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Acknowledgement
At the outset we would like to express our deepest gratitude for Mr. Tejas Chitharia
Sir who believed in us and provided his valuable insights throughout this project.

Secondly, we would like to thank Dr. Nitin Kulkarni who along with sir has given
direction and his valuable insights to us whenever required. Advices given by sir has
been helpful in including relevant data into this report.

We extend our gratitude to MET Institute of Management, our respected Director Dr.
Vijay Page and our respected Deputy-Director Dr. Sangeeta Tandon for their help
and support in executing this project.

We would like to extend our gratitude to our seniors Mr. Rohit Pal and Ms. Kiran
Kharat who acted as our mentors and constantly monitored our progress which
ensured timely completion of our set deadlines.

We would also like to thank Ms. Harpreetkaur Bhamra, Ms. Riya Bandekar and Ms.
Deepti Bhandarkar for advising us whenever we needed their help.

We also acknowledge with a deep sense of reverence, our gratitude towards our
parents and members of our family, who have always supported us morally as well as
economically.

At last but not the least, we extend our gratitude to all our friends who directly or
indirectly helped us to complete this project report.

Any omission in this brief acknowledgement does not mean lack of gratitude.

Thanking You

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 Executive Summary
The fast-moving consumer goods (FMCG) sector is an important contributor to India’s
GDP growth. The sector includes food & dairy products, packaged food products,
household products, drinks and others. FMCG is the fourth largest sector in Indian
economy and provides employment to around 3 million people accounting for
approximately 5% of the total factory employment in India. It is expected to grow to
$103.7 billion in the year 2020, clocking a Growth Rate of 21.4%. These products have
quick turnover and are relatively low cost. These products get replaced within a year
and such an industry requires a high-level distribution network to keep their products
aligned with market. There is strong presence of multinational companies in this
industry and hence the competition is high. Some of the very important growth drivers
for this industry are rising income levels, growing middle class, nuclearization,
changing lifestyles, low labour cost, availability of raw materials and favourable
government policies with respect to FDIs and GST rates.

Therefore, to understand the aspects of this sector we carried out a sectoral analysis
of this industry. The project is divided into two parts the initial one being where the
overall study of the industry is done through VUCA analysis and also studying the
commodities that act as raw materials in manufacturing the FMCG products. The
volatility of the commodity market also has a great effect on these companies and
hence they need to constantly hedge their risk and provide contingent plans for the
business to be working smoothly and efficiently with minimization of cost.

The second part includes the study of the companies that are big players in this
industry. These include, Nestle, Britannia, Dabur, ITC, HUL, Marico and P&G. We
performed the SWOT analysis which allowed us to study the trends that took place in
different companies over the years and what they are capable of offering in the future.
Further we prepared the BCG matrix of the respective companies which made us
aware of the market share of the products and their growth in the market. Moving on
we performed the financial analysis which helped us study the ratios of the company
and also forecasted their numbers for the next 5 years taking into consideration certain
assumptions on the basis of historical growth or latest growth. Lastly, the portfolio
construction was categorised into 3 types depending on the age and the risk appetite
of the investor. The first type being 30-40 age group who are considered risk taking

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investors, the next category is the 40-50 Age group. Here the investors are assumed
to have a medium risk and accordingly such stocks are allocated to them. The third
and the last group is 50 and above. These investors are assumed to have a lower risk
hence would not invest in risky ones at all. The stocks are judged on the basis of 4
ratios- Liquidity, efficiency, returns and leverage. For investors with low appetite risk
prefer stocks which are in consistent business operations, giving regular dividend and
low volatility like P&G, HUL and Dabur. Medium risk takers are assumed to be having
moderate risk-taking capacity and they prefer stocks which give a good investment
return with respect to dividends and/or capital appreciation. The companies under this
portfolio are generally those that have products in the leading market segment. For
e.g. Britannia in biscuits, Nestle in infant formula, coffee or noodles and Marico in
edible oils, hair oils and male grooming segment. Based on the above,
recommendations for the calls are made.

The industry lies in its growth to maturity stage as most of the companies in the
company life cycle do. The demand for such products is always there and hence
technological or supply chain logistics development is always on the go. This does
increase the profitability but it’s very important to maintain the operation costs as well.

However, due to recent Covid-19 developments as well as due to Aatma-Nirbhar call

given by Honourable Prime Minister Shri Narendra Modi, the companies may face
some turbulences in the short to medium term.

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Table of Contents
Executive Summary ............................................................................................................................ iii
Introduction to FMCG Sector in India ................................................................................................ 1
VUCA Analysis of FMCG Sector........................................................................................................ 3
Volatility.............................................................................................................................................. 3
Uncertainty ........................................................................................................................................ 3
Complexity ......................................................................................................................................... 3
Ambiguity ........................................................................................................................................... 4
Porter’s 5 forces of FMCG Sector in India........................................................................................ 5
I)Threat of new entrants .................................................................................................................. 5
II)Industry Rivalry ............................................................................................................................. 5
III)Threat of substitutes .................................................................................................................... 5
IV)Bargaining power of suppliers ................................................................................................... 5
V)Bargaining power of buyers ........................................................................................................ 6
Raw Materials Used in FMCG Industry ............................................................................................ 7
A) Food Segment ............................................................................................................................. 7
I) Sugar .......................................................................................................................................... 7
II) Milk and Dairy......................................................................................................................... 10
III) Plastic ..................................................................................................................................... 13
IV) Potato ..................................................................................................................................... 15
V) Kernel palm oil ....................................................................................................................... 19
VI) Wheat production in India ................................................................................................... 22
B) Personal Care Segment ........................................................................................................... 27
I) Glycerine .................................................................................................................................. 27
II) Aloe Vera ................................................................................................................................ 28
III) Menthol................................................................................................................................... 30
IV) Citric acid ............................................................................................................................... 31
V) Solubilizer ............................................................................................................................... 31
VI) Fatty acids ............................................................................................................................. 32
Analysis of Companies engaged in FMCG Sector in India............................................................................. 33
A) Britannia Industries Ltd. ........................................................................................................... 33
Introduction.................................................................................................................................. 33
SWOT Analysis of Britannia Industries Ltd. ........................................................................... 34
BCG Matrix of Britannia Industries Ltd. .................................................................................. 40
Fund Flow Analysis of Britannia Industries Ltd...................................................................... 41

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 Ratio Analysis of Britannia Industries Ltd. .............................................................................. 43
Financial Forecasting of Britannia Industries Ltd. ................................................................. 45
Company Life Cycle of Britannia Industries Ltd. ................................................................... 47
B) Dabur India Ltd. ......................................................................................................................... 48
Introduction.................................................................................................................................. 48
SWOT Analysis of Dabur India Ltd.......................................................................................... 49
BCG Matrix of Dabur India Ltd. ................................................................................................ 53
Fund Flow Analysis of Dabur India Ltd. .................................................................................. 54
Ratio Analysis of Dabur India Ltd. ........................................................................................... 56
Financial Forecasting of Dabur India Ltd ................................................................................ 58
Company Life Cycle of Dabur India Ltd. ................................................................................. 60
C)Hindustan Unilever Ltd. ............................................................................................................. 61
Introduction.................................................................................................................................. 61
SWOT Analysis of Hindustan Unilever Ltd............................................................................. 63
BCG Matrix of Hindustan Unilever Ltd. ................................................................................... 65
Fund Flow Statement of Hindustan Unilever Ltd................................................................... 66
Ratio Analysis of Hindustan Unilever Ltd. .............................................................................. 68
Financial Forecasting of Hindustan Unilever Ltd................................................................... 70
Company Life Cycle of Hindustan Unilever Ltd. .................................................................... 72
D) ITC Ltd. ....................................................................................................................................... 73
Introduction.................................................................................................................................. 73
SWOT Analysis of ITC Ltd. ....................................................................................................... 74
BCG Matrix of ITC Ltd. .............................................................................................................. 76
Fund Flow Analysis of ITC Ltd. ................................................................................................ 77
Ratio Analysis of ITC Ltd........................................................................................................... 79
Financial Forecasting of ITC Ltd. ............................................................................................. 81
Company Life Cycle of ITC Ltd. ............................................................................................... 83
E) Marico Ltd................................................................................................................................... 84
Introduction.................................................................................................................................. 84
SWOT Analysis of Marico Ltd. ................................................................................................. 85
BCG Matrix of Marico Ltd. ......................................................................................................... 87
Fund Flow Analysis of Marico Ltd. ........................................................................................... 88
Ratio Analysis of Marico Ltd. .................................................................................................... 90
Financial Forecasting of Marico Ltd. ....................................................................................... 92
Company Life Cycle of Marico Ltd........................................................................................... 94
F) Nestle India Ltd. ......................................................................................................................... 95

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 Introduction.................................................................................................................................. 95
SWOT Analysis of Nestle India Ltd. ........................................................................................ 96
BCG Matrix of Nestle India Ltd................................................................................................. 99
Fund Flow Analysis of Nestle India Ltd................................................................................. 100
Ratio Analysis of Nestle India Ltd. ......................................................................................... 102
Financial Forecasting of Nestle India Ltd. ............................................................................ 104
Company Life Cycle of Nestle India Ltd. .............................................................................. 106
G) P & G Ltd.................................................................................................................................. 107
Introduction................................................................................................................................ 107
SWOT Analysis of P&G Ltd. ................................................................................................... 108
BCG Matrix of P&G Ltd. .......................................................................................................... 112
Fund Flow Analysis of P&G Ltd. ............................................................................................ 113
Ratio Analysis of P&G Ltd....................................................................................................... 115
Financial Forecasting of P&G Ltd. ......................................................................................... 117
Company Life Cycle of P&G Ltd. ........................................................................................... 119
Construction of Portfolio and Company Allocation...................................................................... 120
Portfolio Group 1 .......................................................................................................................... 121
Portfolio Group 2 .......................................................................................................................... 122
Portfolio Group 3 .......................................................................................................................... 124
Final Call ............................................................................................................................................ 125
Bibliography ........................................................................................................................................ 128

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 Introduction to FMCG Sector in India
Fast-moving consumer goods (FMCG) are products that sell quickly at relatively low
cost. Examples of FMCG goods include cosmetics, household products, electronic
goods, package food products, plastic products, pharmaceuticals, etc. With revenue
forecasted at US $ 83.7 billion in 2019, the FMCG sector is the 4th largest sector in
the Indian economy. Its revenue share increased from US $31.6 billion to US $52.8
Billion from 2011 to 2018, clocking a growth rate of 21.4%. It is expected to grow at a
Compounded Annual Growth Rate (CAGR) of 27.9% to sum of US $ 103.7 Billion by
2020. (1)

One of the most crucial reasons for such a phenomenal growth of the FMCG sector is
the demographics of India. On the basis of area, the population can be divided into
urban areas and rural areas. The urban areas hold 35% of the total population of the
country and the rural area holds around 65%. Around 45% of the total revenue out of
which 40% of the total consumption in major FMCG categories comes from rural India.
The rest 55% comes from the urban area. The rural FMCG market is expected to grow
at CAGR of 14.6%. Currently, 50% of the total expenses incurred by the rural people
is incurred for FMCG products. (2)

The demographic factor can further be explained with the help of population based on
age and growth. Approximately 12.1% of the global population resides in India. As per
2018 report, the Indian demographics based on age was as follows: Age 0 to 19 years–
36%, 20 to 39years – 33%, more than 40 years – 41%. As we can see, around 2/3rd
of the national population is young and working class. Also, the population growth rate
is approximately 1.1%, providing a steady growth to the sector. It is estimated that by
the year 2030, India will have approximately 370 million Generation-Z(Gen-Z)
consumers changing the dynamics when it comes to priority of goods.

The third important segment of demographic factor is the income level of consumers.
Increase in the income level of consumers has led to an increase in disposable
income. There has been an increase in per capita income from ₹79412 in 2014 to
₹1,12,835 in 2018. Such an improvement drives the incremental growth of the FMCG
sector. According to McKinesy Global Institute report, the income level of Indian
consumers will almost triple and India will become world’s fifth – largest consumer
market by 2025. While talking about income level, it is also important to talk about the

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consumption level. As of March 2018, the average per capita consumption for FMCG
products was about ₹2,800. This is quite low compared to other countries with
emerging economies. For example, the average per capita consumption of India is
twice of India, that of China is four times more and that of Philippines is 5 times more
than that of India. Some reasons that can be attributed for such low consumption could
be due to affordability, awareness as well as availability of products in remote parts of
India. However, this would also work in favour of FMCG companies as they can
penetrate such unexplored markets with efficient marketing strategies and strong
logistics and distribution system. It is estimated that by 2025, there would be around
850 million consumers buying FMCG products. (3)

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 VUCA Analysis of FMCG Sector
Volatility
 Shift of customers’ preference from brand loyalty to product requirement.
 Volatility in Key commodity prices essential to the business operations of the
company.
 Volatile and unstable global markets having widespread implications for
manufacturing organisations from rising energy costs to unexpected fluctuations in
raw material price levels, destabilising supply chains, etc.
 Shortage of manpower due to migration triggered by the lockdown (4).

Uncertainty
 Shortage of goods at retailers as well as distributors due to reduction in
manufacturing activities as well as shrinkage in transportation triggered by the
lockdown. (5)
 Increase in transit period due to lockdown.
 Uncertainty of customer preference towards discretionary spending such as luxury
products or tobacco products post lockdown.
 Global unrest and Trade war situation between countries.

Complexity
 Complexity in designing and maintaining safety hygienic protocols right from
procurement till delivery of products so as to ensure zero chance of Covid-19
transmission.
 Paradigm shift in taxation procedures post GST.
 Constant changes and updates in GST processes.
 Difficulty in storing and maintaining records. Need more space, follow more paper
work and hire more people for adequate maintenance. Time consuming process.
 In order to get the input tax credit, the seller as well as the buyer need to upload
their invoice and it should match, making the process mandatory and time
consuming.
 Amendment in The Essential Commodities Act to deregulate trade in cereals, edible
oils, oilseeds, pulses, onion and potato, and stock limits for these will be imposed
only in exceptional circumstances.

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 Formulation of a new central law to provide barrier-free inter-state trade of farm
produce and more freedom for farmers to sell directly or even online giving access
to nationwide market across state boundaries. No curbs or stock limits on such
commodities except in case of certain situations such as natural calamities.
 Fulfilling of complex regulatory requirements in case of transnational and
multinational companies.

Ambiguity
 Quality assurance of the raw material requirements and the finished products in
respect of contamination from Coronavirus.
 In cases of Mergers, Acquisitions and takeovers, the decision to hire and fire the
key managerial persons of the acquired/merged company, determining the working
environment and policies

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 Porter’s 5 forces of FMCG Sector in India

I)Threat of new entrants

Low-Medium

Local competition for each company does exist but the huge FMCG company enjoy a
wide and deep distribution network, economies of scale and brand recognition and
large capital investments

All these factors give a huge advantage to the few major players in the market hence
the threat of new entrants remains low

II)Industry Rivalry
High

There are multiple brands within a single parent company catering to different
consumers as well as many companies with a wide range of portfolio for the same
category.

E.g. In case of detergents HUL has Wheel, Rin and Surf Excel, P&G has Ariel and
Tide, Nirma, Ghadi, Henko by Jyothy Laboratories.

FMCG products are low involvement and low cost so brand loyalty is not very high.
Consumers can easily switch between products.

III)Threat of substitutes
Low

As majority of the FMCG sub sectors are essentials in nature the threat of substitutes
is low.

IV)Bargaining power of suppliers

Low

Since these companies purchase in large quantities they are able to dictate the terms
of supply. Number of suppliers for products are also not few.

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 V)Bargaining power of buyers
High

Consumer loyalty is low because FMCG products are low involvement and low cost.

They can switch to other alternatives giving more or less the same features from a
competitor.

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 Raw Materials Used in FMCG Industry

A) Food Segment

I) Sugar

Sugar is a soft commodity, which is produced, traded and consumed all around
the world. The sugar cane or sugar beets are the raw materials from which
farmers can produce sugar. Sugar is used widely in everything from food to
industrial applications. Sugar can be produced and/or refined many countries
and finds its way in different forms, for different purposes to different
destinations.

Global sugar production for the year 2018-19 decline by 12 million tonnes
to 183 million tonnes. Global stocks were expected to reach 53 million metric
tonnes (raw value) as a massive stock-building in India was expected to more
than offset the impact from lowered stock levels in China and the European
Union. India is the Largest Producer of Sugar in the World. During sugar season
India is having a share of over 15 percent of the world’s sugar production. (6)

Sugar industry is the second largest agro based industry in India. Its
contribution to the Indian economy is enormous. With a total turnover of around
Rs. 20000 crore per-annum, the Indian Sugar Industry is amongst the largest
tax payers, contributing around Rs. 1800 crore per annum to the Central and
State exchequers. Further, about 4.5 crore sugarcane farmers, their
dependents and a large number of agriculture labour and about 5 lakh skilled
and semi-skilled workers mostly from rural areas, earn their livelihood form the
sugar industry.8 It is also employment generated industry through its various
ancillary activities, various agencies of distributive trade and through subsidiary
industries such as confectionery and alcohol. By way of sugarcane price about
Rs. 12000 crores are disbursed amongst cane farmers every year. India’s
2018-19 sugar production was 33.0 million tonnes compared to 32.3 million

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 Figure 1

tonnes produced in the previous year. Output in Uttar Pradesh, Maharashtra

and Karnataka accounted for a ~80% share of the country’s production. (7)
During the current year, Sugar production in the country touched nearly 265
lakh tonnes (LT) till May 15, about 61 LT lower than the corresponding period
last year. Sugar mills are grappling with excess stocks since bulk consumers of
the white sweetener such as beverage makers and sweetmeat producers are
affected by the Covid-19 lockdown and hence they are yet to resume buying.

Factors affecting sugar prices

1) Global sugar stocks (inventories):

This is a factor actually that affects all commodities. Likewise, for sugar, low
levels of stocks indicate strong demand, weak supply or a combination of the
two. Because of the long supply cycle of sugar, whenever there is a problem in
terms of storing the sugar commodities, then there is also a significant effect in
sugar price.
2) Oil price:

Another important factor which influences the price of sugar is oil price. This is
because sugar can be considered an energy source. The value of an energy
source depends on the caloric value of the source and the energy price. The

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latter is dominated by the oil price. This is not theory; in practice the sugar cane
farmers can produce sugar or ethanol from their cane. The ethanol, competes
with gasoline in the transport fuel market. Thus a decrease in gasoline’s price
will also mean a decrease in ethanol prices and hence less demand on sugar
cane to produce ethanol, thus potentially an oversupply of raw sugar. And an
abundance of raw sugar will bring sugar prices down.
3) Weather conditions:

As mentioned before countries with warm climate produce sugar mainly.

However, imagine that a warm climate can also be “too warm” for sugar. A
drought, for example, can damage sugar canes and make the production cycle
roll slower. While too warm atmosphere can cause problems, also wet weather
is not ideal for producing sugar. Sugar canes require dry atmosphere.
Malfunctions in the production cycle due to weather conditions are another
driving factor in sugar price.

4) Governmental regulations:

Governmental contributions and import tariffs are playing also a role in the
game of sugar trading. The FRP for sugar season 2018-19 was fixed at Rs 275
per quintal of sugarcane linked to a basic recovery of 10.00% and subject to a
premium of Rs 2.75 per quintal of sugarcane for every 0.1 percentage point
increase above that level. The SAP for the sugar season 2018-19 was kept
unchanged at Rs 315 per quintal of the normal variety of sugarcane.

Figure 2

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 II) Milk and Dairy
India is the highest milk producer in the entire globe. India is well known as the 'Oyster'
of the global dairy industry, with opportunities galore for the entrepreneurs globally. In
India dairying from very much earlier is regarded as an instrument for social and
economic development. The country's milk supply comes from millions of small
producers, who are dispersed throughout the rural areas. All these farmers maintain
an average herd of one or two milch animals, comprising cows and/or buffaloes.
Mostly ample labour and a small land base encourage farmers to practice dairying as
an occupation subsidiary to agriculture. As income from crop production is seasonal
instead dairying provides a stable which is a year-round income and also an important
economic incentive for the small farmer.

In India Milk production is dominated by small and marginal land-holding farmers and
also by landless labourers who in aggregate own 70% of the national milch animal
herd. And as the crop production on 78% of the agricultural land still depends on rain,
which is prone to both drought and floods, rendering agricultural income is very much
uncertain for most of the farmers. Dairying, as a subsidiary source of income and
occupation, is real relief to most of the farmers in the society. Usually one or two milch
animals enable the farmers to generate sufficient income to break the vicious
subsistence agricultural-debt cycle.

India had tremendous milk production in 40 years and has become the world's largest
milk-producing nation with a gross output of 187.7 million tons in 2018. The Indian
Dairy Industry has achieved this strength of a producer-owned and professionally-

Figure 3

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managed cooperative system, despite the facts that a majority of dairy farmers are
illiterate and run small, marginal operations and for many farmers, selling milk is their
sole source of income. More than 10 million dairy farmers belong to 96,000 local dairy
cooperatives, who sell their products to one of 170 milk producers' cooperative unions
who in turn are supported by 15 state cooperative milk marketing federations. (8)

Factors affecting Milk Prices

On the long-term demand side, growing per capita income is the major driving force,
indicating a demand shift. The causes for increase in demand have been identified
and defined as growth in population, urbanisation, changing demography, increasing
per Capita GDP, widespread and 24 × 7 availability of liquid milk / milk products,
changing food consumption patterns, high income elasticity of demand for milk and
regional imbalances in income / consumption.

Domestic supply is determined by average production per animal and number of

animals in milk. Availability of credit and risk cover facility and its market price have a
positive relationship while beef price is expected to have negative effect.

Since the source of milk is the female dairy animal, it is crucial to understand the
factors that impact their population. The profitability is moderated by productivity in
terms of breed, feed and management. The number of female animals is also
adversely affected by high beef price as it results in increased attrition. Feeding and
labour are the major costs of rearing dairy animal, apart from cost of ownership and
availability of labour is affected by social factors such as stigma associated with
farming and preference for employment in urban areas.

In the long-term, milk supply is also a function of the proportion of the three classes of
female bovine animals viz. buffaloes, indigenous cows and crossbred cows. Any ban
on cow slaughter is expected to create additional demand for carabeef which is beef
from buffaloes, adversely affecting their live numbers. Buffaloes have a high milk
production capacity and produce 55% of the total milk in India. Hence, any reduction
in their population is expected to adversely affect total milk production, imparting an
upward pressure on milk price.

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In the short-term, it is the domestic stock level of SMP and butter that determines the
price of milk. Their stocks can be manipulated quickly and easily by way of exports or
imports. This impact gains importance from the fact 4 that the option of enhancing

Figure 5

Figure 4

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growth rate in domestic milk production being a physiological process is available only
in the medium to long term.

III) Plastic
Packaging fulfils the diverse role from protecting products, preventing spoilage,
contamination, extending shelf life, ensuring safe storage thereby helping to make
them readily available to consumers. Due to varied crop pattern, localized production
of commodities, safety and hygienic storage, transportation and distribution, and
protection against wastage, packaging is of utmost importance.

Why Plastics for packing?

Plastics have emerged as the most preferred choice of packaging material for various
products- from food, beverages, chemicals, electronic items and so on. They offer
unique advantages over conventional materials.

a. Safety:
Plastics are safer materials for packaging of food products specially polyolefins
which do not react with food. Pilferage and contamination is difficult.

b. Shelf Life:
Plastics packaging material offer better shelf life.

c. Cost:
Plastics are the most cost effective medium of packaging when compared with
any other material, the cost of transportation is reduced considerable on
account of lower weight and less damage.

d. Convenience:
Plastics can be converted in any form with various processing techniques, thus
can pack any type of substances like liquids, powders, flakes, granules, solids.

e. Waste:
Packaging in plastics reduces the wastage of various food products, typical
example is potatoes or onions packed in leno.

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 f. Aesthetics:
A right choice of plastics packaging increased the aesthetic value of products
and helps in brand identity.

g. Handling and Storage:

Products packed in plastics are easiest to handle and store as well as
transport.

h. Plastic products are easy to recycle.

Every day there are new products packed in plastics replacing conventional
products and when a thought is given to pack a new product the first choice
appears in the mind is Plastic packaging material.

Types of Packaging

Plastic is used in various packaging materials for FMCG products like Stand up
Pouches, Zipper Pouches, Laminate Tubes, etc.

Stand up Pouches are widely known for providing utmost safety. They are available
as excellent shelf-marketing medium for the packaging of spices, confectioneries, oil,
allied products and juices. They are offered inwell-defined standard size and shapes
to the valuable clients of domestic as well as overseas market. They are durable,
having glossy finish and eye catching looks.

Zipper Pouches are ideal to enhance the appeal of the packed food products. They
are widely applicable in different industries for packing Spices, Pickles, Salt, Semi
Cooked Food, Namkeens, etc. They are easy to carry and easy to store.

Laminate Tubes are widely useful for the packaging of pharmaceutical, tooth pastes
as well as cosmetics creams. They are used in different sectors from medicine to paint,
from skin care to toothpastes, etc.

(9) (10) (11)

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 IV) Potato
History

Potato popularly known as ‘The king of vegetables’, has emerged as fourth most
important food crop in India after rice, wheat and maize. Because, the dry matter,
edible energy and edible protein content of potato makes it nutritionally superior
vegetable as well as staple food not only in our country but also throughout the world.
Being a short duration crop, it produces more quantity of dry matter, edible energy and
edible protein in lesser duration of time than cereals like rice and wheat.

In our daily life we eat potatoes almost every day and have been used as food for
more than 10000 years. Potato in India has still to transform from simply a vegetable
supplement to serious food security option. Ability of potato to produce highest
nutrition and dry matter on per unit area and time basis, among major food crops, it
is the crop to address future global food security and poverty alleviation. Potato in
India has still to transform from simply a vegetable supplement to serious food
security option. The current share of potato to agricultural GDP is 2.86% from 1.32%
cultivable area.

Rising number of working couples, rapid rate of urbanization, enhanced tendency of

eating out of home, higher disposable income levels of people and important place of
potato in fast food items, create an ideal situation for enormous expansion of potato
consumption in the near and distant future.

Products

Potatoes are used in making chips prominently. Companies like ITC, PepsiCo, Virani
Group, Parle etc for manufacturing chips.

UP, West Bengal, Bihar, Gujarat, Madhya Pradesh, are the top potato producing
states in India with a total production of 44,193.15 thousand tonnes in the year 2018-
19. KufriChandramukhi, KufriLauvkar, Kufri Chipsona-1, Kufri Chipsona-2, Kufri
Anand are potato varities suitable for making chips and French fries.

ITC makes Bingo and the potato chip variant with its different seasonings use potato
as the primary raw material. ITC also sells healthy potato and French fries.

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Potato production in India

Production and annual demand for potatoes from 2012-13 to 2017-18

Table 1

Between 1960 and 2000, potato production increased by almost 850 percent, partly in
response to growing demand from higher-income urban populations. Since 1990, per
capita consumption has risen from around 12 kg to 17 kg a year. Potato consumption
per capita reached 25.5 kg in 2017 in India, according to Faostat.

Challenges

India lacks the right appliances for mass farming (though India’s manufacturing sector
is adequately advanced) probably because farm sizes are small. Tractor
manufacturers are not investing enough in bringing to India the latest agricultural tools
commonly used for automation in farming

The main problems of potato producers in the tropics and subtropics are the
unsatisfactory quality of seed potatoes, mainly derived from the informal seed supply
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system, and the insufficient availability and high cost of certified seed potatoes. The
hope for improving this situation can be the application of soil-less technologies for
mini tuber production under controlled conditions.

Our current agronomic practices are also pretty primitive and yield is low. Large-scale
investment is needed in drip irrigation systems for farming, especially in tubular crops
like potato which need less water to grow.

Without these improvements the country will have to depend on sporadic imports that
often have fungal issues like black dot, brown rot and other defects that are not visible.
So the cost to consumer and the nation’s import bill keeps rising

Current Scenario

Despite higher retail price of potato, the sowing of tuber is set to shrink in Northern
states as farmers prefer alternate crops including onion, garlic, sugarcane and other
perishables in this Rabi season. The rising gap between retail and wholesale price in
recent years in India, second largest producer of potato, is dissuading big growers
from cultivation of potato in states like Uttar Pradesh, Punjab and Haryana.

In the last few years the gap between wholesale and retail price of potato has widened
by two-three times. It has disenchanted potato growers and many are shifting to other
crops. Mostly big farmers who store their produce have incurred losses in potato
business and many such farmers are shifting from cultivation of tuber.

Figure 6

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Potato prices have plunged up to 12% in the past month. And although peanut output
was lower than usual, prices have been steady at the wholesale market due to steep
fall in demand. Hotels, restaurants and bars normally buy 70% of french fries sold in
the country, but the lockdown has badly hit sales. Offtake from the cold storages are
down by 50%. Prices too have fallen by nearly 12% since the second week of
April 2020. As of May 200Potato prices have shot up due to transportation bottlenecks.

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 V) Kernel palm oil
History

Palm kernel oil is the oil that is used for manufacturing eatables or snacks under the
FMCG sector. Most of this oil is not produced in India but imported from countries like
Malaysia and Indonesia. (12)

The demand for this oil all over the world has increased so much that Indonesia
cleared out many of their forests for the cultivation of palm oilseeds. Palm oil can be
traced back to more than 5000 years ago. Palm oil was long recognized in West
African countries.

It is used widely among West African peoples as cooking oil Palm oil was first
introduced to Malaysia (then Malaya) in 1870 as an ornamental plant. Its use as a crop
was developed in 1917 when the first plantation was established. Then the palm oils
plantation was mostly operated by English landowners. From the 1960’s major palm
oil plantation scheme was introduced by the government mainly to eradicate poverty.
Each settler was allocated 10 acres of land planted either with Palm oil or rubber, and
they are given 20 years to pay off the land.
Malaysia is the largest exporter of palm oil in the world, producing about 15 million
tonnes of palm oil a year. It now accounts for approximately 47% of global palm oil
production and 54% of world exports. As one of the biggest producers and exporter of
palm oil and palm oil products, Malaysia has been playing an important role to
accomplish the needs and to stay competitive in the world’s oils and fats market.

Production in India

Oil Palm India Limited was established in the year 1977 with the objective of
propagating oil palm cultivation in the country and more particularly in Kerala. From
1983 onwards the Company started functioning as a joint venture of the Government
of Kerala and Government of India with share participation of 51% and 49%
respectively.

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Palm Oil contains an equal proportion of saturated and unsaturated fatty acid
containing about 1-40% oleic acid, 10% linoleic acid. 44% palmitic acid and 5% stearic
acid. The unprocessed palm oil is used for cooking in various countries.

The Company has set up a Kernel Oil Factory on an investment of about Rs.2.5 crores
for the extraction of Palm Kernel Oil at Yeroor. Annual production of Kernel Oil comes
to about 800 Metric Tonnes. Oil Palm Development Programme (OPDP) in India was
launched during 1999-2000 under the “Technology Mission on Oil Seeds and Pulses
(TMOP) with a focus on area expansion. From 2004-05 onwards the scheme is being
implemented as part of the “Integrated Scheme of Oil Seeds, pulses, Oil Palm and
Maize (ISOPOM).

Oil Palm is comparatively a new crop in India and is the highest vegetable oil yielding
perennial crop. With quality planting materials and proper management there is
potential of achieving 20-30 MT Fresh Fruit Bunches (FFBs) per hectare after attaining
the age of 5 years. Therefore, there is urgent need to intensify efforts for area
expansion under Oil Palm to enhance palm oil production in the country.

Now, National Security Mission (NFSM) envisages increases in production of

vegetable oils. In Kerala state, Oil Palm India Limited (OPIL) is the Nodal agency for
undertaking area expansion programme of Oil Palm cultivation amongst the small
holders in the state. The central and state government are extending subsidy for the
cultivation. The programme is successfully implementing in the state with the active
participation of the farmers. (13)

Figure 7
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 Products

Kernel palm oil is utilised in manufacturing various eatables like ice-cream, margarine,
chocolate confectionary, cookies as well as breads.

Nestle does not have any palm oil as its major raw material for their products as they
use only processed palm oil for some of their products and has no direct link to the
plantations. The KERNEL PALM OIL is mainly used for the production of chocolate
like Nestle classic and Kit Kat also in some of the dairy products manufactured by the
company. Palm oil is used in beverages and culinary. Most of the oil they use they get
it from Malaysia and Indonesia. It is also used in Maggi instant noodles.

ITC deals with a wide variety of chocolates and confectionaries that fall under its
FMCG segment. Kernel palm oil is used in premium chocolates like Fabelle. It is used
in the chocolates to prevent it from melting. Also in biscuits and cakes segment which
includes the Dark Fantasy. The oil is used in Bingo chips Tomato flavour only, hence
these chips are not sold in the school premises following the restrictions

HUL uses the Kernel Palm Oil in the various ice creams they make through Kwality
Walls and Magnum. Kwality walls are well known for their creamy taste and the oil
makes it more smooth and creamier.

Britannia breads and cake use palm oil to keep it fresh and its inexpensive to bake. It
is widely used in making bread because it is solid at room temperature. Britannia uses
this oil in baking its cookies like Good day, Milk Bikis, Tiger etc. They had a false
allegation to face where people thought it contains pork, that is when they (14)

Figure 8
Page | 21
came out and cleared that E472e emulsifier is actually the palm oil they use in baking
their products.

Current Scenario

With respect to the present lockdown situation and lack of labour force, the decision
of easing imports of refined palm oil seemed the right thing to do. But, this will have
an adverse effect on the domestic edible oil refining industry and its ancillary units.
The total monthly demand of palm oil alone has come down by almost 80% to 3.5 to
4 lakh tonne post the lockdown due to drop in institutional sales.

This demand can be easily met by the domestic oil refining industry.

Seeing this is as a chance to increase the production in India and not relying highly on
the products from Malaysia and Indonesia, SEA (Solvent Extractors Association of
India) urged the Indian government to increase the custom duty on these imports.

VI) Wheat production in India

History

Having a significant share in consumption of food basket with a 36% share in the total
food grains produced from India and ensuring not only food security but also nutrition
security, wheat is extensively procured by the government and distributed to a majority
of the population. It ensures not only food security but also nutrition security. The
cereal is one of the cheapest sources of energy, provides a major share of protein
(20%) and calorie intake (19%) from consumption. Wheat is accessible across the
country and consumed as various processed forms from prehistoric times. After
independence, India was net deficit in food production and had to import wheat for
domestic consumption. During 1966–1967, India adopted new strategy which led the
‘Green Revolution’, especially in the production of wheat and rice. Coordinated
research and several developmental and food security-based programmes in various
phases have made the nation to progress closer towards ‘food and nutrition for all’ by
achieving record and surplus production of wheat. After the Green Revolution, the

Page | 22
nation has maintained strategic distance from famine even during unfavourable
weather conditions.

Products

Indian wheat is largely a soft/medium hard, medium protein, white bread wheat,
somewhat similar to U.S. hard white wheat. Wheat grown in central and western India
is typically hard, with high protein and high gluten content. India also produces around
1.0-1.2 million tons of durum wheat, mostly in the state of Madhya Pradesh. Most
Indian durum is not marketed separately due to segregation problems in the market
yards. However, some quantities are purchased by the private trade at a price
premium, mainly for processing of higher value/branded products.

The most important product that is produced by one of the biggest FMCG player in
India i.e. ITC is Aashirvaad Atta. Durum wheat is widely used in India for production
of pasta by Maggi under Nestle and Sunfeast Pasta under ITC. There are range of
healthier biscuits provided by ITC namely, SunfeastFarmlite Digestive biscuits which
are made from their own brand ‘Aashirvaad atta’. Sunfeast snacky which are the
crackers segment under Sunfeast also require wheat flour for production.

Britannia has a complete segment of biscuits, crackers and chips made from wheat
flour. Their digestive biscuits were the first sugar free diabetic friendly biscuits.
Britannia also provides with high quality bread made of 100% whole grains of wheat.
Britannia also produces premium bake rusk ‘Toastea’ which requires wheat for
production.

Nestle mainly uses wheat for the production of atta noodles and pasta under the brand
Maggi. They also require wheat for the production of cereals.

Maida is a white flour from the Indian subcontinent, made from wheat. Finely milled
without any bran, refined, and bleached, it closely resembles cake flour. Maida is used
extensively for making fast foods, baked goods such as pastries, bread, several
varieties of sweets, and traditional flatbreads. So not only is pure atta used but also
the processed wheat is being used.

ITC uses it to make cakes and biscuits like dark fantasy, sunfeast creamy biscuits etc.

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Britannia uses it to make breads, cakes and biscuits. Good day, Bourbon, Milk Bikis
are some of the biscuits that are made out of Maida.

Nestle India uses Maida to prepare Maggi, one of the main ingredients in the
preparation of noodles. They also have healthier segment as mentioned earlier atta
noodles.

Conditions Favourable for Production

Figure 9

Wheat production the last four years has been above trends due to development and
expansion of new area planted, higher yielding varieties and generally favourable
weather conditions. After stagnant consumption, India’s wheat consumption is
forecast to increase in 2020-21 to 93 million tonnes due to excess domestic supplies.
The cultivated area under wheat at national level has shown increasing trend, from
29.04 million hectares to 30.54 million hectares with a magnitude of 1.5 million-hectare
(5%) net gain in terms of area. (15)

The sharp rise in minimum support price and government’s procurement are the two
important drivers which led to significant increase in the area under wheat cultivation.

Page | 24
 Challenges

The variation in wheat cultivation is also due to the weather conditions as high
temperatures are not suitable for its growth. In India a significant part of wheat area is
under heat stress, and Gangetic plains and central and peninsular India are the most
heat-stressed regions, whereas it is moderate in north-western parts of Indo-Gangetic
Plains. Variability in climate is also one of the biggest environmental threats to Indian
agriculture, potentially impacting the wheat production and security. In India, it has
been predicted that with every rise in 1°C temperature, the wheat production will be
decreased by 4–6 million tonnes. Rainfed wheat will experience a reduction in yield
with 9–25% profit loss for every 2–3.5°C rise in temperature.

Soil contamination is another issue involved as since Green revolution excessive use
of fertilizers has led to the deterioration of the soil and the mono cropping farming style
had made it unfit for further use. Therefore, new technologies and awareness through
various programs and assistive farming like ITC which provides help and knowledge
to the farmers with respect to farming has allowed them to grow. Improved variety of
seeds through proper research and development have been formed which provide
with higher quality of wheat, this has improved the status of some farmers but is still
to spread a long way.

Current Scenario

Punjab, in the last few days, has issued 2.7 million coupons to farmers for bringing
wheat crop to mandis, while the number of purchase centres has been increased to
around 3,691 in the state. This has been done by converting 1,824 rice mills into wheat
procurement centres to avoid over-crowding.

A farmer shall be entitled to take multiple coupons each day or on different days
depending on space in the purchase centre in order to avoid rush in the mandis,
according to official guidelines.

One of the biggest problems faced by the farm leaders are that the labourers not
turning up for the work because of which the harvest of the wheat crop is done by
engaging their family members.

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He said the state had increased the procurement centres and planned to ensure
smooth movement of tractors and manpower at the mandis while maintaining all
Covid-19 guidelines.

Uttar Pradesh government has also started a system of online tokens so that there is
no crowding in the markets. The centre in-charge will then generate an online token in
a week's time, and the same will be sent to the farmer through an SMS.

In Madhya Pradesh, the government has started with ‘saudapatrak’ system which is a
contract between the trader and the farmer, where in the farmers don’t have to get
their whole yield in the market, but the trader based on the sample shown fixes the
trade and gets it from the designated location or outside the mandi and the mandi
records the trade. It is governed by Agriculture Produce Marketing Committee.

One of the major drawbacks the FMCG companies are facing is transporting the wheat
to the required production mills without losing its quality because in such a situation it
is very difficult for them to adhere to the government restrictions as well as provide the
products to the consumers. Secondly even if the products do reach the production unit
the manufacturing is in a pickle because of lack of available labour resources as they
are functioning to about 45 to 55 % of their capacity. (16)

Figure 10

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 B) Personal Care Segment

I) Glycerine
● Glycerine supply has been strong in the first 9 months of 2019. Biodiesel sales
suffered however during QIII, especially in Argentina, the USA and South-East
Asia. On the other hand, Brazilian production reached a new high between July
and September. Consumption has matched this surge in supply, especially in
technical applications such as antifreeze in Russia.
● Consumption in all applications in China seems to show no limit as to their
capacity to absorb glycerine at attractive prices. Prices have increased slightly
on the international market during QIII, although gains proved unsustainable
and reversed in QIV.
● A substantial increase in refined glycerine capacity has squeezed refining
margins to unsustainable levels. Integrated glycerine refiners are selling crude
glycerine rather than refined glycerine.
● With limited new applications for glycerine on the horizon capable of absorbing
very large volumes, the glycerine market will remain long and low priced for
2020.
● Niche markets are emerging such as RSPO segregated or pure rape non-GMO
kosher food and pharmaceutical grade quality, which can command a hefty
price premium over basic quality.
● Good quality crude glycerine prices don’t allow for much refining margins, which
is not sustainable in the mid-term.
● Crude glycerine prices seem bound to have to decrease further. (17)

Glycerine Prices: Outlook

● Contracts for QIV have been settled around 40ct/LB. delivered in bulk for
kosher USP grade and 35cts/lb. delivered in bulk for technical grade.
● Supply is showing signs of constraint. It is difficult to find price- effective
biodiesel crude glycerine, which is key for established refiners to keep
production levels where they are.
● Cheap imports from South East Asia and South America are forcing domestic
producers to work with unsustainable refining margins.

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 ● Prices are due to remain on the low side as long as imports continue flowing in.
The prospect of re-introducing the blender’s credit for biodiesel producers early
in 2020 further dispels possibilities of sustainable price increases in the coming
months.

US Production: Q1, Q2 and Q3 2019 December 2019 Glycerine Market Report /

Issue Glycerine generation, by industry January - September 2019 in MT.

Biodiesel/Methyl esters 435,000 Fatty acids 71,000 Fatty alcohols 11,000 Soaps 8,000
Total 525,000

Glycerine imports into China are heading towards 1.3 million MT in 2019, +34%
in one year. The Chinese Market:

The market continues to absorb large volumes of glycerine, the great majority as crude
glycerine which is then domestically distilled. QIII imports were 87k MT of RG and
247k MT. of CG, decreasing versus QII.

II) Aloe Vera

During the 16th century, the Indian tribes also became familiar with the aloe healing
plant. Aloe was one of the 16 holy plants which were worshiped with a god like status.
The diluted aloe juice that they applied to their skin worked as an insect repellent
protecting them on their exhausting marches through the infested swamp areas. The
Indians also used the aloe insect repellent on wood and other vulnerable materials
that were likely to be damaged by insects; this treatment preserved the materials with
great effect.

The Aloe Vera plant has been known and used for centuries. It is a true gift from
nature. Ancient records show that the benefits of Aloe Vera have been known for
centuries with its therapeutic advantages and healing properties. It grows mainly in the
dry region of Africa, Asia, Europe and America. In India it is found in Rajasthan, Andhra
Pradesh, Gujarat, Maharashtra and Tamil Nadu. The nutrients make up of Aloe Vera
is one of a kind and has amazing natural healing properties. Its uses are multiple and
undoubtedly the nature’s gift to humanity and it remains for us to introduce it to
ourselves and thank the nature for its never ending gift.

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The plant has triangular, fleshy leaves with serrated edges, yellow tubular flowers and
fruits that contain numerous seeds. Each leaf is composed of three layers:

1) An inner clear gel that contains 99% water and rest is made of glucomannans,
amino acids, lipids, sterols and vitamins.

2) The middle layer of latex which is the bitter yellow sap and contains anthraquinones
and glycosides.

3) The outer thick layer of 15–20 cells called as rind which has protective function and
synthesizes carbohydrates and proteins. Inside the rind are vascular bundles
responsible for transportation of substances such as water (xylem) and starch
(phloem).

Active components with its properties: Aloe Vera contains 75 potentially active
constituents:

Vitamins, enzymes, minerals, sugars, lignin, saponins, salicylic acids and amino acids

1. Vitamins: It contains vitamins A (beta-carotene), C and E, which are

antioxidants. It also contains vitamin B12, folic acid, and choline. Antioxidant
neutralizes free radicals.
2. Enzymes: It contains 8 enzymes: aliiase, alkaline phosphatase, amylase,
bradykinase, carboxypeptidase, catalase, cellulase, lipase, and peroxidase.
Bradykinase helps to reduce excessive inflammation when applied to the skin
topically, while others help in the breakdown of sugars and fats.
3. Minerals: It provides calcium, chromium, copper, selenium, magnesium,
manganese, potassium, sodium and zinc. They are essential for the proper
functioning of various enzyme systems in different metabolic pathways and few
are antioxidants.
4. Sugars: It provides monosaccharides (glucose and fructose) and
polysaccharides: (glucomannans/polymannose). These are derived from the
mucilage layer of the plant and are known as mucopolysaccharides. The most
prominent monosaccharide is mannose-6-phosphate, and the most common
polysaccharides are called glucomannans [beta-(1, 4)-acetylated mannan].
Acemannan, a prominent glucomannan has also been found. Recently, a

Page | 29
 glycoprotein with antiallergic properties, called alprogen and novel anti-
inflammatory compound, C-glucosyl chromone, has been isolated from Aloe
vera gel.
5. Anthraquinones: It provides 12 anthraquinones, which are phenolic
compounds traditionally known as laxatives. Aloin and emodin act as
analgesics, antibacterials and antivirals.
6. Fatty acids: It provides 4 plant steroids; cholesterol, campesterol, β-sisosterol
and lupeol. All these have anti-inflammatory action and lupeol also possesses
antiseptic and analgesic properties.
7. Hormones: Auxins and gibberellins that help in wound healing and have anti-
inflammatory action.
8. Others: It provides 20 of the 22 human required amino acids and 7 of the 8
essential amino acids. It also contains salicylic acid that possesses anti-
inflammatory and antibacterial properties. Lignin, an inert substance, when
included in topical preparations, enhances penetrative effect of the other
ingredients into the skin. Saponins that are the soapy substances form about
3% of the gel and have cleansing and antiseptic properties.

The machine which produces around 150 litres of Aloe Vera juice in a day is of approx.
Rs 7 lakh.

The expense of Rs 40 comes on the production of 1 litres juice. Of you supply

this juice to some company; you would get Rs 150 for one litre of juice. So, you can
produce juice worth Rs 22,550

III) Menthol
Menthol is an organic compound made synthetically or obtained from the oils of corn
mint, peppermint, or other mints. It is a waxy, crystalline substance, clear or white in
color, which is solid at room temperature and melts slightly above.

Agriculture Commissioner of India, this year's menthol oil production in the country is
estimated to be more than 30,000 tons. India exports nearly 22,500 tons of menthol oil
annually. ... “Uttar Pradesh accounts for nearly 80 per cent of mint produced in the
country.

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The price of natural menthol oil, on an average, is more than ₹1,500 a kg, as there
has been a decline in the availability of synthetic menthol oil, used mainly for non-food
applications.

IV) Citric acid

Citric acid was first isolated in 1784 by the Swedish chemist Carl Wilhelm Scheele,
who crystallized it from lemon juice. Industrial-scale citric acid production began in
1890 based on the Italian citrus fruit industry. In 1893, C.
Wehmer discovered Penicillium mold could produce citric acid from sugar.

Citric acid is a weak organic acid that has the chemical formula C
It occurs naturally in citrus fruits. In biochemistry, it is an intermediate in the citric acid
cycle, which occurs in the metabolism of all aerobic organisms.

More than two million tons of citric acid are manufactured every year. It is used widely
as an acidifier, as a flavoring and a chelating agent.

A citrate is a derivative of citric acid; that is, the salts, esters, and the polyatomic
anion found in solution. An example of the former, a salt is trisodium citrate; an ester
is triethyl citrate. When part of a salt, the formula of the citrate anion is written as C

V) Solubilizer
Solubilizers is a surfactant which help to disperse oils in water. Solubilizes are more
water soluble and are used to incorporate very low level (usually less than 2% total
lipids) into an aqueous formula such as a shampoo, shower gel, toner to obtain a
transparent formula.
How to use a solubilizer
The solubilizer is mixed directly with the oils and this is then added to the
water. Generally, the amount of solubilizer required will depend on the polarity of the
oils to be solubilized. The more polar the oils, the less solubilizer is needed.
Formulators using synthetic solubilizers usually start with three parts solubilizer to one-
part oil. For “natural” solubilizers it is recommended to start with six parts solubilizer

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to one-part oil. If the product remains cloudy or oil is floating on the surface, more
solubilizer should be added.
The key historic benchmark solubilizer is PEG 40 hydrogenated castor oil. Many
formulators also use polysorbate 20 and polysorbate 80. These solubilizers are
synthetic and also commonly known as natural solubilizers.

VI) Fatty acids

Among the most widely distributed fatty acids are the 16- and 18-carbon fatty acids,
also known as palmitic acid and stearic acid, respectively. Both palmitic and stearic
acids occur in the lipids of the majority of organisms. It accounts for anywhere from 5
to 50 percent of lipids in vegetable fats, being especially abundant in palm oil.
Stearic acid is abundant in some vegetable oils (e.g., cocoa butter and shear butter).
Fatty acids have a wide range of commercial applications. For example, they are used
not only in the production of numerous food products but also in soaps, detergents,
and cosmetics. Soaps are the sodium and potassium salts of fatty acids. Some skin-
care products contain fatty acids, which can help maintain healthy skin appearance
and function. Fatty acids, particularly omega-3 fatty acids, are also commonly sold as
dietary supplements.

Top Manufacturers, Suppliers and Exportors of Fatty Acids

● Divine Oleo Formulations India Llp , MUMBAI
● Dinesh Sales Corporation. MUMBAI
● Atlas Chemicals. MUMBAI
● Harmony Enterprises. MUMBAI
● Vinay Trading Company. KOLKATA
● Subhash Chemicals Industries Pvt Ltd, PUNE
● AacashExports, MUMBAI
● Aura Oil Industries, MUMBAI
● Chemical Construction International PVT LTD, DELHI

Page | 32
 Analysis of Companies engaged in FMCG Sector in India

A) Britannia Industries Ltd.

Introduction
Britannia Industries is one of India’s leading food companies with a 100-year legacy
and annual revenues in excess of Rs. 9000 Cr. Britannia’s product portfolio includes
Biscuits, Bread, Cakes, Rusk, and Dairy products including Cheese, Beverages, Milk
and Yoghurt. Britannia products are available across the country in close to 5 million
retail outlets and reach over 50% of Indian homes. It produces some of the most
famous biscuit brands such as Good Day, Tiger, NutriChoice, Milk Bikis and Marie
Gold which are household names in India. Britannia Bread is the largest brand in the
organized bread market with an annual turnover of over 1 lac tons in volume and
Rs.450 crores in value. The business operates with 13 factories and 4 franchisees
selling close to 1 million loaves daily across more than 100 cities and towns of India.
The company’s Dairy business contributes close to 5 per cent of revenue and Britannia
dairy products directly reach 100,000 outlets. Besides, the company boasts its
presence in more than 79 countries across the globe. Its footprint includes presence
in Middle East through local manufacturing in UAE and Oman. It is the No 2 biscuit
player in UAE with a strong contention to leadership and has a similarly strong market
position in the other GCC countries. The company is also one of the market leaders in
Nepal and is in the process of investing a manufacturing facility in that country. Its
footprint also spreads across North America, Europe, Africa and South East Asia
through exports. Currently, the company is investing in a state- of- the- art facility in
Mundra SEZ, Gujarat, to service the exports markets (18)

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 SWOT Analysis of Britannia Industries Ltd.
Highlights

Focus increased on rural markets since 2015

Set up small factories around rural areas with higher demand to reduce distribution
costs

Bakery – subdivided into biscuits (2/3rd revenue) and (bread, cake, rusk) 1/3rd revenue

Market leader in organized rusk product

70% overall Indian Households consume Britannia products, 80% in urban area, 90%+
in metros. (18)

I)Strengths

1. Oldest brand
Founded in 1892, it is one of the oldest brands in India catering to masses from
different strata of society.

2. Efficient manufacturing and supply chain management

In rural areas where there is an increased demand but the distribution costs to
supply the products is high, the company has set up smaller factories so that the
costs are minimized as well as such markets are efficiently captured. It has set up
integrated food park at Ranjangaon, Maharashtra consisting of Biscuit and Cake
line. It also follows the hub-and-spoke distribution model where it sets up major
warehouses connecting smaller markets and hence expanding its reach while
optimizing costs.

3. Increased Market Reach

Due to such well-planned and efficient distribution management, Britannia
Industries Ltd. has been able to increase its town reach from 14 in March 2015 to
138 in March 2017. It was able to penetrate the FMCG markets of around 45,000

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 villages via Split-Route Strategy. The outlet reach has been increased to a record
5.2million retailers out of which the direct reach has been increased from 7.3 lakhs
in March 2014 to around 18.4 lakhs in March 2018.

4. Decreased wholesale channel

Since the manufacturing and distribution channel has been strengthened by
Britannia Industries themselves, they are less dependent on wholesale channel for
delivering the products to the market. (19)

5. Blockbuster brands
Britannia has created many blockbuster brands such as GoodDay, NutriChoice,
Milk Bikis, 50:50, Tiger, Treat, Healthy Slice, etc. it has also invested heavy amount
on their brand promotion to make them stronger.

6. Common Household Product

Britannia has been able to market its products so well that you can find at least 1
Britannia product in almost every home. Around 70% overall households in India
consume its products. This percentage increases to 80% in urban areas and goes
beyond 90% in metro cities.

7. Market Leader
The Rusk market segment is a largely disorganized one. But Britannia has been
efficiently able to capture the organized sector and it is currently a market leader. It
is also a market leader in Biscuits category with the market share of around 56%.

II) Weaknesses

1. Overdependence on biscuit portfolio

A major chunk of revenue for Britannia comes from its biscuit portfolio. This makes
it heavily reliant on its profits and any volatility in this segment can adversely affect
the company’s performance.

2. Lower revenue-share of Dairy business

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 Milk and Milk products are almost equal to a daily requirement in modern times. Milk
is a necessary food in a person’s diet. Despite of being an established player in this
business, the revenue share of Dairy in Britannia’s portfolio is not that significant
when compared to other competitive players. This puts the company at a
disadvantage position.

III) Opportunities

1. Rising income and increasing aspiration

The per capita income of an indian consumer is increased from ₹79412 in 2014 to
₹1,12,835 in 2018 and the trend is expected to continue. This means the consumer
is in a better position to buy the products in terms of quantity as well as quality. At
the same time, the increase in income has also lead to increased aspiration as well
as demand of the consumers in terms of premium quality of the products.

2. Increasing awareness of healthy diet

Due to increased awareness of the changing environment on human health as well
as due to increased penetration of digital technology, the modern consumer has
started to understand the effects of food on the human body and hence there is a
growing shift in demand towards healthier products with less harmful effects.

3. Decreased time to cook

traditionally there were only male members in the family who used to work and the
female members used to take care of the family. However, this has changed and
the society has become more progressive and now there is no such distinction. As
well as, there is an increasing trend of following nuclear families as following
traditional joint family. This has led to decrease in available time to cook for the
family and hence there is an increasing demand for ready-to-consume products.

Page | 36
4. Young consumers
As stated previously, around 2/3rd of the Indian population falls under young and
working age. This, coupled with the population growth rate, suggests that the major
chunk of FMCG demand would be influenced by the youth. This serves to be the
biggest opportunity for the company as it can target its products related to youth.
(20)

5. Potential for market growth

Dairy business as well as rusk business are largely unorganized where the local
players are more dominant than the companies. This serves as a large opportunity
for the company to expand its organized business in such territories and achieve
the top-line growth.

6. Improvements in technology
Currently, a challenge that food Sector as a whole is facing is the life of the product.
This can be extended with the help of improved cold chain technology. Also, the
current infrastructure with respect to the Indian transport system is not at par with
its global peers. This gives it a room for improvement and such improvements will
give better connectivity to the company for its markets.

IV) Threats

1. Key Commodity Prices

The availability principal raw materials such as sugar, wheat, flour, etc. are majorly
dependent on the monsoon season. This makes the prices of these products
unstable and volatile. Also, an increase in their prices can hurt the company’s
bottom-line.

2. Macro-economic connection
The demand for the FMCG products is dependent on the health of the economy.
The more the economy progresses, the higher is the demand and a lower rate or
progression or even regression can lead to lower demand of the products.

Page | 37
3. Tepid Response to new launches
Britannia launches many new products in the market. It has been observed that it
releases at least 4 new products every year. However, after 2-3 years their
production is stopped. This is due to lower positive response towards the product
and hence a lower demand.

4. Credit Squeeze
Due to demonetization, GST implementation, Liquidity crisis and many such events
in the past years, a portion of the rural players are facing a credit squeeze while
paying for the goods. This can turn into a major threat if such situation aggravates,
given the current situation of the lockdown and its dangerous after-effects.

5. Hyper-competitive market
The cost of raw materials or labour costs to produce a snack is quite low in India.
This results into lower capital costs which in-turn has led to presence of large
number of manufacturers and aggressive competition. It poses as a threat to the
company, given for a fact that it has launched its snack brand Timepass just a few
years back.

6. Unavailability of Good Quality Milk

The dairy business of Britannia involves manufacturing and selling of flavoured milk,
cheese products, curd, whitener, etc. This requires an excellent quality of milk to
ensure the products so manufactured are of premium quality. However, the quality
of milk available in the market is quite low due to inferior quality of cows and
buffaloes compared to the global counterparts.

7. Competition in Bread Segment

Bread is largely an unorganized segment where the consumers source their bread
from the local players due to the freshness as well as warmth of the bread. This
becomes a drawback to the company since it cannot provide the “hot-baked” feature
in its product. At the same time, many formidable organized players too are entering
the bread segment hence posing a threat to the company.

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8. Global Scenario
The business of Britannia is also dependent on the global relations of the countries.
In recent times, there has been some turbulence in the relations among the
countries and this affects it’ business activities. The trade tensions between US and
China are one of the major worrisome global factors threatening the business
operations. Another issue that has cropped up is in the Middle-East where there
has been a slowdown in consumption due to shrinking diaspora, mass layoffs,
political instability as well as war-like situation. In Africa, another key market, there
has been a steep depreciation in the local currency hence increasing their costs.

Page | 39
 BCG Matrix of Britannia Industries Ltd.

BCG Matrix of Britannia

Question mark

Milk Based Products

Market Growth

Biscuits
Star
Snacks and wafers
Bread

Cash Cow Dog

Relative Market Share

Figure 11
Name of the Name of the Name of The Reason
Segment competitor Category
Biscuits Parle Star Biscuits category is giving the largest share of revenue
to the company. The company has been able effectively
premiumise the products and at the right price. The
company has also been marketing the products to the
target customers very well.
Bread haldiram Cash cow Bread is such a product which is consumed everyday.
However, it is largely an unorganized market . Still, it is
one of the first segments that britannia ventured into and
the company has been able to achieve a significant
share of the market and it is continuing to do so.

Milk Based Amul Question This is a segment which the company has entered into
Products Mark since a past few years. It is largely captured by Amul
being the oldest brand in this segment. However,
Britannia is giving a good competition with its product
differentiation and marketing strategies and has
captured a good 20% share already.

Snacks and MFIL Question Britannia has re-entered into this segment just recently.
wafers Mark Being a low cost segment, it already has many
established players and is full of aggressive
competition. With the re-launch of the brand "Time
Pass" in chips, The company is slowly gaining the
market share by targeting the Youth.
Table 2

Page | 40
 Fund Flow Analysis of Britannia Industries Ltd.
Fund flow Statement for the year 2017
Source Application
Particulars Rs Particulars Rs
Long Term Sources Long Term Uses
Capital work-in-progress 44.73 Property, plant and equipment 184
Intangible assets 1.72 Investment property 15.25
Investments 50.19 Income-tax assets, (net) 104.94
Loans receivable 141.49 Other non-current assets 0.18
Other financial assets 25.45 Borrowings 0.05
Deferred tax assets, (net) 17.27 Government grant 0.71
Other equity 565.95
Other financial liabilities 1.77
848.57 305.13
Short Term Sources Short Term Uses
Current Investments 271.23 Inventories 218.41
Other financial liabilities 13.53 Trade receivables 19.53
Other current liabilities 3.63 Loans receivable 365.82
Provisions 8.16 Other financial assets 13.29
Current tax liabilities, (net) 4.79 Other current assets 199.09
301.34 Trade payables 0.9
Bank balances 26.47
843.51
Increase in Cash and Cash Equivalents 1.27

1149.91 1148.64

Fund flow Statement for the year 2018

Source Application
Particulars Rs Particulars Rs
Long Term Sources Long Term Uses
Investment property 0.26 Property, plant and equipment 195.84
Intangible assets 3.63 Capital work-in-progress 170.51
Investments 63.53 Deferred tax assets, (net) 2.25
Loans receivable 29.78 Other non-current assets 51.51
Other financial assets 12.12 Borrowings 0.14
Income-tax assets, (net) 142.27 Government grant 0.72
Equity share capital 0.01
Other equity 653.29
Other financial liabilities 2.11
907.00 420.97
Short Term Sources Short Term Uses
Inventories 8.03 Investments 649.75
Bank balances 23.98 Trade receivables 103.91
Other current assets 122.6 Loans receivable 28.47
Borrowings 9.01 Other financial assets 67.44
Trade payables 222.54 Other current liabilities 3.57
Other financial liabilities 39.69 Provisions 3.43
Current tax liabilities, (net) 12.37
438.22 856.57
Increase in Cash and Cash Equivalents 67.68

1345.22 1277.54

Page | 41
 Fund flow Statement for the year 2019
Source Application
Particulars Rs Particulars Rs
Long Term Sources Long Term Uses
Equity share capital 0.02 Property, plant and equipment 275.54
Other equity 804.15 Investment property 21.14
Other financial liabilities 2.06 Investments 600.32
Capital work-in-progress 135.37 Income-tax assets, (net) 15.45
Intangible assets 0.35 Other non-current assets 25.06
Loans receivable 71.19 Borrowings 0.04
Deferred tax assets, (net) 8.68 Government grant 0.72
Deferred tax liabilities, (net) 3.87 Other financial assets 1
1025.69 939.27
Short Term Sources Short Term Uses
Trade payables 166.18 Inventories 124.31
Other financial liabilities 22.55 Trade receivables 120.64
Other current liabilities 2.78 Bank balances 7.41
Provisions 17.47 Loans receivable 301
Current tax liabilities, (net) 16.36 Other financial assets 21.03
Investments 140.78 Borrowings 9.01
Other current assets 66.68
432.80 583.40
Decrease in Cash and Cash Equivalents 64.18

1458.49 1522.67

Page | 42
 Ratio Analysis of Britannia Industries Ltd.

Liquidity Ratios
Sr. Name of ratio formula 2019 2018 2017
1 Current ratio Current assets/current liabilities 1.94 times 2.03 times 1.84 times
2 Quick Ratio (Current Assets -Inventory)/(Current Liability) 1.49 times 1.59 times 1.29 times
(Cash + Marketable Securities + Net Receivable
3 Absolute liquidity ratio and Debtors)/Current Liability 0.62 times 0.78 times 0.24 times
4 Cash Ratio Cash + Marketable Securities / Current Liability 0.39 times 0.60 times 0.10 times

Turnover Ratios
Sr. Name of ratio formula 2019 2018 2017
Net Credit sales(Revenue from operations)/Avg
5 Debtors Turnover Ratio Debtors 35.75 times 52.04 times 73.57 times
6 Avg collection peroid 365/ Drs turnover 10.21 Days 7.01 Days 4.96 Days
7 Inventory Turnover Ratio Cost of Goods Sold/Average Inventory 69.24 times 73.73 times 81.21 times
8 Capital Turnover Ratio Net Sales OR Cost of Goods Sold/Capital Employed 2.17 times 2.44 times 2.87 times
9 Asset Turnover Ratio Turnover/Net Tangible Assets 4.19 times 5.67 times 5.75 times
10 Fixed Asset turnover ratio Turnover/Average Fixed Assets 7.92 times 8.84 times 10.83 times
11 Working Capital turnover Ratio Net Sales /Working Capital 6.98 times 6.62 times 9.37 times

Operating Profitability Ratios

Sr. Name of ratio formula 2019 2018 2017
12 GP margin ratio GP/ Rev from Op 16.53% 15.59% 14.60%
13 Earning Margin Net Income/Turnover * 100 10.80% 10.21% 9.83%
14 Return on Assets PAT/Average Total Assets 21.83% 22.78% 6.21%
15 Return on Investment PBIT/Total CapitalDividend)/Ordinary
(PAT-Preference employed * 100 42.20% 44.36% 48.05%
16 Return on Equity (EAT - Preference
Shareholder's FundDividend)
* 100 / No. of 27.78% 29.30% 32.68%
17 Earning per Share Ordinary Shares ₹46.71 ₹39.48 ₹70.31

Financial Risk Ratios

Sr. Name of ratio formula 2019 2018 2017
18 Debt Equity Ratio Total debts/ share holders's funds 0.399 0.430 0.432
Interest Coverage Ratio
19 Analysis EBITDA /Interest Expense 1203.02 times 1080.28 times 1006.66 times

Stability Ratios
Sr. Name of ratio formula 2019 2018 2017
20 Debt asset ratio Total Debt/ Assets 0.29 0.30 0.30
21 Fixed Asset Ratio Fixed Assets / Capital Employed 0.32 0.31 0.31
Ratio to Current Assets to Fixed
Current Assets / Fixed Assets
22 Assets 2.39 2.74 2.47
Shareholder Fund / Total Tangible
Proprietary Ratio
23 Assets 0.72 0.70 0.70
Net Profit Margin×Asset
24 DuPont Analysis Turnover×Equity Multiplier 0.63308 0.82795 0.80865

Page | 43
 Altman's Z Score
formula 2019 2018 2017
A(working cap/Total assets) 0.26 0.30 0.25
B(retained earnings[or other equity from B/S]/total assets) 0.71 0.69 0.69
C(EBIT/Total assets) 0.30 0.24 0.25
D(market valueequity/book value of debts) 45.94 42.87 18.17
E(sales/total assets) 1.84 2.01 2.32
1.2A + 1.4B + 3.3C + 0.6D + 1.0E 31.72 29.85 15.32

Page | 44
 Assumptions Taken for Calculation of Projected P&L and Balancesheet
Sales Costs Other operating Other Cost Of Excise Purchase Changes In Employee Finance Depreciation Other Taxes
Growth revenues Income Materials Duty Of Stock-In Inventories Of Benefit Costs and Expenses
Consumed Trade FG,WIP And Stock-In Expenses Amortization

Page | 45
Trade
11.93% Values as a 0.89% 1.73% 48.55% 3.00% 12.88%
-0.36% 3.03% 5.31% of 11.42% of 20.56% 33.52% of Profit
% of Sales Borrowings Fixed Assets Before Tax
STATEMENT OF PROFIT AND LOSS
Current Figures Projected Profit and Loss
Financial Forecasting of Britannia Industries Ltd.

For the year ended 31st March 2017 31 March 2018 31 March 2019 31-Mar-20 31-Mar-21 31-Mar-22 31-Mar-23 31-Mar-24
Revenue from operations
Sale of goods / Income from operations 8,581.55 9,282.04 10,389.49 11,629.07 13,016.55 14,569.57 16,307.88 18,253.59
Other operating revenues 102.84 98.13 92.96 104.05 116.47 130.36 145.91 163.32
8,684.39 9,380.17 10,482.45 11,733.12 13,133.01 14,699.93 16,453.79 18,416.91
Other income 144.78 155.93 190.52 201.60 225.65 252.58 282.71 316.44
Total Income (I+II) 8,829.17 9,536.10 10,672.97 11,934.72 13,358.67 14,952.50 16,736.50 18,733.35
Expenses:
Cost of materials consumed 4,342.78 4,405.17 4,944.77 5,646.26 6,319.93 7,073.96 7,917.97 8,862.67
Excise duty 270.02 76.11 348.87 390.50 437.09 489.24 547.61
Purchases of stock-in-trade 904.78 1,372.46 1,381.88 1,497.45 1,676.11 1,876.09 2,099.92 2,350.47
Changes in inventories of finished goods,work-in-progress and -49.25 -4.18 -49.02 -42.28 -47.33 -52.97 -59.29 -66.37
stock- in-trade
Employee benefits expense 241.68 294.87 321.64 352.32 394.35 441.40 494.07 553.02
Finance costs 1.34 1.45 1.54 1.85 2.07 2.32 2.60 2.91
Depreciation and amortisation expense 96.43 119.76 135.00 285.59 319.67 357.81 400.50 448.28
Other expenses 1,770.23 1,825.26 2,221.05 2,390.57 2,675.79 2,995.05 3,352.39 3,752.37
Total expenses 7,578.01 8,090.90 8,956.86 10,480.64 11,731.09 13,130.74 14,697.38 16,450.94
Profit before tax (III-IV) 1,251.16 1,445.20 1,716.11 1,454.09 1,627.58 1,821.76 2,039.12 2,282.41
Tax expense:
Current tax 390.20 499.56 581.36
Deferred tax 17.27 -2.25 12.55
407.47 497.31 593.91 487.38 545.53 610.62 683.47 765.01
Profit for the year (V-VI) 843.69 947.89 1,122.20 966.71 1,082.05 1,211.15 1,355.65 1,517.40
Earnings per share (face value of ` 1 each)
Basic [in `] 70.31 39.48 46.71 40.21 45.01 50.37 56.39 63.11
Weighted average number of equity shares used in computing earnings per share:
- Basic 1 1 ,9 9 ,9 1 ,0 2 0 24,00,92,954 24,02,46,514 240246514 240246514 240246514 240246514 240246514
- Diluted 1 2 ,0 0 ,1 1 ,6 0 8 24,02,14,276 24,04,27,551 240427551 240427551 240427551 240427551 240427551
Market Price 1687 2485.3 3085.5 2,653.72 2,970.34 3,324.73 3,721.41 4,165.42
P/E Ratio 23.99 62.95 66.06 66 66 66 66 66
 Britannia Balancesheet
Current Figures (In Crores) Projected Figures
As at 31-Mar-17 31-Mar-18 31-Mar-19 31-Mar-20 31-Mar-21 31-Mar-22 31-Mar-23 31-Mar-24
ASSETS
Non-current assets
Property, plant and equipment 812.47 1,008.31 1,283.85
Capital work-in-progress 29.77 200.28 64.91
Investment property 15.25 14.99 36.13
Intangible assets 11.6 7.97 7.62
Financial assets
Investments 514.18 450.65 1,050.97
Loans receivable 116.52 86.74 15.55
Other financial assets 12.12 0 1.00
Deferred tax assets, (net) 6.43 8.68 0
Income-tax assets, (net) 156.34 14.07 29.52
Other non-current assets 16.58 68.09 93.15
Total Non Current Assets 1,691.26 1,859.78 2,582.70 2,500.71 2,799.07 3,133.03 3,506.84 3,925.24
Current assets
Inventories 602.61 594.58 718.89
Financial assets
Investments 85.73 735.48 594.70
Trade receivables 126.41 230.32 350.96
Cash and cash equivalents 21.23 88.91 24.73
Bank balances other than (iii) above 32.32 8.34 15.75
Loans receivable 791.94 820.41 1,121.41
Other financial assets 31.07 98.51 119.54
Other current assets 313.57 190.97 124.29
Total Current Assets 2004.88 2767.52 3070.27 3,202.34 3,584.42 4,012.08 4,490.77 5,026.56
Total Assets 3,696.14 4,627.30 5,652.97 5,703.05 6,383.49 7,145.11 7,997.60 8,951.81
EQUITY AND LIABILITIES
Equity
Equity share capital 24 24.01 24.03 24.03 24.03 24.03 24.03 24.03
Other equity 2557.98 3211.27 4015.42 4004.13 4484.74 5022.69 5624.81 6298.78
Total Equity 2,581.98 3,235.28 4,039.45 4,028.16 4,508.77 5,046.72 5,648.84 6,322.81
Liabilities
Non-current liabilities
Financial liabilities
Borrowings 0.44 0.30 0.26
Other financial liabilities 22.86 24.97 27.03
Deferred tax liabilities, (net) 0 3.87
Government grant 1.44 0.72 0.00
Total Non Current Liabilities 24.74 25.99 31.16 34.88 39.04 43.70 48.91 54.75
Current liabilities
Financial liabilities
Borrowings 9.01
Trade payables 643.82 866.36 1032.54
Other financial liabilities 142.93 182.62 205.17
Other current liabilities 85.62 82.05 84.83
Government grant 0.71 0.71 0.71
Provisions 174.48 171.05 188.52
Current tax liabilities, (net) 41.86 54.23 70.59
Total Current Liabilities 1089.42 1366.03 1582.36 1,640.01 1,835.68 2,054.70 2,299.85 2,574.25
Total Liabilities 1114.16 1392.02 1613.52 1,674.89 1,874.72 2,098.40 2,348.76 2,628.99
Total Equity and Liabilities 3,696.14 4,627.30 5,652.97 5,703.05 6,383.49 7,145.11 7,997.60 8,951.81

Page | 46
 Company Life Cycle of Britannia Industries Ltd.

Britannia Industries Ltd.

14000
Net Sales and Net Profit ₹ in Crores

12000
10000
8000
6000
4000
2000
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Years

Sales Net Profit

Figure 12

The Sales of the company has been steadily increasing from the initial years. It started
its sales from 2267.65 with net profit of 105.13, giving a net profit margin of 4.64%.
Since then, it has been able to clock the sales growth in the range of 10-20 % every
year. It has also been able to achieve increasing profit margins every succeeding year.
Currently, the company stands at the stage between growth and maturity stage with
sales revenue of 11599.55 and profit of 1393.16, giving a net profit margin of 12.01%
which is the highest ever recorded for Britannia Industries.

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 B) Dabur India Ltd.

Introduction

Dabur India Ltd. is one of India’s leading FMCG Companies with Revenues of over Rs
8,500 Crore & Market Capitalisation of over Rs 72,500 Crore. It was started in 1884
as an ayurvedic medicines company by the Burman Family. Now, with an experience
of over 135 years, Dabur is the world’s largest Ayurvedic and Natural Health Care
Company. Dabur India is also a world leader in Ayurveda with a portfolio of over 250
Herbal/Ayurvedic products. Dabur's FMCG portfolio today includes five flagship
brands with distinct brand identities Dabur as the master brand for natural healthcare
products, Vatika for premium personal care, Hajmola for digestives, Réal for fruit juices
and beverages and Fem for fairness bleaches and skin care products. Dabur operates
in key consumer product categories like Hair Care, Oral Care, Health Care, Skin Care,
Home Care and Foods. The company has over 6,100 acres of land under cultivation
of rare herbs and medicinal plants in India and Nepal. It has 20 high-performing
manufacturing units, out of which 8 are set-up outside India such as in Bangladesh,
South Africa, Egypt, UAE, etc. The ayurvedic also company has a wide distribution
network, covering 6.7 million retail outlets with a high penetration in both urban and
rural markets. Dabur's products also have huge presence in the overseas markets and
are today available in over 100 countries across the globe. Its brands are highly
popular in the Middle East, SAARC countries, Africa, US, Europe and Russia. Dabur's
overseas revenue today accounts for over 27% of the total turnover. (21)

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 SWOT Analysis of Dabur India Ltd.
Highlights

The company has presence in around 44000 villages.

It has a strong distribution network consisting of relations with 39000 doctors, 200000
chemists, 10000 ayurvedic pharmacies (21).

The key regions for international business are Middle East, Africa, South Asia, US,
Turkey

I)Strengths

1. Oldest Ayurveda Company

Dabur India Ltd. Is one of the oldest ayurvedic companies in the world. It has
positioned itself as “Science-based Ayurveda Specialist” in the global market. Due
to its longest operations here, it has a better understanding of the Indian market
compared to its competitors.

2. Key Brands

Dabur India has a diverse product portfolio ranging from packaged juice to
toothpaste to honey. Some of the star brands include Real fruit juice, Dabur
Chyawanprash, Dabur Honey, Dabur Glucose, Hajmola, Pudin Hara, Dabur Lal
Tail, Dabur Amla. Dabur Red Paste is the 3rd largest toothpaste brand in the country.

3. Strong distribution network

Dabur India boasts of a strong distribution network for an Ayurveda company. It has
a distribution reach to around 6.7 million retail outlets out of which the direct reach
is more than 1.1million outlets. It has a high penetration in rural and urban markets
especially for the Hajmola, Chyawanprash and Honey brands. Dabur has also
managed to expand its reach through 387 Ayurvedic Centres that act as sales and
advocacy centres.

4. Establishment of “NewU”

NewU is the one stop beauty destination offering beauty and personal care products
such as make-up, skin-care, hair care, fragrances, personal grooming products, etc.

Page | 49
Currently, it has brick and mortar retail stores across 102locations in 35 different
cities.

II)Weaknesses

1. Major dependence on Home and Personal Care category

Dabur has been efficiently able to market its products, especially the home and
personal care products to the masses. However, one major drawback is the
company’s topline and bottomline now consists of this category to the tune of
around 3000 cr which makes around 50% of the total top-line collection. This could
be a cause of concern since any set-back in this segment would adversely affect
the company’s revenues.

2. Higher employee benefits cost compared to peers

Dabur spends around 10% of its total revenues on costs payable to its employees.
This is higher than the industry average of around 5%. A potential reason could be
its tie-ups with special Ayurvedic Doctors who provide specialized consultation.

3. Major dependence on rural market

Around 46% of the total revenues earned by Dabur India is contributed by the rural
areas. This can be a flag of concern since a severe slowdown impacting the rural
areas can have a grave impact on the company’s top-line.

III)Opportunities

1. Impact of Changing Life-styles

The 21st century is an era of rapid change in life-style. Junk food, lack of active
lifestyle, increasing stress levels and many such new problems are on a constant
rise in India and abroad. At the same time, the side-effects of allopathy and the
slow impact of homeopathy medicines are making them a less preferred choice.
Ayurveda, on the other hand, is an ancient science of natural medicinal treatment.
It has none to minimum side effects as compared to allopathy and it achieves
results faster than homeopathy. This is slowly being accepted by the consumers,
leading to a shift in their choices and preferences.

Page | 50
2. Changing Population demographics

Around 50% of the total population of India comprises of children and youth out of
which around 60% is the youth. This trend is going to further skew in the favour of
youth in the next 10-20 years. Hence this is the perfect opportunity for Dabur India
to innovate and promote its products towards the youth to achieve a better market
share in the future.

3. Youth Acceptance of Ayurveda

Today, the youth is more willing to experiment and accept the products of
Ayurveda. The youth knows the side effects of allopathy and hence wishes to adopt
a better solution to the health issues. The power of herbal and ayurvedic remedies
is also becoming increasingly popular among youth due to faster communication
channels and globalization.

4. Government Initiatives

The Government of India too is working towards the promotion of Ayurveda. It has
formed the Ministry of AYUSH (Ayurveda, Yoga and Naturopathy, Unani, Siddha
and Homeopathy) to look after regulation of these fields of health remedies to ease
the pressure on allopathic system. The government has also established All India
Ayurveda Institute in Delhi. It is also encouraging farmers to grow Ayurvedic farms
to diversify agriculture and boost farm income. All these policies will definitely
favour the Ayurvedic Industry and especially Dabur India Ltd. to expand its
markets.

5. Digitalization and E-commerce

The biggest opportunities that this decade has provided is the digitalization of data
and selling products online. The company can display its products online alongwith
its features and benefits. This will ease the customers’ search process and give
them the necessary information. At the same time, the company can study and
analyze the popularity of the products based on website hits and product requests
and change its strategies accordingly. The company can also adopt an aggressive
e-commerce marketing strategy to reap the logistic and price advantage it
provides.

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 IV)Threats

1. Currency fluctuations

Dabur India Ltd is a transnational company, meaning it operates in countries

beyond the national boundaries of India. It regularly imports and exports raw
materials and products and may also have to enter into foreign exchange
transactions. Hence any fluctuations in home currency or in foreign currency may
affect its profitability either lightly or heavily based on the severity of the fluctuation.

2. Geopolitical tensions

Dabur India Ltd. has its operations spread over many countries such as US, Egypt,
UAE, Nepal naming a few. The recent geopolitical tensions over the globe such as
US-China trade tensions, the India-Nepal ties, the troubles in the UAE countries
can have severe effects on the global business operations of Dabur India ltd.

3. Unpredictable weather patterns affecting supply of raw materials

Ayurveda is a remedy where the principal raw materials are all natural and need to
be grown in farms. The company sources its raw materials from
farmers/manufacturers who are dedicatedly producing such ingredients. However,
Indian agriculture is majorly based on the mercy of the monsoon season. Any
shortfall or excess of rains can disrupt the production of these ingredients,
ultimately affecting the supply of raw materials.

4. Counterfeit products/lookalike products

The FMCG Sector has a regular problem of counterfeit and fake products. These
products cause a loss to the tune of around Rs.2500 every year. Dabur India Ltd.
is no exception to this issue. These products affect the consumer confidence in the
company and spurious products also affect the health of the consumers alongwith
causing financial loss to the company.

5. Intense Competition

Dabur is a strong company in the segments of packaged fruit juices, honey, etc.
But it faces an intense competition in those segments from giant rival brands such
as Tropicana, Minute-maid, Patanjali naming a few. Hence, the company needs to
be on its guard all the time in order to protect the market share as well as expand
it.

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 BCG Matrix of Dabur India Ltd.

BCG Matrix of Dabur

Question mark

Honey
Chyawanprash
Market Growth

Star Toothpaste

Package Fruit
Juice

Cash Cow Dog

Relative Market Share

Figure 13

Name of Name of
Name of the the The
Segment competitor Category Reason
Launched in the year 1997, Real is the undisputed leader in the Fruit Juice
domain, and Amit Burman is credited with conceiving, nurturing the brand and
Real Fruit Tropicana making it a category leader. Fruit juice segment continues to provide the
Juice by PepsiCo Cash Cow required cash for the company to fund its other segments
Launched in 1949, Chyawanprash is the one of the oldest segments that
Dabur is involved in. During all these times, Dabur has successfully been able
Chyawanpra to create trust and brand loyalty for the product in the minds of the consumers
sh Baidyanath Star that chyawanprash can almost be related to Dabur's image.
Dabur entered this segment in 1994 hence this is another oldest segment the
company is engaged in. Dabur has ensured top notch product quality by
harvesting the honey form north-east India only and such standard-adhering
products has ensured the company captures customers' loyalty and market
Honey Patanjali Star share
When Dabur entered this segment, there were already established national
players like Colgate-Palmolive and HUL. Hence there was already a tough
competition going on for market share. The USP of Red Toothpaste was its
ayurvedic qualities. However, even this USP was challenged with the entry of
Patanjali toothpaste which aggravated the competition as well as reduced the
market share. Now, since the segment growth is reduced to 4% p.a.(FY-19),
Toothpaste Colgate Dog this segment for Dabur has entered into Dog sector.
Table 3

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 Fund Flow Analysis of Dabur India Ltd.
Fund flow Statement for the year 2017
Source Application
Particulars Rs Particulars Rs
Long Term Sources Long Term Uses
Investment property 0.99 Property, plant and equipment 307.41
Other intangible assets 4.24 Capital work-in-progress 3.29
Other financial assets 0.36 Financial investments 475.08
Equity Share Capital 0.24 Other non-current assets 55.65
Other equity 563.35 Other Non Current financial Liabilities 1.25
Non Current Financal Borrowings 200.74
Non Current Provisions 2.49
Deferred Tax Liabilities 21.76
794.17 842.68
Short Term Sources Short Term Uses
Inventories ₹16.29 current investments 61.1
Trade Reveivables ₹87.44 Other current financial assets 2.26
Bank balances other than Cash ₹1.75 other current Assets 23.18
Other current financial liabilities 1.68 Financal Borrowings 3.47
Other current liabilities 11.1 Trade Payables 24.18
other current provisions 6.98
Current tax liabilities 6.68
Current Tax Assets ₹3.06
134.98 114.19
Decrease in Cash and Cash Equivalents 27.72
929.15 956.87
Fund flow Statement for the year 2018
Source Application
Particulars Rs Particulars Rs
Long Term Sources Long Term Uses
Investment property 0.99 Property, plant and equipment 42.16
Other intangible assets 4.02 Non Current tax asset 3.28
Other financial assets 5.88
Other non-current assets 26.74 Financial investments 400.64
Capital work-in-progress 1.43 Financal Loans 15.43
Other equity 568.98
Other Non Current financial Liabilities 0.54 Non Current Financal Borrowings 0.42
Non Current Provisions 2.52 Deferred Tax Liabilities 2.25
611.10 464.18
Short Term Sources Short Term Uses
current investments ₹21.73 Inventories 105.52
Trade Reveivables ₹11.91 other current Assets 39.54
MSME Trade Payables ₹53.46 other current liabilites 38.26
short term borrowings 2.45 Bank balances other than Cash 0.13
other current financial liabilities 6.05 Loans 1.41
Provisions 10.01 Other current financial assets 0.71
current tax liabilities 6.23
105.61 191.8
Increase in Cash and Cash Equivalents 60.73

716.71 655.98

Page | 54
 Fund flow Statement for the year 2019
Source Application
Particulars Rs Particulars Rs
Long Term Sources Long Term Uses
Capital work-in-progress 5.13 Property, plant and equipment 0.54
Investment property 0.99 Other intangible assets 6.59
non current Investments 482.93 Other financial assets 73.55
loans 2.29 Other non-current assets 13.65
Non Current tax asset 2.42 Other equity 258.52
Equity Share Capital 0.48 Financal Borrowings 174.99
Other financial Liabilities 0.31 Deferred Tax Liabilities 87.71
Non Current Provisions 2.72
497.27 615.55
Short Term Sources Short Term Uses
Current Financial Loans ₹23.23 Inventories 28.11
Other current financial liabilities ₹183.23 current investments 12.01
Other current liabilities ₹19.00 Trade Reveivables 110.12
other current provisions 16.7 Bank balances other than Cash 92.2
Current tax liabilities 3.93 Loans 3.15
Trade Payables 37.7 Other current financial assets 10.06
other current assets 35.63
319.42 255.65
Decrease in Cash and Cash Equivalents 54.51

816.69 871.2

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 Ratio Analysis of Dabur India Ltd.
Liquidity Ratios
Sr. Name of ratio formula 2019 2018 2017
1 Current ratio Current assets/current liabilities 1.40 times 1.59 times 1.48 times
2 Quick Ratio (Current Assets -Inventory)/(Current Liability) 0.92 times 1.02 times 0.98 times
(Cash + Marketable Securities + Net Receivable and
0.78 times 0.90 times 0.90 times
3 Absolute liquidity ratio Debtors)/Current Liability
4 Cash Ratio Cash + Marketable Securities / Current Liability 0.49 times 0.64 times 0.62 times

Turnover Ratios
Sr. Name of ratio formula 2019 2018 2017
5 Debtors Turnover Ratio Net Credit sales(Revenue from operations)/Avg Debtors 16.67 times 17.14 times 14.24 times
6 Avg collection peroid 365/ Drs turnover 21.90 Days 21.30 Days 25.62 Days
7 Inventory Turnover Ratio Cost of Goods Sold/Average Inventory 46.43 times 49.24 times 57.45 times
8 Capital Turnover Ratio Net Sales OR Cost of Goods Sold/Capital Employed 1.54 times 1.23 times 1.34 times
9 Asset Turnover Ratio Turnover/Net Tangible Assets 1.84 times 1.47 times 1.58 times
10 Fixed Asset turnover ratio Turnover/Average Fixed Assets 2.97 times 2.70 times 3.09 times
Working Capital turnover
11 Ratio Net Sales /Working Capital 10.35 times 7.74 times 9.30 times

Operating Profitability Ratios

Sr. Name of ratio formula 2019 2018 2017
12 GP margin ratio GP/ Rev from Op 32.26% 33.37% 24.41%
13 Earning Margin Net Income/Turnover * 100 20.15% 19.11% 18.59%
14 Return on Assets PAT/Average Total Assets 22.20% 19.44% 20.70%
15 Return on Investment PBIT/Total Capital employed * 100 37.76% 30.47% 32.69%
(PAT-Preference Dividend)/Ordinary Shareholder's Fund
16 Return on Equity * 100 31.86% 25.36% 27.29%
17 Earning per Share (EAT - Preference Dividend) / No. of Ordinary Shares ₹8.51 ₹7.80 ₹7.35

Financial Risk Ratios

Sr. Name of ratio formula 2019 2018 2017
18 Debt Equity Ratio Total debts/ share holders's funds 0.406 0.375 0.426
Interest Coverage Ratio
19 Analysis EBITDA /Interest Expense 55.10 times 68.41 times 85.40 times

Stability Ratios
Sr. Name of ratio formula 2019 2018 2017
20 Debt asset ratio Total Debt/ Assets 0.29 times 0.27 times 0.30 times
21 Fixed Asset Ratio Fixed Assets / Capital Employed 0.24 times 0.21 times 0.23 times
Ratio to Current Assets to
Current Assets / Fixed Assets
22 Fixed Assets 2.19 times 2.02 times 1.92 times
23 Proprietary Ratio Shareholder Fund / Total Tangible Assets 0.71 times 0.73 times 0.70 times
24 DuPont Analysis Net Profit Margin×Asset Turnover×Equity Multiplier 0.52 0.39 0.42

Page | 56
 Altman's Z Score
formula 2019 2018 2017
A(working cap/Total assets) 0.11 0.12 0.11
B(retained earnings[or other equity from B/S]/total assets) 0.68 0.70 0.67
C(EBIT/Total assets) 0.27 0.24 0.25
D(market valueequity/book value of debts) 44.85 36.48 31.36
E(sales/total assets) 1.12 0.96 1.03
1.2A + 1.4B + 3.3C + 0.6D + 1.0E 30.02 24.77 21.74

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 Assumptions Taken for Calculation of Projected P&L and Balancesheet
Sales Growth Other Income Costs Cost Of Excise Duty Purchase Of Changes In Employee Finance Costs Depreciation and Advertisement and
Others
publicity Taxes

Page | 58
Materials Stock-In Trade Inventories Of Benefit Amortization
Consumed FG,WIP And Expenses
Stock-In Trade
11.84% 13.81% as a % of 36.04% 0.30% 17.16% -1.32% 8.04% 1.38% of total 1.83% of Non 8.24% 9.59% 15.90% of Profit
Sales liabilities Current Assets Before Tax
STATEMENT OF PROFIT AND LOSS
Current Period Future Projections
Particulars 31-Mar-16 31-Mar-17 31-Mar-18 31-Mar-19 31-Mar-20 31-Mar-21 31-Mar-22 31-Mar-23 31-Mar-24
Financial Forecasting of Dabur India Ltd

Income
Revenue from operations 5,422.57 5,369.84 5,609.06 6,273.19 7,015.96 7,846.67 8,775.74 9,814.81 10,976.91
Other income 194.36 274.64 283.23 274.74 318.80 356.55 398.77 445.98 498.79
Total income 5,616.93 5,644.48 5,892.29 6,547.93 7,334.76 8,203.22 9,174.50 10,260.79 11,475.70
Expenses
Cost of materials consumed 1,930.28 1,922.37 2,060.26 2,262.51 2,528.72 2,828.13 3,162.99 3,537.50 3,956.35
Excise duty 16.77 - 20.98 23.46 26.24 29.34 32.82
Purchases of stock-in-trade 952.05 944.60 916.46 984.91 1,204.10 1,346.67 1,506.12 1,684.45 1,883.89
Changes in inventories of finished -23.77 -8.19 -74.03 10.09 -92.60 -103.56 -115.82 -129.54 -144.88
goods, stock-in-trade and work-in-
progress
Employee benefits expense 431.89 425.30 461.13 572.33 563.76 630.51 705.16 788.65 882.03
Finance costs 10.26 16.23 21.89 29.8 25.48 28.50 31.88 35.65 39.87
Depreciation and amortisation exp 72.83 75.43 102.50 108.83 698.51 781.22 873.72 977.17 1,092.87
ense
Other expenses 1,034.04 974.39 0.00 0.00 0.00 0.00 0.00
Advertisement and publicity 461.95 490.75 577.82 646.23 722.75 808.33 904.03
Others 537.69 585.36 672.56 752.19 841.25 940.86 1,052.26
Total expenses 4,407.58 4,350.13 4,504.62 5,044.58 6,199.33 6,933.35 7,754.28 8,672.41 9,699.25
Profit before exceptional items 1,209.35 1,294.35 1,387.67 1,503.35 1,135.43 1,269.87 1,420.22 1,588.38 1,776.45
and tax
Exceptional items - - 14.54 -
Profit before tax 1,209.35 1,294.35 1,373.13 1,503.35 1,135.43 1,269.87 1,420.22 1,588.38 1,776.45
Tax expense
Current tax 259.11 277.52 340.33 369.28
Deferred tax 12.98 18.50 -39.25 -130.22
Total tax expense 272.09 296.02 301.08 239.06 180.55 201.93 225.84 252.58 282.49
Net profit for the year 937.26 998.33 1,072.05 1,264.29 954.87 1,067.93 1,194.38 1,335.80 1,493.96
Earnings per equity share 5.33 5.67 6.09 7.16 5.41 6.05 6.76 7.56 8.46
Weighted No. of Equity Shares 1,75,91,41,170 1,76,15,20,510 1,76,15,20,510 1,76,62,91,141 1,76,62,91,141 1,76,62,91,141 1,76,62,91,141 1,76,62,91,141 1,76,62,91,141
.
Market Price Per Share 249.9 277.35 328.4 408.8 308.15 344.63 385.44 431.08 482.12
P/E Ratio 46.89 48.92 53.92 57.09 57 57 57 57 57
 Dabur India Ltd. Balancesheet
Current Period Future Projections
Particulars 2016 2017 2018 2019 2020 2021 2022 2023 2024
ASSETS
Non-current assets
a) Property, plant and equipment 621.77 929.18 971.34 971.88
b) Capital work-in-progress 24.96 28.25 26.82 21.69
c) Investment property 52.34 51.35 50.36 49.37
d) Other intangible assets 17.04 12.8 8.78 15.37
e) Financial assets
Investments 1843.95 2319.03 2719.67 2,236.74
Loans 0 0 15.43 13.14
(ii) Others 10.33 9.97 4.09 77.64
f) Non-current tax assets (net) 3.28 0.86
g) Other non-current assets 25.18 80.83 54.09 67.74
Total non-current assets 2595.57 3431.41 3853.86 3454.43 4,220.69 4,720.43 5,279.35 5,904.44 6,603.54
Current assets
a) Inventories 615.56 599.27 704.79 732.9
b) Financial assets
Investments 674.02 735.12 713.39 725.4
(ii) Trade receivables 420.69 333.25 321.34 431.46
Cash and cash equivalents 44.66 16.94 77.67 23.16
Bank balances other than (ii) above 10.97 9.22 9.35 101.55
Loans 1.41 4.56
(vi) Others 1.09 3.35 4.06 14.12
CurrentTaxAssets(Net) 3.06 -
c) Other current assets 64.11 87.29 126.83 91.2
Total current assets 1834.16 1784.44 1958.84 2124.35 2,384.91 2,667.29 2,983.11 3,336.32 3,731.35
Total assets 4429.73 5215.85 5812.7 5578.78 6,605.60 7,387.73 8,262.46 9,240.76 10,334.89
EQUITY AND LIABILITIES
Equity
a) Equity share capital 175.91 176.15 176.15 176.63 176.63 176.63 176.63 176.63 176.63
b) Other equity 2918.38 3481.73 4050.71 3,792.19 4,582.76 5,146.29 5,776.54 6,481.41 7,269.74
Total equity 3094.29 3657.88 4226.86 3968.82 4,759.39 5,322.92 5,953.17 6,658.04 7,446.37
LIABILITIES
Non-current liabilities
a) Financial liabilities
Borrowings 0.72 201.46 201.04 26.05
(ii) Other financial liabilities 4.96 3.71 4.25 4.56
b) Provisions 45.03 47.52 50.04 52.76
c) Deferred tax liabilities (net) 76.52 98.28 96.03 8.32
Total non-current liabilities 127.23 350.97 351.36 91.69 284.88 318.61 356.33 398.52 445.71
Current liabilities
a) Financial liabilities
Borrowings 86.51 83.04 85.49 108.72
(ii) Trade payables 931.34 907.16
Due to Micro and Small Enterprises 7.37 54.61
Due to Others 953.25 943.71
(ii) Other financial liabilities 73.87 75.55 81.6 264.83
b) Other current liabilities 65.64 76.74 38.48 57.48
c) Provisions 47.4 54.38 64.39 81.09
d) Current tax liabilities (net) 3.45 10.13 3.9 7.83
Total current liabilities 1208.21 1207 1234.48 1518.27 1,561.34 1,746.20 1,952.96 2,184.19 2,442.81
Total liabilities 1335.44 1557.97 1585.84 1609.96 1,846.21 2,064.81 2,309.29 2,582.72 2,888.52
Total equity and liabilities 4429.73 5215.85 5812.7 5578.78 6,605.60 7,387.73 8,262.46 9,240.76 10,334.89

Page | 59
 Company Life Cycle of Dabur India Ltd.

Figure 14

Dabur Ltd. was established in the year 1884. However, due to unavailability of the past
data, it is assumed that Dabur has already passed the introduction stage. The sales
of the company have been steadily rising over the years. During the years 2010 to
2015, the company had achieved exponential growth giving a steeper slope to the
sales curve. However, after the year 2015, the company got into intense competition
with Patanjali, a newly established company founded by Yoga Guru Baba Ramdev. It
had a major impact on the Honey segment which is a cash cow for Dabur. Still, the
company was successful enough to recover almost all of the lost market share from
Patanjali in the next 3 years. Currently, it is at a maturity stage with sales revenue at
Rs. 8703.49cr and Net Profit at Rs. 1447.93cr, giving a total return of an astonishing
16.64%.

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 C)Hindustan Unilever Ltd.
Introduction
Hindustan Unilever Limited (HUL) is the Indian subsidiary of Unilever. Unilever is a
British-Dutch multinational company and has got over 67% shareholding in HUL. It is
headquartered in Mumbai, India. HUL was established in 1933 as Lever Brothers of
United Kingdom Later, the company was renamed in June 2007 as 'Hindustan
Unilever Limited'.

The liberalization of the Indian economy in 1991 marked an inflexion in the Company’s
growth curve. The removal of the regulatory framework allowed the company to
explore every single product and opportunity segment. Simultaneously, deregulation
permitted various alliances, acquisitions and mergers.

Mr. Sanjiv Mehta is the Chairman and Managing Director of HUL since 30 th June,
2018. HUL is listed on both the major stock exchanges i.e. NSE and BSE. It has been
one of the steadily growing companies. Even during the pandemic situation, it has
shown an YoY growth of around 4.23% in the top line and about 7.18% in the profits
before exceptional items as of the 1st quarter of FY21.

The Company is in the fast-moving consumer goods (FMCG) business comprising

primarily into four business segments such as, home care, personal care, foods and
refreshments. Soaps and detergents include soaps, detergent bars, detergent
powders. Personal products include products in the category of oral care, skin care,
hair care, talcum powder and cosmetics. Beverages include tea and coffee. Foods
include staples like atta, salt, bread and culinary products. Ice creams include ice
creams and frozen desserts. Apart from this, their portfolio also includes chemicals
and water business.

In short, HUL’s portfolio includes a wide range of leading household brands and
needless to say, occupies a major shelf space in all the shops. HUL’s brands include
Lux, Lifebuoy, Surf Excel, Wheel, Sunsilk, Clinic Plus, Axe, Pepsodent, Closeup,
Lakme, Ponds, Brooke Bond, etc. just to name a few.

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The company with its exhaustive product range and wide distribution network aims to
provide products fulfilling the needs and demands of all the segments of the society
across the country. The company has always focused on innovative product offerings
and adapting itself to the market changes, which has helped it maintain its market
leadership.

Page | 62
 SWOT Analysis of Hindustan Unilever Ltd.
I)Strengths

1. With over 40 brands across 12 distinct categories, the Company is part of the
daily life of millions of consumers.
2. It has got a great brand visibility. HUL occupies a large shelf space in any
grocery or departmental store which itself explains the acceptance / demand of
its products.
3. Offers different products for different income groups. Whether you buy Surf or
Wheel, the money will go into HUL’s pocket. Thus it is successful in having
share of wallet of the consumer.
4. The products are available in over eight million outlets across India.
5. Having more than 80 years of experience in the consumer goods market &
backed by Unilever who owns 67% controlling share in HUL, it is financially very
strong.
6. Unilever Sustainable Living Plan’s (USLP) vision of reducing our environmental
footprint and at the same time, creating a positive social impact.
7. one of the biggest advertisers in India, based on media spend.
8. Extensive and integrated 4 tier distribution system.
9. Direct Coverage: It is through common stockist within a town of population
under 50000 people.
10. Indirect coverage: It targeted retailers in accessible villages closer to larger
urban markets.
11. Operation Streamline: This leveraged the rural wholesale channel to reach
markets inaccessible by roads. Goods are distributed from C&F agents to rural
distributors, who have 15-20 sub stockists (Star Sellers). These star sellers
distribute it to the retailers in smaller villages using local means of transport.
12. Project Shakti: It empowers underprivileged rural women. These women
represent HUL and are termed Shakti Amma, who sell its health care, home
and hygiene products in villages having population of less than 2000.

Page | 63
 II)Weaknesses

1. It is losing its current market share due to the presence of other strong FMCG
brands.
2. Lux and Lifebuoy put together saw their value market share fall 390 basis points
since 2017.
3. HUL’s average daily sales and factory output have tumbled to about 40%
because of Covid 19.

III)Opportunities

1. Acquired Adityaa Milk to expand our ice creams business. This acquisition will
also enable them to pilot low-cost business models and enhance their ice cream
supply chain and ‘go to market’ capabilities.
2. Merger of GlaxoSmithKline Consumer Healthcare (GSK CH) business into HUL
will build one of the largest Foods & Refreshment businesses in the country.
GSK CH India is the market leader in the Health Food Drinks category, with
iconic brands such as Horlicks and Boost. The amalgamation of the two
Companies -the combined knowledge and the strong portfolio gives a strong
competitive edge.
3. The digital transformation of work is bringing a great opportunity to become a
simpler, more agile and efficient organisation with a strong data moat.
4. Its concept of distribution channel in rural areas with the concept of their project
Shakti Amma would lead to a higher market penetration.

IV)Threats

1. Plethora of brands are available in the market. Consumer is the king and has
got the power to select whichever brand he likes.
2. Unfavourable raw material prices due to various external factors like inflation or
the current pandemic.

Page | 64
 BCG Matrix of Hindustan Unilever Ltd.

STAR Question mark

Axe

Horlicks
Market Growth Rate

Surf Excel

Brooke Bond

Cash Cow Dog

Relative Market Share

Figure 15

Name of the Name of the Name of The

Segment competitor Category Reason
Health Drink Bournvita Star Horlicks is having a sizeable market share as it is having variety of flavours and
(Cadbury) caters to a wider population, not just for kids but also for women. The market growth
is also at a higher rate. Hence it belongs to star category.
Deodrants Fogg (Vini Question Mark Axe was once a deodrant with a large market share. But now with a variety of other
Cosmetics deodrants like Fogg, Engage, Set Wet, etc., the relative market share of Axe has
Pvt Ltd) reduced but the segment is growing at a high rate. Hence Axe belongs to the
category of Question Mark. To become a star category it should increase its
marketing expenditure so that more and more people buy its product and it would
thus gain a higher market share.
Detergents Ghari (RSPL Question Mark Surf Excel is one of the premium detergent brands. But in the overall detergent
group) segment, due to the presence of several other detergent brands, its market share is
relatively low. However, the market is growing at a relatively high rate. Hence it
belongs to the category of Question Mark.
Tea Tata Tea Dog Brooke Bond is a product having a relatively low market share and the segment is
(Tata Group) also not growing at a high rate. Chane of gaining the market share is also limited
because the market itself is not growing at a higher rate. Hence Brooke Bond
belongs to the category of Dog.

(22) (23) (24) (25) (26) (27) Table 4

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 Fund Flow Statement of Hindustan Unilever Ltd.
Fund flow Statement for the year 2017
Particulars Amount Particulars Amount
Sources of Funds Uses of Funds
Long Term Sources Long Term Uses
Other equity 171 Provisions 109
Non-controlling interests 2 Property, plant and equipment 803
Other financial liabilities 53 Other intangible assets 358
Non-current tax liabilities (net) 126 Loans 168
Other non-current liabilities 23 Non-current tax assets (net) 80
Capital work-in-progress 179 Deferred tax assets (net) 2
Other financial assets 141 Other non-current assets 20
Investment in sub 26 Deferred tax Liabilities (net) 1
Long Term Sources 721 Long Term Uses 1541
Short Term Sources Short Term Uses
Borrowings 100 Other financial liabilities 63
total outstanding dues of creditors other than
micro enterprises and small enterprises 501 Investments 1228
Other current liabilities 10 Other financial assets 92
Provisions 99 Other current assets 27
Inventories 185 Assets held for sale 25
Trade receivables 179
Bank balances other than cash and cash equivalents
mentioned above 979
Short Term Sources 2053 Short Term Uses 1435
Decrease in Cash and Cash Equivalents -202
Total Sources 2774 Total Uses 2976

Fund flow Statement for the year 2018

Particulars Amount Particulars Amount
Sources of Funds Uses of Funds
Long Term Sources Long Term Uses
Other equity 537 Property, plant and equipment 112
Other financial liabilities 46 Capital work-in-progress 232
Provisions 286 Loans 16
Non-current tax liabilities (net) 126 Non-current tax assets (net) 174
Other intangible assets 3 Deferred tax assets (net) 132
Investments 4 Other non-current assets 9
Non-controlling interests 2
Other non-current liabilities 10
Long Term Sources 1002 Long Term Uses 687
Short Term Sources Short Term Uses
Total outstanding dues of creditors other than MSME 984 Loans 4
Other financial liabilities 19 Trade receivables 225
Other current liabilities 151 Bank balances other than cash & cash eqi 1636
Provisions 296 Other financial assets 474
Inventories 28 Other current assets 104
Investments 917 Borrowings 277
Assets held for sale 31
Short Term Sources 2426 Short Term Sources 2720
Increase in Cash and Cash Equivalents 21
Total Sources 3428 Total Uses 3407

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 Fund flow Statement for the year 2019
Particulars Amount Particulars Amount
Sources of Funds Uses of Funds
Long Term Sources Long Term Uses
Other equity 586 Non-controlling interests 2
Other financial liabilities 58 Property, plant and equipment 112
Provisions 282 Goodwill 36
Non-current tax liabilities (net) 43 Other intangible assets 39
Other non-current liabilities 20 Loans 31
Capital WIP 55 Other financial assets 5
Non-current tax assets (net) 200
Deferred tax assets (net) 71
Other non-current assets 74
Long Term Sources 1044 Long Term Uses 570
Short Term Sources Short Term Uses
Borrowings 99 Other current liabilities 262
Total outstanding dues of creditors other than
micro enterprises and small enterprises 36 Provisions 165
Other financial liabilities 72 Inventories 61
Investments 157 Trade receivables 506
Bank balances other than cash and cash
Other financial assets 228 equivalents mentioned above 300
Other current assets 188
Assets held for sale 12

Short Term Sources 792 Short Term Uses 1294

Decrease in Cash and Cash Equivalents -28
Total Sources 1836 Total Uses 1864

Page | 67
 Ratio Analysis of Hindustan Unilever Ltd.

Liquidity Ratios
Sr. Name of ratio Formula 2019 2018 2017
1 Current ratio Current assets/current liabilities 1.37 times 1.31 times 1.32 times
2 Quick Ratio (Current Assets -Inventory)/(Current Liability) 1.08 times 1.03 times 0.99 times
Cash + Marketable Securities + Net Receivable and
3 Absolute liquidity ratio Debtors/Current Liability 0.96 times 0.86 times 0.87 times
4 Cash Ratio Cash + Marketable Securities / Current Liability 0.75 times 0.72 times 0.73 times

Turnover Ratios
Sr. Name of ratio Formula 2019 2018 2017
5 Debtors Turnover Ratio Net Credit sales(Revenue from operations)/Avg Debtors 25.15 times 30.26 times 33.28 times
6 Avg collection peroid 365/ Drs turnover 14.51 Days 12.06 Days 10.97 Days
7 Inventory Turnover Ratio Cost of Goods Sold/Average Inventory 11.96 times 11.37 times 11.61 times
8 Capital Turnover Ratio Net Sales OR Cost of Goods Sold/Capital Employed 3.05 times 3.20 times 3.68 times
9 Asset Turnover Ratio Turnover/Average Total Assets 2.15 times 2.16 times 2.41 times
10 Fixed Asset turnover ratio Turnover/Fixed Assets 5.85 times 5.84 times 6.46 times
11 Working Capital turnover Ratio Net Sales /Working Capital 12.11 times 13.07 times 14.55 times

Operating Profitability Ratios

Sr. Name of ratio Formula 2019 2018 2017
12 GP margin ratio GP/ Rev from Operations 22.59% 20.69% 17.73%
13 Earning Margin Net Income/Turnover * 100 22.47% 20.25% 17.46%
14 Return on Assets PAT/Average Total Assets 33.21% 31.13% 30.39%
15 Return on Investment PBIT/Total Capital employed * 100 86.70% 81.67% 81.51%
(PAT-Preference Dividend)/Ordinary Shareholder's Fund
16 Return on Equity * 100 28.06% 24.19% 20.84%
17 Earning per Share (EAT - Preference Dividend) / No. of Ordinary Shares 28.06 24.19 20.84

Financial Risk Ratios

Sr. Name of ratio Formula 2019 2018 2017
18 Debt Equity Ratio Total debts/ share holders's funds 1.36 1.45 1.32
19 Interest Coverage Ratio Analysis EBITDA /Interest Expense 278.85 times 301.92 times 198.46 times

Stability Ratios
Sr. Name of ratio Formula 2019 2018 2017
20 Debt asset ratio Total Debt/ Assets 0.58 0.59 0.57
21 Fixed Asset Ratio Fixed Assets / Capital Employed 0.67 0.69 0.69
Ratio of Current Assets to Fixed
22 Assets Current Assets / Fixed Assets 1.8 1.9 1.8
23 Proprietary Ratio Shareholder Fund / Total Tangible Assets 1.7 1.6 1.6
24 DuPont Analysis Net Profit Margin × Asset Turnover × Equity Multiplier 28.06 24.19 20.84

Page | 68
 Altman's Z Score
Formula 2019 2018 2017
A(working cap/Total assets) 0.17 0.16 0.16
B(retained earnings/total assets) 0.41 0.40 0.42
C(EBIT/Total assets) 0.46 0.41 0.41
D(market valueequity/BV of liabilities) 34.32 34.91 41.24
E(sales/total assets) 2.11 2.03 2.28
1.2A + 1.4B + 3.3C + 0.6D + 1.0E 25.02 25.07 29.16

Page | 69
 Page | 70
Assumptions taken for projecting financial statements of Hindustan Unilever Ltd.
Other Excise Cost of Purchases of Changes in Employee benefits Other Exception
Sales Values Income Duty materials Stock-in-Trade inventories expense expenses Depreciation al Items Tax%
as a % 7.83% of fixed
8.48% of Sales 1.40% 0.00% 34.87% 12.10% 0.03% 4.77% 25.64% costs 0.42% 29.57%
Profit and Loss Account
Financial Forecasting of Hindustan Unilever Ltd.

Current Figures Projected Figures

Particulars 31st March, 2017 31st March, 2018 31st March, 2019 31st March, 2020 31st March, 2021 31st March, 2022 31st March, 2023 31st March, 2024
INCOME
Revenue from operations 35,759 36,238 39,310 42642.42 46257.34 50178.71 54432.51 59046.91
Other income 369 384 550 596.63 647.20 702.07 761.58 826.15
TOTAL INCOME 36,128 36,622 39,860 43,239 46,905 50,881 55,194 59,873
EXPENSES
Cost of materials consumed 11,946 12,927 13,707 14868.98 16129.47 17496.81 18980.07 20589.06
Purchases of stock-in-trade 4,223 3,875 4,755 5158.10 5595.36 6069.70 6584.24 7142.41
Changes in inventories 144 -72 12 13.02 14.12 15.32 16.62 18.03
Excise duty 2,597 693 0 0.00 0.00 0.00 0.00 0.00
Employee benefits expenses 1,743 1,860 1,875 2033.95 2206.37 2393.41 2596.31 2816.41
Finance costs 35 26 33 26.24 28.47 30.88 33.50 36.34
Depreciation and amortisation
expense 432 520 565 570.48 632.11 655.81 599.49 597.31
Other expenses 8,766 9,456 10,081 10935.60 11862.64 12868.27 13959.15 15142.51
TOTAL EXPENSES 29,886 29,285 31,028 33,606 36,469 39,530 42,769 46,342
Profit before exceptional items and
tax 6,242 7,337 8,832 9632.68 10436.01 11350.59 12424.72 13531.00
Exceptional items (net) 237 -33 -228 178.97 194.14 210.59 228.45 247.81
Profit before tax from Continuing
Operations 6,479 7,304 8,604 9811.65 10630.15 11561.18 12653.17 13778.81
Tax expenses -
Current tax -1,947 -2,216 -2,610
Deferred tax credit/(charge) -30 137 66
Profit after tax from Continuing
Operations (A) 4,502 5,225 6,060
Profit/(Loss) from Discontinued
Operations before tax -13 2 0
Tax expenses of Discontinued
Operations 1 - -
Profit/(loss) from Discontinued
Operations after tax (B) -12 2 0
Total tax 2901.07 3143.08 3418.37 3741.24 4074.07
PROFIT FOR THE YEAR (A+B) 4,490 5,227 6,060 12,713 13,773 14,980 16,394 17,853
Earnings per Equity Share
Basic 20.75 24.2 27.89 32.06 34.78 37.73 40.93 44.40
No. of Shares 2,16,46,38,572 2,16,49,24,045 2,16,49,89,454 2,16,49,89,454 2,16,49,89,454 2,16,49,89,454 2,16,49,89,454 2,16,49,89,454
Market Price 912 1,333 1,707 1,963 2,129 2,309 2,505 2,717
PE Ratio 43.95 55.08 61.20 61.20 61.20 61.20 61.20 61.20
 Balance Sheet of Hindustan Unilever Ltd.
Current Figures Projected Figures
Particulars
31st March, 2017 31st March, 2018 31st March, 2019 31st March, 2020 31st March, 2021 31st March, 2022 31st March, 2023 31st March, 2024
ASSETS
Non-current assets 5,534 6,202 6,715 7,284 8,071 8,374 7,655 7,627
Property, plant and equipment 3,968 4,080 4,192
Capital work-in-progress 229 461 406
Goodwill 0 0 36
Other intangible assets 370 367 406
Goodwill on consolidation 81 81 81
Financial assets
Investments 6 2 2
Loans 168 184 215
Other financial assets 6 6 11
Non-current tax assets (net) 461 635 835
Deferred tax assets (net) 170 302 373
Other non-current assets 75 84 158
Current assets 10,172 11,660 11,914 12,597 13,496 15,021 17,724 19,903
Inventories 2,541 2,513 2,574
Financial assets
Investments 3,788 2,871 2,714
Loans 0 4 4
Trade receivables 1085 1,310 1,816
Cash and cash equivalents 628 649 621
Bank balances other than cash and
cash equivalents 1200 2,836 3,136
mentioned above
Other financial assets 331 805 577
Other current assets 552 656 468
Assets held for sale 47 16 4
TOTAL ASSETS 15,706 17,862 18,629 19,881 21,567 23,395 25,378 27,530
EQUITY AND LIABILITIES
Equity 6,766 7,301 7,885 8,828 9,576 10,388 11,269 12,224
Equity share capital 216 216 216 216 216 216 216 216
Other equity 6,528 7,065 7,651 8612.04 9360.42 10172.24 11052.88 12008.17
Non-controlling interests 22 20 18
Liabilities
Non-current liabilities 1,226 1,674 2,077 1,652 1,792 1,944 2,108 2,287
Financial liabilities
Other financial liabilities 73 119 177
Provisions 514 800 1,082
Non-current tax liabilities (net) 432 558 601
Other non-current liabilities 207 197 217
Current liabilities 7,714 8,887 8,667 9,402 10,199 11,063 12,001 13,019
Financial liabilities
Borrowings 277 99
Trade payables
total outstanding dues of MSMEs
total outstanding dues of creditors
6,186 7,170 7,206
other than MSME
Other financial liabilities 195 214 286
Other current liabilities 664 815 553
Provisions 392 688 523
Total Liabilities 8,940 10,561 10,744 11,053 11,990 13,007 14,110 15,306
TOTAL EQUITY AND LIABILITIES 15,706 18,629 17,862 19,881 21,567 23,395 25,378 27,530

Page | 71
 Company Life Cycle of Hindustan Unilever Ltd.

Figure 16

The data of the Sales and Profit is obtained from the year of 2000. The profits and the
sales have been increasing at a steady rate. However, it can be seen that the graph
rose very high for the year ended 2009 and fell down in 2010. This was because they
had changed their financial year end. Up till 2007, the year-end used to be on 31st
December and from 2009, it was on 31st March. So that year, the company had
recorded the sales and profits for a period of 15 months. From the next year onwards,
the growth rate was again stable.
(28)

Page | 72
 D) ITC Ltd.
Introduction
ITC Limited is a diversified conglomerate with businesses spanning Fast Moving
Consumer Goods comprising Foods, Personal Care, Cigarettes and Cigars, Branded
Apparel, Education & Stationery Products, Incense Sticks and Safety Matches; Hotels,
Paperboards and Packaging, Agri Business and Information Technology. The
Company was incorporated on August 24, 1910 under the name Imperial Tobacco
Company of India Limited. As the Company's ownership progressively Indianite, the
name of the Company was changed to Indian Tobacco Company Limited in 1970 and
then to I.T.C. Limited in 1974. In recognition of the ITC's multi-business portfolio
encompassing a wide range of businesses, the full stops in the Company's name were
removed effective September 18, 2001. The Company now stands rechristened 'ITC
Limited,' where 'ITC' is today no longer an acronym or an initialized form. It is
headquartered in Kolkata, India. Some popular brands are – Aashirvaad, Sunfeast,
Bingo, Yippee, Fiama, Vivel, Dermafique, Vivel, Engage, Savlon, Classmate,
Paperkraft, AIM, Mangaldeep and Sunbean. In July 2020 ITC acquired Sunrise Foods
in Rs. 2150 cr, which is a spice maker company. Current Chairman and MD of the
company – Sanjiv Puri ITC is listed on both NSE and BSE. The Share price of the
company is near 200 INR. (29)

Page | 73
 SWOT Analysis of ITC Ltd.
I)Strengths

1. Brand Image
ITC’s FMCG brands have achieved impressive market standing in a short span of
time. Today, ITC’s FMCG products reach over 124 million Indian households.
2. Good portfolio
It is in 13 businesses in 5 segments i.e. FMCG, Hotels, Agri- Business, Information
Technology, Paperboards and Packaging.
3. Brand Leadership
ITC has strong brand leadership Aashirvaad is No. 1 in branded Atta, Sunfeast is
No. 1 in cream biscuits, Bingo is No.1 in Bridges segments of snack foods,
Classmate No. 1 in Notebooks, Yippee is No.2 in Noodles, Engage is No.2 in
Deodorants, Fiama is No.2 in Body wash, Mangaldeep is No.1 in Dhoop segment
and No.2 in Agarbattis.
4. Achieved environment sustainability
It is the only enterprise in the world of comparable dimensions to have achieved and
sustained the three key global indices of enviormental sustainability of being ‘water
positive’ (for 17 years), ‘carbon positive’ (for 14 years) and ‘solid waste recycling
positive’ (for 12years).

II)Weakness

1. Tobacco Product
ITC is highly dependent on the revenue from the Tobacco. ITC’s cigarette has
75% market share.
2. Tax reforms in India
Under the newly enforced Goods and Services Tax Act, 2017 tax is charged at a
higher rate than before GST which is affecting the business especially cigarette
business of ITC.
3. Hotel industry
Hotel industry of ITC is not able to capture the market. It is not very known to the
people.

Page | 74
 III)Opportunities

1. Growing demand in the FMCG sector

Increasing urbanization and a growing middle class are resulting in an ever-
growing demand for processed food in the FMCG sector. Investment in food
processing over the next five to seven years reduces the over dependence of ITC
on tobacco business.
2. Company is also partnering with NITI Aayog to boost the agricultural sector, an
opportunity for agri-business.
3. There is an opportunity to increase the revenue from the rural areas.

IV)Threats

1. Competition
ITC Limited is facing and will face in future, intense competition from domestic and
foreign companies in various industries.
2. Compliance
GST has imposed stricter and heavier compliance regulation and filings which will
ultimately increase the cost of compliance of ITC.
3. Reduction in consumption of cigarettes
Due to the Tax regime consumption of cigarettes in India is among the lowest in
the world.

Page | 75
 BCG Matrix of ITC Ltd.

BCG Matrix of ITC

Star Question Mark

Sunfeast Cream
Market Growth

Biscuits
Engage

Cash Cow Mangal Deep Vivel Dog

Agarbatti
Aashirvaad Aata
Yippee Noodles

Cigarette
Relative Market Share
Figure 17

Name of
Name of the Name of the The
Segment competitor Category Reason
Yippee Noodles Nestle Maggi Dog Though the company is No.2 in the Noodles segment ,it's
market share and market growth is low. Company is not able
to beat its competitor.

Vivel HUL (LUX) Dog Company has launched this product since past few years.
And the competitors are the big player of this
segment.Though company has low market share and market
growth, product is showing good progress.
Ashirwaad Aata Shakti Bhog Cash cow Aashirvaad Aata is a leader in the Branded aata segment. It
Foods Limited has good market share but the market growth is quiet low. It
may be because may of the people still not preferred to use
Aata in packed form.
Sunfeast Cream Parle Star Sunfeast cream biscuit is No.1 in Cream Biscuits category.It
Biscuits has high market share and high market growth.Company is
able to engage its consumer with them.

Mangaldeep Agarbatti Cycle Cash cow Mangaldeep Agarbatti is No. 2 in the Agarbatti segment.It
has high market share but low market growth.

Engage Vinni (Fogg) Star Engage is No.2 in the deodorant segment. Company
showing good progress in this segment. It has high market
share and high market growth.

Ciggrette Godfrey Philips Cash cow Largest share of revenue of the company is come from this
segment.The market share of this segment is very high and it
has low market share.

Table 5

(30), (31), (32), (33), (34)

Page | 76
 Fund Flow Analysis of ITC Ltd.
Fund flow Statement for the year 2017
Source Application
Particulars RS Particulars RS
Long Term Sources Long Term Uses
Intangible assets 8.09 Property, Plant and Equipment 877.36
Loans 2.28 Capital work-in-progress 1102.91
Others 931.35 Intangible assets under development 14.94
Equity Share capital 410.02 Investments 1632.31
Other Equity 3274.51 Other non-current assets 195.4
Provisions 19.18 Borrowings 7.84
Deferred tax liabilities (Net) 4.27 Other financial liabilities 5.92
Other non-current liabilities 14.65
4664.35 3836.68

Short term Sources Short term uses

Inventories 655.83 Investments 3628.45
Other Bank Balances 2972.29 Trade receivables 521.15
Loans 0.48 Others 597.69
Total outstanding dues of creditors other than 323.21 Other current assets 104.42
micro enterprises and small enterprises
Other financial liabilities 190.07 Total outstanding dues of micro enterprises 3.59
and small enterprises
Current Tax Liabilities (Net) 72.69 Other current liabilities 90.81
Provisions 15.77
4214.57 4961.88
Increase in Cash and Cash Equivalents 80.36
8878.92 8878.92
Fund flow Statement for the year 2018
Source Application
Particulars RS Particulars RS
Long Term Sources Long Term Uses
Intangible assets under development 36.96 Property, Plant and Equipment 650.68
Other non-current assets 644.49 Capital work-in-progress 1525.52
Equity Share capital 5.69 Intangible assets 35.07
Other Equity 6053.42 Investments 5008.26
Other financial liabilities 26.15 Loans 1.56
Deferred tax liabilities (Net) 46.24 Others 1641.45
Other non-current liabilities 23.65 Income Tax Assets (Net) 18.66
Provisions 9.46
Borrowings 6.86
6836.6 8897.52
Short Term Sources Short Term Uses
Inventories 626.84 Trade receivables 149.51
Investments 196.33 Loans 0.78
Other Bank Balances 92.27 Other financial asset 143.04
Other current liabilities 1305.63 Other current assets 647.84
Total outstanding dues of micro enterprises and 29.42 Other financial liabilities 6.48
small enterprises
Total outstanding dues of creditors other than 801.63 Provisions 2.59
micro enterprises and small enterprises
Current Tax Liabilities (Net) 101.08
3052.12 1051.32
Decrease in Cash and Cash Equivalents 60.12
9948.84 9948.84

Page | 77
 Fund flow Statement for the year 2019
Source Application
Particulars RS Particulars RS
Long Term Sources Long Term Uses
Capital work-in-progress 1625.38 Property, Plant and Equipment 2825.65
Financial Loans 1.19 Intangible assets 94.76
Income Tax Assets (Net) 18.66 Intangible assets under development 1.16
Other non-current assets 142.58 Investments 577.68
Equity Share capital 5.43 Other financial Asset 639.21
Other Equity 6544.29 Borrowings 3.24
Other financial liabilities 6.54 Other non-current liabilities 38.3
Provisions 10.73
Deferred tax liabilities (Net) 126.2
8481 4180
Short Term Source Short Term Uses
Other current assets 563.5 Inventories 350.09
Total outstanding dues of micro enterprises and 24.89 Investments 2603.1
small enterprises
Other financial liabilities 194.64 Trade receivables 1289.21
Other current liabilities 253.62 Provisions 14

Current Tax Liabilities (Net) 344.7 Other Bank Balances 1107.17

Loans 0.87
Others 212.34
Total outstanding dues of creditors other than 38.89
micro enterprises and small enterprises
1381.35 5615.67
Increase in Cash and Cash Equivalents 66.68
9862.35 9862.35

Page | 78
 Ratio Analysis of ITC Ltd.
Liquidity Ratios
Sr. Name of ratio formula 2019 2018 2017
1 Current ratio Current assests/current liabilities 3.07 times 2.77 times 3.59 times
(Current Assets -Inventory)/(Current
2 Quick Ratio Liability) 2.28 times 1.95 times 2.44 times
Cash + Marketable Securities + Net
3 Absolute liquidity ratio Receivable and Debtors/Current Liability 1.70 times 1.40 times 1.82 times
Cash + Marketable Securities / Current
4 Cash Ratio Liability 1.32 times 1.13 times 1.50 times

Turnover Ratios
Sr. Name of ratio formula 2019 2018 2017
Net Credit sales(Revenue from
5 Debtors Turnover Ratio operations)/Avg Debtors 14.99 times 17.80 times 20.59 times
6 Avg collection peroid 365/ Drs turnover 24.35 Days 20.50 Days 17.73 Days
7 Inventory Turnover Ratio Cost of Goods Sold/Average Inventory 3.84 times 3.81 times 4.99 times
Net Sales OR Cost of Goods Sold/Capital
8 Capital Turnover Ratio Employed 0.47 times 0.54 times 0.86 times
9 Asset Turnover Ratio Turnover/Average Total Assets 0.68 times 0.70 times 0.77 times
10 Fixed Asset turnover ratio Turnover/Fixed Assets 2.72 times 2.75 times 2.86 times
11 Working Capital turnover Ratio Net Sales /Working Capital 2.26 times 2.60 times 2.26 times

Operating Profitability Ratios

Sr. Name of ratio formula 2019 2018 2017
12 GP margin ratio GP/ Rev from Op 41.07% 40.68% 38.73%
13 Earning Margin Net Income/Turnover * 100 40.28% 38.01% 27.96%
14 Return on Assets PAT/Average Total Assets 18.86% 19.25% 19.57%
15 Return on Investment PBIT/Total Capital employed * 100 30.71% 31.65% 32.76%
(PAT-Preference Dividend)/Ordinary
16 Return on Equity Shareholder's Fund * 100 21.51% 21.84% 22.50%
(EAT - Preference Dividend) / No. of
Ordinary Shares 10.17 9.20 8.40
17 Earning per Share
Financial Risk Ratios
Sr. Name of ratio formula 2019 2018 2017
18 Debt Equity Ratio Total debts/ share holders's funds 0.20 0.21 0.24
Interest Coverage Ratio
19 Analysis EBITDA /Interest Expense 578.83 times 208.70 times 721.74 times

Stability Ratios
Sr. Name of ratio formula 2019 2018 2017
20 Debt asset ratio Total Debt/ Assets 0.17 0.18 0.16
21 Fixed Asset Ratio Fixed Assets / Capital Employed 0.30 0.28 0.31
Ratio to Current Assets to
22 Fixed Assets Current Assets / Fixed Assets 1.6 1.6 1.7
23 Proprietary Ratio Shareholder Fund / Total Tangible Assets 0.8 0.8 0.8
Net Profit Margin×Asset Turnover×Equity
24 DuPont Analysis Multiplier 0.33 0.32 0.26

Page | 79
 Altman's Z Score
formula 2019 2018 2017
A(working cap/Total assets) 0.2858 0.2508 0.3266
B(retained earnings/total assets) 0.8127 0.8044 0.8139
C(EBIT/Total assets) 0.2647 0.2715 0.2864
D(market valueequity/book value of debt) 30.6980 28.4401 40.5676
E(sales/total assets) 0.6447 0.6513 0.7394
1.2A + 1.4B + 3.3C + 0.6D + 1.0E 21.4178 20.0386 27.5564

Page | 80
 Page | 81
Assumptions Taken for Calculation of Projected P&L and Balancesheet
Sales Other Excise Cost of materials Purchases of Changes in Employee Other Deprecia Exceptio
Growth Income Values as Duty consumed Stock-in-Trade inventories benefits expense expenses tion nal Items Tax%
a % of
3.00% 5.52% Sales 1.72% 29.30% 9.56% -0.40% 6.06% 17.02% 2.74% 0.00% 32.42%
Statement of Profit and Loss
Current Figures Projected Profit and Loss
Particulars 31 March,2017 31 March,2018 31 March,2019 31 March,2020 31 March,2021 31 March,2022 31 March,2023 31 March,2024
Income
I Revenue from Operations* 55448.46 44329.77 45784.39 47157.92 48572.66 50029.84 51530.73 53076.66
Financial Forecasting of ITC Ltd.

II Other Income 1985.91 2129.84 2484.54 2559.08 2635.85 2714.92 2796.37 2880.26
III Total Income (I+II) 57434.37 46459.61 48268.93 49717.00 51208.51 52744.76 54327.11 55956.92
IV EXPENSES
Cost of materials consumed 11765.56 11756.21 13184.97 13580.52 13987.93 14407.57 14839.80 15284.99
Purchases of Stock-in-Trade 3566.57 2991.98 4300.32 4429.33 4562.21 4699.08 4840.05 4985.25
Changes in inventories 644.17 1041.85 -180.14 -185.54 -191.11 -196.84 -202.75 -208.83
Excise duty 15359.78 3702.23 788.74 812.40 836.77 861.88 887.73 914.37
Employee benefits expense 2444.31 2487.46 2728.44 2810.29 2894.60 2981.44 3070.88 3163.01
Finance costs 22.95 86.65 34.19 35.58 36.65 37.75 38.88 40.05
24
Depreciation and amortization expense 1038.04 1145.37 1311.7 1269.26 1307.34 1346.56 1386.96 1428.57
Other expenses 7090.03 6809.06 7656.55 7886.25 8122.83 8366.52 8617.51 8876.04
Total expenses (IV) 41931.41 30020.81 29824.77 30638.09 31557.24 32503.95 33479.07 34483.44
V Profit before exceptional items and tax (III-
IV) 15502.96 16438.8 18444.16 19078.90 19651.27 20240.81 20848.03 21473.48
VI Exceptional Items 0 412.9 0 0.00 0.00 0.00 0.00 0.00
VII Profit before tax (V-VI) 15502.96 16851.7 18444.16 19078.90 19651.27 20240.81 20848.03 21473.48
VIII Tax expense:
Current Tax 5285.65 5599.83 5849.24
Deferred Tax 16.41 28.62 130.6
Total Tax 6185.63 6371.20 6562.34 6759.21 6961.98
IX Profit for the year (VII-VIII) 10200.9 11223.25 12464.32 12893.27 13280.07 13678.47 14088.83 14511.49
Earnings per equity share 8.43 9.22 10.19 10.54 10.86 11.18 11.52 11.86
Weighted average number of equity shares used in computing earnings per share:
- Basic 12103851999 12175814877 12231113530 12231113530 12231113530 12231113530 12231113530 12231113530
Market Price 280.5 255.9 296.7 305.70 314.87 324.32 334.05 344.07
P/E Ratio 33 28 29 29 29 29 29 29
 Balance Sheet
Current Figures (In Crores) Projected Figures
Particulars 31 March,2017 31 March,2018 31 March,2019 31 March,2020 31 March,2021 31 March,2022 31 March,2023 31 March,2024
ASSETS
Non-current assets
(a) Property, Plant and Equipment 14469.32 15120 17945.65
(b) Capital work-in-progress 3491.33 5016.85 3391.47
(c) Intangible assets 410.92 445.99 540.75
(d) Intangible assets under development 45.69 8.73 9.89
(e) Financial Assets
(i) Investments 8485.51 13493.77 14071.45
(ii) Loans 5.84 7.4 6.21
(iii) Others 99.83 1741.28 2380.49
(f) Income Tax Assets (Net) 18.66
(g) Other non-current assets 2670.12 2025.63 1883.05
Total non- current Assets 29678.56 37878.31 40228.96 36164.03 37248.95 38366.42 39517.41 40702.94
Current assets
(a) Inventories 7863.99 7237.15 7587.24
(b) Financial Assets
(i) Investments 10099.78 9903.45 12506.55
(ii) Trade receivables 2207.5 2357.01 3646.22
(iii) Cash and cash equivalents 156.15 96.03 162.71
(iv) Other Bank Balances 2591.12 2498.85 3606.02
(v) Loans 3.37 4.15 5.02
(vi) Others 1004.91 1147.95 1360.29
(c) Other current assets 610.57 1258.41 694.91
Total current assets 24537.39 24503 29568.96 29024.34 29895.07 30791.92 31715.68 32667.15
TOTAL ASSETS 54215.95 62381.31 69797.92 65188.37 67144.02 69158.34 71233.09 73370.08
EQUITY AND LIABILITIES
Equity
(a) Equity Share capital 1214.74 1220.43 1225.86 1225.86 1225.86 1225.86 1225.86 1225.86
(b) Other Equity 44126.22 50179.64 56723.93 53018.00 54645.31 56321.45 58047.87 59826.08
Total equity 45340.96 51400.07 57949.79 54243.86 55871.17 57547.31 59273.73 61051.94
Liabilities
Non-current liabilities
(a) Financial Liabilities
(i) Borrowings 17.99 11.13 7.89
(ii) Other financial liabilities 9.21 35.36 41.9
(b) Provisions 131.37 121.91 132.64
(c) Deferred tax liabilities (Net) 1871.7 1917.94 2044.14
(d) Other non-current liabilities 14.65 38.3 0
Total non-current liabilities 2044.92 2124.64 2226.57 2317.28 2386.79 2458.40 2532.15 2608.11
Current liabilities
(a) Financial Liabilities
(i) Trade payables
Total outstanding dues of micro enterprises and
small enterprises 0.01 29.43 54.32
Total outstanding dues of creditors other than
micro enterprises and small enterprises 2551.22 3352.85 3313.96
(ii) Other financial liabilities 784.78 778.3 972.94
(b) Other current liabilities 3351.15 4656.78 4910.4
(c) Provisions 41.83 39.24 25.24
(d) Current Tax Liabilities (Net) 101.08 0 344.7
Total current liabilities 6830.07 8856.6 9621.56 8627.24 8886.05 9152.63 9427.21 9710.03
Total Liabilities 8874.99 10981.24 11848.13 10944.51 11272.85 11611.03 11959.36 12318.14
TOTAL EQUITY AND LIABILITIES 54215.95 62381.31 69797.92 65188.37 67144.02 69158.34 71233.09 73370.08

Page | 82
 Company Life Cycle of ITC Ltd.

Figure 18
The Sales of the company showing the increasing trend from the initial years. In the
year 1992 the sales were 1472.96 with net profit of 115.17 having net profit margin of
7.82%. Initially sales growth was between 10% - 20% and sometimes it was above
20%. In the past few years’ sales growth is up to 10%. Currently the company is at
the growth stage with sales of 44995.70 and net profit 12464.30 with the net profit
margin of 27.70%. (35), (36), (37)

Page | 83
 E) Marico Ltd.

Introduction
Marico Limited is one of India's leading consumer goods companies providing
consumer products and services in the areas of health, beauty and wellness. With its
headquarters in Mumbai, Maharashtra, India, Marico is present in over 25 countries
across emerging markets of Asia and Africa. It owns brands in categories of hair care,
skin care, edible oils, health foods, male grooming, and fabric care.

As of 2018-19, the company generated a turnover of ₹7,334 crores. Marico has 8

factories in India located at Pondicherry, Perundurai, Kanjikode, Jalgaon, Paldhi,
Dehradun, Baddi and Paonta Sahib. (38)

In Bangladesh, Marico operates through Marico Bangladesh Limited, a wholly owned

subsidiary. Its manufacturing facility is located at Shirirchala, in Dhaka Division.

The International business portfolio includes brands such as Parachute, Parachute

Advansed, Haircode, MedikerSafeLife, Fiancee, Hercules, Caivil, Black Chic, Code
10, Ingwe, X-Men, Sedure, Thuan Phat and Isoplus.

Harsh Mariwala is the Chairman and Saugata Gupta assumed the role of the
Managing Director in March 2014 and is currently the MD and CEO of this
organisation.

Marico remains committed towards sustainable value creation through a consumer

and community-centric strategy. Being the market leader in 90% of our business
segments, they focus on maintaining their leadership position and driving category
growth by bringing value to their consumers in the form of right pricing as well as
superior product offerings.

Page | 84
 SWOT Analysis of Marico Ltd.
I)Strengths

1. One of the major products that Marico has its hold on is the coconut hair oil
which constitutes about 60% market share and include Parachute, Oil of
Malabar and Nihar. The oil market is a strong point for this company. Saffola oil
also created a new market which brought health consciousness in the
consumer’s mind. This constitutes about 75% of the market share of premium
refined oil segment.
2. Secondly, Marico has its hold over the markets of Asia as well as Africa.
3. The product portfolio is widespread as it consists of hair oils, body lotion, edible
oils, deos&
hair gels targeting markets which did not interest other multi-national
companies like anti-lice shampoo, ethnic hair conditioner or fabric conditioner.
4. They have excellent distribution system and also research & development
team.

II)Weaknesses

1. Many a times new products are not accepted by the consumer and hence it
may lead to failure.
2. They also had a number of failed products like the Parachute hot oil and Saffola
snacks. These were a big hit to the company in terms of costs they had to bear.
3. It shares a limited presence due to other strong brands. It has stiff competition
from various big brands and international markets.
4. Marico had made sure to launch more than 2 products every year, but now their
products portfolio is vast and they don’t understand how to channelize the
resources.

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 III)Opportunities

1. Instead of looking at established market Marico Ltd. Is investing in the emerging

markets like, Egypt, Vietnam.
2. Acquisition of the brand code 10 proved to be a plus point for expansion in
Malaysian markets.
3. Penetrating the rural markets and making the products available at affordable
prices. They have delightful technology for the upcoming consumers under
kaya youth, their new skin care brand for youth. Marico launched a skin
analyser tool which leverages artificial intelligence and machine learning
capabilities to analyse the skin parameters and also provide them solutions with
it.
4. They also acquired 45% stake in Beardo which also helped them spread their
horizon in men’s grooming creating an opportunity for them.
5. Under the pandemic situation they also entered the foray of sanitizers under
Mediker sanitizer.
6. Recently they introduced a healthy gourmet segment under the name FITTIFY
attracting health conscious consumers.

IV)Threats

1. Intense competition amongst the FMCG companies. Secondly FDI in retail has
allowed the international brand to enter the market which prove to be a threat
to Marico’s position in the market.
2. Competition is not only from big brands but also from unbranded and local
products.
3. Risk of private labels though has been less in India but this can be changed
with the advent of E-commerce

Page | 86
 BCG Matrix of Marico Ltd.

STARS QUESTION MARKS

Hair serums

Deodorants

Cooking oil

Coconut oil DOGS

CASH COWS

Figure 19
Name of the Name of the Name of The
Segment competitor Category Reason
Coconut oil Patanjali Cash cow Over the years parachute had been one of the star
product of marico, and still manages to hold a large
market share along with nihar shanti oils and oil of
malabar in coconut oil segment. Though a very low
share, but Patanjali is in this race too which cannot be
unseen with the rising popularity of the brand. Patanjali
even offers at a lower price than that of parachute. Other
market shares are mostly occupied by loose oils
available in the market especially in southern region
Hair serums Loreal Star Marico had been the only company who had forayed
into premium hair nourishment at an affordable price
which was very uncommon intially, as they were genrally
used professionally. They therefore hold a better place
in the market with rspect to affordability and availability.
Cooking oil Adani wilmer Cash cow Saffola oils have always been considered a healthy way
of living, They started with the concept of health
consciousness and hence still holds a prominent
position in the market. Though the growth rate of this
industry has reduced as there are many competitors
now with different quality of oils, they still hold a good
market share.
Deodorant Vini Cosmetics Cash cow Marico has been the leading manufacturer in male
grooming segment with set wet gels and deos and also
zatak deos, they also have a 45% stake in Beardo and
hence this segment is still growing. But deos, like fogg
through excessive advertising has been able to create a
considerable market share and hence is still a tough
competiton. But still deodorants are a competitive
market hence marico has still a chance to bring their
product into the star category.

(39) (40) (41) (42) (43) Table 6

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 Fund Flow Analysis of Marico Ltd.
Fund Flow Statement for the year 2017
Sources Applications
Particulars Amount Particulars Amount
Long term sources Long term uses
Capital work-in-progress 25.57 Property, Plant & Equipment 22.85
Investment properties 0.69 Investment accounted for using the equity method 15.48
Goodwill 17.91 Non current investments 15.83
Other intangible assets 0.65 Other financial non current assets 1.96
Non current loans & advances 0.02 Inventories 327.88
Deferred tax assets(net) 55.39 Current investments 63.71
Trade Receivables 5.1 Current financial loans 1.12
Bank balance 30.67
Other financial current assets 3.9
Current tax assets 1.06
Other current assets 17.98
Other non-current assets 12.35
171.29 448.83
Short term sources Short term uses
Non- controlling interests 0.97
Equity attributable to owners 308.31 Long term Borrowings 0
Employee benefit obligations 3.05 Deferred tax liabilities 0.81
Short term borrowings 86.01 Other financial liabilities 182.43
Trade Payables 27.56 Employee benefit obligations 2.22
Provisions 5.77 Current tax liabilities (net) 5.5
Other current liabilities 20.42
430.7 212.35
Decrease in Cash and Cash Equivalents 59.19
661.18 661.18
Fund Flow Statement for the year 2018
Sources Applications
Particulars Amount Particulars Amount
Long Term Sources Long Term Uses
Property, Plant & Equipment 13.19 Capital Work-in-progress 15.84
Financial Investments 21.41 Investment Properties 0.02
Other Financial assets 0.71 Goodwill 6.55
Deferred Tax Assets(net) 0.54 Other Intangible Assets 31.92
Current Investments 47.5 Investment accounted for using the equity method 3.7
Bank balances 43.31 Non-current Financial Loans 0.27
Current Financial Loans 2.12 Non-current tax assets 33
Other financial assets 1.17 Other non-current assets 13.78
Current tax assets 0.92 Inventories 257.56
Assets classified under sale 12.45 Trade receivables 93.01
143.32 Other Current Assets 152.12
607.77
Short Term Sources Short Term Uses
Equity attributable to owners 217.32
Employee benefit obligations 3.14 Non- controlling interests 1.34
deferred tax liabilities (net) 6.97 Other financial liabilities 5.64
Non current borrowings 20 Trade Payables 696.6
Borrowings 50.2
Trade Payables due to micro and small
enterprises 4
Trade Payables due to others 818
Current liabilities provision 0.59
Current Employee Benefit Obligations 3.97
Current Tax Liabilities (net) 19.43
Other Current Liabilities 41.44
1185.06 703.58
Increase in Cash and Cash Equivalents 17.03
1328.38 1328.38

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 Fund Flow Statement for the year 2019
Source Application
Particulars Amount Particulars Amount
Long Term Sources Long Term Uses
Investment Properties 13 Property, Plant & Equipment 38
Other tangible assets 5 Capital work-in-progress 18
Inventories 100 goodwill 17
Investment accounted for using the equity
Investments 95 method 5
Other non current financial assets 10
Non-Current financial investments 3 Deferred tax assets(net) 179
Non curerent tax assets (net) 6
Bank balance 354
Other current financial assets 2
Financial Loans 1
Financial Trade receivables 177
Other current assets 58
Assets held as classified for sale 12
Other non-current assets 3
216 880
Short Term Sources Short Term Uses
Equity attributable to owners 456 Non Current financial Borrowings 0
Non Current Employee Benefit Obligations 1 Deferred tax Liabilities (net) 17
Current Financial Borrowings 46 Non controlling interests 1
Trade payables due to micro & small
enterprises 9
Trade payables due to others 113
Other financial liabilities 4
Current Employee Benefit Obligations 12
Current Tax Liabilities 9
Other Current Liabilities 35
685 17
Increase in Cash and Cash Equivalents 4
901 901

Page | 89
 Ratio Analysis of Marico Ltd.
Liquidity Ratios
Sr. Name of ratio Formula 2019 2018 2017
1 Current ratio Current assets/current liabilities 1.90 times 1.92 times 1.95 times
2 Quick Ratio (Current Assets -Inventory)/(Current Liability) 1.06 times 0.88 times 0.92 times
(Cash + Marketable Securities + Net
3 Defensive Internal ratio Receivable and Debtors)/Current Liability 0.87 times 0.70 times 0.82 times
Cash + Marketable Securities / Current
4 Cash Ratio Liability 0.30 times 0.10 times 0.16 times
Turnover Ratios
Sr. Name of ratio Formula 2019 2018 2017
Net Credit sales(Revenue from
5 Debtors Turnover Ratio operations)/Avg Debtors 17.12 times 21.58 times 23.79 times
6 Avg collection peroid 365/ Drs turnover 21.33 Days 16.92 Days 15.34 Days
7 Inventory Turnover Ratio Cost of Goods Sold/Average Inventory 4.14 times 3.76 times 4.38 times
Net Sales OR Cost of Goods Sold/Capital
8 Capital Turnover Ratio Employed 1.98 times 1.98 times 2.01 times
9 Asset Turnover Ratio Turnover/Net Tangible Assets 10.30 times 9.42 times 8.61 times
10 Fixed Asset turnover ratio Turnover/Average Fixed Assets 1.54 times 1.40 times 1.33 times
Working Capital turnover
11 Ratio Net Sales /Working Capital 4.84 times 4.74 times 5.12 times

Operating Profitability Ratios

Sr. Name of ratio Formula 2019 2018 2017
12 GP margin ratio GP/ Rev from Op 17.32% 17.67% 19.33%
13 Earning Margin Net Income/Turnover * 100 15.48% 13.07% 13.66%
14 Return on Assets PAT/Average Total Assets 25.73% 21.56% 23.23%
15 Return on Investment PBIT/Total Capital employed * 100 41.33% 42.62% 48.33%
(PAT-Preference Dividend)/Ordinary
16 Return on Equity Shareholder's Fund * 100 37.71% 32.41% 34.67%
(EAT - Preference Dividend) / No. of
Ordinary Shares ₹8.79 ₹6.42 ₹6.28
17 Earning per Share

Financial Risk Ratios

Sr. Name of ratio Formula 2019 2018 2017
18 Debt Equity Ratio Total debts/ share holders's funds 0.575 0.597 0.539
Interest Coverage Ratio
19 Analysis EBITDA /Interest Expense 57.67 times 76.44 times 75.79 times

Stability Ratios
Sr. Name of ratio Formula 2019 2018 2017
20 Debt asset ratio Total Debt/ Assets 0.37 0.37 0.35
21 Fixed Asset Ratio Fixed Assets / Capital Employed 0.40 0.44 0.47
Ratio to Current Assets to
22 Fixed Assets Current Assets / Fixed Assets 2.63 2.41 2.14
23 Proprietary Ratio Shareholder Fund / Total Tangible Assets 4.23 3.80 3.39
Net Profit Margin×Asset Turnover×Equity
24 DuPont Analysis Multiplier 2.51137 1.96805 1.80991

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 Altman's Z Score
Formula 2019 2018 2017
A(working cap/Total assets) 0.32 0.33 0.32
B(retained earnings[or other equity from B/S]/total
assets) 0.62 0.60 0.62
C(EBIT/Total assets) 0.27 0.28 0.32
D(market valueequity/book value of debts) 25.84 27.57 30.19

E(sales/total assets) 1.55 1.55 1.65

1.2A + 1.4B + 3.3C + 0.6D + 1.0E 19.19 20.24 22.08

Page | 91
 Page | 92
Assumptions Taken for Calculation of Projected P&L and Balancesheet
Other Cost of Purchases of Changes in Excise Employee Other Tax as a
Values
Sales Income materials stock-in- inventories duty benefit Depreciation expense % of PBT
as a % of
16.65% of
Sales
15.81% 21.18% 51.43% 2.38% -2.04% 0.24% 6.61% Fixed Assets 23.13% 21.82%
Statement of Profit and Loss
Current Figures Projected figures
As at 31st As at 31st As at 31st As at 31st As at 31st As at 31st As at 31st As at 31st As at 31st
Particulars March, 2016 March, 2017 March, 2018 March, 2019 March, 2020 March, 2021 March, 2022 March, 2023 March, 2014
Revenue:
Financial Forecasting of Marico Ltd.

Revenue from operations 6024.45 5935.92 6333.00 7334.00 8493.22 9835.67 11390.30 13190.66 15275.59
Other Income 93.33 97.31 85 103 1798.56 2082.85 2412.06 2793.32 3234.83
Total Income 6117.78 6033.23 6418.00 7437.00 10291.78 11918.51 13802.36 15983.98 18510.42
Expenses:
Cost of materials consumed 2855.56 2765.23 3372 3995 4368.40 5058.87 5858.48 6784.48 7856.84
Purchases of stock-in-trade 154.89 122.39 196 145 201.96 233.89 270.86 313.67 363.25
Changes in inventories 60.1 -56.67 -220 -123 -172.86 -200.18 -231.82 -268.46 -310.89
Excise duty 7.13 18.13 11 - 20.35 23.56 27.29 31.60 36.59
Employee benefit expense 373.4 404.18 422 466 561.30 650.02 752.77 871.75 1009.54
Finance costs 20.62 16.58 16 24 21.21 24.57 28.45 32.95 38.15
Depreciation and amortisation expense 94.86 90.3 89 96 1414.19 1637.72 1896.58 2196.35 2543.51
Other expense 1521.99 1523.39 1414 1570 1964.72 2275.27 2634.90 3051.38 3533.68
Total expense 5088.55 4883.53 5300.00 6173.00 8379.28 9703.72 11237.50 13013.71 15070.67
Profit before Investment profits 1029.23 1149.7 1118 1264 1912.50 2214.79 2564.86 2970.27 3439.75
Share of net loss of joint ventures -0.53 -1 0 -1
Profit before exceptional items and tax 1028.70 1148.70 1118.00 1263.00 1912.50 2214.79 2564.86 2970.27 3439.75
Exceptional Item
Profit before tax from continuing operations 1028.70 1148.70 1118.00 1263.00 1912.50 2214.79 2564.86 2970.27 3439.75
Income tax expense
Current tax 250.3 292.21 284 331 0 0 0 0 0
Deferred tax 55.07 45.52 6 -15 0 0 0 0 0
Tax expense for the current year 305.37 337.73 290.00 316.00 417.40 483.38 559.78 648.26 750.72
Tax adjustment for earlier years -188 0 0 0 0 0
Total tax expense 305.37 337.73 290 128.00 417.40 483.38 559.78 648.26 750.72
Profit for the year (A) 723.33 810.97 828.00 1135.00 1495.10 1731.41 2005.08 2322.01 2689.03
Earnings per equity share
Basic earnings per share 5.53 6.21 6.31 8.67 11.58 13.41 15.53 17.99 20.83
No. of ordinary shares 1290171198 1290471198 1290171498 1290864398 1290864398 1290864398 1290864398 1290864398 1290864398
Market Price 240.80 294.85 326.05 346.65 463.08 536.27 621.04 719.20 832.87
Equity Share Dividend 502.43 451.65 548.58 589 968.41 1035.82 1199.54 1389.15 1608.72
Tax On Dividend 0 57.03 87.25 93 143.07 153.03 177.22 205.23 237.67
Carried Forward to B/S 220.90 302.29 192.17 453.00 383.62 542.56 628.32 727.63 842.65
P/E Ratio 43.54 47.48 51.67 39.98 39.98 39.98 39.98 39.98 39.98
 Balance Sheet
Current Figures Projected figures

As at 31st As at 31st As at 31st As at 31st As at 31st As at 31st As at 31st As at 31st As at 31st

Particulars March,2016 March,2017 March,2018 March,2019 March,2020 March,2021 March,2022 March,2023 March,2024
ASSETS
Non-current Assets
Property, Plant & Equipment 524.34 547.19 534 572
Capital work-in-progress 36.73 11.16 27 45
Investment properties 30.67 29.98 30 17
goodwill 497.36 479.45 486 503
Other intangible assets 28.73 28.08 60 55
Investment accounted for using the equity method 0.82 16.3 20 25
Financial assets
(i) Investments 42.58 58.41 37 34
(ii) Loans 3.75 3.73 4 4
(iii) Other financial assets 13.75 15.71 15 25
Deferred tax assets(net) 64.93 9.54 9 188
Non curerent tax assets (net) 33 39
Other non-current assets 30.57 18.22 32 35
Total non-current assets 1274.23 1217.77 1287 1542 1751.38 2028.20 2348.78 2720.04 3149.97
Current assets
Inventories 925.56 1253.44 1511 1411
Financial assets
(i) Investments 469.79 533.5 486 391
(ii) Trade Receivables 252.09 246.99 340 517
(iii) Cash & cash equivalents 93.16 33.97 51 48
(iv) Bank balances other than (iii) above 223.98 193.31 150 504
(v) Loans 5 6.12 4 5
(vi) Other financial assets 7.07 3.17 2 4
Current tax assets 1.98 0.92
Other current assets 115.86 97.88 250 308
Assets classified as held for sale 12.45 12.45 12
Total current assets 2106.94 2381.75 2794 3200 3620.23 4192.45 4855.11 5622.51 6511.21
Total assets 3381.17 3599.52 4081 4742 5371.61 6220.65 7203.89 8342.55 9661.18
EQUITY & LIABILITIES
Equity
Equity share capital 129.02 129.05 129 129 129 129 129 129 129
Other equity
Reserves & surplus 1907.64 2232.99 2448 2920 3303.62 3846.19 4474.51 5202.14 6044.79
Other reserves -19.29 -36.36 -34 -50
Equity attributable to owners 2017.37 2325.68 2543 2999 3432.62 3975.19 4603.51 5331.14 6173.79
Non- controlling interests 14.31 13.34 12 11
Total equity 2031.68 2339.02 2555 3010 3432.62 3975.19 4603.51 5331.14 6173.79
Liabilities
Non-current liabilities
Financial liabilties
(i) Borrowings - - 20 14
Employee benefit obligations 12.81 15.86 19 20
deferred tax liabilities (net) 22.84 22.03 29 12
Total non current liabilities 35.65 37.89 68 46 53.27 61.69 71.44 82.73 95.81
Current liabilities
Financial liabilities
(i) Borrowings 152.79 238.8 289 335
(ii) Trade Payables 669.04 696.6
Due to micro and small enterprises 4 13
Due to others 818 931
(iii) Other financial liabilties 209.07 26.64 21 25
Provisions 50.64 56.41 57 57
Employee benefit obligations 54.25 52.03 56 68
Current tax liabilities (net) 38.07 32.57 52 61
Other current liabilities 139.98 119.56 161 196
Total current liabilities 1313.84 1222.61 1458 1686 1885.72 2183.78 2528.95 2928.67 3391.58
Total liabilities 1349.49 1260.5 1526 1732 1938.99 2245.47 2600.39 3011.41 3487.39
Total equity and liabilities 3381.17 3599.52 4081 4742 5371.61 6220.65 7203.89 8342.55 9661.18

Page | 93
 Company Life Cycle of Marico Ltd.

Figure 20

The company started in 1991 and has been steadily moving toward growth, till 2003 it
was in its introductory stage slowly moving upwards towards growth. Marico was able
to claim its space in the market because of some of the segments with leading
products like, Parachute coconut hair oil, Saffola edible oil, Set Wet hair gels and
deodorants for men, Mediker for lice shampoo and Revive for cloth repair. These were
some of the different segments which they had their hold on. The company in its initial
years also acted as a distributor for Indo Nissin under which they sold Top ramen and
for P&G for personal products, but the pacts were ended in 2008 and 2002
respectively. This had also helped in the revenue building of the company.

By the year 2014 it had entered the maturity stage, but it was a short lived one till
2017, from where it again entered into its 2nd growth stage and is still rising upwards.
That is the time when the hair oil gathered a market volume of 59% and also the men
grooming sector gained a double digit in the market volume. Hence, such leading
products in many segments of the business has led to a steady rise in the sales of the
company.

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 F) Nestle India Ltd.
Introduction

NESTLÉ India is a subsidiary of NESTLÉ S.A. of Switzerland. With eight factories and
a large number of co-packers, Nestlé India is a vibrant Company that provides
consumers in India with products of global standards and is committed to long-term
sustainable growth and shareholder satisfaction.
The Company insists on honesty, integrity and fairness in all aspects of its business
and expects the same in its relationships. This has earned it the trust and respect of
every strata of society that it comes in contact with and is acknowledged amongst
India's 'Most Respected Companies' and amongst the 'Top Wealth Creators of India'.
After more than a century-old association with the country, today, NESTLÉ India has
a presence across India with 8 manufacturing facilities and 4 branch offices.
Nestle India has its products in these following categories (44)
1. Nescafe Instant coffee and Nestea
2. Nesplus breakfast range
3. Whites and Wafers (Munch and KitKat)
4. Dairy products (Nestle A+, Nestle Milkmaid)
5. Maggi (Instant Noodles, Ketchup, Coconut Milk)
6. Infant Food (Ceregrow, Nangrow)
Some of the famous brands of the company are Nescafe, Nestlè Every day, Sunrise,
Maggi, Kitkat, Milkybar, Milkmaid, Nestea, Munch, Bar one, Polo and many more. It
has focused on Taste, Nutrition, Health and Wellness and well-being of the customers
and its tagline ‘Good Food, Good life’ resonates with that. It aims to create value to
the customers by offering a wide variety of safe, high quality food products at prices
that are affordable. It constantly develops its product range so as to meet the changing
needs and demands of the customers. The company with its product offerings has
also given a major push to the dairy sector of the country and has helped develop the
milk economy. Nestle is the market leader in various categories such as Infant Cereals
(96.5%), Instant Pasta (65.2%), Instant Noodles (59.5%), White Chocolates and
wafers (62.6%). (45)

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 SWOT Analysis of Nestle India Ltd.
I)Strengths

1. Market leaders in the instant noodle’s category

In the instant noodle’scategory, the Nestle Maggi has over 60% of market share.
Subsequently products launched with the same brand name also enjoy higher brand
value. (Maggi masala e magic and Maggi ketchup) (46)

2. Has nutritional drinks for kids and infants (diversified portfolio)

Again in this category Nestle has almost 90% of market share because of two reasons
a) they already have their distribution networks and b) this market is categorized by
many small and often unorganized pharmaceutical companies

3. Strong growth of Nescafé and Maggi in commercial spaces

Nescafe and Maggi products are used by the HoReCa segments also. Nestle has
recorded phenomenal growth in this section between 2016 and 2019.

4. International brand which is well recognized

The parent company is a Swiss company with worldwide presence. The brand is well
recognized and they have the financial strength also to enter and sustain in newer
markets. The best global practices are implemented in India to have better results and
profitability.

II) Weaknesses

1. Litigation fees due to the Maggi issue has led to funds locked up in a
contingency reserve
The 2015 Maggi issue, Nestle has been caught up in a legal battle and that has cost
the company money which otherwise could have been used in better ways. (47)

Page | 96
2. Data analytics-based approaches can lead to a better and more efficient
company

The company unlike Hindustan Unilever Limited doesn't not speak about the analytics
part like zero based budgeting and better CRM software’s which even Nestle can
implement to have a more efficient network.

III) Opportunities

1. Entry into new markets to increase export sale (markets where preferably
Indian diaspora is present)
Products which are India specific can be launched in markets like UAE and US where
a large number of Indian diasporas is present.

2. Entering into new product categories like confectionary items

Biscuits and premium biscuits is a market with a high growth rate and Nestle can enter
this space given the resources they have.

3. Focus on Nutrition, Health and Wellness category as millennials have a

mobile lifestyle and higher disposable income
There has been a shifting trend towards a healthier lifestyle and environmentally
conscious products. Nestle can enter this space with healthier snacking products. (48)

4. E commerce is emerging as Indians have become more tech savvy even

in the tier 2 and tier 3 cities
E-commerce segment is expected to grow at 4% this year because of the coronavirus
pandemic. Even the tier 2 and tier 3 cities have witnessed a phenomenal growth due
to cheaper mobile phones and internets and stronger distribution networks. FMCG
companies can join this bandwagon and take advantage of this opportunity.

5. Products in the international markets can also be launched in India

Milo, Nesquik and achocolate-based drink can be launched in India to compete with
Hersheys.Chocolates like the original Kitkat, original Milky bar, Smarties and Aero can

Page | 97
be brought to India too.Nido Milk Powder also will have an edge since we have dairy
whiteners and only skimmed milk powders in case of organized players (49) (50)

IV) Threats

1. In the Milk products and Nutrition Sector Nestle has introduced Maggie
Dips (yogurt based) to which Amul has substitutes in cheese-based dips. (51)

2. International issues surrounding the parent company could have an effect

on brand image in India too.

The cases and allegations that Nestle faces in Africa with the baby food and water
issues in Pakistan etc can have a negative effect on the brand image in India too. (52)

Page | 98
 BCG Matrix of Nestle India Ltd.

BCG Matrix
QUESTION MARKS
STARS

Whites and wafers

Relative Market Share

(Munch)

Instant Coffee
Infant formula (Nescafe)

Instant Noodles
(Maggi) DOGS
CASH COW
Market Growth

Figure 21

Name of
Name of the Name of the The
Segment competitor Category Reason
Maggi gives the highest revenue to the company. The brand has the highest
market share in the Instant Noodles market. Even after the Maggi incident
Instant Noodles people did not refain from consuming Maggi. It has a high brand loyalty
(Maggi) ITC (Yipee) Cash Cow despite being an FMCG product
The Instant coffee market is dominated by two giants ie Nestle and
ITC.Despite having almost half the market share its competitor has the other
half and because of that the relative market share is low. Nestle can try and
Instant Coffee Question increase he market share by adding more lower prices variants like the
(Nescafe) ITC (Bru) Mark Nescafe Surise to compete wih a lower prices Bru.
The Infant formula market does not have many FMCG players but it has
Pharma companies as competitors. But those pharma companies lack the
Amul (Baby milk distribution network and brand loyalty which is captured by Cerelac. This
Infant formula powder) Cash cow makes Nestle a giant in terms of Infant formulas
The tussle between Munch and Perk is one to watch. This variant is low
priced and high volume. Munch does have the upper hand by market share.
Whites and Mondelez Foods Question Once the markt share increases considerably they have an opportunity to
wafers (Munch) (Cadbury Perk) Mark convert it into a star or a cash cow
Table 7
(53)

Page | 99
 Fund Flow Analysis of Nestle India Ltd.
For the year ended 2016
Sources of Funds Amt Uses of Funds Amt
Long Term Long Term
Borrowings 163.6 Deferred tax liabilities (net) 193.6
Provisions 3750 Investments 1325
Other non-current liabilities 6.8 Loans 16.3
Property, Plant and Equipment 1677 Other non-current assets 29.8
Capital work-in-progress 426.2
Other equity 2465
Total Long Term Sources 8488.8 Total Long Term Uses 1565.0
Short Term Short Term
Total outstanding dues of creditors other than
micro enterprises andsmall enterprises 497.5 Borrowings 9.4
Other financial liabilities 623.7 Other current liabilities 143.2
Provisions 31.6 Inventories 1193
Loans 16 Investments 2934
Current tax assets 300.3 Trade receivables 195.1
Bank Balances other than cash and
cash equivalents 4
Other financial assets 104
Other current assets 9.8
Total Short Term Sources 1469 Total Short Term Uses 4592
Increase in Cash and Cash
Equivalents 3800.5
Total Sources 9957.6 Total Uses 9957.6

For the year ended 2017

Sources of Funds Amt Uses of Funds Amt
Long Term Long Term
Borrowings 19.9 Deferred tax liabilities (net) 333.8
Provisions 3193.8 Other non-current liabilities 0.8
Property, Plant and Equipment 1139.6 Investments 1109.7
Capital work-in-progress 940.1 Other non-current assets 125.6
Loans 180.2
Other equity 1382.6
Total Long Term Sources 6856.2 Total Long Term Uses 1569.9
Short Term Short Term
Total outstanding dues of micro enterprises and
small enterprises 52.5 Other current liabilities 955.6
Total outstanding dues of creditors other than
micro enterprises andsmall enterprises 1802.3 Investments 1122.4
Other financial liabilities 23.8 Loans 122.0
Provisions 336.6 Other financial assets 101.2
Inventories 375.9 Current tax assets 36.6
Trade receivables 89.6
Bank Balances other than cash and cash 9.5
Other current assets 145.0
Total Short Term Sources 2835.2 Total Short Term Uses 2337.8
Increase in Cash and Cash
Equivalents 5783.7
Total Sources of Funds 9691.4 Total Uses of Funds 9691.4

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 For the year ended 2018
Sources of Funds Amt Uses of Funds Amt
Long Term Long Term
Other equity 2531.5 Deferred tax liabilities (net) 631.4
Property, Plant and Equipment 2155.6 Other non-current liabilities 0.9
Loans 62.1 Capital work-in-progress 110.4
Other non-current assets 114.2 Investments 1480.8
Provisions 1733.3
Total Long Term Sources 6596.7 Total Long Term Uses 2223.5
Short Term Short Term
Total outstanding dues of micro enterprises and
small enterprises 55.2 Inventories 630.8
Total outstanding dues of creditors other than
micro enterprises andsmall enterprises 2502.1 Investments 5315.4
Other financial liabilities 21.6 Trade receivables 356.2
Bank Balances other than cash and
Provisions 698.0 cash equivalents 15.6
Other current liabilities 345.5 Other financial assets 97.0
Loans 109.1 Current tax assets 124.6
Other current assets 54.3
Total Short Term Sources 3731.5 Total Short Term Uses 6593.9
Increase in Cash and Cash
Equivalents 1510.8
Total Sources of Funds 10328.2 Total Uses of Funds 10328.2

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 Ratio Analysis of Nestle India Ltd.
Liquidity Ratios
Sr. Name of ratio Formula 2018 2017 2016
1 Current ratio Current assets/current liabilities 2.55 times 2.64 times 2.40 times
2 Quick Ratio (Current Assets -Inventory)/(Current Liability) 2.03 times 2.03 times 1.71 times
Absolute liquidity (Cash + Marketable Securities + Net Receivable and
3 ratio Debtors)/Current Liability 1.97 times 1.97 times 1.65 times
4 Cash Ratio Cash + Marketable Securities / Current Liability 1.91 times 1.91 times 1.58 times

Turnover Ratios
Sr. Name of ratio Formula 2018 2017 2016
Accounts receiveable
5 turnover annual credit sales / average debtors 105.75 times 109.07 times 107.45 times
6 Average collection time Accounts receivable / avg daily sales 4.03 Days 3.19 Days 3.77 Days
7 Inventory Turnover Ratio Cost of Goods Sold/Average Inventory 9.29 times 8.79 times 8.66 times
8 Capital Turnover Ratio Net Sales OR Cost of Goods Sold/Capital Employed 1.81 times 1.74 times 1.74 times
9 Asset Turnover Ratio Turnover/Net Tangible Assets 4.51 times 3.76 times 3.25 times
10 Fixed Asset turnover Turnover/Fixed Assets 3.37 times 2.98 times 2.69 times
11 Working Capital turnover Net Sales /Working Capital 3.92 times 4.17 times 4.94 times

Operating Profitability Ratios

Sr. Name of ratio Formula 2018 2017 2016
12 GP Margin PBDIT / sales 25.47% 22.31% 21.12%
13 Earning Margin Net Income/Turnover * 100 14.23% 12.02% 10.57%
14 Return on Assets PBDIT / Average Total Assets 37.24% 32.08% 31.01%
15 Return on Investment PBIT/Total Capital employed * 100 40.76% 32.90% 30.26%
(PAT-Preference Dividend)/Ordinary Shareholder's
16 Return on Equity Fund * 100 43.74% 35.82% 30.51%
(EAT - Preference Dividend) / No. of Ordinary
Shares ₹166.66 ₹127.07 ₹103.85
17 Earning per Share

Financial Risk Ratios

Sr. Name of ratio Formula 2018 2017 2016
18 Debt Equity Ratio Longterm debts/ share holders's funds 0.36 0.36 0.34
19 Interest Coverage Ratio EBITDA /Interest Expense 25.70 times 24.74 times 22.01 times

Stability Ratios
Sr. Name of ratio Formula 2018 2017 2016
20 Debt Asset Ratio Long Term Debt / Assets 0.32 0.33 0.32
21 Fixed Asset Ratio Fixed Assets / Capital Employed 0.54 0.58 0.65
Ratio to Current Assets to
22 Current Assets / Fixed Assets 1.41 1.15 0.93
Fixed Assets
23 Proprietary Ratio Shareholder Fund / Total Tangible Assets 1.10 1.00 0.93
24 DuPont Analysis Net Profit Margin×Asset Turnover×Equity Multiplier 16.67 12.71 10.39

Page | 102
 Altman's Z Score
Formula 2018 2017 2016
Working capital / total assets 0.3563 0.3320 0.2813
Retained earnings / Total assets 0.4423 0.4515 0.4678
EBIT / total assets 0.3142 0.2623 0.2418
MV of equity/ BV of debt ( Book value of
total liabilities) 17.9195 16.3415 15.7333
Sales / total assets 1.3962 1.3843 1.3912
1.2A + 1.4B + 3.3C + 0.6D + 1.0E 14.2174 13.0715 12.6078

Page | 103
 Page | 104
Other Assumptions
Purchases of taken for Financial Forecasting of Nestle IndiaOther
Ltd. Total Tax as a
Values Incom Cost of materials stock-in- Employee Finance Depreciation and expen Operation Expense % of
Sales as a % e consumed trade benefits expense costs Amortisation ses s Others s profit
11% of 1% 40% 2% 10% 1% 10% 24% 0.46% 1% 83% 34%
STATEMENT OF PROFIT AND LOSS
PARTICULARS Current Figures Projected Figures
INCOME 2016 2017 2018 2019 2020 2021 2022 2023
Sale of products 94096 101351.1 112162.3
Financial Forecasting of Nestle India Ltd.

Other operating revenues 650 570.7 760.4

Revenue from operations 94745.70 101921.80 112922.70 125818.48 140186.96 156196.32 174033.95 193908.64
Other Income 1509 1769.2 2589.2 2610 2631 2652 2674 2695
Total Income 96254.70 103691.00 115511.90 128428.51 142817.99 158848.52 176707.49 196603.69
EXPENSES
Cost of materials consumed 37750.90 42316.6 43656.8 50337 56086 62491 69627 77579
Purchases of stock-in-trade 1153.80 1747.6 2305.6 2086 2324 2590 2886 3215
Changes in inventories -76.60 -795.6 -60.1 -384 -427 -476 -531 -591
Excise duty 3323.30 1825.8
Employee benefits expense 9015.70 10174.5 11241.5 12353 13763 15335 17086 19038
Finance costs 909.10 919 1119.5 1196 1333 1485 1655 1844
Depreciation and Amortisation 3536.70 3422.5 3356.7 3738 4165 4641 5171 5761
Other expenses 22954.60 24170.2 28181.1 30573 34065 37955 42289 47119
Impairment loss on property, plant and
equipment 118.30 371.8 110.8 247 275 306 341 380
- Operations 418.00 383.6 621 574 639 712 793 884
- Others 1266.70 492.9 415.1 918 1023 1139 1269 1414
Corporate social responsibility expense 313.60 269.1 273.7 351 391 436 486 541
Total Expenses 80684.10 85298.00 91221.70 101989.06 113636.21 126613.48 141072.75 157183.26
Profit before tax 15570.60 18393.00 24290.20 26439.45 29181.77 32235.04 35634.74 39420.42
Tax expense
Current taxearlier years 5611.9 6491.7 8848.7
Deferred tax -172 -350.6 -628.5
Total Tax Expenses 5440.2 6141.1 8220.2 9004.29 9938.22 10978.05 12135.86 13425.12
Profit after tax 10130.40 12251.90 16070.00 17435.16 19243.55 21256.99 23498.88 25995.30
No. of ordinary shares 9,64,15,716 9,64,15,716 9,64,15,716 9,64,15,716 9,64,15,716 9,64,15,716 9,64,15,716 9,64,15,716
Market Price 5,785.15 5,974.40 7,863.20 10851.20 10977.42 12125.97 13404.85 14828.92
EPS 105.07 127.07 166.67 180.83 199.59 220.47 243.72 269.62
P/E Ratio 55 47 47 60 55 55 55 55
 BALANCE SHEET
Current Figures Projected Figures
PARTICULARS 2016 2017 2018 2019 2020 2021 2022 2023
ASSETS
Non-current assets 35276.6 34252.0 33511.3 37338.29 41602.33 46353.32 51646.87 57544.95
Property, Plant and Equipment 27301.4 26161.8 24006.2
Capital work-in-progress 1,881.7 941.6 1052
Financial Assets
Investments 4743.1 5852.8 7333.6
Loans 643.7 463.5 401.4
Other non-current assets 706.7 832.3 718.1
Current assets 32828 39373.9 47369.5 53143.66 59212.67 65974.76 73509.08 81903.83
Inventories 9400.6 9024.7 9655.5
Financial Assets
Investments 12813.5 13935.9 19251.3
Trade receivables 979.3 889.7 1245.9
Cash and cash equivalents 8693.2 14476.9 15987.7
Bank Balances other than cash and cash
equivalents 106.8 97.3 112.9
Loans 166 288.0 178.9
Other financial assets 326.7 427.9 524.9
Current tax assets 27.3 63.9 188.5
Other current assets 314.6 169.6 223.9
TOTAL ASSETS 68104.6 73625.9 80880.8 90481.95 100815.00 112328.08 125155.95 139448.77
EQUITY AND LIABILITIES
EQUITY
Equity Share Capital 964.2 964.2 964.2 964.2 964.2 964.2 964.2 964.2
Other Equity 31859.1 33241.7 35773.2 41983.53 46888.17 52352.91 58441.73 65225.89
Total Equity 32823.3 34205.9 36737.4 42947.73 47852.37 53317.11 59405.93 66190.09
LIABILITIES
Non-current liabilities
Financial Liabilities
Borrowings 331.5 351.4 351.4
Provisions 19722.1 22915.9 24649.2
Deferred tax liabilities (net) 1553.4 1219.6 588.2
Other non-current liabilities 6.8 6 5.1
Total Non Current Liabilities 21613.8 24492.9 25593.9 28516.73 31773.34 35401.85 39444.75 43949.34
Current liabilities (total) 13667.5 14927.1 18549.5 19017.49 21189.29 23609.11 26305.27 29309.34
Financial Liabilities
Borrowings
Trade payables
Total outstanding dues of MSMEs 52.5 107.7
creditors other than MSMEs 7991.6 9793.9 12296
Other financial liabilities 3116.4 3140.2 3161.8
Provisions 538 874.6 1572.6
Other current liabilities 2021.5 1065.9 1411.4
Total Liabilities 35281.3 39420.0 44143.4 47534.22 52962.63 59010.97 65750.02 73258.68
Total Equity and Liabilities 68104.6 73625.9 80880.8 90481.95 100815.00 112328.08 125155.95 139448.77

Page | 105
 Company Life Cycle of Nestle India Ltd.

Figure 22

Nestle can be seen having an exponential growth barring the Maggi incident in 2015.
Nestle is seen to be in the Introductory to Growth phase. Sales have been increasing
on an average of 11.31%. The portfolio of Nestle India has been expanding to include
new product categories like Dairy and instant coffee. However, Maggi brand has given
them growth and increased revenue every year. Nestle has also recouped from the
Maggi incident within 1 year stating strong brand loyalty and recognition. Nestle India
has extensive support from its parent company helping it with facing challenges that a
company might face in the formative years.

Page | 106
 G) P & G Ltd.

Introduction
The Procter & Gamble Company (P&G) is an American multinational consumer
goods corporation headquartered in Cincinnati, Ohio, founded in 1837 by William
Procter and James Gamble.

It specializes in a wide range of personal health/consumer health, and personal

care and hygiene products; these products are organized into several segments
including Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine,
& Family Care.
Before the sale of Pringles to Kellogg's, its product portfolio also included foods,
snacks, and beverages.
Procter & Gamble Health Limited (formerly Merck Limited) was set up in India as one
of Merck’s Asian subsidiaries in 1967.
Till 2018, the Company was operating in all businesses included in the
pharmaceuticals and chemicals businesses in the country. With a strong portfolio of
brands backed by science and trusted by doctors, pharmacists and consumers,
Procter & Gamble Health Limited combines the best of P&G and Legacy Merck’s
Consumer Health capabilities and cultures. (54) (55) (56)

Page | 107
 SWOT Analysis of P&G Ltd.

I)Strengths

1. Brand equity

One of the best advantages of P&G is that it owns brands which are very valuable by
themselves. It owns Gillette which is the 138th ranked brand in the world and has a
20-billion-dollar brand valuation. It also owns Tide and Ariel which are in the top
500. Duracell, Pampers, Pantene, Vicks, Whisper, Olay are all famous brands by
themselves. Naturally, P&G is an umbrella brand company and the parent brand has
a fantastic valuation.

2. Economies of Scale

With such top players in its product portfolio, Economies of scale is a major
advantage with P&G. It shares resources such as warehouses, accounts, factories,
and any other fixed incomes which are otherwise an unsalable cost expenditure. As
the operation rises, the economies of scale also increases.

3. Excellent R&D

An advantage of P&G is its excellent R&D due to which it has innovated and brought
many products in the market which have taken the market by storm. This is the
reason that P&G has a good bottom-line. All its products are innovative in nature.

4. Multinational and Multi product line presence

P&G is a Multi-national company being originated from United States. It has a

fantastic multinational presence and is known to operate in a whopping 180
countries. Besides operating in so many countries, it also has a fantastic product
line. On latest count, it had 65 brands, each of which will have their own product
line. So you can understand the depth of operations at P&G.

5. High gross profit margin

Because of their expenditure in R&D as well as Marketing and distribution, P&G

believes in keeping higher profit margins, a strategy which has benefited them
immensely because they have the highest margin in the FMCG industry. This in turn

Page | 108
results in the brand investing even further in brand building and therefore revenue
generation.

6. Fantastic distribution channel

Be it Rural, Urban, Modern or Online, P&G brands have covered all distribution
channels. There is so much demand for the product by themselves that if they are
not present in the market, then a competitor will soon take over. But the job done
by the distribution team is commendable because managing the inventory and
deliveries of so many products across so many locations is a tough job.

7. Known for its Marketing strategies

P&G is known for its marketing strategies including its tactics used on the ground.
P&G is one company which uses pull marketing effectively and we can see the
effect in Tide, Ariel or Olay. Furthermore, the integrated marketing
communication of the brand is excellent and it uses multiple channels to reach its
audience.

II)Weakness

1. Loss due to closure of brands

Prior to 2014, P&G had close to 300 brands but it pruned its brand porfolio to
include only 65 brands which were driving 95% of its overall profits. With this move,
P&G also underwent a loss because a lot of capital as invested in growing the other
235 brands. But it was a necessary move which set the mood for the rapid boost of
the P&G brand.

2. Organization structure causes slow decision making

Because it is an old Organization and as there are so many SBU’s and portfolio’s
to manage, the decision making is said to be slow and hence it affects the
organization as a whole.

3. Low organic growth

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Rate of Increase in customer base is slow as saturation curve is reached and
lower innovation is happening. As a result, P&G is going through a phase of low
organic growth. For P&G to overcome this, it has to pull off some unique marketing
and product gimmicks to get the sales going.

4. Regular change is needed

In the beauty and personal care products, the market trend is that every single
month, the market demands that the products be changed. A new fragrance be
introduced or a new variant be introduced in the market. This regular change is an
inherent requirement of the market, affecting the profit of the firm.

III)Opportunities

1. Rural markets

A major challenge for all FMCG companies is penetrating the rural markets, which
are price sensitive and impervious to advertisements. Availability and pricing are
two major factors affecting the decision making of rural markets and this is
an opportunity still for the likes of HUL and P&G.

2. Increase organic growth

By launching better products in the market or increasing the marketing effort, P&G
can get its brand going again. Even age old dominants like Gillette have been
shaken by private label brands like Dollar shave club. So increasing organic growth
promises a positive future for the brand.

3. Increased purchasing power

Purchasing power of consumers is going to increase in the near future with

economies booming across many countries. These developing economies will give
rise to better markets and thereby they become ideal target markets for the likes
of P&G.

4. Mergers and Acquisitions

Page | 110
Acquisition of local competition who are good in their products or distribution
channel is a way to eliminate the competition and also to add a new product in the
portfolio.

5. Overseas growth

As mentioned above, with the increase of purchasing power in under developed

and developing economies, P&G will observe better growth in overseas markets
as compared to its home market – USA.

IV)Threats

1. Intense competition

P&G has to constantly worry about competition especially from HUL. HUL is a
competition in several product lines and the brands are constantly at loggerheads,
a reason which affects the profitability of both brands.

2. Increased local / unbranded competition

With governments supporting local brands and Make in India campaign, as well as
foreign countries supporting their own infrastructure and manufacturing, me too
products are on the rise and therefore offer higher local or unbranded competition
to the likes of P&G.

3. Private labels

Many retail brands Like D Mart and Reliance fresh have starting with their own
brands and are planning their own private labels also for detergents, personal care
products and others. Soon, something similar can be expected from E-
commerce players who will manufacture and sell at lowest costs because they
don’t have the expenses of distribution to incur. Naturally, these private labels
affect the overall sale of P&G. (57) (58) (59)

Page | 111
 BCG Matrix of P&G Ltd.

BCG Matrix of P&G Ltd.

Stars Question Marks

Gillete Ariel

Ambi pur
Vicks Pantene
Olay Oral B
Pampers

Cash Cows Dogs

Figure 23

Name of the Name of the Name of The

Segment competitor Category Reason
Personal Care Unilever Star Personal Care category is giving the largest
share of revenue to the company. The company
has been able effectively premiumise the
products and at the right price. These products
have a high market share in Strong growing
market.
P&G Olay Cash cow Costs on distribution are shared across all
entities since the sales force iscommon. Costs
are allocated according to sales.
Hygine Pampers Dog This is a segment which the company has
entered into since a past few years. Feminine
Hygiene is among the most under-penetrated
segments in the Consumerspace. Much low
levels of penetration are usually witnessed in
categories that are relativelydiscretionary in
nature and not in a category like sanitary napkins,
which areessential to a large segment of the
population.Feminine Hygiene features strong
brand loyalty in India and worldwide.Consumers
usually trade up and rarely trade down. However,
given the extremelylow penetration, growth is
unlikely to come from the premium end of the
market.
Ambipur Worship Question Mark They have unsure and questionable situation.
Table 8

Page | 112
 Fund Flow Analysis of P&G Ltd.

Fund flow Statement for the year 2017

Sources Applications
Particulars RS Particulars RS
Long term source Long term use
Tangible Assets 31.15 Capital Work-In-Progress 6.12
Long Term Provisions 48.12 Deferred Tax Assets [Net] 18.39
Long Term Loans And Advances 120.51 Other Non-Current Assets 153.09
Reserves and Surplus 985.09
199.78 1162.69

Short term source Short term use

Trade Receivables 16.82 Inventories 49.87
Short Term Loans And Advances 120.19 OtherCurrentAssets 14.76
Trade Payables 39.06 Short Term Provisions 221.8
Other Current Liabilities 115.23
291.3 286.43
Decrease in Cash and Cash Equivalents 958.04
1449.12 1449.12

Fund flow Statement for the year 2018

Sources Applications
Particulars RS Particulars RS
Long term source Long term use
Tangible Assets 35.6 Other Non-Current Assets 54.06
Capital Work-In-Progress 19.36 Long Term Provisions 2.96
Deferred Tax Assets [Net] 3.29
Long Term Loans And Advances 8.95
Reserves and Surplus 279.38
346.58 57.02

Short term source Short term use

Inventories 53.74 Trade Receivables 15.67
Trade Payables 43.03 Short Term Loans And Advances 1.8
Short Term Provisions 0.12 OtherCurrentAssets 31.88
Other Current Liabilities 54.34
96.89 103.69
Increase in Cash and Cash Equivalents 282.76
443.47 443.47

Page | 113
 Fund flow Statement for the year 2019
Sources Applications
Particulars RS Particulars RS
Long term source Long term use
Tangible Assets 15.89 Deferred Tax Assets [Net] 13.78
Capital Work-In-Progress 6.93 Other Non-Current Assets 9.38

Long Term Loans And Advances 2.88

Reserves and Surplus 103.56
Long Term Provisions 16.77
146.03 23.16
Short term source Short term use
OtherCurrentAssets 45.63 Inventories 79.81
Trade Payables 141.45 Trade Receivables 32.19
Short Term Provisions 1.09 Short Term Loans And Advances 1.87
Other Current Liabilities 56.31
188.17 170.18
Increase in Cash and Cash Equivalents 140.86
334.2 334.2

(60) (61) (62) (63)

Page | 114
 Ratio Analysis of P&G Ltd.

Liquidity Ratios
Sr. No. Name of ratio Formula 2019 2018 2017
1 Current ratio Current assets/current liabilities 1.66 times 1.54 times 1.04 times
2 Quick Ratio (Current Assets -Inventory)/(Current Liability) 1.35 times 1.33 times 0.73 times
Cash + Marketable Securities + Net
3 Absolute liquidity ratio Receivable and Debtors/Current Liability 1.20 times 1.15 times 0.56 times
4 Cash Ratio Cash + Marketable Securities / Current Liability 0.92 times 0.89 times 0.34 times

Turnover Ratios
Sr. No. Name of ratio Formula 2019 2018 2017
Net Credit sales(Revenue from operations)/Avg
5 Debtors Turnover Ratio Debtors 17.88 times 17.46 times 16.43 times
6 Avg collection peroid 365/ Drs turnover 20.41 Days 20.91 Days 22.22 Days
7 Inventory Turnover Ratio Cost of Goods Sold/Average Inventory 14.29 times 12.14 times 10.86 times
Net Sales OR Cost of Goods Sold/Capital
8 Capital Turnover Ratio Employed 3.02 times 2.87 times 4.01 times
9 Asset Turnover Ratio Turnover/Net Tangible Assets 12.56 times 9.82 times 8.12 times
10 Fixed Asset turnover ratio Turnover/Fixed Assets 11.83 times 9.04 times 7.10 times
11 Working Capital turnover Ratio Net Sales /Working Capital 6.79 times 7.91 times 111.42 times

Operating Profitability Ratios

Sr. No. Name of ratio Formula 2019 2018 2017
12 GP margin ratio GP/ Rev from Op 20.83% 23.91% 29.41%
13 Earning Margin Net Income/Turnover * 100 98.09% 99.03% 96.75%
14 Return on Assets PAT/Average Total Assets 27.42% 28.98% 26.03%
15 Return on Investment PBIT/Total CapitalDividend)/Ordinary
(PAT-Preference employed * 100 62.88% 68.73% 118.06%
16 Return on Equity Shareholder's Fund * 100 46.11% 46.50% 82.25%
(EAT - Preference Dividend) / No. of Ordinary
Shares ₹12.91 ₹11.54 ₹13.33
17 Earning per Share

Financial Risk Ratios

Sr. No. Name of ratio Formula 2019 2018 2017
18 Debt Equity Ratio Total debts/ share holders's funds 0.80 0.77 1.21
19 Interest Coverage Ratio Analysis EBITDA /Interest Expense 581.38 times 513.66 times 252.30 times

Stability Ratios
Sr. No. Name of ratio Formula 2019 2018 2017
20 Debt asset ratio Total Debt/ Assets 0.44 0.43 0.55
21 Fixed Asset Ratio Fixed Assets / Capital Employed 0.26 0.32 0.57
Ratio to Current Assets to Fixed
Current Assets / Fixed Assets
22 Assets 4.38 3.25 1.85
23 Proprietary Ratio Shareholder Fund / Total Tangible Assets 3.88 3.22 1.84
Net Profit Margin×Asset Turnover×Equity
24 DuPont Analysis Multiplier 22.12 17.20 17.32

Page | 115
 Altman's Z Score
Formula 2019 2018 2017
A(working cap/Total assets) 0.27 0.22 0.02
B(retained earnings/total assets) 0.54 0.54 0.43
C(EBIT/Total assets) 0.38 0.41 0.59
D(market valueequity/book value of debt) 48.08 51.85 41.20
E(sales/total assets) 1.80 1.72 2.00
1.2A + 1.4B + 3.3C + 0.6D + 1.0E 32.96 35.21 29.28

Page | 116
 Page | 117
Assumptions Taken for Calculation of Projected P&L and Balancesheet
Sales Other Cost Of Purchase Of Changes In Employee Finance Costs Depreciation Other Expenses Other Op Tax
Income Materials Stock-In Trade Inventories Benefit And Income
Values as
Consumed Expenses Amortisation
a % of
19.85% Sales 2.57% 25.91% 13.66% -0.29% 4.75% 8.37% of 2.25% of 32.03% 0.07% 30.99% of
Borrowings Fixed Costs Profit Before
Tax
Statement of Profit & Loss
Current Figures Forecast for the next 5 years
Particulars June 30, 2017 June 30, 2018 June 30, 2019 June 30, 2020 June 30, 2021 June 30, 2022 June 30, 2023 June 30, 2024
Financial Forecasting of P&G Ltd.

INCOME
Revenue From Operations 2418.56 2455.22 2942.48 3526.44 4226.29 5065.04 6070.24 7274.93
Less: Excise/Other Levies 98.76 0 0 0.00 0.00 0.00 0.00 0.00
Revenue From Operations [Net] 2319.8 2455.22 2942.48 3526.44 4226.29 5065.04 6070.24 7274.93
Other Operating Revenues 0.6 0.07 4.02 2.38 2.85 3.42 4.09 4.91
Total Operating Revenues 2320.4 2455.29 2946.5 3528.82 4229.15 5068.46 6074.34 7279.84
Other Income 77.3 24.07 53.34 90.67 108.67 130.23 156.08 187.05
Total Revenue 2397.7 2479.36 2999.84 3619.49 4337.81 5198.69 6230.41 7466.89
EXPENSES
Cost Of Materials Consumed 612.52 544.83 950.64 913.78 1095.13 1312.47 1572.94 1885.10
Purchase Of Stock-In Trade 353.56 342.22 321.95 481.56 577.13 691.67 828.94 993.45
Changes In Inventories -51.11 61.64 -37.73 -10.29 -12.34 -14.79 -17.72 -21.24
Employee Benefit Expenses 114.1 115.23 132.38 167.48 200.71 240.55 288.28 345.50
Finance Costs 10.42 5.32 5.48 3.97 4.76 5.70 6.83 8.19
Depreciation And Amortisation 59.74 64.96 49.78 79.33 95.07 113.94 136.56 163.66
Other Expenses 626.7 763.39 970.01 1129.47 1353.63 1622.26 1944.22 2330.06
Total Expenses 1725.93 1897.59 2392.51 2765.30 3314.10 3971.81 4760.05 5704.72
Profit/Loss Before Tax 671.77 581.77 607.33 854.19 1023.72 1226.88 1470.37 1762.17
Tax Expenses
Current Tax 252.26 206.46 221.85
Deferred Tax -13.22 6.85 -10.19
Tax For Earlier Years 0 -6.13 -23.46
Total Tax Expenses 239.04 207.18 188.2 264.70 317.23 380.19 455.64 546.06
Profit/Loss After Tax And Before
ExtraOrdinary Items 432.73 374.59 419.13 589.50 706.49 846.69 1014.73 1216.11
Profit/Loss From Continuing
Operations 432.73 374.59 419.13 589.50 706.49 846.69 1014.73 1216.11
Profit/Loss For The Period 432.73 374.59 419.13 589.50 706.49 846.69 1014.73 1216.11
Earnings per equity share 133.31 115.4 129.12 181.60 217.64 260.84 312.60 374.64
Weighted average number of equity shares used in computing earnings per share:
- Basic 32460736 32460736 32460736 32460736 32460736 32460736 32460736 32460736
- Diluted 32460736 32460736 32460736 32460736 32460736 32460736 32460736 32460736
Market Price 8023.15 9233.9 10714.85 15073.01 18064.38 21649.42 25945.93 31095.13
P/E Ratio 60 80 83 83 83 83 83 83
 Balance Sheet
Current Figures Forecast for the next 5 years
Particulars June 30, 2017 June 30, 2018 June 30, 2019 June 30, 2020 June 30, 2021 June 30, 2022 June 30, 2023 June 30, 2024
EQUITIES AND LIABILITIES
SHAREHOLDER'S FUNDS
Equity Share Capital 32.46 32.46 32.46 32.46 32.46 32.46 32.46 32.46
Total Share Capital 32.46 32.46 32.46 32.46 32.46 32.46 32.46 32.46
Reserves and Surplus 493.66 773.04 876.6
Total Reserves and Surplus 493.66 773.04 876.6 976.12 1176.28 1416.17 1703.66 2048.21
Total Shareholders Funds 526.12 805.5 909.06 1008.58 1208.74 1448.63 1736.12 2080.67
NON-CURRENT LIABILITIES
Long Term Provisions 51.69 48.73 65.5
Total Non-Current Liabilities 51.69 48.73 65.5 47.43 56.85 68.13 81.65 97.86
CURRENT LIABILITIES
Trade Payables 363.19 406.22 547.67
Other Current Liabilities 214.97 160.63 104.32
Short Term Provisions 4.15 4.27 5.36
Total Current Liabilities 582.31 571.12 657.35 899.76 1078.33 1292.33 1548.80 1856.18
Total Capital And Liabilities 1160.12 1425.35 1631.91 1955.78 2343.92 2809.09 3366.58 4034.70
ASSETS
NON-CURRENT ASSETS
Tangible Assets 285.71 250.11 234.22
Capital Work-In-Progress 40.84 21.48 14.55
Fixed Assets 326.55 271.59 248.77
Deferred Tax Assets [Net] 26.27 22.98 36.76
Long Term Loans And Advances 50.96 42.01 39.13
Other Non-Current Assets 153.21 207.27 216.65
Total Non-Current Assets 556.99 543.85 541.31 784.83 940.59 1127.25 1350.97 1619.08
CURRENT ASSETS
Inventories 177.35 123.61 203.42
Trade Receivables 132.8 148.47 180.66
Cash And Cash Equivalents 116.83 399.59 540.45
Short Term Loans And Advances 97.6 99.4 101.27
OtherCurrentAssets 78.55 110.43 64.8
Total Current Assets 603.13 881.5 1090.6 1170.95 1403.33 1681.84 2015.61 2415.63
Page | 118
Total Assets 1160.12 1425.35 1631.91 1955.78 2343.92 2809.09 3366.58 4034.70
 Company Life Cycle of P&G Ltd.

Figure 24

The sale of the company has been steadily increasing from initial years.

Currently if we are talking P&G Business Cycle Revenue from Operations i.e SALES
and Profit and Loss in the year 2004 574.29 and 92.17 Respectively Slowly and
Gradually it grew up and if we are talking about Stages Initially it was in Product
Development Then Introduction Phase 2007-08 then comes Growth where in the year
2012-13 then Maturity Then decline then Again in the year 2017-18-19 Maturity Stage
is there. (64)

Page | 119
 Construction of Portfolio and Company Allocation

For Construction of the portfolio, the investors have been categorized into 3 types
based on their age as well as risk appetite. The first category is the 30-40 Age group.
It is assumed that these investors are risk-taking in nature hence stocks with higher
risk are allocated here. The next category is the 40-50 Age group. Here the investors
areassumed to have a medium risk and accordingly such stocks are allocated to them.
The third and the last group is 50 and above. These investors are assumed to have a
lower risk hence would not invest in risky ones at all.

Next, the stocks are judged on ratios based on 4 parameters – Liquidity, Efficiency,
Returns and Leverage – to get an overall idea of the risks and returns of the stocks.
They are as follows:

Table 9

The above ratios are chosen with the following rationale:

i) Quick Ratio provides the actual short-term liquidity information of the company by
excluding the inventories which are less liquid compared to actual cash and
marketable securities.

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ii) Cash Conversion Cycle shows the efficiency of the companies in handling the credit
policies and managing the debtors.

iii) Earnings Margin represents the overall return for the investors of the companies.

iv)Return on Assets gives an insight of efficiency in using the assets in generating

revenues for the companies.

v)Return on Equity shows the efficiency of the company in using the capital invested
by shareholders in generating revenues for the company.

vi)Debt-Equity Ratio signifies how are the company’s assets are financed and what is
the proportion.

The Colors are the Ranks of the companies for the given ratios for the given years.

Rank 1 means best and Rank 7 means worst.

*Note: The range/limits of an efficient Quick Ratio and Debt-Equity Ratio depends
upon the type of business/industry and can be used accordingly to give maximum
returns to the shareholders. However, for the purpose of simplicity, it is assumed that
the higher the quick ratio, the better is the company and for Debt-Equity Ratio, the
lower the ratio, the better is the company. (65) (66)

Portfolio Group 1
Age Group- 55 and Above

Risk Level- Low

Important Parameters Considered - 5 Year Market Returns, Volatility of the stocks.

Stocks Allocated - Dabur, P&G, HUL

Details - For investors with low appetite of risk, they generally prefer stocks which are
consistent in the business operations, giving regular dividends to their shareholders

Page | 121
as well as low market Volatility and better returns. P&G and HUL have their business
diversified into various segments giving constant return to the shareholders. Moreover,
they regularly reward their investors with dividend. Basically in the P&G the Operating
Cycle tells you how many days it takes for something to go from first being in inventory
to receiving the cash after the sale i.e. 95.03 Days & Earning Margin is 20.64 where
in Gross Profit Margin equals percent of sales available after deducting cost of goods
sold. This percentage is available to cover selling, general and administrative costs,
and also earn a profit. It indicates the basic cost structure of a P&G company and
shows the company's cost-price position.

The ratios of both the companies are normal to moderate. The volatility of P&G and
HUL is 18.81% and 20.93% respectively. This indicates that the companies are less
volatile when compared to its peers whose volatility is around 22-25% indicating that
the companies are moderately affected by the overall market movements.

Lastly, Dabur has a volatility factor of 21.36% and it has been able to give an annual
return of 13.52% to the investors. But, the future prospects of the company look
brighter due to increasing focus on natural/ayurvedic treatments as well as ayurvedic
products. This is especially after the lockdown as people will face a lot more health
problems due to sudden change in life-style, making them search for natural
treatments.

Name of the
5 year Market Returns Volatility Portfolio Allocation
company
Dabur 13.52% 21.36% 25.50%
P&G 23.65% 18.81% 39.28%
HUL 19.06% 20.93% 35.22%
Total 100.00%

Portfolio Group 2
Age Group - 45-55

Risk Level - Medium

Important Parameters Considered- Volatility, Dividend Yields

Page | 122
Stocks Allocated - Britannia, Nestle, Marico

Details - For investors with medium appetite of risk, they prefer stocks which give a
good investment return with respect to dividends and/or capital appreciation at a
moderate level of risk. Britannia has a high volatility of 24.86%. Hence, a sudden
market move may have an adverse impact on this stock. However, this stock has given
a historical return of 23.62% every year, it is at a comfortable liquidity position with
quick ratio at 1.49 times and Return on equity at 27.78%. All these reasons make
Britannia a worthy bet.

Nestle is a market leader in the noodles category and it contributes the most to the
company’s revenues. Besides, instant coffee segment, infant formula and whites and
wafer segments too are well penetrated and captured by Nestle. The quick ratio is high
as compared to its peers making it extremely liquid. Return on equity is higher as the
equity shares are low and the earnings are high. An investor in this age group can
expect dividends as well as a high growth from this stock.

Marico on the other hand has its brands either in the cash cow segment or star
segment of the BCG matrix. Overall, the business operations are quite strong. Getting
on to the risk part, Nestle and Marico have their Beta factors as 0.62 and 0.44
respectively and their volatility as 22.54% and 21.90% respectively, indicating a
medium volatility in their stocks due to overall market movement. Also, the Maggi
controversy is still going on in the court. This along with the issues with the parent
company (Nestle. S.A.) can pose potential risks to Nestle Ltd.

If we see here, Marico has always shown a steady growth hence the ratios also have
been mediocre. The company has a vast portfolio mostly dealing in the leading
products and hence the company has a good reach. The ratios are a clear proof of
that, the cash conversion cycle being in negative which is a plus point for the company,
depicting the operations of the company are efficient. The earnings margin has
increased since last year and is considered to be average. The return on assets has
also increased as compared to last year which is a positive sign for the company. The
return on equity is also increasing and is considered good because it means there is
good utilization of the capital since the company also has low debts.

Page | 123
 Name of the Portfolio
Volatility Dividend Yield
company Allocation
Britannia 24.86% 0.49% 28.63%
Nestle 22.54% 1.98% 41.68%
Marico 21.90% 1.37% 29.68%
Total 100.00%

Portfolio Group 3
Age Group - Below 45

Risk Level - High

Stocks Allocated- None

Reason - All these companies are in their growth to maturity company life cycle and
well established. The scope for growth for these companies is not as lucrative with
respect to the risk as compared with other sectors. Hence, the investors are advised
to either invest lower portion of their portfolio in the FMCG sector or to look for better
sectors.

Note: Investing in ITC is not recommended because of the negative growth rate
coupled with the higher risk. It is recommended to wait for the company to recalibrate
its business strategy and to reduce high dependency on cigarettes because it is highly
volatile.

Page | 124
 Final Call
Industry P/E:46 Industry P/B:12

Britannia Industries Ltd.

Company P/E:66 Company P/B:18

Recommendation: hold

Reason: The company is trading at P/E multiple of 66 which is 20 times more than the
industry average. However, judging by the strong fundamentals that the company has
along with the recent stellar earnings show based on change in its business strategy,
it is expected that the company will continue to dominate the market for the
foreseeable future.

Nestle India Ltd

Company P/E:49 Company P/B:22

Recommendation: Buy

Reason: The company is trading at a P/E multiple of 49 which is around the industry
average. Nestle trades at a higher price as compared to its peers in the industry. The
strong reserves as well as the product portfolio diversification makes it a company with
high growth potentials. Nestle has given dividends at almost 80% of its earnings.
Coupled with exponential growth and industry outlook Nestle is expected to grow more
in the near future.

Dabur India Ltd

Company P/E:57 Company P/B:13

Recommendation: Buy

Reason: The company is currently valued at 57 times its earnings multiple and 13
times its book value which is in line with the industry. Going ahead, increased
distribution network, innovation in Ayurveda products, shift in consumer preference to

Page | 125
natural remedies and increase in associated Ayurveda Doctors would further push the
topline of the company resulting in better margins.

ITC Ltd

Company P/E:29 Company P/B:6

Recommendation: Sell

Reason: The company is trading at a P/E multiple of 29 which is less than the industry
average. The share price of the ITC is less than the other FMCG companies. Company
has a diversified portfolio in 6 different sectors, however the sectors contributing the
most i.e. cigarettes and hospitality have been badly affected by the COVID pandemic
and it is expected that it would take more time to revive the business revenue.

P&G Ltd

Company P/E 83 Company P/B: 8.12

Recommendation: Hold

Reason: The company is trading at a P/E multiple of 83 which is above the industry
average. P&G trades at a higher price as compared to its peers in the industry. The
strong reserves as well as the product portfolio diversification makes it a company with
high growth potentials. P&G has also got Strong Global Network.

HUL Ltd

Company P/E 60.1 Company P/B: 36

Recommendation: Hold

Reason: HUL is one of the steadily growing companies in the FMCG sector. It has the
highest return on assets, indicating the efficient use of assets to generate revenue.
The earnings margin is also pretty good, given the low volatility. This indicates that it

Page | 126
is moderately affected by the overall market conditions. The shareholders will definitely
benefit from the steady returns and growth of the company. Hence it would be wise to
hold the position.

Marico Ltd

Company P/E: 39.4 Company P/B: 4.85

Recommendation: Buy

Reason: The company has been steadily growing since its inception in 1991. It is in
its second growth stage. The company has a strong portfolio with leading brands in
many product segments of this sector. Earnings growth over past years has been
consistently high, despite significant volatility in commodity costs, due to its diversified
branded portfolio the returns given by the company are positive and seem profitable
in the near future as well.

Page | 127
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