Hdfc Bank Wacc Analysis

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Thus we can see that Cumulative Abnormal Returns is 4.54 and Cumulative Average Abnormal Returns is 0.0910. Therefore, we can conclude that, on an average, after the merger, the stock price of HDFC has been positively affected (i.e) the returns have been more than the expected returns without the effect of the merger. Therefore, the shareholders have seen this merger with a positive note.

Valuation of CBoP

Calculation of Free Cash Flow

Year

2003

2004

2005

2006

2007

Net Profit for the Year

-34.26

-67.09

30.15

122.48

121.38

Depreciation

48.75

36.14

29.73

51.48

56.97

Capex (Investments)

4.93

4.93

475.46

1443.19

1692.13

Increase in NWC

-19.97

-19.97

-117.62

358.48

-79.33

Increase in Net Debt

177.57

177.57

501.37

5877.08

6343.4

FCFE

207.1

161.66

203.41

4249.37

4908.95

NPV Calculation

Year

2007

2008

2009

2010

2011

FCFE

4908.95

5670.82

6550.93

7567.63

8742.13

Growth rate

15.52%

Continuation value

136029.05

Present Value

4908.95

5173.18

5451.64

5745.09

100260.85

Net Present Value

121539.73

WACC Calculation

Total Equity

1,396.10

Weight of Equity

0.60

Total Debt

930.89

Weight of Debt

0.40

Interest

45.49

Rf

7.50%

Debt

930.89

Rm

20%

Cost of debt

4.89%

Beta

0.495

Tax rate

0.28

Re

13.69%

WACC

9.62%

Growth Rate

3%

Calculation of Beta

Debt

328.34

covariance

0.000291774

Equity

1190

Std. Dev

0.026675732

D/E

0.28

beta

0.410028958

Unlevered Beta

0.35

Calculation of Levered Beta

D/E

0.67

Levered Beta

0.49

Explanation

- Net Profit and Depreciation amounts are obtained from the income statement of CBoP.

- Capex is the difference between the value of assets at ‘t’ and at ‘t-1’.

- Similarly Increase