3,310 4,209 5,296 6,483 7,995 9,781 11,886 14,365 17,278
Current liabilities
Short term bank loan and overdrafts 2,403 1,813 3,041 3,321 3,233
Long term loan - current portion 230 236 157
Non-convertible bond - current portion 1,000
Trade payables 50 41 65 125 264
Cost accruals 327 273 264 418 663
Provisions and other liabilities 344 340 353 476 560
Unclaimed dividend 7 8 10 13 17
Provision for taxation 255 402 371 625 752
Total current liabilites 3,386 2,877 5,334 5,214 5,647 5,512 5,276 4,912 4,385 3,650
Net Working Capital -922 433 -1,125 82 836 2,483 4,505 6,974 9,980 13,627
Change in Net Working Capital 1,355 -1,558 1,207 754 1,647 2,021 2,469 3,006 3,647
-14% 6% -13% 1% 6% 16% 25% 33% 40% 46%
Actual Forecasted period

23. Wacc Calculation Enterprise value
Target Capital Structure (1) Present value of Free Cash Flow 3,911
Debt to Total Capitalization 3%
Equity to Total Capitalization 97% Terminal Value 26,915
Debt to Equity Ratio 3% Discount Factor
Present Value of Terminal Value 15,318
Cost of Equity % of Enterprise Value 80%
Risk-free rate (2) 7.94%
Market risk Premium (3) 4.84% Enterprise value 19,229.32
Levered Beta (4) 42% Less: Total debt 3,719
Size Premium (5) 2% Plus: Cash and Cash Equi. 291
Cost of Equity
12%
Net Debt 3,429
Cost of Debt Implied Equity Value 15,800.78
Cost of Debt 14% Outstanding shares 52.95
Taxes 27.5% Implied share price 298.39
After Tax Cost of Debt 10%
Implied multiples
WACC 11.93% Enterprise Value 19,229
SALES 2016 15,200
EBITDA 2016 4,712
Implied EV/SALES 1.3x
Implied EV/EBITDA 4.1x
RENATA LTD.
DCF model
(5) Low-Cap Decile size premium based on market
capitalization, per Ibbotson
(1) Obtained from Beta and Capital Structure tab
(2) Interpolated Yield on 10-year Treasury bond
(3) Obtained from Ibbotson SBBI Valuation Yearbook
(4) Obtained from Beta and Capital Structure tab
OutputInput

24. 19,229 19,229 2.5% 3.0% 3.5% 4% 4.5% Average
Standard
deviation
Coefficient
of variance
10% 22,653 23,978 25,508 27,179 29,407 25,745 2,656 10%
11% 19,751 20,736 21,854 23,050 24,608 22,000 1,909 9%
12% 17,600 18,369 19,229 20,137 21,299 19,327 1,454 8%
13% 15,608 16,201 16,857 17,541 18,402 16,922 1,098 6%
14% 14,078 14,553 15,074 15,611 16,280 15,119 866 6%
Average 17,938 18,767 19,704 20,703 21,999 19,822 1,597
standard deviation 2,656 3,726 4,125 4,574 5,192 4,055
Coefficient of variance 15% 20% 21% 22% 24%
19,229 17.0% 17.5% 18% 18.5% 19.0% Average
Standard
deviation
Coefficient
of variance
10% 23,911 24,703 25,508 26,326 27,157 25,521 1,283 5.03%
#REF! 11% 20,491 21,167 21,854 22,552 23,262 21,865 1,095 5.01%
12% 18,034 18,627 19,229 19,842 20,464 19,239 960 4.99%
13% 15,813 16,331 16,857 17,392 17,935 16,866 839 4.97%
14% 14,143 14,605 15,074 15,550 16,034 15,081 748 4.96%
Average 18,478 19,087 19,704 20,332 20,970 985
standard deviation 3,862 3,993 4,125 4,260 4,398 4,128
Coefficient of variance 21% 21% 21% 21% 21%
RENATA LTD.
DCF model
Sensitivity Analysis
Perpetuity growth %
WACC%
Annual sales growth %
WACC

25. Average 1124.621 4624.019 1757.37071 0.001075921 -0.000239937 -0.000178969
variance 13385.25 37978.84 5780.978144 0.000297994 0.0000660313 0.00007383122
Beta 48% 0.424518842

26. Group 13
Crystal Ball Report - Full
Simulation started on 29-Jan-17 at 9:13 AM
Simulation stopped on 29-Jan-17 at 9:13 AM
Run preferences:
Number of trials run 1,000
Extreme speed
Monte Carlo
Random seed
Precision control on
Confidence level 95.00%
Run statistics:
Total running time (sec) 0.85
Trials/second (average) 1,175
Random numbers per sec 3,524
Crystal Ball data:
Assumptions 3
Correlations 0
Correlation matrices 0
Decision variables 0
Forecasts 1
Page 1

27. Group 13
Forecasts
Worksheet: [Group 13.xlsx]DCF
Forecast: Enterprise value Cell: R15
Summary:
Certainty level is 61.7%
Certainty range is from 17,119,708,803 to 21,000,064,717
Entire range is from 12,189,315,795 to 27,334,353,356
Base case is 19,229,319,158
After 1,000 trials, the std. error of the mean is 70,261,885
Statistics: Forecast values
Trials 1,000
Base Case 19,229
Mean 19,221
Median 19,101
Mode ---
Standard Deviation 2,222
Variance 4,936,732,496,767
Skewness
Kurtosis
Coeff. of Variation
Minimum 12,189
Maximum 27,334
Range Width 15,145
Mean Std. Error 70
Page 2

28. Group 13
Forecast: Enterprise value (cont'd) Cell: R15
Percentiles: Forecast values
0% 12,189
10% 16,426
20% 17,351
30% 17,950
40% 18,524
50% 19,093
60% 19,662
70% 20,283
80% 21,055
90% 22,187
100% 27,334
End of Forecasts
Page 3

29. Group 13
Assumptions
Worksheet: [Group 13.xlsx]DCF
Assumption: Perpetuity Growth Rate Cell: B32
Triangular distribution with parameters:
Minimum 3.15%
Likeliest 3.53%
Maximum 3.85%
Assumption: Sales Growth Cell: H5
Normal distribution with parameters:
Mean 18%
Std. Dev. 2%
Assumption: WACC % Cell: U21
Normal distribution with parameters:
Mean 12%
Std. Dev. 1%
End of Assumptions
Page 4

30. Group 13
Sensitivity Charts
Page 5

31. Particulars 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015
Sales 6,520 7,672 8,757 11,107 12,881 18% 14% 27% 16%
COGS 3,099 3,620 4,317 5,419 6,336 17% 19% 26% 17%
Gross Profit 3,420 4,052 4,441 5,688 6,545 18% 10% 28% 15%
Administrative, selling and distribution expenses 1,703 1,881 2,031 2,794 3,408 10% 8% 38% 22%
Other income 21.48 8.00 .76 17.04 12.91 -63% -90% 2133% -24%
Operating profit 1,739 2,179 2,409 2,911 3,150 25% 11% 21% 8%
Gain/(loss) on disposal of property plant or equipment 3.5
interest on overdraft 9.23
Finance cost 215 381 429 463 282 77% 13% 8% -39%
Profit before contribution to WPPF 1,511 1,798 1,980 2,447 2,868 19% 10% 24% 17%
Contribution to WPPF 72 86 94 117 137 19% 10% 24% 17%
Profit before tax 1,439 1,712 1,885 2,331 2,732 19% 10% 24% 17%
Tax expenses
Current tax 301 400 293 548 515 33% -27% 87% -6%
Deferred tax 50 74 202 72 210 48% 172% -64% 191%
351 474 495 620 725 35% 4% 25% 17%
Net profit after tax for the year 1,088 1,238 1,390 1,711 2,007 14% 12% 23% 17%
Horizontal Analysis of Income Statement

32. Particulars 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015
Assets
Non-current assets
Property, plant and equipment at cost/ revaluation less
accumulated depreciation 3,783 4,269 6,348 8,107 8,696 13% 49% 28% 7%
Capital work-in-progress 1,370 2,062 2,026 857 723 50% -2% -58% -16%
Investment in subsidiaries 63 63 143 143 143 0% 127% 0% 0%
other investment 31 -100%
Investment in shares 11 18 56 90 92 62% 207% 60% 3%
Total non-current assets 5,227 6,443 8,574 9,197 9,655 23% 33% 7% 5%
Current assets
Inventories 1,585 1,987 2,658 2,761 3,374 25% 34% 4% 22%
Trade and other receivables 640 843 1,143 1,914 2,476 32% 36% 67% 29%
Advances, deposits and prepayments 98 149 168 220 242 53% 13% 31% 10%
Loan to Renata Agro Industries Limited 150 100 -33%
Cash and cash equivalents 141 331 240 252 291 135% -27% 5% 15%
Total Current assets 2,464 3,310 4,209 5,296 6,483 34% 27% 26% 22%
TOTAL ASSETS 7,692 9,753 12,782 14,494 16,138 27% 31% 13% 11%
EQUITY AND LIABILITIES
Shareholders' equity
Share capital 226 282 353 441 530 25% 25% 25% 20%
25% 25% 25% 20% 0% 0% -20%
Revaluation surplus 158 158 157 157 157 0% 0% 0% 0%
Tax holiday reserve 131 207 249 296 315 57% 21% 19% 6%
Available for sale reserve 13 14 10%
Retained earnings 3,443 4,423 5,535 6,843 8,390 28% 25% 24% 23%
Total shareholders equity 3,959 5,070 6,295 7,751 9,406 28% 24% 23% 21%
Non-current liabilities
Deferred liability - staff gratuity 149 175 203 200 18% 15% -1% -100%
Horizental Analysis of Balance Sheet

33. Deferred tax liability 198 272 474 546 756 37% 74% 15% 38%
Long term loan - net off current portion 358 477 783 329 33% 64% -58%
non convertible bond 1,000 -100%
Total Non-current liabilities 347 1,806 1,154 1,529 1,085 420% -36% 33% -29%
Current liabilities
Short term bank loan and overdrafts 2,403 1,813 3,041 3,321 3,233 -25% 68% 9% -3%
Long term loan - current portion 230 236 157 3% -33%
Non-convertible bond - current portion 1,000 -100%
Trade payables 50 41 65 125 264 -18% 58% 92% 111%
Cost accruals 327 273 264 418 663 -17% -3% 58% 59%
Provisions and other liabilities 344 340 353 476 560 -1% 4% 35% 18%
Unclaimed dividend 7 8 10 13 17 21% 25% 31% 32%
Provision for taxation 255 402 371 625 752 58% -8% 69% 20%
Total current liabilites 3,386 2,877 5,334 5,214 5,647 -15% 85% -2% 8%
TOTAL LIABILITIES ANS STOCKHOLDERS EQUITY 7,692 9,753 12,782 14,494 16,138 27% 31% 13% 11%

34. Income statement
Particulars 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015
Sales 6,519.64 7,671.57 8,757.41 11,107.28 12,880.96 100.00% 100.00% 100.00% 100.00% 100.00%
COGS 3,099.36 3,619.61 4,316.78 5,418.97 6,335.80 47.54% 47.18% 49.29% 48.79% 49.19%
Gross Profit 3,420.28 4,051.96 4,440.63 5,688.31 6,545.15 52.46% 52.82% 50.71% 51.21% 50.81%
Administrative, selling and distribution expenses 1,702.91 1,880.63 2,031.34 2,794.41 3,408.12 26.12% 24.51% 23.20% 25.16% 26.46%
Other income 21.48 8.00 .76 17.04 12.91 0.33% 0.10% 0.01% 0.15% 0.10%
Operating profit 1,738.85 2,179.32 2,408.53 2,910.94 3,149.94 26.67% 28.41% 27.50% 26.21% 24.45%
Gain/(loss) on disposal of property plant or
equipment 3.52 .22 .40 .00 .00 0.05% 0.00% 0.00% 0.00% 0.00%
interest on overdraft 9.23 .00 .00 .00 .00 3.30% 0.00% 0.00% 0.00% 0.00%
Finance cost 215.32 381.11 429.30 463.47 281.85 0.14% 4.97% 4.90% 4.17% 2.19%
Profit before contribution to WPPF 1,510.78 1,797.99 1,979.63 2,447.47 2,868.09 23.17% 23.44% 22.61% 22.03% 22.27%
Contribution to WPPF 71.94 85.62 94.27 116.55 136.58 1.10% 1.12% 1.08% 1.05% 1.06%
Profit before tax 1,438.84 1,712.38 1,885.36 2,330.92 2,731.51 22.07% 22.32% 21.53% 20.99% 21.21%
Tax expenses
Current tax 300.88 400.26 293.24 547.85 514.82 4.61% 5.22% 3.35% 4.93% 4.00%
Deferred tax 50.24 74.19 201.96 72.21 210.05 0.77% 0.97% 2.31% 0.65% 1.63%
351.12 474.45 495.19 620.06 724.87 5.39% 6.18% 5.65% 5.58% 5.63%
Net profit after tax for the year 1,087.72 1,237.93 1,390.16 1,710.86 2,006.64 16.68% 16.14% 15.87% 15.40% 15.58%
Vertical Analysis of Income Statement

35. Particulars 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015
Assets
Non-current assets
Property, plant and equipment at cost/ revaluation
less accumulated depreciation 3,782.85 4,268.93 6,348.18 8,106.69 8,695.86 49% 44% 50% 56% 54%
Capital work-in-progress 1,370.22 2,061.91 2,026.08 857.48 723.27 18% 21% 16% 6% 4%
Investment in subsidiaries 63.07 63.07 143.07 143.07 143.07 1% 1% 1% 1% 1%
other investment .00 30.59 .00 .00 .00 0% 0% 0% 0% 0%
Investment in shares 11.33 18.36 56.36 89.96 92.39 0% 0% 0% 1% 1%
Total non-current assets 5,227.48 6,442.86 8,573.70 9,197.20 9,654.59 68% 66% 67% 63% 60%
Current assets
Inventories 1,585.10 1,986.74 2,657.78 2,760.77 3,374.27 21% 20% 21% 19% 21%
Trade and other receivables 640.20 843.23 1,142.69 1,913.80 2,475.55 8% 9% 9% 13% 15%
Advances, deposits and prepayments 97.56 148.95 167.99 219.80 242.48 1% 2% 1% 2% 2%
Loan to Renata Agro Industries Limited .00 .00 .00 150.00 100.00 0% 0% 0% 1% 1%
Cash and cash equivalents 141.27 331.29 240.26 252.01 290.87 2% 3% 2% 2% 2%
Total Current assets 2,464.13 3,310.22 4,208.71 5,296.37 6,483.18 32% 34% 33% 37% 40%
TOTAL ASSETS 7,691.60 9,753.08 12,782.41 14,493.57 16,137.77 100% 100% 100% 100% 100%
EQUITY AND LIABILITIES
Shareholders' equity
Share capital 225.94 282.42 353.02 441.28 529.54 3% 3% 3% 3% 3%
Revaluation surplus 158.43 157.96 157.48 157.00 156.52 2% 2% 1% 1% 1%
Tax holiday reserve 131.44 206.61 249.50 296.34 315.03 2% 2% 2% 2% 2%
Available for sale reserve .00 .00 .00 13.11 14.48 0% 0% 0% 0% 0%
Retained earnings 3,442.80 4,423.50 5,535.12 6,842.99 8,390.30 45% 45% 43% 47% 52%
Total shareholders equity 3,958.61 5,070.48 6,295.11 7,750.71 9,405.86 51% 52% 49% 53% 58%
Non-current liabilities .00 .00 .00 .00 .00 0% 0% 0% 0% 0%
Deferred liability - staff gratuity 149.14 175.37 202.53 200.27 .00 2% 2% 2% 1% 0%
Deferred tax liability 198.00 272.04 473.84 545.90 755.79 3% 3% 4% 4% 5%
Long term loan - net off current portion .00 358.33 477.31 782.51 328.91 0% 4% 4% 5% 2%
non convertible bond .00 1,000.00 .00 .00 .00 0% 10% 0% 0% 0%
Total Non-current liabilities 347.14 1,805.74 1,153.68 1,528.68 1,084.70 5% 19% 9% 11% 7%
Current liabilities .00 .00 .00 .00 .00 0% 0% 0% 0% 0%
Short term bank loan and overdrafts 2,402.99 1,812.61 3,041.32 3,321.41 3,233.50 31% 19% 24% 23% 20%
Long term loan - current portion .00 .00 229.74 235.90 157.00 0% 0% 2% 2% 1%
Non-convertible bond - current portion .00 .00 1,000.00 .00 .00 0% 0% 8% 0% 0%
Trade payables 50.17 41.21 64.99 124.72 263.50 1% 0% 1% 1% 2%
Cost accruals 326.94 272.57 263.88 418.07 663.42 4% 3% 2% 3% 4%
Provisions and other liabilities 343.92 340.46 353.18 476.37 560.48 4% 3% 3% 3% 3%
Unclaimed dividend 6.55 7.91 9.92 12.96 17.06 0% 0% 0% 0% 0%
Provision for taxation 255.28 402.11 370.60 624.74 752.25 3% 4% 3% 4% 5%
Total current liabilites 3,385.85 2,876.86 5,333.62 5,214.18 5,647.21 44% 29% 42% 36% 35%
TOTAL LIABILITIES ANS STOCKHOLDERS EQUITY 7,691.60 9,753.08 12,782.41 14,493.57 16,137.77 100% 100% 100% 100% 100%
Vertical analysis of Balance Sheet

36. Profitability Ratio 2011 2012 2013 2014 2015
Gross Profit Margin 52.46% 52.82% 53.33% 51.21% 50.81%
EBITDA margin 28.93% 31.02% 35.93% 28.82% 27.50%
NOPAT margin 19.34% 20.60% 19.94% 19.00% 17.73%
Net Income Margin 16.68% 16.14% 15.87% 15.40% 15.58%
ROE 27.48% 24.41% 22.08% 22.07% 21.33%
ROA 14.14% 12.69% 10.88% 11.80% 12.43%
LIQUIDITY RATIOS 2011 2012 2013 2014 2015
Current Ratio 0.73 1.15 0.79 1.02 1.15
Acid test ratio 0.23 0.41 0.26 0.31 0.36
Cash Ratio 0.04 0.12 0.05 0.05 0.05
cash flows from operations 0.23 0.21 0.15 0.22 0.21
Activity Ratio 2011 2012 2013 2014 2015
Inventory Turnover 1.96x 1.82x 1.54x 1.96x 1.88x
Inventory Turn-Days 184.11 197.60 234.12 183.41 191.73
Accounts Receivable Turnover 10.18x 9.10x 7.66x 8.20x 7.36x
Day's accounts receivable 35.35 39.57 46.97 43.92 48.93
Accounts Payable Turnover 61.78x 87.84x 62.89x 43.45x 24.04x
Average Payment Period 5.83 4.10 5.72 8.29 14.97
DEBT & COVERAGE RATIO 2011 2012 2013 2014 2015
Liabilities-to-Equity ratio 1.70 1.33 1.03 0.60 0.40
Debt to equity ratio 0.61 0.63 0.75 0.56 0.40
Net-debt-to- equity ratio 0.57 0.56 0.72 0.53 0.36
Net-debt-to- net capital ratio 0.36 0.39 0.53 0.41 0.29
Debt-to-captial ratio 0.38 0.38 0.43 0.36 0.28
Interest coverage (earnings Basic) 7.68 5.62 5.51 6.05 11.62
interest coverage (cash flow Basic) 11.88 6.91 4.38 4.70 7.32
ASSESING SUSTAINABLE GROWTH RATE 2011 2012 2013 2014 2015
Dividend payout ratio 0.32 0.21 0.12 0.08 0.04
Sustainable growth rate 19% 19% 19% 20% 20%
Ratio Analysis