KRBL Limit

Industry Basmati Rice Country India Reporting Currency INR

The Narrativ

With a 120 year heritage and an existence since 1889, KRBL Ltd. is India’s first integrated rice com
the Basmati grain. Their relationship with Basmati farmers goes back in time- across generations.
management practices, commitment to excellence and access to top grade inputs determine the
abroad with strong presence and impressive market share. It has earned a patronage amongst con
share' over the 'market share' of a company. It doesn't matter to how many people the company s
both a mind share and a market share, thanks to its flagship brand of Basmati Rice, India Gate. W
own domains, headed by Mr. Anil Kumar Mittal, a pioneer in Basmati Rice Exports. The product
recession, which will discourage its customers from buying costly food items. Nevertheless, the c
enjoys a geographic monopoly-- Basmati grown in India is said to hav

The Numbe
Sales ₹ 4,120.00 Previous Sales ₹ 3,246.00 Operating Income ₹ 733.00

Equity ₹ 2,727.58 Debt ₹ 1,414.75 Cost of Debt 8.50%

Risk-free Rate 7.87% Company Beta 1.52 Industry Beta 2.07

The Capital Conv

Research & Development Debt

R&D Expense ₹ 5.23 Life of R&D 5.00 Interest Expense ₹ 63.74

Year R&D Expense R&D Asset R&D Amortization Debt (Type A) ₹ 14.81

-1 ₹ 5.23 ₹ 4.18 ₹ 1.05 Maturity (Type A) 1.00

-2 ₹ 4.79 ₹ 2.87 ₹ 0.96 Debt (Type B) ₹ 60.40

-3 ₹ 4.23 ₹ 1.69 ₹ 0.85 Maturity (Type B) 6.00

-4 ₹ 3.69 ₹ 0.74 ₹ 0.74 Debt (Type C) ₹ 11.87

-5 ₹ 3.58 ₹ 0.00 ₹ 0.72 Maturity (Type C) 1.00

0 ₹ 0.00 ₹ 0.00 ₹ 0.00 Debt (Type D) ₹ 21.00

0 ₹ 0.00 ₹ 0.00 ₹ 0.00 Maturity (Type D) 1.00

 0 ₹ 0.00 ₹ 0.00 ₹ 0.00 Debt (Type E) ₹ 15.13

0 ₹ 0.00 ₹ 0.00 ₹ 0.00 Maturity (Type E) 2.25

0 ₹ 0.00 ₹ 0.00 ₹ 0.00 Maturity of Debt 3.60

Adjustments ₹ 14.72 ₹ 4.30 Value of Debt ₹ 1,850.88

The Assumpti
Value Drivers Base Year High Growth Period

High Growth Period 15 Years Years 1-5 Years 6-10 Years 11-15

Sales Growth 26.93% 10.00% 10.00% 8.00%

Operating Margin 17.87% 22.00% 20.00% 18.00%

Tax Rate 31.00% 25.34% 27.67% 30.00%

Capital Turnover 0.89 1.15 1.15 1.15

Reinvestment Rate 193.16% 48.13% - 51.22% 54.65% - 53.10% 51.12% - 54.75%

Return on Capital 11.00% 15.00% - 15.08% 14.33% - 13.98% 13.12% - 10.09%

Depreciation 1.72% 2.05% 2.05% 2.05%

Industry Beta 0.00% 10.77% 10.77% 10.77%

The Diagnos
Value Drivers Assumptions Diagnosis

Inputs Complete All the inputs are complete

Sales Growth Valid This is a reasonable estimate of Grow

Operating Margin Valid This is a reasonable estimate of Operating

Tax Rate Valid This is reasonable estimate of Tax Rat

 Capital Turnover Valid This is a reasonable estimate of Capital Tu

Companies cannot find better investment opportunities as they

Reinvestment Rate Unlikely
acquire growth or opt to pay dividends in

Return on Capital Valid This is a reasonable estimate of Return on

Depreciation Valid This is a reasonable estimate of Deprecia

The Cash Flo

Year Sales Operating MarginOperating Profit Tax Rate Profit After Tax

1 ₹ 4,532.00 22.00% ₹ 997.04 25.34% ₹ 744.39

2 ₹ 4,985.20 21.60% ₹ 1,076.80 25.81% ₹ 798.92

3 ₹ 5,483.72 21.50% ₹ 1,179.00 25.92% ₹ 873.37

4 ₹ 6,032.09 21.33% ₹ 1,286.85 26.12% ₹ 950.76

5 ₹ 6,635.30 21.00% ₹ 1,393.41 26.51% ₹ 1,024.09

6 ₹ 7,298.83 20.00% ₹ 1,459.77 27.67% ₹ 1,055.85

7 ₹ 7,999.52 19.60% ₹ 1,567.91 28.14% ₹ 1,126.76

8 ₹ 8,759.47 19.50% ₹ 1,708.10 28.25% ₹ 1,225.52

9 ₹ 9,577.02 19.33% ₹ 1,851.56 28.45% ₹ 1,324.85

10 ₹ 10,438.96 19.00% ₹ 1,983.40 28.84% ₹ 1,411.49

11 ₹ 11,274.07 18.00% ₹ 2,029.33 30.00% ₹ 1,420.53

12 ₹ 12,085.81 16.00% ₹ 1,933.73 28.59% ₹ 1,380.84

13 ₹ 12,931.81 15.50% ₹ 2,004.43 28.24% ₹ 1,438.38

14 ₹ 13,793.93 14.67% ₹ 2,023.11 27.65% ₹ 1,463.65

15 ₹ 14,621.57 13.00% ₹ 1,900.80 26.48% ₹ 1,397.47

15 - ∞ ₹ 15,206.43 8.00% ₹ 1,216.51 22.96% ₹ 937.20

The Value
Value of the Firm ₹ 6,844.55

(-) Value of Debt and Operating Leases ₹ 1,886.78

(+) Cash, Cash Equivalents and Non-operating Assets ₹ 23.83

(-) Minority Interests ₹ 1.19

(-) Value of Equity Options ₹ 0.00

(-) Probability of Failure 5.00%

Value of Equity ₹ 4,753.56

Value of Equity per Share ₹ 201.94

(-) Expected Margin of Safety 5.00%

Expected Purchase Price of Equity per Share ₹ 191.84

Market Price of Equity per Share ₹ 189.08

"Numbers and Narratives" is a simple Discounted Cash Flow model built and improvised by Din
of Business). For more Valuation-related content, visit www.valuationinm
 KRBL Limited
Market Capitalization ₹ 4,451.00 Date of Valuation 5/21/2018 Financials

The Narratives

t integrated rice company with a comprehensive product chain. KRBL, has spent three generations perfecting
across generations. A farmer’s awareness of traditional knowledge and skills, experience in modern-day crop
nputs determine the quality of their harvest. KRBL's flagship brand India Gate is recognized both in India and
ronage amongst consumers and retailers over the years.Warren Buffet once talked about preferring the 'mind
eople the company sells. It's a matter of how many people keep coming back for more. Fortunately, KRBL has
ati Rice, India Gate. What's more, the company has an amazing management team, who are experts in their
xports. The product itself, Basmati Rice, is a luxury consumable. As such, the key risk the company faces is a
s. Nevertheless, the company enjoys sufficient pricing power, owing to the nature of the product. KRBL also
in India is said to have a distinctly better aroma than the ones grown elsewhere.

The Numbers
Depreciation ₹ 64.00 Tax Rate 31.00% Number of Shares

Cash ₹ 5.77 Cash Equivalents ₹ 18.06 Non-operating Assets

Industry D/E 2.81 Indexed Returns 12.15% Minority Interests

The Capital Conversions

Operating Lease Equity Options

Lease Expense Number of SOPs

Year Lease Commitment PV (Lease)
₹ 8.25 Average Exercise Price

Explicit Duration 1 ₹ 9.54 ₹ 8.79 Time to Expiry

5.00 2 ₹ 7.81 ₹ 6.63 Standard Deviation

Embedded Duration 3 ₹ 7.81 ₹ 6.11 Dividend Yield

1.00 4 ₹ 7.81 ₹ 5.64 Adjusted Price

Value of Lease 5 ₹ 7.81 ₹ 5.19 Adjusted Interest Rate

₹ 35.91 0 ₹ 0.00 ₹ 0.00 Variance

Adjustments 0 ₹ 0.00 ₹ 0.00 d1

 Depreciation 0 ₹ 0.00 ₹ 0.00 N (d1)

₹ 5.98 0 ₹ 0.00 ₹ 0.00 d2

Earnings 0 ₹ 0.00 ₹ 0.00 N (d2)

₹ 2.27 5+ Years ₹ 5.77 ₹ 3.54 Value of Equity Options

The Assumptions
Terminal Year Link to the Narratives

After Year 15 Having a superior pricing power will allow KRBL will grow at a faster pace for many years

4.00% Size impedes growth and growth is constrained by the economy

8.00% Margins will decline, as competition increases

22.96% Corporate Tax Rate converges towards the Global Average Tax Rate

1.01 Since Indian agriculture doesn't to upskill faster, KRBL will not increase productivity

61.59% No extraordinary reinvestments assumed

6.49% Return on Capital will approach the Cost of Capital over time

2.05% Depreciation will remain fairly stable

10.77% Cost of Capital calculated using the Bottom-up Beta-based Capital Asset Pricing Model

The Diagnostics
Diagnosis Solution

nputs are complete Nothing

nable estimate of Growth Nothing

estimate of Operating Margin Nothing

able estimate of Tax Rate Nothing

e estimate of Capital Turnover Nothing

nt opportunities as they grow bigger, so they either Will the company grow through acquisitions? If not, consider decreasing
opt to pay dividends instead the Sales Growth estimates

estimate of Return on Capital Nothing

ble estimate of Depreciation Nothing

The Cash Flows

Reinvestment Reinvestment Rate Invested Capital Return on Capital Depreciation

₹ 358.26 48.13% ₹ 4,963.51 15.00% ₹ 92.91

₹ 394.09 49.33% ₹ 5,357.60 14.91% ₹ 102.20

₹ 433.50 49.63% ₹ 5,791.09 15.08% ₹ 112.42

₹ 476.85 50.15% ₹ 6,267.94 15.17% ₹ 123.66

₹ 524.53 51.22% ₹ 6,792.47 15.08% ₹ 136.02

₹ 576.98 54.65% ₹ 7,369.45 14.33% ₹ 149.63

₹ 609.29 54.07% ₹ 7,978.75 14.12% ₹ 163.99

₹ 660.83 53.92% ₹ 8,639.58 14.18% ₹ 179.57

₹ 710.91 53.66% ₹ 9,350.49 14.17% ₹ 196.33

₹ 749.51 53.10% ₹ 10,100.00 13.98% ₹ 214.00

₹ 726.19 51.12% ₹ 10,826.18 13.12% ₹ 231.12

₹ 723.05 52.36% ₹ 11,549.24 11.96% ₹ 247.76

₹ 758.20 52.71% ₹ 12,307.43 11.69% ₹ 265.10

₹ 780.61 53.33% ₹ 13,088.05 11.18% ₹ 282.78

₹ 765.18 54.75% ₹ 13,853.23 10.09% ₹ 299.74

 ₹ 577.22 61.59% ₹ 14,430.45 6.49% ₹ 311.73

The Sensitivity of Value

Sensitivity 10.00% Win-Loss Ratio 1.50 Standard Deviation

Variables Cost of Capital (Industry Beta)

Terminal Growth 13.04% 11.85% 10.77% 9.70%

2.92% ₹ 135.81 ₹ 161.58 ₹ 191.20 ₹ 229.50

3.24% ₹ 137.06 ₹ 163.48 ₹ 194.08 ₹ 234.06

3.60% ₹ 138.55 ₹ 165.77 ₹ 197.60 ₹ 239.70

4.00% ₹ 140.34 ₹ 168.56 ₹ 201.94 ₹ 246.80

4.40% ₹ 142.29 ₹ 171.65 ₹ 206.82 ₹ 254.98

4.84% ₹ 144.66 ₹ 175.45 ₹ 212.96 ₹ 265.52

5.32% ₹ 147.58 ₹ 180.23 ₹ 220.85 ₹ 279.58

Pessimistic Value ₹ 135.81 Probable Value ₹ 201.94 Optimistic Value

t and improvised by Dinesh Sairam, inspired by Prof. Aswath Damodaran (Dean of Valuation, NYU Stern School
isit www.valuationinmotion.blogspot.in or write to dineshssairam@gmail.com for queries.
 2017-18

enerations perfecting
e in modern-day crop
ed both in India and
ut preferring the 'mind
Fortunately, KRBL has
o are experts in their
company faces is a
product. KRBL also

23.54

₹ 0.00

₹ 1.19

quity Options

0.00

₹ 0.00

0.00

12.50%

1.48%

₹ 0.00

0.00%

0.00%

0.00
 0.00

0.00

0.00

₹ 0.00

ter pace for many years

e economy

es

age Tax Rate

ncrease productivity

over time

al Asset Pricing Model

not, consider decreasing
es

Free Cash Flow

₹ 479.04

₹ 507.03

₹ 552.29

₹ 597.58

₹ 635.58

₹ 628.49

₹ 681.46

₹ 744.26

₹ 810.27

₹ 875.98

₹ 925.46

₹ 905.54

₹ 945.28

₹ 965.82

₹ 932.03
₹ 671.72

29.22%

8.73%

₹ 275.27

₹ 282.49

₹ 291.59

₹ 303.32

₹ 317.22

₹ 335.81

₹ 361.82

₹ 361.82
Opportunity
1 10 Years
Cost
Company Beta 2 15 Years

Industry Beta 3 20 Years

Risk-free Rate 4 Medium

10
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