Aarti Surfactants — DCF Valuation

Every assumption explained. Adjust the model to see how the answer changes.

Historical free cash flow

The real input to the DCF model. Free cash flow = operating cash flow minus capital expenditure. The most recent year is used as the starting point for the 5-year projection.

Year	Free Cash Flow	Operating CF
FY22	₹1 Cr	₹23 Cr
FY23	₹14 Cr	₹25 Cr
FY24	₹36 Cr	₹52 Cr
FY25	₹-9 Cr	₹11 Cr
FY26	₹32 Cr	₹77 Cr

Assumptions used

Revenue growth (5 years)

13.0%

Based on the company's recent revenue trend, tapering toward the terminal rate. For cyclical companies, the average of 3-year and 5-year CAGRs is used to smooth cycle effects.

Discount rate (WACC)

12.0%

The required rate of return — what you could earn elsewhere at similar risk. A higher WACC reflects more business risk and significantly reduces today's value of future cash flows. Moving this by 1pp typically shifts the output 20–30%.

Terminal growth rate

5.0%

The growth rate assumed to continue forever after year 5 — typically near India's long-run GDP growth rate. Terminal value usually accounts for 60–80% of the total DCF value, so this single assumption matters enormously.

Projection horizon

5 years

Cash flows are explicitly projected for 5 years. A terminal value captures all growth beyond that point. The 5-year horizon limits exposure to compounding forecast error.

Adjust the model

Change any assumption to see how the intrinsic value shifts. This shows you why DCF results are always a range, not a single precise number.

Reverse DCF

What growth rate is the market already paying for?

Implied Growth vs. History

Priced for slower growth

Historical CAGR (7y)15.7%

Implied growth (what the market is pricing in)8.0%

0%30%

At the market's implied growth rate, revenue would reach ₹1,261 Cr in 5 years. At the historical growth rate, it would reach ₹1,779 Cr.

The market is pricing in only 8.0% annual growth — slower than the historical 15.7% CAGR. If growth holds, this may represent an undervalued entry point.

DCF limitations

DCF is highly sensitive to assumptions. Moving the discount rate by 1pp typically changes the output by 20–30%. Moving terminal growth by 0.5pp can shift it 10–15%. Small errors in assumptions compound significantly over a 5-year horizon. Treat the output as a range, not a precise target — and use peer comparison as a sanity check.

New to DCF?

Read our plain-English guide to how DCF analysis works and what each assumption means.

Read DCF guide →

The intrinsic value shown is an algorithmic estimate based on publicly available financial data. It is not investment advice or a recommendation to buy, sell, or hold any security. Please consult a SEBI-registered investment adviser before making any investment decision.