Date: 27/07/2017
How to Calculate Enterprise Value (EV)
Dear
Friends, I know that many of you know about what is company’s enterprise value
and its importance.
But dear
readers, today I am going to share how to calculate enterprise value (EV) of
any company by seeing the company’s balance statement
What is Enterprise Value (EV): Enterprise value is nothing but simply represent the company’s
total value or cost.
For example,
somebody wants to buy the entire business of any company and as a buyer for him
what matters is the value of the entire firm or what he would have to pay to
take over the entire business including value of equity and value of debt and
this is called the Enterprise Value (EV).
Enterprise
value is calculated as the market capitalization plus debt, minority interest
and preferred shares,
minus total cash and cash equivalents.
Formula:
Enterprise Value (EV) = (Market Cap) + Market value of preferred
equity + (Total Debt) + Minority interest – Cash and Cash equivalents.
Steps to calculate the Company’s Enterprise Value (EV):
Step1:
Collect the company’s market cap data which you will get from many Indian
website or you can calculate any company Market cap by using below formula
Market
Cap = Share Price x Total Share Capital.
Step2:
Calculate the Total Debt
Total
Debt = Long term debt + Sort term debt
Step3:
Collect the data of minority interest from balance sheet in annual report
Often
times, the minority interest is effectively zero, although this need
not be the case.
Step4:
Collect the data of Preferred Share from balance sheet in annual report
Often
times, the preferred equity is effectively zero, although this need not be the
case.
Step5:
Do the summation of Step No 1+2+3+4
Step6 Enterprise
Value: Minus cash & cash equivalent from the figure/value coming from Step
no. 5 (Step 5 value-Cash&Cash equivalent).
By
doing the above steps you will get the Enterprise Value (EV).
Friends,
I have calculated the Chambal fertilisers and Chemicals Limited Company’s five
years Enterprise Value by using Chambal fertiliser’s balance sheet which i am
going to share with you today.
I have provided the Chambal fertiliser's company balance sheet data snapshot (From Money Control) which i have used for EV calculation for your reference.
Step1: Market Cap Data:
|
Chambal Fertilisers & Chemicals Limited (In Rs. Cr.)
| |||||
|
Year
|
Mar-16
|
Mar-15
|
Mar-14
|
Mar-13
|
Mar-12
|
|
Market Cap
|
2282.901
|
2794.190
|
1653.746
|
2078.959
|
3215.207
|
Step2: Total Debt:
Chambal Fertilisers & Chemicals Limited (In Rs. Cr.)
|
|||||
Year
|
Mar-16
|
Mar-15
|
Mar-14
|
Mar-13
|
Mar-12
|
Long Term Debt
|
708.350
|
781.840
|
1019.090
|
1127.110
|
1184.610
|
Sort Term Debt
|
3775.160
|
2879.130
|
3300.990
|
3751.410
|
2181.790
|
Total Debt
|
4483.510
|
3660.970
|
4320.080
|
4878.520
|
3366.400
|
Step3: Minority Interest Data:
No
minority interest for the last 5 years so value will be zero.
Step4: Preferred
Share:
No preferred share for the last 5 years so value will be zero.
Step5: Summation of
Step1+2+3+4:
|
Chambal Fertilisers & Chemicals Limited (In Rs. Cr.)
| |||||
|
Year
|
Mar-16
|
Mar-15
|
Mar-14
|
Mar-13
|
Mar-12
|
|
Step1: Market Cap
|
2282.90
|
2794.19
|
1653.74
|
2078.95
|
3215.20
|
|
| |||||
|
Long Term Debt
|
708.35
|
781.84
|
1019.09
|
1127.11
|
1184.61
|
|
Sort Term Debt
|
3775.16
|
2879.13
|
3300.99
|
3751.41
|
2181.79
|
|
Step2: Total Debt (Long
Term + Sort Term Debt)
|
4483.51
|
3660.97
|
4320.08
|
4878.52
|
3366.40
|
|
| |||||
|
Step3: Minority
Interest
|
0.000
|
0.000
|
0.000
|
0.000
|
0.000
|
|
| |||||
|
Step4: Preferred Share
|
0.000
|
0.000
|
0.000
|
0.000
|
0.000
|
|
| |||||
|
Step5: Summation of
Step1+2+3+4
|
6766.41
|
6455.16
|
5973.82
|
6957.47
|
6581.60
|
Step6 Enterprise Value:
Chambal Fertilisers & Chemicals Limited (In Rs. Cr.)
|
|||||
Year
|
Mar-16
|
Mar-15
|
Mar-14
|
Mar-13
|
Mar-12
|
Step5: Summation of
Step1+2+3+4
|
6766.41
|
6455.16
|
5973.82
|
6957.47
|
6581.60
|
Cash & Cash Equivalent
|
30.88
|
21.37
|
23.66
|
224.71
|
273.53
|
Step 6 Enterprise Value
(EV): Step5 value - Cash & Cash equivalent
|
6735.53
|
6433.79
|
5950.16
|
6732.76
|
6308.07
|
Snapshot of - Money control provided Enterprise Value (EV) data of Chambal Fertilisers & Chemicals Limited.
Friends you can see that our above calculated EV data is perfectly
matching with Money control provided EV data of Chambal fertilisers.
I hope you will like
this article.
Benefits: By looking the EV value
you can justify the company’s value and cheapness of the business.
Dear
readers, please follow and comments whether you like this article or not and remember your
comments will improve my motivation.
Thanks,
Kamlesh Bavrva
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