How much is the Taj Mahal worth?

A historical monument of the grandeur and beauty of the Taj Mahal may be priceless to most people. While we see that logic we believe that as the Taj Mahal generates a lot of revenues yearly for the government and that anything which has the potential to create future cash flows can be valued by running a discounted cash flow evaluation. Imagine you woke up one morning and checked the NSE website to see The Taj as an investment opportunity. How much would it be trading at? This article tries to address the same.

How is the Taj Mahal a cash generator for the government?

The Taj earns from the millions of tourists that visit the monument, every year. It is exposed to the same risks as most tourist businesses. Security concerns in India, may reduce tourism from outside India who contributes a huge share to the Taj's revenues. If it were a company listed on the market it would be in the tourism sector. 

As of 2018, a domestic tourist pays only Rs 50 for entry as compared to a SAARC member who pays 540. Everyone else pays Rs1100.  Close to 69 Lakh people visited Taj in 2018 and from them 8.11 were foreigners. 8.11*1100 = 8910

50*60 = 3000

Clearly the majority of the business comes from foreigners. The monument is also a catalyst to why a lot of people visit Agra. This leads to a lot of expenditure and income created by the Taj which is not directly included in the revenues generated. 

How does the Taj Mahal contribute to the economy?

This valuation is being done from the government's perspective. This means that there will no tax payments. Furthermore, the economic benefit created by the Taj, will be added to revenue.

When tourists come to visit the Taj, there is a high chance they stay a night in Agra. With estimated costs of close to 100 dollars for the entire stay, the Taj contributes close to 560 Crores to the economy in Agra. If you assume 10% of that as taxes, to the government gets close to 56 Crores from the Taj indirectly. (This amount could be a lot more, but I am taking a very quick estimate). Of course, the monument also creates a livelihood for many people in Agra but I am not including the same here due to difficulty of calculation. Also, this keeps things relatively simple. 

How much does Taj Mahal earn yearly?

In 2018, in net revenues, the Taj earned Rs 119 Crores.

The monument as of 2016 had a maintenance cost including environmental, representational costs of about 15%. Assuming that the same remains the Earnings of the monument for a year amount to Rs 101.15 Crores. Furthermore, I include the additional revenue the government got as the indirect benefit which is 56 Crores. That makes the amount Rs 157 Crores.

How fast will these revenues grow?

The Indian GDP is expected to grow at 7.5% for the next 2 years according to the world bank estimates. That means that this sector is expected to grow even faster. ( Agriculture, mining, etc have shown slow growth). Furthermore, the prime minister is trying to promote more tourism as a lot of money was spent on the State of Unity.

We assume that revenues will grow at 10% for the next 10 years. Then we grow them to perpetuity at the current risk-free rate which I took as 5.5%.

What discount rate should we use?

We are going to use CAPM to calculate the same. 

Risk-free rate - 5.5

Equity Risk Premium - 7.5

Beta - 1

= 5.5+(7.5*1) = 13%

For the terminal value, we bring this down to 11% as we see the ERP going down as India becomes more stable and mature as an economy. 

( This could have been a lot more complicated but we are keeping it very simple. It also saves us a lot of time. This is a pet project after all. )

How much is it worth?

According to the assumptions made, running a DCF gives a value of close to Rs 4266 Crores.

This though is the value of it merely as a business. It does not include the cost of assets, brand value, historical significance, etc.

According to Wikipedia, the Taj Mahal in 2015 terms cost close to Rs 5280 Crores to make. However other sources claim that the cost to build it will be close 1 Billion dollars or 7000 Crores.

Furthermore the brand value and economic which is very hard to estimate here will be astronomical. The business value too would be better if proper financials could be found.

Conclusion

Taj Mahal is a historical monument and a thing of beauty. This post is merely for recreational purposes and the Taj is not a business and hopefully will never be. This was just a quick pet project, which took literally an hour of research. Of course, we have missed out on a lot of things but an hour of research only gets us this far. I hope this got you thinking about how much monuments may be worth.