Unit ko samjho · NISM Series XV
Case Study - Valuation
8 questions is unit mein
Sawaal aur jawaab English mein hain, kyunki NISM ka exam paper bhi English mein hota hai.
Is unit mein kya hai
- CASE — Orion Ltd. has a market capitalisation of ₹4,800 crore, total debt of ₹900 crore, cash of ₹300 crore and EBITDA of ₹600 crore. Assuming no other enterprise-value adjustments, what is Orion's EV/EBITDA multiple?
- CASE — Orion Ltd. has 6 crore shares outstanding, a market capitalisation of ₹4,800 crore and net profit attributable to ordinary shareholders of ₹240 crore. What are the share price, EPS and P/E?
- CASE — Orion Ltd. trades at 9x EV/EBITDA while a carefully selected peer group trades at a median 13x. Orion's growth, return on capital and accounting quality appear broadly comparable with the peers. What is the most defensible first conclusion?
- CASE — Meridian Ltd. has a market capitalisation of ₹4,200 crore, total debt of ₹1,000 crore and cash of ₹400 crore. Assuming no other enterprise-value adjustments, net debt represents what proportion of enterprise value?
- CASE — Zenith Ltd. reports EBITDA of ₹420 crore, depreciation and amortisation of ₹120 crore, and finance cost of ₹60 crore. Using EBIT divided by finance cost, what is its interest coverage ratio?
- CASE — Zenith Ltd. has total debt of ₹900 crore, cash of ₹300 crore and EBITDA of ₹400 crore. Its net debt-to-EBITDA ratio is:
- CASE — Zenith Ltd. reports profit before tax of ₹240 crore. Assume tax expense is 25% of profit before tax, there are no exceptional items, and average ordinary shareholders’ equity is ₹1,500 crore. What is ROE?
- CASE — Zenith Ltd. carries substantial debt, while a close operating peer is almost debt-free. Their businesses and accounting policies are otherwise reasonably comparable. Which multiple is generally more suitable for comparing operating value before differences in capital structure?
Zaroori ideas
Practice bank se · 1
CASE — Orion Ltd. has a market capitalisation of ₹4,800 crore, total debt of ₹900 crore, cash of ₹300 crore and EBITDA of ₹600 crore. Assuming no other enterprise-value adjustments, what is Orion's EV/EBITDA multiple?
Enterprise value = 4,800 + 900 − 300 = ₹5,400 crore. EV/EBITDA = 5,400 ÷ 600 = 9.0 times. Remember: In enterprise multiples, first bridge equity value to enterprise value.
Hint Common mistake: Dividing market capitalisation by EBITDA and calling the result EV/EBITDA.
XV-026Practice bank se · 2
CASE — Orion Ltd. has 6 crore shares outstanding, a market capitalisation of ₹4,800 crore and net profit attributable to ordinary shareholders of ₹240 crore. What are the share price, EPS and P/E?
Share price = ₹4,800 crore ÷ 6 crore shares = ₹800. EPS = ₹240 crore ÷ 6 crore shares = ₹40. P/E = ₹800 ÷ ₹40 = 20 times. Remember: Market capitalisation, shares outstanding, earnings, EPS and P/E form a linked set of calculations.
Hint Common mistake: Using total profit directly in the P/E denominator instead of EPS.
XV-027Practice bank se · 3
CASE — Orion Ltd. trades at 9x EV/EBITDA while a carefully selected peer group trades at a median 13x. Orion's growth, return on capital and accounting quality appear broadly comparable with the peers. What is the most defensible first conclusion?
A lower multiple, with broadly comparable operating metrics, can flag a potential valuation difference worth investigating. It is not proof of mispricing because leverage structure, cyclicality, governance, accounting, capital intensity, risk and sustainability may still differ. Remember: Relative valuation identifies questions to investigate. It does not by itself establish intrinsic value.
Hint Common mistake: Treating a lower multiple as automatic proof that a stock is cheap.
XV-028Practice bank se · 4
CASE — Meridian Ltd. has a market capitalisation of ₹4,200 crore, total debt of ₹1,000 crore and cash of ₹400 crore. Assuming no other enterprise-value adjustments, net debt represents what proportion of enterprise value?
Net debt = ₹1,000 crore − ₹400 crore = ₹600 crore. Enterprise value = ₹4,200 crore + ₹600 crore = ₹4,800 crore. Net debt as a proportion of EV = 600 ÷ 4,800 = 12.5%. Remember: Keep equity value and enterprise value denominators distinct in leverage analysis.
Hint Common mistake: Dividing net debt by market capitalisation when the question asks for net debt as a percentage of enterprise value.
XV-057Practice bank se · 5
CASE — Zenith Ltd. reports EBITDA of ₹420 crore, depreciation and amortisation of ₹120 crore, and finance cost of ₹60 crore. Using EBIT divided by finance cost, what is its interest coverage ratio?
EBIT = EBITDA − depreciation and amortisation = ₹420 − ₹120 = ₹300 crore. Interest coverage = EBIT ÷ finance cost = 300 ÷ 60 = 5.0 times. Remember: When a question specifies EBIT-based interest coverage, subtract depreciation and amortisation from EBITDA before dividing by finance cost.
Hint Common mistake: Using EBITDA/interest when the question explicitly asks for EBIT/interest.
XV-059Practice bank se · 6
CASE — Zenith Ltd. has total debt of ₹900 crore, cash of ₹300 crore and EBITDA of ₹400 crore. Its net debt-to-EBITDA ratio is:
Net debt = ₹900 − ₹300 = ₹600 crore. Net debt/EBITDA = 600 ÷ 400 = 1.5 times. Remember: Net leverage ratios require cash to be deducted from debt when the numerator is net debt.
Hint Common mistake: Using gross debt rather than net debt.
XV-060Practice bank se · 7
CASE — Zenith Ltd. reports profit before tax of ₹240 crore. Assume tax expense is 25% of profit before tax, there are no exceptional items, and average ordinary shareholders’ equity is ₹1,500 crore. What is ROE?
Profit after tax = ₹240 × (1 − 25%) = ₹180 crore. ROE = ₹180 ÷ ₹1,500 × 100 = 12%. Remember: ROE uses profit attributable to equity after tax, not profit before tax.
Hint Common mistake: Dividing PBT directly by equity when tax must first be accounted for.
XV-061Practice bank se · 8
CASE — Zenith Ltd. carries substantial debt, while a close operating peer is almost debt-free. Their businesses and accounting policies are otherwise reasonably comparable. Which multiple is generally more suitable for comparing operating value before differences in capital structure?
EV/EBITDA compares enterprise value with an operating earnings measure before interest, making it less directly distorted by differences in debt financing than equity multiples such as P/E. It still requires care regarding leases, capital intensity, accounting and business comparability. Remember: Match the valuation multiple to the economic difference you are trying to neutralise.
Hint Common mistake: Using P/E across companies with very different leverage without adjusting the interpretation.
XV-062