1. SECURITY ANALYSIS & VALUATION 1 EMP APRIL 2008
AN EFFORT BY TEAM OF :
ACHAL GARG - 02
ANAND K SINGH- 09
MUKUND TRIVEDY -26
NAZISH-28
OM PRAKASH-29
ROHIT JHA-40
SUNNYBHAT-54
CASE STUDY OF VALUAUATIONS USING MARKET COMPARABLESCASE STUDY OF VALUAUATIONS USING MARKET COMPARABLES

2. SECURITY ANALYSIS & VALUATION 2 EMP APRIL 2008
ENTERPRISE VALUATION EXERCISEENTERPRISE VALUATION EXERCISE
Problem Statement :
The Government of India has decided for various reasons to do strategic
sale of Corporation Bank. It has invited interested Private Sector Banks to
submit proposal for the same. Also assume that one of the largest European
Bank BNP Paribas is interested to participate in the process and evaluate
the true enterprise value of the Corporation Bank to do the acquisition. BNP
Paribas invites a set of Investment bankers to do the due diligence and find
out the true worth of the Corporation Bank and whether it should go for the
deal. The team of analyst (this group) intends to prepare a preliminary
analysis of acquisition price multiples that are warranted based on current
market conditions.
The Data belongs to the March 2009 period Annual report as declared by
these banks.

3. SECURITY ANALYSIS & VALUATION 3 EMP APRIL 2008
SCOPE OF ANALYSISSCOPE OF ANALYSIS
• Identifying comparable firms for doing correct estimation
• Would estimate the true enterprise value or equity value of Corporation
Bank using market comparable
• Estimation of valuation ratios for the Banking Firms Under Consideration
• Sensitivity analysis using Goal Seek function
• Conclusions and Recommendations

4. SECURITY ANALYSIS & VALUATION 4 EMP APRIL 2008
INTRODUCTIONINTRODUCTION
• Industry under consideration: Banking and Investment Industry
• Bank chosen for valuation is Corporation Bank
• Based on the following factors we Identified three Banks that are considered
the primary competitors to Corporation Bank.
– Government Banks
– Market Capitalization
– Capital Structure
• Comparable companies are Oriental Bank of Commerce, Allahbad Bank
and Syndicate Bank (shown in the next slide)

5. SECURITY ANALYSIS & VALUATION 5 EMP APRIL 2008
CORPORATION BANKCORPORATION BANK
• The Bank was founded in 1906 in Udupi, Karnataka state, India
• The Bank is a Public Sector Unit with 57.17% of Share Capital held by the
Government of India
• The Bank came out with its Initial Public Offer (IPO) in October 1997
• The bank has the distinction of the first Indian bank to publish its financial
results (1998-99) conforming to US GAAP.
• The Number of Equity share holders are 14.34 Crores
• The Bank’s market capitalization stood at Rs. 2579 Crores as on 31 March
2009

6. SECURITY ANALYSIS & VALUATION 6 EMP APRIL 2008
ANALYSIS - COMPARABLE PSU BANKSANALYSIS - COMPARABLE PSU BANKS

7. SECURITY ANALYSIS & VALUATION 7 EMP APRIL 2008
VALUATION BY EBITDA MULTIPLE METHODVALUATION BY EBITDA MULTIPLE METHOD
P articulars S Y NBAN OR IBAN ALLBAN
Non Interest Bearing Debt 1 0.00 0.00 0.00
Interest bearing Debt (long
and short term) 2
118075.62 99090.81 85908.83
MV= Price per share *
Shares Outstanding 3
2505.60 2753.00 1735.43
Firm Value 4 = 1+2+3 120581.22 101843.81 87644.26
Less: Non Interest bearing
debt 5
0.00 0.00 0.00
Less: Cash and Equivalents
6
14404.41 12225.13 6636.76
Enterprise value
(Calculate)
106176.81 89618.68 81007.50
EBITDA 1392.37 1441.58 1343.03
EBITDA Multiple 76.26 62.17 60.32
All Fig in INR Crores
66.25
1491.48
98805.64
68095.67
For Corporation Bank
E B ITDA MUL TIPL E ME THOD
Average EBITDA Multiple
EBITDA for Y 2009 in Rs Crores
Enterprise Value In Rs Crores
Enterprise Value In Rs Crores from Balance Sheet

8. SECURITY ANALYSIS & VALUATION 8 EMP APRIL 2008
VALUATION BY PE MULTIPLE METHODVALUATION BY PE MULTIPLE METHOD
P articulars S Y NBAN OR IBAN ALLBAN
Market Price in Rs 48.00 109.90 38.85
EPS in Rs 17.49 36.14 17.21
P/E ratio 2.74 3.04 2.26
Av. PE Multiple 2.68
2.68
62.24
2392.79
67909.41
68095.67Enterprise Value In Rs Crores from Balance Sheet
Value of Equity
For Corporation Bank
Average PE Multiple
EPS in Y 2009
Enterprise Value
PE MUL TIPL E ME THOD

9. SECURITY ANALYSIS & VALUATION 9 EMP APRIL 2008
VALUATION BY DISCOUNTED DIVIDEND METHODVALUATION BY DISCOUNTED DIVIDEND METHOD
Year Expected Growth rateEPS DPO DPS Ke Cum Ke PV of DPS
1 13% 70.33 20.08% 14.13 17.52% 1.18 12.02
2 13% 79.47 20.08% 15.96 17.52% 1.38 11.56
3 13% 89.81 20.08% 18.04 17.52% 1.62 11.11
4 13% 101.48 20.08% 20.38 17.52% 1.91 10.68
5 13% 114.67 20.08% 23.03 17.52% 2.24 10.27
6 13% 129.58 20.08% 26.02 17.52% 2.63 9.88
7 13% 146.43 20.08% 29.41 17.52% 3.10 9.50
PV of Dividend in Yr 1 to 7 75.02
519.53
167.78
Current Fair value of Corporation Bank Stock Price 242.80
3481.70
68998.32
Terminal value at end of 7 years
PV of Terminal Value
Equity Value in Crores
Enterprise value in Rs Crores
16.38%
12.50
62.24
20.08%
0.799
13%
DDM for Equity Valuation
ROE
DPS
EPS
Payout ratio
Retention ratio
Expected Growth Rate
8%
1.16
16.21%
8.21%
17.52%
13%
Assumptions for yr 1-7
Risk Free rate ( Yield of GOI 10 yr Bond)
Beta for Corporation Bank
8 years return on Nifty
Market Risk premium
Ke
Estimated Expected growth rate for Yr 1 to 7
12%
6%
6%
K e
R f
Assumptions for Y r 8 till infinity
G rowth rate

10. SECURITY ANALYSIS & VALUATION 10 EMP APRIL 2008
SENSITIVITY ANALYSISSENSITIVITY ANALYSIS
EBITDA Multiple
0
20000
40000
60000
80000
100000
120000
140000
13% 10% 7% 4% 1% -2% -5% -8%
Growth rates
EV/EBITDAinRsCr
0
200
400
600
800
1000
1200
1400
1600
1800
EV EBITDA
P/E Multiple Method
0
500
1000
1500
2000
2500
3000
13% 11% 9% 7% 5% 3% 1% -1% -3% -5% -7% -9%
Growth rate
EPS/EquityValue
0
10
20
30
40
50
60
70
80
Equity Value EPS

11. SECURITY ANALYSIS & VALUATION 11 EMP APRIL 2008
SENSITIVITY ANALYSISSENSITIVITY ANALYSIS
Sensitivity with changes in
Growth rates and DPO
Sensitivity with changes in
Growth rates and Cost of
Equity
Using DDM Multiple
DPO @20.08% DPO @25% DPO @15% DPO @10%
Growth Rates Scenario #1 Scenario #2 Scenario #3 Scenario #4
13% 68998.32 69850.63 68117.03 67250.23
10% 68480.98 69206.66 67730.64 66992.63
5% 67775.57 68328.56 67203.79 66641.40
0% 67231.86 67651.75 66797.70 66370.67
-5% 66816.33 67134.50 66487.35 66163.77
-10% 66501.36 66742.33 66252.10 66006.94
Using DDM Multiple
Ke @17.52% Ke @15% Ke @12% Ke @10%
Growth Rates Scenario #1 Scenario #2 Scenario #3 Scenario #4
13% 68998.32 69487.13 70186.22 70738.14
10% 68480.98 68890.48 69475.67 69937.34
5% 67775.57 68077.83 68509.09 68848.85
0% 67231.86 67452.53 67766.75 68013.89
-5% 66816.33 66975.64 67201.94 67379.54
-10% 66501.36 66615.11 66776.19 66902.27

12. SECURITY ANALYSIS & VALUATION 12 EMP APRIL 2008
CONCLUSIONCONCLUSION
• EV per share of Corporation Bank is very near to the current market value

13. SECURITY ANALYSIS & VALUATION 13 EMP APRIL 2008
THANK YOUTHANK YOU

14. SECURITY ANALYSIS & VALUATION 14 EMP APRIL 2008
ANALYSIS - COMPARABLE PSU BANKSANALYSIS - COMPARABLE PSU BANKS
31/3/09 31/3/09 31/3/09 31/3/09 31/3/09 31/3/09
BANK Mkt Price No of shares Mar Cap DE Ratio EPS OPM
in Rs In Crores in Rs 10^2 Cr in Rs in %
Bank Of Baroda 234.55 36.43 85.45 14.99 61.14 18.20
OBC 109.90 25.05 27.53 15.25 36.14 13.31
Corporation Bank 179.85 14.34 25.79 15.11 62.24 18.07
Canara Bank 165.90 41.00 68.02 18.57 38.17 8.79
Allahabad Bank 38.85 44.67 17.35 14.52 17.21 15.37
UCO Bank 24.00 54.94 13.19 36.11 10.15 7.52
Union Bank of India 147.25 50.51 74.38 19.66 34.18 17.06
Central Bank of India 33.95 40.41 13.72 37.92 12.45 8.48
Bank of India 219.90 52.52 115.49 16.10 57.26 20.98
Syndicate Bank 48.00 52.20 25.06 25.22 17.49 9.27
Dena Bank 32.31 28.68 9.27 22.09 14.74 9.13
Bank of Maharashtra 20.75 43.05 8.93 23.65 7.63 15.06