Inox Wind IPO Set to Unlock Value for Gujarat Fluorochem
farm and posted .` 26 crore of net profit from revenues of .` 155 crore for the 9-month period ended December 2014. It is an annuity business with high cash flows that is sufficient to service the debt.
Going by the sum of parts valuation methodology, Gujarat Fluorochemicals’ listed entities contribute nearly .` 6,400 crore to its value. The chemical business is enjoying EBIDTA margins of 26% currently and the management has given a guidance of 30% EBITDA margins as capacity utilisation improves at the PTFE plant by December 2015. Vinati Organics, a chemical company with similar high margins, enjoys market valuation 27-28 times its annualised profits. Considering GFL’s high return on capital employed (RoCE), cash generation and growth visibility, the chemical business can be valued at 28-30 times its annual earnings. The standalone valuation of the chemicals business should be of around .` 3,300 crore.
The wind farm business, a profitable cash-generating business, has slow growth, but high RoCE. This entity can be valued 15 times its annualised profits or around .` 600 crore.