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Valuation of Startups

17th May, 2023

Resource person: CA Saimanohar Prabhu

CA Saimanohar Prabhu, Proprietor, Saimanohar Prabhu & Co, enlightened the students of MBA II about the valuation of startups and the KPI thereof.

Key points emphasised upon:

  • Free cash flow is Essential to compute to arrive at the valuation of an enterprise. This helps to ensure that the valuation is not inflated by taking the cash flows. The working capital requirement reduces the free cash flow.

  • Example of startup manufacturing Railway track sensors was given. Robots are used to man the tracks. This process is completely automated. While doing valuation, factor considered was that if similar products are available, then business value comes down. Besides that, whether the startup is planning for presence in city, state or pan-India, would also impact the valuation.

  • The KPIs that he talked about were ROI, WACC, Operating Profit, market capitalization amongst others.

  • He also lay emphasised that synergy benefits need to be considered while doing valuation as they intangibles play a big role in the valuation.

  • To a question as to why companies go for valuation, he specified the situations – enhancement in equity, to avail debt, to consider the possibility of mergers and acquisitions.

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