Vela Footwear — Investor Returns & Exit
The investor returns and exit — the 41.9% base-case project IRR, the 4.5× base-case exit multiple and the value-realisation pathways available to equity investors.
Section 19 · Business Plan
Investor Returns & Exit
The investor returns and exit — the 41.9% base-case project IRR, the 4.5× base-case exit multiple and the value-realisation pathways available to equity investors.
This section sets out the returns available to equity investors, the
assumptions behind them, and the realistic routes to exit. The headline
base-case return is attractive; the more important number is the
downside, which remains comfortably above a typical cost of capital.
Both are presented so investors can weight them for themselves.
Returns summary
| Measure | Base case | Downside case |
|---|---|---|
| Equity invested (R’000) | 98,000 | 98,000 |
| Exit EBITDA multiple | 4.5x | 4.0x |
| Terminal enterprise value (R’000) | 506,842 | stressed |
| Project IRR | 41.9% | 26.3% |
| NPV at 18% discount (R’000) | 145,347 | — |
Basis of the return
The base-case project IRR of 41.9% assumes the full
volume ramp to roughly 2.19 million pairs by Year 5, gross-margin
expansion to 29.6%, disciplined working capital, and an exit at 4.5x
Year-5 EBITDA (a terminal enterprise value of approximately R507
million). The downside IRR of 26.3% applies revenue 10%
below plan, materials three points higher as a share of sales, and a
lower 4.0x exit multiple. The NPV at an 18% discount rate is
approximately R145 million in the base case.
Exit routes
- Trade sale to a larger footwear or
industrial-products group seeking certified local manufacturing capacity
and Master Plan localisation credentials — the most probable
route. - Secondary / private-equity sale to a financial
buyer attracted by the de-leveraged, cash-generative profile and growth
headroom by Year 5. - Sponsor buy-out or recapitalisation once the
business is investment-grade, allowing earlier investors to realise
while the sponsor retains control. - Dividend recapitalisation — the model already
initiates dividends from Year 3, returning cash to shareholders ahead of
a full exit.
Alignment and holding period
The plan implies a five-year-plus hold to capture the full ramp and
de-leveraging before exit, by which point net debt / EBITDA is below
1.0x and EBITDA approaches R136 million. The substantial first-loss
equity layer and the sponsor’s operational role align incentives with
lenders and minority investors alike.
headline
The 41.9% base-case IRR is a genuine outcome only if the build, ramp
and margin trajectory all land close to plan — a demanding set of
conditions for a greenfield. The 26.3% downside IRR is the more
defensible anchor for an investment decision, and even it excludes a
severe execution failure. A disciplined investor should underwrite to
the downside, treat the base case as upside, and require the contract
pipeline, management appointments and concessional-funding awards to be
substantially de-risked before committing.
Confidential — this business plan is provided to prospective investors and lenders for evaluation purposes only and may not be reproduced or distributed without the written consent of Vela Footwear Manufacturing (Pty) Ltd.