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Abrassives
-Submitted by Group 1
Elvis Abraham – 17PGDM148
Aakarsh Tomar – 17PGDM123
Akarsh Agarwal – 17PGDMxxx
Raunaq Choubey – 17PGDMxxx
Ankit Bhansali – 17PGDMxxx
Siddharth Nautiyal – 17PGDMxxx
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Grindwell Norton (GNO), a company listed on the Bombay and National Stock Exchanges,
pioneered the manufacture of grinding wheels in India in 1941. Today, GNO’s businesses
include: Abrasives, Silicon Carbide, High Performance Refractories, Performance Plastics and
ADFORS. The Saint-Gobain Delegation (Country Head) office, and INDEC (the captive India IT
Development Centre for the Saint-Gobain Group globally) are also part of GNO. GNO’s
subsidiary, Saint-Gobain Ceramic Materials Bhutan Pvt. Ltd., manufactures Silicon Carbide. GNO
is part of the Saint-Gobain Group. The Group currently holds 51.66% of the equity capital of
GNO.
The businesses of the Saint-Gobain Group in India are housed in two large entities, Grindwell
Norton Limited (GNO), a publicly traded company, and Saint-Gobain India Pvt. Ltd. (SGI).
GNO’s subsidiary, Saint-Gobain Ceramic Materials Bhutan Pvt. Ltd., manufactures Silicon
Carbide. GNO holds 70% of the equity of this Company.
GNO’s Abrasives Business, markets and manufactures a full range of Bonded A brasives, Coated
Abrasives (including Non-Woven Abrasives), Thin Wheels and Super Abrasives at its plants near
Mumbai, Bangalore, Nagpur and Himachal Pradesh.
2013
1. Beta:
2. Cost of Debt:
The company has been borrowing from HDFC Bank at a rate of 10%. Hence, the post-tax cost of debt
(tax rate = 33%) is 7%
4. Cost of Equity:
Risk Free Rate from return on 364 Day Treasury Bill in 2013: 8%
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Cost of equity: 8.15%
WACC = x Re + x Rd x (1 – Tc)
Where:
Re = cost of equity
Rd = cost of debt
E = market value of the firm’s equity
D = market value of the firm’s debt
V=E+D
E/V = percentage of financing that is equity
D/V = percentage of financing that is debt
Tc = corporate tax rate
WACC: 7%
6. Operating Leverage:
7. Financial Leverage:
2014
1. Beta:
4|Page
2. Cost of Debt:
The company has been borrowing from HDFC Bank at a rate of 10%. Hence, the post-tax cost of debt
(tax rate = 33%) is 7%
4. Cost of Equity:
Risk Free Rate from return on 364 Day Treasury Bill in 2013: 8.5%
WACC = x Re + x Rd x (1 – Tc)
Where:
Re = cost of equity
Rd = cost of debt
E = market value of the firm’s equity
D = market value of the firm’s debt
V=E+D
E/V = percentage of financing that is equity
D/V = percentage of financing that is debt
Tc = corporate tax rate
WACC:13%
6. Operating Leverage:
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7. Financial Leverage:
2015
1. Beta:
2. Cost of Debt:
The company has been borrowing from HDFC Bank at a rate of 10%. Hence, the post-tax cost of debt
(tax rate = 33%) is 7%
4. Cost of Equity:
Risk Free Rate from return on 364 Day Treasury Bill in 2013: 7.5%
6|Page
WACC = x Re + x Rd x (1 – Tc)
Where:
Re = cost of equity
Rd = cost of debt
E = market value of the firm’s equity
D = market value of the firm’s debt
V=E+D
E/V = percentage of financing that is equity
D/V = percentage of financing that is debt
Tc = corporate tax rate
WACC: 6%
6. Operating Leverage:
7. Financial Leverage:
2016
1. Beta:
2. Cost of Debt:
The company has been borrowing from HDFC Bank at a rate of 10%. Hence, the post-tax cost of debt
(tax rate = 33%) is 7%
7|Page
4. Cost of Equity:
Risk Free Rate from return on 364 Day Treasury Bill in 2013: 6.75%
WACC = x Re + x Rd x (1 – Tc)
Where:
Re = cost of equity
Rd = cost of debt
E = market value of the firm’s equity
D = market value of the firm’s debt
V=E+D
E/V = percentage of financing that is equity
D/V = percentage of financing that is debt
Tc = corporate tax rate
WACC: 6%
6. Operating Leverage:
7. Financial Leverage:
2017
8|Page
1. Beta:
2. Cost of Debt:
The company has been borrowing from HDFC Bank at a rate of 10%. Hence, the post-tax cost of debt
(tax rate = 33%) is 7%
4. Cost of Equity:
Risk Free Rate from return on 364 Day Treasury Bill in 2013: 6.25%
WACC = x Re + x Rd x (1 – Tc)
Where:
Re = cost of equity
Rd = cost of debt
E = market value of the firm’s equity
D = market value of the firm’s debt
V=E+D
E/V = percentage of financing that is equity
D/V = percentage of financing that is debt
Tc = corporate tax rate
9|Page
WACC: 19%
6. Operating Leverage:
7. Financial Leverage:
Year-Wise Trends
Beta
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
2013 2014 2015 2016
10 | P a g e
Kd, Ke and WACC
30%
25%
20%
15%
10%
5%
0%
2013 2014 2015 2016 2017
Kd (Post-Tax) Ke WACC
11 | P a g e