Notes on Indian equities, sectors and economy

Posts Tagged ‘PE’

Jan’16 sees USD800m of VC/PE deals

Posted by fairval on February 13, 2016

Better than Dec’15, which say USD667m, but last 2 months (Dec and Jan) are slower than general trend in 2015.

Number of disclosed deals remains robust, at 85.




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53 VC/PE transactions recorded in Feb’15

Posted by fairval on March 2, 2015

February continued to witness robust PE deal activity in India, all though the amount of money invested dropped compared to January. 53 deals were reported in Feb’15, compared to 56 in the previous month, and 42 in February. In the first 2 months of 2015, 109 deals have been reported, as compared to 86 in the first 2 months of 2014.

Aggregate investment amount reported in Feb’15 was $696m, a sharp growth over $337m reported in Feb’14. In Jan-Feb’15, $2.1b of investment has been reported, as compared to a $534m in Jan-Feb’14.

VC/PE transactions in Feb'15

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Asian Paints: Chartspeak

Posted by fairval on January 22, 2014

There was a time when A Paints used to quote at 18-20x, at a clear discount to FMCG majors. Lately it moved into the same orbit: 35-40x PE. Now there is some negative sentiment. Goldman just put a sell. This chart from their report is self explanatory. Even several FMCG majors have the same issue: slowing sales and very high PEs


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A new method to calculate relative PE

Posted by fairval on January 17, 2013

When analysts make their price targets, what PE to use (this being the most common metric) is often quite arbitrary. We have used the following method in a recent report. This is a report on Sona, an auto ancillary. About 45% of its sales are to Maruti, so i decided to derive its PE in relation to Maruti.

Sona should clearly trade at a discount to Maruti, but how much? To give a method to this, we compared cumulative profits over last 10 years. This should be a long enough period to arrive at a assessment of relative profit generating (and therefore wealth creation) abilities of the two businesses.

Here is what we got. FY03 is indexed to 100. Adding up profits, Maruti made about 3x the net profit as compared to Sona. (This is not an absolute number, but an indexed number).  It seems fair to say that Maruti’s PE should be 3x Sona. Brokers currently value Maruti at around 18x FY14. Sona could well get 6x FY14.

If this were true, Sona appears a good buy at current price. And with 5% dividend yield currently, downside is protected.

A metric for relative PE calculation

Posted in Auto, Stock Ideas, The Science of Investing, Valuation | Tagged: , , , | Leave a Comment »

2012 saw record exits by private equity funds in India

Posted by fairval on January 5, 2013

3 key data items on VC/PE activity for 2012 (data source: Four-S Services)

1. 2012 was a the all-time record year for PE exits in India with total exit value of around f $5.30bn over 80 transactions,  compared to 80 deals worth $2.68bn in 2011. In the largest exit, Carlyle sold its stake in mortgage lender Housing Development Finance Corp (HDFC), pocketing nearly $1.1bn. Genpact ($1bn) was also one of the largest exits, exiting funds were General Atlantic and Oak Hill Capital.

 2. Total deal value fell. The year 2012 saw 475 PE/VC deals worth $8.13bn, a decline of 27% compared to investments worth $11.18bn across 423 deals in 2011.

PE Investments in India

PE Investments in India


3. Top 5 deals: The largest PE investment during the year was wherein Bain Capital agreed to buy 30% in BPO firm Genpact for $1bn. This was followed by $210mn investment by Morgan Stanley Infrastructure Partners to buy majority stake in Continuum Wind Energy, a wind energy firm. In another mega deal, Blackstone acquired 50% stake in Embassy Property Developments owned portfolio of three business parks for $200mn.

Investors Target

Stake (%)

Amount ($Mn)

Sector – Industry
Bain Capital, GIC Genpact



Services – IT/ITeS
Morgan Stanley Infrastructure Partners Continuum Wind Energy

Over 50


Infrastructure –Power
Blackstone Embassy Property’s Office Portfolio



Real estate
Fairbridge Capital Pvt. Ltd. Thomas Cook (India) Ltd.



Services – Travel
MIH (part of Naspers Group), ICONIQ Capital, Accel Partners and Tiger Global Management Flipkart



Services – Retail

Posted in Data, PE/VC, Trends | Tagged: , , , , , , , | 1 Comment »

IIP – Is this India’s worst slowdown since 1991?

Posted by fairval on November 14, 2012

While the market continues to hover around its 52 week high, and not too far away from its all time high, the data on the IIP isn’t good at all. Check some issues:

  • We are in the worst slowdown since 1991, in terms of sharpness of fall. The 12 month rolling IIP is close to 0%. This is far worse than what happened in the 2001-03 slowdown or the 2008-09 slowdown, or the earlier 1998-00 or 1997 slowdowns.
  • This is the second worst slowdown in terms of months. I define a slowdown as IIP data below 6%. In the 2001-03 phase, IIP fell below 6% in Feb’01, and could not re-emerge till May’03, or after 28 months. The 2008-09 slowdown lasted 14 months, from Oct’08 to Nov’09. Before that, the 1998-20000 slowdown lasted 17 months between Sep’98 to Jan’00. The current phase is already 15 months long, beginning Jul’11. Even if IIP starts reviving, it will take atleast 4 months before it crosses 6%, so it is set to the 1998-00 slowdown.

12 month average IIP versus Sensex IIP

I have plotted Sensex P/E alongside IIP data. Lets take a look at Sensex lows —

  • 13.04 in Dec’97, the last month of the 1997 slowdown
  • 10.27, in Oct’98, very early on, in the 1998-00 slowdown. By the end of the slowdown, trailing Sensex PE was already well above 20x
  • 12.68 in Oct’02, in the 21st month of the 28 month 2001-03 slowdown.
  • 11.88 in Nov’08, again very early on in the 2008-09 slowdown, by the end of which the PE was above 20.
  • 16.37 in Jun’12, in the current,and ongoing slowdown

There is a clear disconnnect this time when it comes to market valuations. We haven’t quite hit the lows seen earlier. What explains it – Global liquidity, or is the worst yet to come? Most market commentators have concluded the worst is over, though any such indication clearly is yet to show up in economic data

Posted in Indian Economy | Tagged: , , , , , | 1 Comment »

Target price using PEG greater than 1

Posted by fairval on November 3, 2012

I guess when a stock commands high P/E, every once in a while comes a time when it becomes hard to explain the valuation. This is from a report on Titan by a foreign broker. They have used a PEG of 1.2 to arrive at a target price! There is always a first time.

We roll forward our target price time frame to Sep’13 with a revised TP of Rs244 (earlier Mar’13 TP of Rs205). Our PT is based on PEG of 1.2x implying 30x FY13 P/E and 24x FY14 P/E. Our target PEG ratio is at the higher end of the 1.0-1.2x PEG ratio we use to value regional retail companies because of Titan’s better return and growth profile.

Posted in Valuation, What was that Again? | Tagged: , , , | 2 Comments »