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deveshkayal
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   Posted: 11/May/2008 at 1:40pm |
Market is forward looking and not backward, so you have to estimate future earnings FY09, FY10. Nonetheless, Good efforts 
Small Correction in Valuation:
Private Equity will be valued at 15% of AUM
Life Insurance: 19% margins in case of Kotak and 18 multiple.
Brokerages: 18x forward multiple
Having said that, who knows what valuation is correct 
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"You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett
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basant
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Posted: 11/May/2008 at 1:52pm |
In bearish phases we look at trailing EPS and in bullish ones we look at 2013 
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'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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CHINKI
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Posted: 11/May/2008 at 5:29pm |
Originally posted by deveshkayal
Market is forward looking and not backward, so you have to estimate future earnings FY09, FY10. Nonetheless, Good efforts
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True Devesh. I was only trying to find out the present value of KMB.
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TOUGH TIMES NEVER LAST, BUT TOUGH PEOPLE DO
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omshivaya
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Posted: 11/May/2008 at 7:37pm |
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The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it
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Mr. V
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Posted: 12/May/2008 at 3:16am |
Thanks Chinki for updating the valuations with FY08 numbers.
Originally posted by CHINKI
Kotak Securities :
Revenue - 1330 cr : PAT - 409 cr
Since India Bull Securities Limited has been demerged into a separate company, I am taking its figures for comparison:
Revenue - 621 cr : PAT - 252 cr : Market cap - 2841 cr
It is safe to take Market Cap of Kotak Securities at 4500 cr
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I think for Valuation purposes, its best to keep it simple and value Kotak's brokerage franchise at a PE of 15x and that would give it a Mcap ~ 6000 cr
Indiabulls securities is presently being valued at a PE multiple of ~11 but other players like Motilal, India Infoline etc seem to be commanding much higher valuations.
Originally posted by CHINKI
KOTAK PRIVATE EQUITY
This is what Mr. V had written about PE amount at that time:
It is very difficult to value the Private Equity biz because the profits from it are not going to come in the near future. Nevertheless, if one were to look at the funds under mgmt, 1100 cr, and predict that it will be able to triple its investments over the next 4 years then the earnings of the PE division would be 110 cr per year ( 20% of profits ) which means an EPS of Rs 3.4 and @25 PE it would translate into a market cap of 2767 cr.
If an initial investments had to triple in four years, then it has to give CAGR of 41.5% over those years. Since at the end of 4 years the amount would be Rs.4,400 Crores, profit would be Rs.3,300 crores. So profit/year would be Rs.825 crores. So I don’t know how he got 110 crores profit.
Currently, funds under management : Rs.5740 cr. (US$1.4bn)
Assuming 15% profit under the present market condition, profit = 861 Cr. EPS = Rs. 24.98/-
Taking PE @ 15 (Mr. V had taken 25PE), it would give market cap of Rs.12915Cr.
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Tripling of the corpus equates to an absolute return of 200%, that would mean 1100 cr becomes 3300 cr
Kotak's share of the profit is 20% (Actually its lower because of hurdle rates and all but for simplicity let's assume 20% of total profits).
This works out to 440 cr ( 20% * (3300 - 1100) )
Annualizing the profit over 4 years means 110 cr per year.
Devesh has mentioned that Private Equity should be valued at 15% of AUM that would translate to a Market Cap of 15%* 5740 = 861 cr
Valueing Private Equity businesses can be very tricky. I personally feel that we can't use the same valuation techniques as traditional asset managements businesses like equity MFs, Bond houses because the PE player gets to keep a significant chunk of the profits as well as charge a 2% management fee that more or less goes to the bottomline.
I would take 2% mgmt fees + 8% annual returns on the AUM as Net Profit for the Private Equity biz and then value it at say 15 PE.
That would mean a market cap of 8100 cr.
Edited by Mr. V - 12/May/2008 at 3:17am
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deveshkayal
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Posted: 13/May/2008 at 7:27pm |
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Infact, Kotak Investment Banking MD Falguni Nayyar herself has mentioned that PE is valued at 15-20% of AUM !!!
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"You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett
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deveshkayal
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Posted: 13/May/2008 at 7:59pm |
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"You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett
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basant
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Posted: 13/May/2008 at 8:18pm |
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Most is slowly adjusting to the reality - falling prices with falling targets. So much has changed in the past 16 weeks!
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'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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