The document provides an analysis of ITC Limited including: 1. Historical stock price data for ITC and benchmark indices from 2000-2008. 2. Key financial metrics such as earnings per share, price to earnings ratio, and book value from 2003-2008. 3. The average monthly return on ITC shares over the period was 1.14% with an annual return of 13.70%.

1. Corporate Valuation - ITC
S.No. Particulars ( Click on item to vie
1 Balance Sheet & Profit and Loss Account ( Ann
2 Beta , Ke & WACC computation
3 Calculation of FCFF
4 Valuation using DCF, Relative and Sensitivity A
5 Operating and Financial Leverage
Submitted By: Group No. 3
CA. Dinesh Goyal GMBA08A164
Hardik Doshi GMBA08A117
Pratik Mehta GMBA08B129
Punit Biyani GMBA08B131

2. Valuation - ITC Limited
ars ( Click on item to view )
eet & Profit and Loss Account ( Annual Reports )
WACC computation
of FCFF
using DCF, Relative and Sensitivity Analysis
and Financial Leverage

3. Date ITC ITC modified NIFTY RETURN FROM ITC RETURN FROM NIFTY
31-Jan-00 692.20 692.20 1,546.20
29-Feb-00 746.85 746.85 1,654.80 0.076 0.068
31-Mar-00 741.45 741.45 1,528.45 (0.007) (0.079)
28-Apr-00 569.20 569.20 1,406.55 (0.264) (0.083)
31-May-00 725.60 725.60 1,380.45 0.243 (0.019)
30-Jun-00 791.80 791.80 1,471.45 0.087 0.064
31-Jul-00 741.95 741.95 1,332.85 (0.065) (0.099)
31-Aug-00 775.95 775.95 1,394.10 0.045 0.045
29-Sep-00 713.20 713.20 1,271.65 (0.084) (0.092)
31-Oct-00 759.80 759.80 1,172.75 0.063 (0.081)
30-Nov-00 817.25 817.25 1,268.15 0.073 0.078
29-Dec-00 896.10 896.10 1,263.55 0.092 (0.004)
31-Jan-01 910.95 910.95 1,371.70 0.016 0.082
28-Feb-01 776.20 776.20 1,351.40 (0.160) (0.015)
30-Mar-01 814.00 814.00 1,148.20 0.048 (0.163)
30-Apr-01 839.20 839.20 1,125.25 0.030 (0.020)
31-May-01 796.05 796.05 1,167.90 (0.053) 0.037
29-Jun-01 754.30 754.30 1,107.90 (0.054) (0.053)
31-Jul-01 792.70 792.70 1,072.85 0.050 (0.032)
31-Aug-01 720.20 720.20 1,053.75 (0.096) (0.018)
28-Sep-01 579.75 579.75 913.85 (0.217) (0.142)
31-Oct-01 686.00 686.00 971.90 0.168 0.062
29-Nov-01 667.30 667.30 1,067.15 (0.028) 0.093
31-Dec-01 677.60 677.60 1,059.05 0.015 (0.008)
31-Jan-02 694.35 694.35 1,075.40 0.024 0.015
28-Feb-02 743.20 743.20 1,142.05 0.068 0.060
28-Mar-02 696.70 696.70 1,129.55 (0.065) (0.011)
30-Apr-02 629.65 629.65 1,084.50 (0.101) (0.041)
31-May-02 609.00 609.00 1,028.80 (0.033) (0.053)
28-Jun-02 640.85 640.85 1,057.80 0.051 0.028
31-Jul-02 628.90 628.90 958.90 (0.019) (0.098)
30-Aug-02 699.45 699.45 1,010.60 0.106 0.053
30-Sep-02 650.00 650.00 963.15 (0.073) (0.048)
31-Oct-02 614.15 614.15 951.40 (0.057) (0.012)
29-Nov-02 634.95 634.95 1,050.15 0.033 0.099
31-Dec-02 660.90 660.90 1,093.50 0.040 0.040
31-Jan-03 638.75 638.75 1,041.85 (0.034) (0.048)
28-Feb-03 650.80 650.80 1,063.40 0.019 0.020
31-Mar-03 628.25 628.25 978.20 (0.035) (0.084)
30-Apr-03 682.95 682.95 934.05 0.083 (0.046)
30-May-03 694.15 694.15 1,006.80 0.016 0.075
30-Jun-03 767.40 767.40 1,134.15 0.100 0.119
31-Jul-03 717.50 717.50 1,185.85 (0.067) 0.045
29-Aug-03 832.25 832.25 1,356.55 0.148 0.134
30-Sep-03 800.90 800.90 1,417.10 (0.038) 0.044
31-Oct-03 866.75 866.75 1,555.90 0.079 0.093
28-Nov-03 857.45 857.45 1,615.25 (0.011) 0.037
31-Dec-03 983.50 983.50 1,879.75 0.137 0.152
30-Jan-04 1,024.90 1,024.90 1,809.75 0.041 (0.038)

4. 27-Feb-04 1,100.50 1,100.50 1,800.30 0.071 (0.005)
31-Mar-04 1,043.10 1,043.10 1,771.90 (0.054) (0.016)
30-Apr-04 1,076.60 1,076.60 1,796.10 0.032 0.014
31-May-04 878.00 878.00 1,483.60 (0.204) (0.191)
30-Jun-04 886.90 886.90 1,505.60 0.010 0.015
30-Jul-04 1,037.70 1,037.70 1,632.30 0.157 0.081
31-Aug-04 1,046.80 1,046.80 1,631.75 0.009 (0.000)
30-Sep-04 1,137.15 1,137.15 1,745.50 0.083 0.067
29-Oct-04 1,087.70 1,087.70 1,786.90 (0.044) 0.023
30-Nov-04 1,288.80 1,288.80 1,958.80 0.170 0.092
31-Dec-04 1,310.75 1,310.75 2,080.50 0.017 0.060
31-Jan-05 1,361.50 1,361.50 2,057.60 0.038 (0.011)
28-Feb-05 1,294.10 1,294.10 2,103.25 (0.051) 0.022
31-Mar-05 1,342.05 1,342.05 2,035.65 0.036 (0.033)
29-Apr-05 1,437.70 1,437.70 1,902.50 0.069 (0.068)
31-May-05 1,599.25 1,599.25 2,087.55 0.106 0.093
30-Jun-05 1,662.10 1,662.10 2,220.60 0.039 0.062
29-Jul-05 1,682.85 1,682.85 2,312.30 0.012 0.040
31-Aug-05 1,731.65 1,731.65 2,384.65 0.029 0.031
30-Sep-05 136.75 2,051.25 2,601.40 0.169 0.087 Share Splitted
31-Oct-05 120.20 1,803.00 2,370.95 (0.129) (0.093)
30-Nov-05 134.50 2,017.50 2,652.25 0.112 0.112
30-Dec-05 142.10 2,131.50 2,836.55 0.055 0.067
31-Jan-06 154.80 2,322.00 3,001.10 0.086 0.056
28-Feb-06 172.45 2,586.75 3,074.70 0.108 0.024
31-Mar-06 195.15 2,927.25 3,402.55 0.124 0.101
29-Apr-06 203.75 3,056.25 3,557.60 0.043 0.045
31-May-06 165.40 2,481.00 3,071.05 (0.209) (0.147)
30-Jun-06 182.40 2,736.00 3,128.20 0.098 0.018
31-Jul-06 167.40 2,511.00 3,143.20 (0.086) 0.005
31-Aug-06 191.50 2,872.50 3,413.90 0.135 0.083
29-Sep-06 187.70 2,815.50 3,588.40 (0.020) 0.050
31-Oct-06 190.00 2,850.00 3,744.10 0.012 0.042
30-Nov-06 185.10 2,776.50 3,954.50 (0.026) 0.055
29-Dec-06 176.10 2,641.50 3,966.40 (0.050) 0.003
31-Jan-07 174.60 2,619.00 4,082.70 (0.009) 0.029
28-Feb-07 171.70 2,575.50 3,745.30 (0.017) (0.086)
30-Mar-07 151.15 2,267.25 3,821.55 (0.127) 0.020
30-Apr-07 160.05 2,400.75 4,087.90 0.057 0.067
31-May-07 163.80 2,457.00 4,295.80 0.023 0.050
29-Jun-07 154.70 2,320.50 4,318.30 (0.057) 0.005
31-Jul-07 171.00 2,565.00 4,528.85 0.100 0.048
31-Aug-07 170.80 2,562.00 4,464.00 (0.001) (0.014)
28-Sep-07 189.80 2,847.00 5,021.35 0.105 0.118
31-Oct-07 178.90 2,683.50 5,900.65 (0.059) 0.161
30-Nov-07 188.35 2,825.25 5,762.75 0.051 (0.024)
31-Dec-07 209.45 3,141.75 6,138.60 0.106 0.063
31-Jan-08 195.55 2,933.25 5,137.45 (0.069) (0.178)
29-Feb-08 202.75 3,041.25 5,223.50 0.036 0.017
31-Mar-08 206.25 3,093.75 4,734.50 0.017 (0.098)

5. Average Monthly Return 1.14%
Annual Return 13.70%
Date EPS PE Price BV
31-Mar-03 5.54 11.34 62.83 216.78
31-Mar-04 6.43 16.22 104.31 258.8
31-Mar-05 7.36 18.23 134.20 318.29
31-Mar-06 6.07 32.15 195.15 245.57
30-Mar-07 7.18 21.05 151.15 282.99
31-Mar-08 8.28 24.91 206.25 326.09
35.00
30.00
25.00
20.00
15.00
10.00
5.00
-
0 3 0 4 05 0 6 0 7 0 8
ar- ar - ar- ar- ar- ar-
3 1 -M 3 1 -M 3 1 -M EPS PE3 1 -M 3 0 -M 3 1 -M

6. Corporate action on 22 september 2005
The board has recommended sub-division of the ordinary shares with a face value of Rs 10 each to Re 1
each. It recommended issue of bonus shares in the ratio of one share of Re 1 for every two fully paid-up
ordinary shares of Re 1 each.
No. Of equity shares
Year Dividend % Dividend Paid Year
2007 March 310 3.1 2002
2006 March 265 2.65 2003
2005 March 310 31 2004
2004 March 200 20 2005
2003 March 150 15 2006
2002 March 135 13.5 2007
2008
Rergression results for Beta Calculation
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.57
R Square 0.33
Adjusted R Square 0.32
Standard Error 0.07
Observations 98
ANOVA
df SS MS F
Regression 1 0.26 0.26 47
Residual 96 0.52 0.01
Total 97 0.78
Coefficients Standard Error t Stat P-value
Intercept 0.01 0.01 0.95 0.34
X Variable 1 (Beta) 0.71 0.1 6.86 0
Calculation of cost of equity
Beta 0.671
Risk free rate (Rf) 7.00% ( Yield on 10 year government bonds )
Market rate of return (Rm) 13.70% (Actual return based on NSE Index)
Market risk premium (Rm-Rf) 6.70% (Rm-- Rfr)
Cost of equity (CAPM model used)
Ke = Rf+Beta(Rm-Rf) 11.50%
Calculation of market value weights
Market value of equity 7,801,802,280,000.00
(Mkt Capitalization)
Market value of debt 2,008,800,000.00

7. Total market value of firm 7,803,811,080,000.00
Weight of equity capital 99.97%
Weight of debt capital 0.03%
Debt to equity ratio 0.000257
Kd = interest expense/average debt 7.64%
Post Tax Kd 4.97%
Computation of WACC
WaCC 11.498%
10,000.00
9,000.00
8,000.00
7,000.00
6,000.00
5,000.00
NSE
4,000.00
ITC
3,000.00
hare Splitted 2,000.00
1,000.00
-
4 04 5 5 06 -0 7 07
-0 ct- -0 t -0 -0 6 ct- ct-
pr -O Ap
r c pr -O Ap
r
-O
3 0 -A 2 9 2 9- 3 1 -O 2 9 -A 3 1 3 0- 3 1
Date ITC NSE
30-Apr-04 1,076.60 1,796.10
31-May-04 878.00 1,483.60
30-Jun-04 886.90 1,505.60
30-Jul-04 1,037.70 1,632.30
31-Aug-04 1,046.80 1,631.75
30-Sep-04 1,137.15 1,745.50
29-Oct-04 1,087.70 1,786.90
30-Nov-04 1,288.80 1,958.80
31-Dec-04 1,310.75 2,080.50
31-Jan-05 1,361.50 2,057.60
28-Feb-05 1,294.10 2,103.25
31-Mar-05 1,342.05 2,035.65
29-Apr-05 1,437.70 1,902.50
31-May-05 1,599.25 2,087.55
30-Jun-05 1,662.10 2,220.60
29-Jul-05 1,682.85 2,312.30
31-Aug-05 1,731.65 2,384.65
30-Sep-05 2,051.25 2,601.40

8. 31-Oct-05 1,803.00 2,370.95
30-Nov-05 2,017.50 2,652.25
30-Dec-05 2,131.50 2,836.55
31-Jan-06 2,322.00 3,001.10
28-Feb-06 2,586.75 3,074.70
31-Mar-06 2,927.25 3,402.55
29-Apr-06 3,056.25 3,557.60
31-May-06 2,481.00 3,071.05
30-Jun-06 2,736.00 3,128.20
31-Jul-06 2,511.00 3,143.20
31-Aug-06 2,872.50 3,413.90
29-Sep-06 2,815.50 3,588.40
31-Oct-06 2,850.00 3,744.10
30-Nov-06 2,776.50 3,954.50
29-Dec-06 2,641.50 3,966.40
31-Jan-07 2,619.00 4,082.70
28-Feb-07 2,575.50 3,745.30
30-Mar-07 2,267.25 3,821.55
30-Apr-07 2,400.75 4,087.90
31-May-07 2,457.00 4,295.80
29-Jun-07 2,320.50 4,318.30
31-Jul-07 2,565.00 4,528.85
31-Aug-07 2,562.00 4,464.00
28-Sep-07 2,847.00 5,021.35
31-Oct-07 2,683.50 5,900.65
30-Nov-07 2,825.25 5,762.75
31-Dec-07 3,141.75 6,138.60
31-Jan-08 2,933.25 5,137.45
29-Feb-08 3,041.25 5,223.50
31-Mar-08 3,093.75 4,734.50

9. Segment Revenues
Agri business 1,555.18
Tobacco 13,207.00
Hotels 1060.89
No. Of equity shares Paper 2,100.00
No. of shares FMCG others 1,713.46
245415000 Firm 19,636.53
247512000
247679000
248221000 Weighted average unlevered beta 0.4852
3755178860 Levered Beta adjusted with financial leverage 0.49
3762222780 Operating leverage 0.32
3768610050 Beta levered adjusted with operating leverage 0.67
Significance F
0
Lower 95% Upper 95% Lower 95.0% Upper 95.0%
-0.01 0.02 -0.01 0.02
0.5 0.91 0.5 0.91

12. Segment Multiple Estimated Value Unlevered Beta Segment Weight Weighted Average Beta
0.81 1,259.70 0.36 1.65% 0.0059
5 66,035.00 0.52 86.63% 0.4505
4 4,243.56 0.16 5.57% 0.0089
0.61 1,281.00 0.25 1.68% 0.0042
1.99 3,409.79 0.35 4.47% 0.0157
76,229.04 100.00% 0.4852

15. Operating Leverage
0.2100
0.1600
1.2500
0.2100
0.3600
0.2313

18. Profit & loss account - ITC Extracted from annual reports for respectiv
Year Ending 31st March 2007 2006
Revenue 19,636.53 16,510.51
Excise Duties etc. 7,135.75 6,433.90
Net Income 12,500.78 10,076.61
Cost of Sales 8,207.88 6,463.15
PBDIT 4,292.90 3,613.46
Interest 13.28 11.93
PBDT 4,289.62 3,601.53
PBIT 3,929.98 3,281.12
PROFIT Before Tax 3,926.70 3,269.19
Tax 1,226.73 988.82
PROFIT after tax before exceptional items 2,699.97 2,280.37
EXCEPTIONAL items (net of tax) – (45.02)
PROFIT after taxation 2,699.97 2,235.35
Dividends* 1,364.50 1,134.70
Retained profits 1,335.47 1,100.65
Earnings per share on profit after tax before exceptional items
Actual (Rs.)** 7.18 6.07
Adjusted (Rs.) @ 11.00 9.29
Dividend Per Share
Actual (Rs.)** 3.10 2.65
Adjusted (Rs.) @ 4.75 4.05
Market Capitalisation *** 56,583.00 73,207.00
Foreign Exchange Earnings 2,283.21 1,793.51
NOPAT 2554.49 2132.73

19. m annual reports for respective years .
2005 2004 2003 2002 2001 2000
13,585.39 12,039.92 11,194.47 9,982.46 8,827.11 8,069.37
5,710.13 5,344.60 5,159.10 4,780.86 4,474.52 4,133.89
7,875.26 6,695.32 6,035.37 5,201.60 4,352.59 3,935.48
4,846.89 4,109.85 3,712.00 3,155.96 2,516.44 2,475.45
3,028.37 2,585.47 2,323.37 2,045.64 1,836.15 1,460.03
42.43 24.79 29.84 66.93 95.91 112.55
2,985.94 2,560.68 2,293.53 1,978.71 1,740.24 1,347.48
2,715.50 2,343.85 2,086.03 1,847.19 1,696.21 1,341.50
2,673.07 2,319.06 2,056.19 1,780.26 1,600.30 1,228.95
836.00 726.21 684.84 590.54 594.04 436.51
1,837.07 1,592.85 1,371.35 1,189.72 1,006.26 792.44
354.33 – – – – –
2,191.40 1,592.85 1,371.35 1,189.72 1,006.26 792.44
881.70 558.83 418.84 334.14 270.45 224.55
1,309.70 1,034.02 952.51 855.58 735.81 567.89
7.36 6.43 5.54 4.81 4.10 3.23
7.49 6.49 5.59 4.85 4.10 3.23
3.10 2.00 1.50 1.35 1.00 0.75
3.15 2.02 1.51 1.36 1.00 0.75
33,433.00 25,793.00 15,581.00 17,243.00 19,987.00 18,038.00
1,268.65 1,077.51 1,294.00 947.57 697.13 687.70
1765.08 1523.5 1355.92 1200.67 1102.54 871.98

20. Balance sheets , FCFF calculation
No. Shares 376.22 375.52 24.94
I. SOURCES OF FUNDS 2007 2006 2005
1. Shareholders’ Funds
a) Capital 376.22 375.52 249.43
b) Reserves and Surplus 10270.36 8845.94 7689.77
2. Minority Interests 107.58 81.75 63.37
3. Loan Funds
a) Secured Loans 60.8 52.86 89.27
b) Unsecured Loans 140.1 93.82 157.71
4. Deferred Tax - Net 471.27 325.5 376.15
Total 11426.33 9775.39 8625.7
II. APPLICATION OF FUNDS
1. Fixed Assets
a) Gross Block 7795.17 6862.59 6144.8
b) Less : Depreciation 2686.55 2339.28 1943.34
c) Net Block 5108.62 4523.31 4201.46
d) Capital Work-in-Progress 876.09 246.61 192.33
5984.71 4769.92 4393.79
e) Less : Provision for assets given on lease 8.71 8.71 10.17
5976 4761.21 4383.62
2. Investments 2505.89 2998.1 3329.13
3. Current Assets, Loans and Advances
a) Inventories 3934.67 3115.43 2543.08
b) Sundry Debtors 733.04 635.19 620.94
c) Cash and Bank Balances 1086.5 977.77 120.06
d) Other Current Assets 194.35 157.48 147.9
e) Loans and Advances 986.52 770.27 594.5
6935.08 5656.14 4026.48
Less :
4. Current Liabilities and Provisions
a) Liabilities 2548.65 2282.06 2041.35
b) Provisions 1441.99 1358 1072.18
3990.64 3640.06 3113.53
Net Current Assets 2944.44 2016.08 912.95
Total 11426.33 9775.39 8625.7
Net Sales Fig 12500.78 10076.61 7875.26
2007 2006 2005
Reformulated B/Sheet
Equity 11117.85 9546.96 8315.35
Cash & marketable sec 1086.5 977.77
Cash Required i.e 2% of sales 250.02 201.53 *
Excess Cash Retained 836.48 776.24
Core SHF (Equity) 10281.37 8770.72 8315.35
Long Term Debt 200.9 146.68 246.98
Minority Interest 107.58 81.75 63.37

21. Capital Employed 10589.85 8999.15 8625.7
Average Capital Employed 9794.5 8812.43 7622.18
Fixed Assets 5976 4761.21 4383.62
Investments 2505.89 2998.1 3329.13
Non cash Current Assets 5848.58 4678.37 3906.42
Cash & Equivalents 250.02 201.53 120.06
Current Liabilities 3990.64 3640.06 3113.53
Non Cash Working Capital 2107.96 1239.84 912.95
Capital Employed (Cross Checked) 10589.85 8999.15 8625.7
*
* Cash and mkt securities are just sufficient to meet cash requirements
Calculation of NOPAT, reinvestment, Growth
NOPAT 2554.49 2132.73 1765.08
Add: Increase in DTL 145.77 -50.65 288.41
Adjusted NOPAT 2700.26 2082.08 2053.49
Reinvestment
Increase in Fixed Assets 1214.79 377.59 771.57
Increase in Non Cash Working Capital 868.11 326.89 960.31
Total Reinvestment 2082.9 704.48 1731.88
FCFF 617.35 1377.6 321.61
Reinvestment rate 77.14% 33.84% 84.34%
Return on capital employed 27.57% 23.63% 26.94%
Sustainable growth 21.27% 7.99% 22.72%

22. tion
24.77 24.75 24.75 24.54 24.54
2004 2003 2002 2001 2000
247.68 247.51 247.51 245.41 245.41
6162.38 5118.11 4147.08 3289.1 2553.92
0 0 71.48 0 0
31.56 46.52 252.39 565.77 463.92
89.29 70.46 85.3 293.17 188.95
87.74 63.58 146.71
6618.65 5546.18 4950.47 4393.45 3452.2
4740.94 4252.19 4136.08 2521.93 1871.13
1442.63 1245.64 1228.07 707.42 592.25
3298.31 3006.55 2908.01 1814.51 1278.88
313.74 163.42 387.3 146.15 274.36
3612.05 3169.97 3295.31 1960.66 1553.24
- - 10.39 0 0
3612.05 3169.97 3284.92 1960.66 1553.24
3053.96 1608.86 659.21 1006.94 987.26
1534.21 1252.22 1196.63 1144.63 932.46
230.15 206.74 204.03 102.83 115.11
34.04 378.84 269.71 35.41 27.73
817.18 814.34 757.48 696.35 696.34
869.77 835.59 741.04 1048.31 627.74
3485.35 3487.73 3168.89 3027.53 2399.38
2849.83 2093.5 1713.23 1258.42 1137.91
682.88 626.88 449.32 343.26 349.77
3532.71 2720.38 2162.55 1601.68 1487.68
-47.36 767.35 1006.34 1425.85 911.7
6618.65 5546.18 4950.47 4393.45 3452.2
6695.32 6035.37 5201.6 4352.59 3935.48
2004 2003 2002 2001 2000
6497.8 5429.2 4541.3 3534.51 2799.33
378.84 269.71
* 120.71 104.03 * *
258.13 165.68
6497.8 5171.07 4375.62 3534.51 2799.33
120.85 116.98 337.69 858.94 652.87
0 0 71.48 0 0

23. 6618.65 5288.05 4784.79 4393.45 3452.2
5953.35 5036.42 4589.12 3922.83 1726.1
3612.05 3169.97 3284.92 1960.66 1553.24
3053.96 1608.86 659.21 1006.94 987.26
3451.31 3108.89 2899.18 2992.12 2371.65
34.04 120.71 104.03 35.41 27.73
3532.71 2720.38 2162.55 1601.68 1487.68
-47.36 509.22 840.66 1425.85 911.7
6618.65 5288.05 4784.79 4393.45 3452.2
* * *
1523.5 1355.92 1200.67 1102.54 871.98
24.16 -83.13 146.71 0 0
1547.66 1272.79 1347.38 1102.54 871.98
442.08 -114.95 1324.26 407.42
-556.58 -331.44 -585.19 514.15
-114.5 -446.39 739.07 921.57
1662.16 1719.18 608.31 180.97
-7.40% -35.07% 54.85% 83.59% 0.00%
26.00% 25.27% 29.36% 28.11% 50.52%
-1.92% -8.86% 16.10% 23.49% 0.00%

24. Valuation Of ITC Limited Using Three Stage Model and FCFF Approach
Terminal
Stage 1 Actual FCFF for the year 2001 - 2007 (Actuall WaCC) 11.5% WaCC
Stage 2 Projected Cash Flows for next 5 years i.e (2008-2012) ( Growth = 21.27% Declining 2% each year, Growth
Stage 3 Terminal Value Wacc Has been Assumed at 12% and sustainable growth as 11.50%
Growth Actual Actual Actual Actual Actual Actual Actual 21.27 18.27 15.27 12.27 9.27
Year 1 2 3 4 5 6 7 8 9 10 11 12
2001 2002 2003 2004 2005 2006 2007 2008E 2009E 2010E 2011E 2012E
FCFF 180.97 608.31 1719.18 1662.16 321.61 1377.6 617.35 748.66 885.45 1020.65 1145.89 1252.11
Discounting Factor 0.9 0.8 0.72 0.65 0.58 0.52 0.47 0.42 0.38 0.34 0.3 0.27
Present value 162.3 489.31 1240.27 1075.47 186.63 716.98 288.17 313.43 332.46 343.71 346.09 339.17
PV of FCFF 5833.99 Terminal 269704.76
PV of Terminal Value 73056.93
Total Enterprise Value 78890.91
Less Debt 200.9 ASSUMPTIONS
Cash & Cash equivalent 250.02 Terminal growth has been assumed to be 7.7% which around the GDP of India.
Total Equity Value 78940.03 Terminal Wacc has been assumed to be 8.2% which is less than current Wacc considering the fact
No. of Shares 376.86 The sustainable growth in 2007 is 21.27% which has been reduced by 3% year on year as the comp
Value per Share 209.47 Wacc from year 2008 to 2012(forecast period) has been assumed to be constant and at 11.50% wh
Risk free rate of return has been assumed to be 7%
Market risk premium is calculated as 6.7%
Sensitivity analysis using Different Wacc and Growth Rates Since ITC is truly diversified company the beta for the company has been calculated based on top b
Industry beta of each segment is taken and multiplied with segmental weight of revenues in ITC. U
No. Of shares value Per
WaCC Growth Total equity Value O/Standing Share The beta calculated based on the regression is 0.708 which may not be the correct measure becau
14.00% 11.5% 20760 376.86 55.09 Since ITC is mostly debt free company and has very very low debt to equity ratio of 0.00025 the co
13.50% 11.5% 24542 376.86 65.12 The Operating leverage of ITC is 0.32. The overall operating leverage exposure of ITC has been adj
13.00% 11.5% 30845 376.86 81.85
12.50% 11.5% 43450 376.86 115.30
12.02% 11.5% 78359 376.86 207.93 Optimum
11.35% 11.5% -246482 376.86 -654.04 Not Relevant
11.00% 11.5% -70002 376.86 -185.75 Not Relevant
10.50% 11.5% -32184 376.86 -85.40 Not Relevant
Relative Valuation using EV/Sales
Segment Revenues Segment Multiple Estimated Value
Agri business 1,555.18 0.81 1,259.70
Tobacco 13,207.00 5 66,035.00
Hotels 1060.89 4 4,243.56
Paper 2,100.00 0.61 1,281.00
FMCG others 1,713.46 1.99 3,409.79
Firm 19,636.53 0 76,229.04
No. of shares 376.86
Current Debt 200.90
Cash & Cash equivalent 250.02
Total Equity Value 76,278.16
Price per share 202.40

25. 8.20%
7.70%
.7% which around the GDP of India.
% which is less than current Wacc considering the fact that company becomes less risky at it becomes more mature.
hich has been reduced by 3% year on year as the company becomes more mature.
od) has been assumed to be constant and at 11.50% which is calculated considering current cost of capital and market returns.
eta for the company has been calculated based on top bottom approach considering industry multiples of each segment.
multiplied with segmental weight of revenues in ITC. Unlevered beta of ITC has been calculated by summing up all this beta. Unlevered beta is then adjusted for financial and operating leverage of ITC to arrive at levered beta of 0.671.
n is 0.708 which may not be the correct measure because of different risk in each business such agribusiness, FMCG, Hotel, Paper in which ITC is there. Hence top bottom approach for ITC gives more precise value of beta and hence cost of capital.
has very very low debt to equity ratio of 0.00025 the cost of debt doesn’t have much impact on overall cost of capital
verall operating leverage exposure of ITC has been adjusted against total industry operating leverage which is summation of operating leverage of each industry segment.

26. Years 2007 2006 2005 2004 2003
Total Assets/Liabilities (excl Reval & W.off) 15178.15 13259.09 11698.25 10628.92 8619.71
Networth 10380 9002.31 7834.5 6349.22 5303.99
Finacial leverage 1.46 1.47 1.49 1.67 1.63
PBIT 3942.74 3245.27 3078.2 2353.24 2096.44
Net Sales 12298.89 9786.34 7594.94 6407.46 5875.78
Operating Leverage 6.00
0.32 0.33 0.41 0.37 0.36
5.00
4.00
3.00
2.00
1.00
0.00
1993
1994
1995
1996
1997
2000
2003
2004
2005
2006
1998
1999
2001
2002
2007
Row 4 Row 7
Operating Leverage & Financial Leverage Overview
As we glance on the opearting leverage and the financial leverage of ITC Ltd. for period from 1993 to 2007 we can clearly see
this clearly signifies how well the operations of the company have been managed whereas the financial leverage of the compa
has decreased its dependence on debt in the capital structure, therefore striving to reduce its interst liabilities and sharing pro

27. 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993
7195.27 5934.39 4878.35 4907.98 4443.95 3185.16 2662.43 2692.51 2288.44 1771.39
4349.38 3471.06 2735.25 2167.36 1693.77 1289.05 1050.14 782.29 645.35 335.51
1.65 1.71 1.78 2.26 2.62 2.47 2.54 3.44 3.55 5.28
1857.97 1701.67 1401.54 1146.99 947.46 751.01 575.41 529.77 487.49 400.53
5022.4 4196.44 3843.57 3519.19 3075.44 2814.95 2535.72 2386.05 2352.17 1870.84
0.37 0.41 0.36 0.33 0.31 0.27 0.23 0.22 0.21 0.21
2003
2004
2005
2006
2002
2007
m 1993 to 2007 we can clearly see that the operating efficiency of the company grew steadily over the study period,
he financial leverage of the company gardually decreased from 1993 to 2007 which highlights that the company
ts interst liabilities and sharing profits more among shareholders.