Question B2

TechnoCrat is a privately owned firm operating in the IT industry. The firm expects to expand its operations and intends to raise capital through an Initial Public Offering (IPO). The investment bank managing the issue has assigned you as a junior analyst to use a simple valuation technique to determine the share value of TechnoCrat. You decided to begin with comparables and collect financial data from the 2020 annual reports of six companies similar to the firm. TechnoCrat had a book value of $1,250 million in 2019. In addition, TechnoCrat had 4,650 million shares outstanding throughout the year. The financial information of the comparable firms is given below (All numbers are in millions of dollars).

Company	The market value of equity	Book value	Sales revenue	R&D	Net Income
Actino	7,096	1,100	1,410	403	535
Exincan	1,379	450	200	105	66
SenAnti	2,233	600	350	127	35
Xtel	925	350	170	82	18
Ronco	588	125	115	50.8	12
TechnoCrat	?	?	900	450	225

Using the above details:

1. Calculate relevant average multiples. (6 marks)

2. Estimate a value for TechnoCrat. (3 marks)

3. What should be the value per share of TechnoCrat? A market analyst speculated that TechnoCrat's share price should be around $1.75 per share. If the analyst's statement is true, what is your view on the value of the share? Is it the right time for a share issue?

(3 marks)