Talbros Automotive Components Limited Relative Valuation, By Umang Gupta, Monika Chopra (Case Notes/ Answer with Free Case File)

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The case brings out a situation requiring valuation of an auto ancillary client of a leading investment bank based in New Delhi, India. The client wanted to increase revenues from the two-wheeler and... four-wheeler vehicle segments by acquiring original equipment manufacturer (OEM) customers. The financial analyst of the investment bank, Abhishek Agarwal, was assigned the task of evaluating the options and identifying the right target for the client. He used comparable company analysis and comparable transaction analysis, through three valuation ratios—enterprise value-to-sales (EV/sales); EV-to-earnings before interest, tax, depreciation, and amortization (EBITDA); and price-to-earnings per share (P/E ratio)—to arrive at a valuation of Talbros Automotive Components Limited (Talbros) as the best target for the client. For comparable company analysis, Agarwal also compiled a list of four publicly traded firms that were similar to the target company. Since this technique offered only the base valuation, there was a need to estimate the control premium in order to calculate the transaction value. For comparable transaction analysis, Agarwal identified some of the transactions in the auto parts and equipment industry. The objective was to arrive at the final valuation range by combining the results of both techniques (i.e., comparable company analysis and comparable transaction analysis), which could be achieved by combining the results of the comparable company and comparable transaction analyses with a football field analysis [Show More]

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