India: Industry Valuation Multiples Report
The broader markets in India have been more or less flattish in the past 6 months. However, on a sector wise basis, we surely have seen fluctuations in valuation multiples in the recent past. For instance:
- technology sector has been under the heat due to the upheavals been experienced in the western world and their valuation multiples have been under pressure.
- new age companies’ multiples too have squeezed due to the funding freeze experienced in these companies.
On the contrary, the valuation multiples for traditional sectors like metal and mining are reverting to mean, given the benign commodity prices. Given the promise that green and clean energy holds for the future, valuation multiples of companies exposed to these segments have surely improved. Through this Report, we wish to present to you the current dynamics which are playing out in the market in different industries and sectors.
Methodology for Estimating Valuation Multiples
The purpose of this report is to provide an understanding of the sectorial financial performance, movement in the business valuations, and corresponding valuation multiples for companies operating in each industrial sector; over time periods. Financial performance is the basis upon which the market estimates future growth & prospects and thereby forecast business valuation and corresponding valuation multiples for companies. Movement in Valuation Multiples against financial performance can provide fair idea about the market perspective for companies operating in each industrial sector (and for sector as a whole).
In their report, VRG India member, RBSA Advisors, has identified key sectors that have significant influence on India’s overall economy. Further, within each sector, they have identified around 10 companies (“Representative Companies”) which are a fair representative of the techno financial dynamics in which a given sector operates. As a part of their Industry Research, they have also derived weighted average Operating margins (EBITDA Margin) and weighted average Net profit Margins (PAT Margin) for Representative Companies in each sector.
