Basics of valuation 03 12 10 by natarajan

Basics of valuation 3 rd December 2010 R. Natarajan Chief Operating Officer Helion Advisors

Agenda ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object]

Its all about perception Rs 1500 Rs 15,000 Rs 50,000 Rs 150,000 Rs 350,000

A philosophical basis for Valuation ,[object Object],[object Object],[object Object],[object Object]

Misconceptions about valuation ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Fair value ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

What? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Know what we are valuing ,[object Object],[object Object],[object Object],[object Object]

Fair value estimation ,[object Object],[object Object],[object Object],[object Object],[object Object]

Quoted investments ,[object Object],[object Object],[object Object],[object Object],[object Object]

Unquoted investments ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Price of recent investment ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Multiples method ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Net Asset Value Method ,[object Object],[object Object]

Discounted cash flow ,[object Object],[object Object],[object Object]

Industry Valuation Benchmark ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Valuation guidelines and principles ,[object Object],[object Object],[object Object],[object Object]

SFAS 157… Preference of approach depends upon relevant circumstances!! Valuation techniques Market approach - Uses prices and information generated by market transactions involving comparable assets/ liabilities Income approach - Converts future amounts to a single present discounted amount Cost approach - Amount currently required to replace service capacity of asset

SFAS 157 Levels of inputs Level 1: Observable market prices Level 2:Observable prices other than quoted prices Level 3: Unobservable inputs Quoted prices for similar assets and liabilities in active markets Quoted prices for similar assets and liabilities in inactive markets Observable inputs other than Quoted prices Inputs derived from / that can be corroborated by observable market data Entity’s reporting data Unobservable interest rates in a specified currency (related to foreign currency swaps)

Enough of theory and books let us move to some reality check

Valuation at different stages of business Start up Mid Stage Growth Team Team Performance Potential Performance Potential Potential

Valuation at different stages of business Linear Growth Non Linear Growth

Alignment of interest ,[object Object],[object Object],[object Object],[object Object],[object Object]

“ Convertibles a win-win situation”

“ $50M valuation offered by investor can be expensive than $30M asked by entrepreneur” “ Understanding the technicalities and other conditions of valuations is equally important”

Regulatory implications ,[object Object],[object Object],[object Object],[object Object],[object Object]

Helion Ventures … The Journey So Far India Focused ,[object Object],[object Object],[object Object],[object Object],Multi-stage Venture Investment range from $2 - 10M Dual focus themes ,[object Object],[object Object],+ * Started in June 2006 with $140M fund and raised another fund of $208M in February 2008 Active Capital

Basics of valuation 03 12 10 by natarajan

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