SUMMER INTERNSHIP PROJECT REPORT

RATIO ANALYSIS OF DABUR INDIA LIMITED

SUBMITTED TO: Mr.R.S.Dani Additional General Manager of Internal Affairs Dabur India Limited

SUBMITTED BY: Richa Baranwal Institute of Marketing & Management (IMM) New Delhi

UNDERTAKING
Debt can not be paid in words of gratitude
All successful projects start and end with the help of many people. My project is no exception. I have profound pleasure I expressing my deep sense of gratitude and feeling to Mr.R.S.Dani, additional general manager of internal affairs (Dabur India Limited) for giving me this project and a unique opportunity to contribute something to FMCG industry and also to enhance my knowledge. The project was a learning experience which promises to help me in future. During the training period of my project, I met and interacted with several customers. I take the opportunity to thank them for their co-operation and active participation in my project, especially executives and staff member of Dabur India Limited. I also want to thank to all other friends who directly or indirectly gave me a helping hand in completing this project report by sparing their valuable time. Beside this, I want to give my sincere gratitude to Mr. Jagjit Singh, (Executive President, IMM) deep sense of gratitude and special thanks to Mrs.Moli Lal (Education Advisor, IMM) and all other faculties of IMM campus under whom timely guidance I have been able to complete this project successfully.

TABLE OF CONTENTS
Executive Summary Objectives of the Study Methodology Introduction of FMCG Industry History of FMCG Industry Introduction to the company Ratio Analysis Ratio comparison of Dabur with other FMCG Companies Liquidity Ratios Leverage Ratios Profitability Ratios Activity Ratios Ratio Analysis of Dabur India Ltd. Findings Conclusions and Recommendation SWOT analysis Limitations Appendices

5-6 7 8 9-10 11-14 15 16-17 18 19 23 29 43 53 64 65 66 67 68 Bibliograp 72

hy

LIST OF TABLES, CHARTS AND FIGURES

Ratio Comparison of Dabur with other FMCG Companies Liquidity Ratios Current Ratio Leverage Ratios Debt Equity Ratio Long Term Debt Equity Ratio 19 20-21 23 24-25 26-27 29 30-31 32-33 34-35 36-37 38-39 40-41 43 44-45 46-47 48-49 50-51 53 54 55 56 57 58 59 60 61 62 63

18

Profitability Ratios Gross Profit Margin Net Profit Margin Return on Capital Employed Return on Net Worth Operating Profit Margin Profit Before Interest and Tax Margin Activity Ratios Inventory Turnover Ratio Debtors Turnover Ratio Fixed Assets Turnover Ratio Total Assets Turnover Ratio Ratio Analysis of Dabur India Ltd.( Current Ratio Debt Equity Ratio Long Term Debt Equity Ratio Gross Profit Ratio Net Profit Ratio Return on Capital Employed Return on Net Worth Debtors Turnover Ratio Average Collection Period Fixed Assets Turnover Ratio

EXECUTIVE SUMMARY
The project Ratio Analysis: A Case Study of Dabur. Aims to interpret the financial statement so that the strengths and weaknesses of a firm as well as its historical performance and current financial condition can be determined. For the purpose the data has been used, which was collected from the past financial records of the company i.e., balance sheet and profit and loss account, for three financial years(2003-04, 2004-05, 2005-06). The data collected broadly relate to the current assets and current liabilities of the company. The technique used to analyze the financial condition of the company is Ratio Analysis. For this purpose three years (2003-2004, 2004-2005 &2005-2006) ratios have been calculated of Dabur and out of them two years (2003-2004 &2004-2005) ratios have compare with other FMCG companies. The method of trend ratios has been adopted. The analysis process has been undertaken in two stages: a) Calculation of ratios b) Their interpretation The following ratios have been calculated: a) Liquidity Ratios The liquidity ratios represent excess of current assets over current liabilities. It is the ability of a firm to satisfy its short-term obligations as they become due. b) Leverage Ratios The leverage ratios measure the ratios of long-term or total debt to shareholders equity.

c) Profitability Ratios
The profitability ratios use to measures operating efficiency of a firm and its ability to ensure adequate returns to its shareholders depends ultimately on the profits earned by it. d) Activity Ratios The activity ratios measure the speed with which various accounts/assets are converted into sales or cash. After making all the calculations each ratio has been interpreted and this can be summarized as follows: The net working capital of the company shows an increasing trend. The analysis also reveals a rising inventory turnover ratio and debtors turnover ratio and an improved debt collection period. At the same time the company also has a high current asset and quick ratio, which represents high liquidity. The project also gives information about the practices presently being followed in Dabur to manage their ratios. After making a thorough analysis of the various aspects related to the ratios the company conclusion has been drawn. The company has sufficient funds to meet its short-term obligations as they become due. Finally on the basis of the analysis and the conclusions drawn a SWOT analysis has been done and recommendations given. Therefore, a financial analysis of the working capital of Dabur reveals that the company has been able to manage its working capital efficiently thereby strengthening its short-term financial position.

OBJECTIVES OF THE PROJECT

OBJECTIVES:
Finding out the ground realities of the competitors of Dabur India Limited. Analyzing the superiority of Dabur over its competitors. Analyzing the position of Dabur in the minds of customers. Finding out the Ratio Analysis and procedures of calculation.

DELIVERABLES:
Identified the competitors in the market. Identified opportunities: new segment and consumer needs. Identified the problem faced by Dabur India Limited consumers. Identified the rules and regulation. Recommendation

METHODOLOGY
The project work has done in two parts: 1) Calculation of ratios 2) Explain with graph 3) Their interpretations

1) Calculation of Ratio- To analysizing the financial condition of the company, Dabur India Limited, different ratios has been calculated of different FMCG companies on the basis of available data. The ratios has been calculated on yearly basis, of three years (2003-2004, 2004-2005 & 2005-2006). 2) Explain with graph- After calculating the ratios, the data has shown in graphs, in order to explain it. 3) Interpretations- After calculating the ratios and showing it in graphs, the interpretation has been made of each and every ratios. This helps to analysizing the financial condition of the company.

INTRODUCTION OF FMCG INDUSTRY

Fast Moving Consumer Goods is the booming industry in India. After all, it is an industry which touches every aspect of human life, from looks to hygiene to palate. Though the market scenario was very different before the liberalization of Indian economy the product quality as well as the competitiveness has immensely increased. After the liberalization the players like Pepsi and Coke has changed the rules of the game in the industry. One reason for the lagging behind of this industry was the spending power of people, the other reasons were like lack of innovation because of the closed market having high import duties, and the minuscule level of competition as their were not many players in the market. Earlier it was the sales era but at present customer has the final call. Categorization of FMCG Products Category Household Care Products Fabric wash (laundry soaps and synthetic detergents), household cleaners (dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito repellents, Metal polish and furniture polish). Health beverages, soft drinks, staples/cereals, bakery products (biscuits, bread, cakes), snack food, chocolates, ice cream, tea, coffee, soft drinks, processed fruits, vegetables, dairy Products, bottled water, branded flour, branded rice, branded sugar, juices etc. Oral care, hair care, skin care, personal wash (soaps), cosmetics and toiletries, deodorants, Perfumes, feminine hygiene, paper products

Food and Beverages

Personal Care

Industry Segments The main segments of the FMCG sector are:

Personal Care: oral care; hair care; skin care; personal wash (soaps); cosmetics and toiletries; deodorants; perfumes; paper products (tissues, diapers, sanitary); shoe care. Major companies active in this segment include Hindustan Lever; Godrej Soaps, ColgatePalmolive, Marico, Dabur and Procter & Gamble.

10

Household Care: fabric wash (laundry soaps and synthetic detergents); household cleaners (dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito repellants, metal polish and furniture polish). Major companies active in this segment include Hindustan Lever, Nirma and Reckitt & Colman.

Branded and Packaged Food and Beverages: health beverages; soft drinks; staples/cereals; bakery products (biscuits, bread, cakes); snack food; chocolates; ice cream; tea; coffee; processed fruits, vegetables and meat; dairy products; bottled water; branded flour; branded rice; branded sugar; juices etc. Major companies active in this segment include Hindustan Lever, Nestle, Cadbury and Dabur.

Spirits and Tobacco Major companies active in this segment include ITC, Godfrey Philips, UB and Shaw Wallace. An exact product-wise sales break up for each of the items is difficult.

11

HISTORY OF FMCG INDUSTRY

Fast moving consumer goods (FMCG) industry has a long history. However, the Indian FMCG industry began to take shape only during the last fifty-odd years. To date, the Indian FMCG industry continues to suffer from a definitional dilemma. In fact, the industry is yet to crystallize in terms of definition and market size, among others. The definitional confusion that has marked the Indian FMCG industry is getting confounded. Some call it the FMCG industry, some others call it the CPG industry and some even call it the PMCG (Packaged Mass Consumption Goods) industry. The Indian FMCG industry has suffered because of this confusion. It was Dabur, which kick started in India what's today known as the fast moving consumer goods (FMCG) industry. It was some 115 years ago, much before Hindustan Lever (HLL) materialized on the scene. How has the FMCG industry metamorphosed in India? The dramatic nineties Things however began to change post-reforms during the nineties. The floodgates were opened. And MNCs with saturating home-markets who were hungrily looking for markets elsewhere rushed in. Categories within categories were created in products such as hair-oil and skincare, and many new product categories were also created. Untouched facets of the Indian consumer were explored. The FMCG players had in front of them not only a vast untapped market but also a market that was fast growing. Income-levels were rising. A new class of upwardly mobile was emerging. Television and, satellite and cable television were helping the market to grow further in rural areas by changing aspirations and lifestyles. The canvas did widen for the FMCG players, but so did the challenges. Rules of the game changed. Strategies, in their true sense, came to the fore. Quite unlike in the past, companies began looking for ways to expand their product-portfolios and distribution reach. Acquisition of brands became the order of the day as it gave the players easy options of attaining growth in the FMCG sector. That is true of the MNCs who are known for their deep pockets. Dabur, for instance unleashed brands in a way it had never done earlier. Just in a span of ten years, it gobbled up Food products, Health Care Products, was bought in the market. Dabur plan to increase the distribution channel although it already have good distribution channel. Current Scenario in FMCG At present the industry is on a roll. Following are some industry stats which prove it: The FMCG sector is the fourth-largest sector in the Indian economy At present the size of the industry is US $13.1 billion The industry is expected to grow at compounded rate of 9 % per annum The growth in the urban sector is 7% and in rural sector is 4%

12

 The top five companies HLL, ITC, Dabur, Britannia and Nestle of FMCG industry has
grown at the rate of 15% this year. The combined performance chart for the year 2004 and 2005 of these companies is as following: (Rs m) Net Sales Expenditure Operating Profit (EBDIT) Other Income Interest Depreciation Profit before Tax Tax Extraordinary items Profit after Tax Sept'04 58,822 45,316 13,506 1,940 782 1,370 13,294 3,714 427 10,007 Sept'05 67,813 52,632 15,181 22.4% 1,931 297 1,545 15,270 4,066 (62) 11,142 11.3% -0.5% -62.0% 12.8% 14.9% 9.5% Change 15.3% 16.1% 12.4%

Operating Profit Margin (%) 23.0%

Future of the Industry Looking at the steps taken by the government to improve the picture of Indian industry we can say that there are immense growth opportunities for this sector. Following are some of the facts related to the bright future of this industry: The industry is expected to grow up to the size of US $33.4 billion. by the year 2015 The demand for FMCG products is expected to boom by 60% in 2007 and 100% by 2015 In the next few decades the production of foods by PMCG is expected to rise up to 70% from its current share of 11% Opening up of the retail sector for FDI. Currently the FDI in retail is 24% it may be further increased as looking at the growth rate of the industry in 2010 the industry is expected to need an investment of US $28 billion Government encouraging the export of FMCG products by reducing the export duty The per capita disposable income in India is expected to rise from US $556 in 2003 to US $1150 in 2015, which means the increase in purchasing power. It will lead to the growth in the sales of products like health care.

13

 India is the worlds largest producer of milk still only 15% of the milk is processed, a huge potential of growth lies in this segment of the industry. Currently the size of semi processed and ready to eat packaged food market is $70 billion which is the 15% of its potential, this part of FMCG also have an immense growth potential. By 2010, 200 million people are expected to shift to packaged and processed food There is only 45% penetration in the health care market and 55% of the market is still to be covered in this market. If we look at the distribution of Indian population around 47% of Indian population is below 20 years of age by 2015 which is expected to grow to 55% which means the consumer base of FMCG products like healthcare, hygiene, beverages etc will increase The rural market in India was not well penetrated by the FMCG industry till now but with the projects like HLL Shakti and ITC E-Chaupal the penetration has increased and this will lead to faster growth of this industry The emergence of the concept of ECR (Efficient Consumer Response) will the FMCG industry operate more efficiently by filling up the demand supply gap which coming up a major problem in this industry. Environmental Factors affecting the Industry There are various factors at Micro as well Macro level which influences the FMCG industry. The factors at micro level can be costs incurred in production, efficiency of the various departments in the companies of FMCG industry. At macro level following are the factors influencing FMCG industry: Economic Growth as it will lead to increase in the income of the people and so the expenditure on FMCG products Changes in demographic profile of people Government policies like : o Tax o FDI policies o Export Duties Entry of new players in the market as it rises the competition and leads to various changes in the way business is done The competition faced from unorganized sector as they get away without paying taxes and can have the competency at the price level Role of Dabur in this Industry Dabur Foods Limited (DFL) posted a record 53% sales growth for the financial year 2005-06. This outstanding performance has resulted in DFL closing the year at Rs.190 crores (balance sheet figure) and this strong growth is reflected in the incremental turnover of Rs. 12.1 crores over budget and Rs. 61.5 crores over last year.

14

The company recorded a PAT of Rs. 12.1 crores, which is 130.2% growth over LY and as a result PAT % to sales moved from 4.5% to 6.8%. Some of the key Highlights of the Year are:

Company earned additional revenue to the tune of Rs. 15 crores through its export operations, which is a 260% growth over LY and achieved the recognition of a Star Export House in 2 years. New products launches have contributed to 20% of the turnover and contributed to 24% of our growth. Real and Activ Brands together have clocked a turnover of Rs. 150 crores. Replant of Activ has resulted in value sales of Rs 3040 lakhs resulting in a stupendous growth of 99% over last year and increased contribution from 13% to 17% of SBU sales.

Dabur Foods Limited (DFL) a wholly owned subsidiary of Dabur India Limited (DIL), operates on the naturals platform with a product portfolio consisting mainly of packaged fruit juices, cooking pastes, sauces and items for institutional food purchases The business registered another year of fantastic performance in 2005-06 by growing sales by 48% and growing its profit by more than two times. This is the second year in a row that the business has grown over 48% in sales growth. The business recorded a turnover of Rs.192.53 crores registering a growth of 48% and profit after tax of Rs.12.1 crores. In line with the strategic path laid down, the following are the key highlights of performance:

Beverage portfolio growth at 50% driven by its segmentation strategy under Real.
Strong growth from new product launches and new channels which contributed to 24% of our total growth. The line extensions of Home made also continued to drive the growth. Exports grew by over 100%. The primary growth driver of your business was its fruit beverage portfolio. The segmentation strategy put into place by Sanjay and his team to differentiate the 3 brands has been successfully implemented. Real, Activ and Coolers are now differentiated in terms of appeal, benefit, variants and packaging. Real continued to grow by over 35%. The major success of the year was Real Activ which doubled it's sales over last year. The extension to the innovative fruit and vegetable variants has been widely accepted by the Indian consumers. Both these brand have firmly strengthen Dabur Foods leadership in the fruit juices market coupled with the excellent retail distribution by KG and his team. "Coolers" - The range of drinks is based on traditional Indian formulations, which have a cooling effect on the body - grew by 58%. It added 3 new flavors - Muskmelon, Lemon Barley and Jamun.

15

The Home made brand grew by 28 per cent in 2005-06. These growth rates were possible by the excellent performance of Coconut Milk & Tomato Pure. Besides the retails channel, the product is extensively distributed in the food services channel. In view of the growing size of this channel a dedicated structure headed by Jyotiroop has been set up to service the customer. The company continued to dominate this channel by making it available in the best hotels, restaurants, airlines and several institutions like business houses to Indian army.

INTRODUCTION OF A COMPANY
Dabur India Limited established in 1884 by Dr. S. K. Burman, physician of vision and limitless compassion Brought Ayurvedic medicines to the ailing mass of Bengal. It is one of the leading FMCG Company in India. The company was formed by way of amalgamation in Oct.'86. Prior to this, the company was operating under the name Dabur (S K Burman) Pvt Ltd, since 1930. The FMCG industry in India is very unpredictable which ultimately affects the profitability of any company in the sector. The success of Dabur is based on dedication to nature, corporate, and process hygiene, dynamic leadership and commitment to the partners and stakeholders. It provides differentiated products with strong Herbal and Nature profile. Over more than 100 years it is dedicated to providing nature based solution for a healthy and holistic lifestyle through Ayurveda. Leading consumer goods Company in India, holding position among the large turnover companies: 3 major strategies business units (SBU) - Family Product Division (FPD), Health Care Products Division (HCPD), and Dabur Ayurvedic Specialties limited (DASL). 5 Subsidiary Group Companies Dabur Foods, Dabur Nepal, Dabur Oncology, Dabur Pharma and Dabur Egypt. Production market in over 50 countries. Dabur became the first Ayurvedic products company to get ISO 9002 certification for its superior quality standards. Dabur Nepal, a subsidiary of Dabur India, has set up fully automated greenhouses in Nepal. This helps to produce saplings of rare medicinal plants that are under threat of extinction due to ecological degradation.

The company has various brand leaders in different market segments -- Dabur Chyawanprash, a health tonic and Hajmola, a digestive tablet,. Two new brands, Real and Home made, launched during 1996-97 have also carved out a niche in the market. Dabur added a new variant to its Pudin Hara range. Its key pharmaceutical brand New Livfit recorded a growth of more than 100%.

16

To compete in the market and to retain its position, company is focusing on different strategies and taking initiative for efficiency:

17

RATIO ANALYSIS
Ratio analysis is an excellent method for determining the overall financial condition of a business. It puts the information from a financial statement into perspective, helping to spot financial patterns that may threaten the health of a company. Ratios are also very useful for making comparisons between our business and other businesses in same industry. For example, comparing ratios can indicate whether a business is holding too much inventory or collecting receivable too slowly. This comparison provides a window into ways in which our business can improve its operations. The Balance Sheet and the Statement of Income are essential, but they are only the starting point for successful financial management. Apply Ratio Analysis to Financial Statements to analyze the success, failure, and progress of our business. Ratio Analysis enables the business owner/manager to spot trends in a business and to compare its performance and condition with the average performance of similar businesses in the same industry. To do this compare your ratios with the average of businesses similar to yours and compare your own ratios for several successive years, watching especially for any unfavorable trends that may be starting. Ratio analysis may provide the all-important early warning indications that allow you to solve your business problems before your business is destroyed by them. It is also a tool possesses several important features. The data, which are provided by financial statements, are readily available. The computation of ratios facilitates the comparison of firms which differ in size. Ratios can be used to compare a firm's financial performance with industry averages. In addition, ratios can be used in a form of trend analysis to identify areas where performance has improved or deteriorated over time. It is based upon accounting information, its effectiveness is limited by the distortions which arise in financial statements due to such things as Historical Cost Accounting and inflation. Therefore, Ratio Analysis should only be used as a first step in financial analysis, to obtain a quick indication of a firm's performance and to identify areas which need to be investigated further.

18

Conditional Use of Financial Ratio Analysis: Financial ratio analysis is frequently used to measure the performance of various sectors of a business. If properly used (its limitations understood), it can be a very useful management aid. Following are a few reasons why ratio analysis is being used so extensively: a) Ratios are easy to calculate - Most ratios compare two statistics which are normally provided in the income statement or the balance sheet. Because these data are readily available at a more-or- less fixed cost, not much time or expense is required to compute a ratio. b) Ratios allow easy comparison - They allow comparison of a firms past with its present performance, as well as comparisons between similar firms at one time. c) Ratios are easily understood - Not all members of the management team are financial sophisticates and ratios provide simple overview information to all types of management personnel. d) Ratios communicate a firms financial position- The ratios communicate a firms financial position to interested parties outside of management - for example, financial authorities may rely on ratios to determine a firms credit worthiness.

19

RATIO COMPARISON DABUR FMCG COMPANIES

WITH OTHER OF

20

Liquidity Ratios

21

STATEMENT SHOWING CURRENT RATIO AS ON 31ST MARCH 2004 Companies Current Ratio Dabur 1.27 HLL 0.90 Nestle 0.67 Godrej 0.68 Cadbury 1.24 Britannia 0.89 Colgate 1.12 P&G 1.71

Current Ratio= Current Assets/Current Liabilities

Ranking on Current Ratio

1.8 1.6 1.4 1.2 1 Times 0.8 0.6 0.4 0.2 0 1.71 1.27 0.9 0.67 0.68 1.24 0.89 1.12

Dabur

HLL

Nestle

Godrej

Cadbury Britannia Colgate

P&G

Companies

INTERPRETATION:
The ratio is used to assess the short term financial position of the business concern. It is an indicator of the firms ability to meet its short-term obligations. As a conventional, rule a current ratio of 2:1 is considered ideal. Dabur has a current ratio is 1.27 which is an average ratio that the company current assets are more then current liabilities in year 2003-04 increase in current assets and decrease in current liabilities. The company has a sufficient fund to pay its liabilities on time and meet other day to day expenses.

22

STATEMENT SHOWING CURRENT RATIO AS ON 31ST MARCH 2005 Companies Dabur Current Ratio 0.79 HLL 0.82 Nestle 0.65 Godrej 0.66 Cadbury Britannia 0.91 0.86 Colgate 1.29 P&G 1.52

Current Ratio= Current Assets/Current Liabilities

Ranking on Current Ratio

1.6 1.4 1.2 1 Times 0.8 0.6 0.4 0.2 0 1.52 1.29 0.79 0.82 0.65 0.66 0.91 0.86

Dabur

HLL

Nestle

Godrej

Cadbury Britannia Colgate

P&G

Companies

INTERPRETATION:
The ratio is used to assess the short term financial position of the business concern. It is an indicator of the firms ability to meet its short-term obligations. As a conventional, rule a current ratio of 2:1 is considered ideal. Dabur has a current ratio is 0.79 which is far away from the ideal ratio that the company current assets are very less then current liabilities in year 2004-05 decrease in current assets and increase in current liabilities.The company dont have a sufficient funds to pay its liabilities on time and meet other day to day expenses.

23

Criteria for Analyzing Liquidity Ratios

The liquidity ratios measure the ability of the company to meet its current obligations. The liquidity ratios by establishing a relationship between cash and other current assets to current obligation provide a quick measure of liquidity. Current Ratio: - The current ratio of 2:1 or more is considered satisfaction. Dabur India limited has the current ratio 1.27 in the year 2003-2004 and 0.79 in the year 2004-2005 therefore it may be interpreted to be sufficiently liquid. But among all the companies Dabur has secured 2nd rank in the year 2003-2004 and 6th rank in the year 2004-2005. The current ratio represents a margin of safety for creditors. The higher the current ratio, the greater the margin of safety.

24

Leverage Ratios

25

STATEMENT SHOWING DEBT EQUITY RATIO AS ON 31ST MARCH 2004 Companies Debt Equity Ratio Dabur 0.22 HLL 0.75 Nestle 0.02 Godrej 0.48 Cadbury 0.03 Britannia 0.24 Colgate 0.02 P&G 0.20

Debt Equity Ratio = Long-term Loans\ Shareholders Fund

Ranking on Debt Equity Ratio

0.8 0.7 0.6 0.5 Times 0.4 0.3 0.2 0.1 0 0.75 0.48 0.24 0.02 Dabur HLL Nestle 0.03 0.02 P&G

0.22

0.2

Godrej Cadbury Britannia Colgate Companies

INTERPRETATION:
The debt-equity ratio is an important tool of finance analysis to appraise the financial structure of the firm. It has important from the viewpoint of creditors, owner and the firm itself. The ratio reflects the relative contribution of creditors and owners of the business in its financing. A high ratio shows a large share of financing by the creditors of the firm; a low ratio implies a small claim of creditors. The debt-equity ratio indicates the margin of safety to the creditors. The shareholders of the firm would, however stand to gain in two ways: (i) with a limited stake, they would be able to retain control of the firm and (ii) the return to them would be magnified. With a larger proportion of debt in the financial structure, the earnings available to the owner would increase more than proportionately with the increase in the operating profits of the firm.

26

STATEMENT SHOWING DEBT EQUITY RATIO AS ON 31ST MARCH 2005 Companies Dabur Debt Equity Ratio 0.15 HLL 0.35 Nestle 0.03 Godrej 0.33 Cadbury Britannia Colgate 0.02 0.05 0.03 P&G 0.19

Debt Equity Ratio = Long-term Loans\ Shareholders Fund

Ranking on Debt Equity Ratio

0.35 0.35 0.3 0.25 0.2 Times 0.15 0.1 0.05 0 0.33

0.19 0.15 0.03 Dabur HLL Nestle 0.02 0.05 0.03

Godreg Cadbury Britannia Colgate Companies

P&G

INTERPRETATION:
The debt-equity ratio is an important tool of finance analysis to appraise the financial structure of the firm. It has important from the viewpoint of creditors, owner and the firm itself. The ratio reflects the relative contribution of creditors and owners of the business in its financing. A high ratio shows a large share of financing by the creditors of the firm; a low ratio implies a small claim of creditors. The debt-equity ratio indicates the margin of safety to the creditors. The shareholders of the firm would, however stand to gain in two ways: (i) with a limited stake, they would be able to retain control of the firm and (ii) the return to them would be magnified. With a larger proportion of debt in the financial structure, the earnings available to the owner would increase more than proportionately with the increase in the operating profits of the firm.

27

STATEMENT SHOWING LONG TERM DEBT EQUITY RATIO AS ON 31ST MARCH 2004 Companies Dabur LLong Term Debt Equity Ratio 0.17 HLL 0.63 Nestle 0.00 Godrej 0.35 Cadbury Britannia Colgate 0.01 0.06 0.01 P&G 0.85

Long Term Debt Equity Ratio= Long Term Debt Long Term Debt + Shareholders Equity

Ranking on Long Term Debt Equity Ratio

1 0.8 Times 0.6 0.4 0.2 0 Dabur HLL 0.17 0 Nestle 0.01 0.06 0.01 P&G 0.63 0.35 0.85

Godreg Cadbury Britannia Colgate Companies

INTERPRETATION:
The long term debt-equity ratio is also an important tool of finance analysis to appraise the financial structure of the firm. Its again important from the viewpoint of creditors, owner and the firm itself. The ratio reflects the relative contribution of creditors and owners of the business in its financing, but this time it has done for long term financing. A high ratio shows a large share of financing by the creditors of the firm; a low ratio implies a small claim of creditors. The long term debt equity ratio provides large number of debts for the company. It increases the operating profit of a company.

28

STATEMENT SHOWING LONG TERM DEBT EQUITY RATIO AS ON 31ST MARCH 2005 Companies Dabur Long Term Debt Equity Ratio 0.11 HLL 0.30 Nestle 0.00 Godrej 0.17 Cadbury Britannia Colgate 0.01 _ 0.02 P&G 0.16

Long Term Debt Equity Ratio= Long Term Debt Long Term Debt + Shareholders Equity

Ranking on Long Term Debt Equity Ratio

0.3 0.3 0.25 0.2 Times 0.15 0.1 0.05 0 Dabur HLL Nestle Godreg Cadbury Britannia Colgate Companies P&G 0 0.01 0 0.02 0.11 0.17 0.16

INTERPRETATION:
The long term debt-equity ratio is also an important tool of finance analysis to appraise the financial structure of the firm. Its again important from the viewpoint of creditors, owner and the firm itself. The ratio reflects the relative contribution of creditors and owners of the business in its financing, but this time it has done for long term financing. A high ratio shows a large share of financing by the creditors of the firm; a low ratio implies a small claim of creditors. The long term debt equity ratio provides large number of debts for the company. It increases the operating profit of a company.

29

Criteria for Analyzing Leverage Ratios

The second category of ratios is Leverage Ratios; the solvency of a company can be examined by using leverage ratios. Debt- equity ratio measure the ratio of long-term or total debt to shareholders equity. Debt Equity Ratio: - The relationship of lenders and owner describe the lenders and owners contribution for each rupee of the owners contribution is called Debt equity ratio. The Dabur India ltd. has debt equity ratio of 0.22 in the year 2003-2004 and 0.15 in the year 2004-2005 and by this it has secured 4th rank in both years. Long Term Debt Equity Ratio:- The long term debt-equity ratio is a important tool for financial structure of the company. The percentage of this ratio shows the share of financing by the creditors of the company. The dabur India ltd. has long term debt equity ratio of 0.17 in the year 2003-2004 and 0.11 in the year 2004-2005 and by this it has secured 4th rank in both years. .

30

Profitability Ratios

31

STATEMENT SHOWING GROSS PROFIT MARGIN AS ON 31ST MARCH 2004 Companies Dabur Gross Profit Margin 11.25 HLL 14.94 Nestle 18.36 Godrej 15.67 Cadbury Britannia Colgate 11.01 12.24 24.54 P&G 29.73

Gross Profit Ratio= Gross Profit* 100 Net Sales

Ranking on Gross Profit Ratio

29.73 30 25 20 Times 15 10 5 0 Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G 11.25 14.94 18.36 15.67 11.01 12.24 24.54

Companies

INTERPRETATION:
Gross profit is the result of the relation between prices, sales volume and cost. A change in the gross margin can be brought about by changes in any of these factors. The gross margin represents the limit beyond which fall in sales prices are outside the tolerance limit. Further, the gross profit ratio can also be used to determining the extent of loss caused by theft, spoilage, damage, and so on in the case of those firms which follow the policy of fixed gross profit ratio in pricing their products. A very high and rising gross margin may be the result of unsatisfactory basis of evaluation of stock, that is, overvalued of closing stock and undervalued of opening stock. But a low gross margin is also a danger signal, warranting a careful, detailed analysis of the factors responsible for it.

32

STATEMENT SHOWING GROSS PROFIT MARGIN AS ON 31ST MARCH 2005 Companies Gross Profit Margin Dabur 14.35 HLL 14.90 Nestle 19.89 Godrej Cadbury Britannia Colgate 17.30 12.55 12.57 25.82 P&G 26.21

Gross Profit Ratio= Gross Profit* 100 Net Sales

Ranking on Gross Profit Ratio

30 25 20 Times 15 10 5 0 Dabur HLL Nestle Godreg Cadbury Britannia Colgate Companies P&G 14.35 14.9 19.89 17.3 12.55 12.57 25.82 26.21

INTERPRETATION:
Gross profit is the result of the relation between prices, sales volume and cost. A change in the gross margin can be brought about by changes in any of these factors. The gross margin represents the limit beyond which fall in sales prices are outside the tolerance limit. Further, the gross profit ratio can also be used to determining the extent of loss caused by theft, spoilage, damage, and so on in the case of those firms which follow the policy of fixed gross profit ratio in pricing their products. A very high and rising gross margin may be the result of unsatisfactory basis of evaluation of stock, that is, overvalued of closing stock and undervalued of opening stock. But a low gross margin is also a danger signal, warranting a careful, detailed analysis of the factors responsible for it.

33

STATEMENT SHOWING NET PROFIT MARGIN AS ON 31ST MARCH 2004 Companies Net Profit Margin Dabur 8.82 HLL 11.01 Nestle 10.62 Godrej Cadbury Britannia Colgate 11.82 5.22 6.95 11.50 P&G 16.03

Net Profit Ratio= Profit After Tax* 100 Sales

Rating on Net Profit Ratio
18 16 14 12 10 Times 8 6 4 2 0 16.03 11.01 8.82 6.95 5.22 10.62 11.82 11.5

Dabur

HLL

Nestle

Godreg Cadbury Britannia Colgate Companies

P&G

INTERPRETATION:
The net profit margin is indicative of managements ability to operate the business with sufficient success not only to recover from revenues of the period, the cost of services, the expenses of operating the business and the cost of borrowed funds, but also to leave a margin of reasonable compensation to the owner for providing their capital at risk. The ratio of net profit (after interest & taxes) to sale essentially expresses the cost price effectiveness of the operation. A high net profit margin would ensure adequate return to the owner as well as enable a firm to withstand adverse economic condition when selling price is declining, cost of production is rising and demand for the product is falling. A low net profit margin has the opposite implication.

34

STATEMENT SHOWING NET PROFIT MARGIN AS ON 31ST MARCH 2005 Companies Net Profit Margin Dabur 11.67 HLL 11.77 Nestle 11.71 Godrej Cadbury Britannia Colgate 14.26 5.19 7.84 11.83 P&G 18.27

Net Profit Ratio= Profit After Tax* 100

Sales
Ranking on Net Profit Ratio
20 15 Times 10 5.19 5 0 Dabur HLL Nestle Godreg Cadbury Britannia Colgate P&G Companies 14.26 11.67 11.77 11.71 7.84 11.83 18.27

INTERPRETATION:
The net profit margin is indicative of managements ability to operate the business with sufficient success not only to recover from revenues of the period, the cost of services, the expenses of operating the business and the cost of borrowed funds, but also to leave a margin of reasonable compensation to the owner for providing their capital at risk. The ratio of net profit (after interest & taxes) to sale essentially expresses the cost price effectiveness of the operation. A high net profit margin would ensure adequate return to the owner as well as enable a firm to withstand adverse economic condition when selling price is declining, cost of production is rising and demand for the product is falling. A low net profit margin has the opposite implication.

35

STATEMENT SHOWING RETURN ON CAPITAL EMPLOYED AS ON 31ST MARCH 2004 Companies Dabur HLL 44.11 Nestle 116.05 Godrej Cadbury Britannia Colgate 121.79 17.05 34.69 17.14 P&G 92.73

Return on 29.50 Capital Employed

Return on Capital Employed = Net Profit (Before Tax & Interest)* 100 Average Capital Employed

Ranking on Return on Capital Employed

140 120 100 Times 80 60 40 20 0 Dabur HLL Nestle Godreg Cadbury Britannia Colgate Companies P&G 29.5 44.11 17.05 34.69 17.14 116.05 121.79 92.73

INTERPRETATION:
The term capital employed refers to the long term funds supplied by the lenders and owner of the firm. It is equal to non-current liabilities plus owners equity. Alternatively, it is equivalent to net working capital plus fixed assets. Thus, the capital employed basis provides a test of profitability related to the sources of the long term funds.

36

STATEMENT SHOWING RETURN ON CAPITAL EMPLOYED AS ON 31ST MARCH 2005 Companies Dabur HLL 56.62 Nestle 134.90 Godrej Cadbury Britannia Colgate 158.03 22.95 44.37 37.33 P&G 104.52

Return on 49.70 Capital Employed

Return on Capital Employed = Net Profit (Before Tax & Interest)* 100 Average Capital Employed

Ranking on Return on Capital Employed

158.03 160 140 120 100 Times 80 60 40 20 0 134.9 104.52 56.62 22.95

49.7

44.37

37.33

Dabur

HLL

Nestle

Godrej

Cadbury Britannia Colgate

P&G

Companies

INTERPRETATION:
The term capital employed refers to the long term funds supplied by the lenders and owner of the firm. It is equal to non-current liabilities plus owners equity. Alternatively, it is equivalent to net working capital plus fixed assets. Thus, the capital employed basis provides a test of profitability related to the sources of the long term funds.

37

STATEMENT SHOWING RETURN ON NET WORTH AS ON 31ST MARCH 2004 Companies Return on Net Worth Dabur 29.78 HLL 56.61 Nestle 76.99 Godrej Cadbury Britannia Colgate 147.51 12.26 24.85 49.76 P&G 191.77

Return on Net Worth=

Net Profit After Taxes- Preference Dividend* 100 Average Ordinary Shareholders Equity or Net Worth
Ranking on Return on Net Worth

200 150 Times 100 50 0 29.78 56.61 76.99

191.77 147.51

49.76 12.26 24.85

Dabur

HLL

Nestle

Godrej

Cadbury Britannia Colgate

P&G

Companies

INTERPRETATION:
This is probably the single most important ratio to judge whether the firm has earned a satisfactory return for its equity holders or not. Its adequacy can be judged by (i) comparing it with the past record of the same firm, (ii) inter-firm comparison, and (iii) comparisons with the overall industry average. The rate of return on ordinary shareholders equity is of crucial significance in ratio analysis vis--vis from the point of the owners of the firm.

38

STATEMENT SHOWING RETURN ON NET WORTH AS ON 31ST MARCH 2005 Companies Dabur HLL 64.05 Nestle 91.92 Godrej Cadbury Britannia Colgate 186.66 12.58 28.95 52.31 P&G 116.25

Return on Net 48.79 Worth Return on Net Worth=

Net Profit After Taxes- Preference Dividend* 100 Average Ordinary Shareholders Equity or Net Worth

Ranking on Return on Net Worth

200 150 Times 100 48.79 50 0 64.05 12.58 Dabur HLL Nestle Godrej 28.95 186.66

91.92 52.31

116.25

Cadbury Britannia Colgate

P&G

Companies

INTERPRETATION:
This is probably the single most important ratio to judge whether the firm has earned a satisfactory return for its equity holders or not. Its adequacy can be judged by (i) comparing it with the past record of the same firm, (ii) inter-firm comparison, and (iii) comparisons with the overall industry average. The rate of return on ordinary shareholders equity is of crucial significance in ratio analysis vis--vis from the point of the owners of the firm.

39

STATEMENT SHOWING OPERATING PROFIT MARGIN AS ON 31ST MARCH 2004 Companies Operating Profit Margin Dabur 11.91 HLL 16.14 Nestle 18.39 Godrej Cadbury Britannia Colgate 16.14 11.28 12.65 13.37 P&G 12.73

Operating Profit Ratio=

Operating Profit * 100 Net sale

Ranking on Operating Profit Ratio

20 15 Times 10 5 0 Dabur HLL Nestle Godreg Cadbury Britannia Colgate Companies P&G 11.91 16.14 18.39 16.14 11.28 12.65 13.37 12.73

INTERPRETATION:
Operating profit margin indicates how effective a company is at controlling the costs and expenses associated with their normal business operations. The operating margin is another measurement of managements efficiency. It compares the quality of a companys operations to its competitors. A business that has a higher operating margin than its industrys average tends to have lower fixed costs and a better gross margin, which gives management more flexibility in determining prices. This pricing flexibility provides an added measure of safety during tough economic times.

40

STATEMENT SHOWING OPERATING PROFIT MARGIN AS ON 31ST MARCH 2005 Companies Dabur HLL 15.06 Nestle 19.90 Godrej Cadbury Britannia Colgate 17.82 12.72 12.70 14.71 P&G 13.52

Operating 14.72 Profit Margin

Operating Profit Ratio=

Operating Profit * 100 Net sale

Ranking on Operating Profit Ratio

19.9 20 15 Times 10 5 0 14.72 15.06 17.82 14.71 12.72 12.7 13.52

Dabur

HLL

Nestle

Godrej

Cadbury Britannia Colgate

P&G

Companies

INTERPRETATION:
Operating profit margin indicates how effective a company is at controlling the costs and expenses associated with their normal business operations. The operating margin is another measurement of managements efficiency. It compares the quality of a companys operations to its competitors. A business that has a higher operating margin than its industrys average tends to have lower fixed costs and a better gross margin, which gives management more flexibility in determining prices. This pricing flexibility provides an added measure of safety during tough economic times.

41

STATEMENT SHOWING PROFIT BEFORE INTEREST & TAX MARGIN AS ON 31ST MARCH 2004 Companies Dabur HLL 15.02 Nestle 16.32 Godrej Cadbury Britannia Colgate 14.43 7.45 11.13 14.02 P&G 13.66

Profit Before 10.54 Interest & Tax Margin

Profit Before Interest & Tax Margin= Gross Profit Margin Depreciation

Ranking on PBIT
20 15 Times 10.54 10 5 0 Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G Companies 7.45 15.02 16.32

14.43 11.13

14.02

13.66

INTERPRETATION:
The profit which comes out after subtracting the depreciation from total profit is called profit before interest & tax (PBIT). It shows the real position of a company, because interest & tax is included in this figure which subtract later on.

42

STATEMENT SHOWING PROFIT BEFORE INTEREST & TAX MARGIN AS ON 31ST MARCH 2005 Companies Profit Before Interest & Tax Margin Dabur 13.37 HLL 14.02 Nestle 17.75 Godrej Cadbury Britannia Colgate 16.05 9.33 11.53 15.12 P&G 13.97

Profit Before Interest & Tax Margin= Gross Profit Margin Depreciation

Ranking on PBIT
18 16 14 12 10 Times 8 6 4 2 0 17.75 13.37 14.02 9.33 11.53 16.05 15.12 13.97

Dabur

HLL

Nestle

Godrej

Cadbury Britannia Colgate

P&G

Companies

INTERPRETATION:
The profit which comes out after subtracting the depreciation from total profit is called profit before interest & tax (PBIT). It shows the real position of a company, because interest & tax is included in this figure which subtract later on.

43

Criteria for Analyzing Profitability Ratios

Gross Profit Margin: - The gross profit margin reflects the efficiency with which management product each unit of product. The gross profit margin relative to the industry average implies that the company is able to product at relatively lower cost. Dabur India Ltd. have secured 7 th & 6th ranks in the ending year 2003-2004 and in 2004-2005 so Dabur should reduce the variable costs. Net Profit Margin: - The net ratio shows the earning left for shareholders (both equity & preference) as a % of net sales. It measures the overall efficiency of production, administration, selling, financing, pricing and tax management. It provides a valuable understanding of the cost and profit structure of the cost and profit structure of the company. In dabur India ltd. has 8.82% net profit margins in the year 2003-2004 and 11.67 in the year 2004-2005 which is very low in comparison to the other companies. Return on Capital Employed: - It indicates the total profitability of the balance sheet from shareholders point of view. Dabur India Ltd. has secured 6th rank in both the financial years. Return on Net Worth: - It is calculated by measures the return on the total equity funds of ordinary shareholders. Dabur India Ltd has again secured 6th rank in both the financial year. Operating Profit Margin: - It indicates that how much operating cost is involves in business and how much revenue it is giving in a period. Dabur India Ltd has secured 7th and 6th rank in this to financial years. Profit Before Tax & Interest Margin: - Its calculated by subtracting the depreciation from gross profit margin. Dabur India has secured 7th and 6th rank in these two financial years.

44

Activity Ratios

45

STATEMENT SHOWING INVENTORY TURNOVER RATIO AS ON 31ST MARCH 2004 Companies Dabur HLL 7.54 Nestle 10.88 Godrej Cadbury Britannia Colgate 12.68 9.17 14.40 12.52 P&G 11.73

Inventory 7.97 Turnover Ratio

Inventory Turnover Ratio= Cost of Good Sold Average Stock

Ranking on Inventory Turnover Ratio

16 14 12 10 Times 8 6 4 2 0 14.4 12.68 10.88 7.97 7.54 9.17 12.52 11.73

Dabur

HLL

Nestle

Godrej

Cadbury Britannia Colgate

P&G

Companies

INTERPRETATION:
The inventory turnover ratio measures how quickly inventory is sold. It is a test of efficient inventory management. To judge whether the ratio of a firm is satisfactory or not, it should be compared over a period of time on the basis of trend analysis. It can also be compared with the level of the firms in that line of business as well as with industry average. In general, a high inventory turnover ratio is better than a low ratio. A high ratio implies good inventory management. Yet, a very high ratio calls for a careful analysis. It may be indicative of under investment in, or very low level of, inventory. A very low level of inventory has serious implications. It will adversely affect the ability to meet customer demand as it may not cope with its requirement.

46

STATEMENT SHOWING INVENTORY TURNOVER RATIO AS ON 31ST MARCH 2005 Companies Dabur HLL 8.53 Nestle 11.26 Godrej Cadbury Britannia Colgate 9.81 10.03 12.60 10.69 P&G 11.04

Inventory 10.68 Turnover Ratio

Inventory Turnover Ratio= Cost of Good Sold Average Stock

R anking o n Invento ry T urn over R atio
14 12 10 Tim e s 8 6 4 2 0 Dabur HLL Nes tle Godrej CadburyB ritanniaColgate Com pa nie s P&G 10.68 8.53 12.6 11.26 9.81 10.03 10.69 11.04

INTERPRETATION:
The inventory turnover ratio measures how quickly inventory is sold. It is a test of efficient inventory management. To judge whether the ratio of a firm is satisfactory or not, it should be compared over a period of time on the basis of trend analysis. It can also be compared with the level of the firms in that line of business as well as with industry average. In general, a high inventory turnover ratio is better than a low ratio. A high ratio implies good inventory management. Yet, a very high ratio calls for a careful analysis. It may be indicative of under investment in, or very low level of, inventory. A very low level of inventory has serious implications. It will adversely affect the ability to meet customer demand as it may not cope with its requirement.

47

STATEMENT SHOWING DEBTORS TURNOVER RATIO AS ON 31ST MARCH 2004 Companies Dabur HLL 22.65 Nestle 82.01 Godrej Cadbury Britannia Colgate 31.25 36.35 60.93 28.79 P&G 47.36

Debtors 14.46 Turnover Ratio

Debtors Turnover Ratio = Total Sales Debtors + Bill Receivable

R an k in g o n D eb to rs T u rn o ve r R atio
90 80 70 60 50 T im e s 40 30 20 10 0 82.01 60.93 47.36 22.65 14.46 31.25 36.35 28.79

Dabur

HLL

Nes tle G odrej CadburyB ritanniaColgate Co m p a n ie s

P&G

INTERPRETATION:
A company can sell its goods on credit also. It is used as a marketing tool by a number of companies. When the company extends credits to its customers, it will increase more debtors. Debtors turnover ratio indicates the number of time debtors turnover each year. Generally the higher the value of debtors turnover, the more efficient is the management of credit.

48

STATEMENT SHOWING DEBTORS TURNOVER RATIO AS ON 31ST MARCH 2005 Companies Dabur HLL 23.64 Nestle 93.28 Godrej Cadbury Britannia Colgate 65.49 57.06 52.20 55.20 P&G 53.72

Debtors 27.78 Turnover Ratio

Debtors Turnover Ratio= Total Sales Debtors + Bill Receivable

Ranking on D ebtors Turnover Ratio
100 80 Tim e s 60 40 20 0 Dabur HLL Nestle Godrej Cadbury Britannia Colgate Com pa nie s P&G 27.78 23.64 93.28 65.49

57.06

52.2

55.2

53.72

INTERPRETATION:
A company can sell its goods on credit also. It is used as a marketing tool by a number of companies. When the company extends credits to its customers, it will increase more debtors. Debtors turnover ratio indicates the number of time debtors turnover each year. Generally the higher the value of debtors turnover, the more efficient is the management of credit.

49

STATEMENT SHOWING FIXED ASSETS TURNOVER RATIO AS ON 31ST MARCH 2004 Companies Dabur HLL 4.88 Nestle 2.92 Godrej Cadbury Britannia Colgate 12.68 2.61 5.34 8.10 P&G 7.04

Fixed Assets 4.06 Turnover Ratio

Fixed Assets Turnover Ratio= Sales Fixed Assets

Ranking on Fixed Assets Turnover Ratio
14 12 10 Times 8 6 4 2 0 Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G 4.06 4.88 2.92 2.61 5.34 8.1 7.04 12.68

Companies

INTERPRETATION:
The company may wish to know its efficiency of utilizing fixed assets. This ratio indicates the extent to which the investment in fixed assets contributes towards sales. If compared with the previous period, it indicates whether the investment in fixed assets has been judicious or not.

50

STATEMENT SHOWING FIXED ASSETS TURNOVER RATIO AS ON 31ST MARCH 2005 Companies Dabur HLL 5.10 Nestle 2.96 Godrej Cadbury Britannia Colgate 9.81 2.61 6.17 7.84 P&G 7.66

Fixed Assets 4.33 Turnover Ratio

Fixed Assets Turnover Ratio= Sales Fixed Assets

R a n k in g o n F ix e d A s s e ts T u rn o v e r R a tio
9 .81 10 8 6 T im e s 4 2 0 Dabur H L L N e s t le G o d re jC a d b u ry rit a n n ia o lg a t e P & G B C C o m p a n ie s 4 .33 5 .1 2 .96 2.61 6.1 7 7.84 7 .66

INTERPRETATION:
The company may wish to know its efficiency of utilizing fixed assets. This ratio indicates the extent to which the investment in fixed assets contributes towards sales. If compared with the previous period, it indicates whether the investment in fixed assets has been judicious or not.

51

STATEMENT SHOWING TOTAL ASSETS TURNOVER RATIO AS ON 31ST MARCH 2004 Companies Fixed Assets Turnover Ratio Dabur 2.80 HLL 2.94 Nestle 7.11 Godrej Cadbury Britannia Colgate 8.44 2.29 3.12 5.34 P&G 1.09

Total Assets Turnover Ratio= Sales Total Assets

R ankin g on Total Assets Turnover R atio
9 8 7 6 5 Tim e s 4 3 2 1 0 8.44 7.11 5.34 2.8 2.94 3.12 2.29 1.09

Dabur

HLL

Nestle Godrej Cadbury B ritannia Colgate Com pa nie s

P &G

INTERPRETATION:
The total assets turnover in addition to or instead of the net assets turnover. This ratio show the firms ability in generating sales from all financial resources committed to total asset turnover ratio. The total assets turnover of 2.8 times implies that Dabur generates a sale of Rs. 2.8 for one rupee investment in fixed and current assets together.

52

STATEMENT SHOWING TOTAL ASSETS TURNOVER RATIO AS ON 31ST MARCH 2005 Companies Dabur HLL 4.04 Nestle 7.60 Godrej Cadbury Britannia Colgate 9.85 2.46 3.85 6.08 P&G 2.32

Total Assets 3.72 Turnover Ratio

Total Assets Turnover Ratio= Sales Total Assets

R an kin g on T o tal Assets T u rn o ver R atio
9.85 10 8 T im e s 6 4 2 0 Dabur HLL Nes tle G odrej CadburyB ritanniaColgate Co m p a nie s P&G 3.72 4.04 2.46 3.85 2.32 7.6 6.08

INTERPRETATION:
The total assets turnover in addition to or instead of the net assets turnover. This ratio shows the firms ability in generating sales from all financial resources committed to total assets turnover ratio. The total assets turnover of 3.72 times implies that Dabur generates a sale of Rs. 3.72 for one rupee investment in fixed and current assets together.

53

Criteria of Analyzing the Activity Ratios

Inventory Turnover Ratio: - The inventory turnover ratio measure how fast the inventory is moving through the company and generating sales. It reflects the efficiency of inventory management. The higher the ratio, the more efficient but this may not always true. The high inventory turnover may be caused by a low level of inventory which may result in frequent stock outs. So its ranking is very difficult. Dabur India Ltd has secured 7th and 5th rank in 2003-2004 and in 2004-2005. Debtors Turnover Ratio: - The debtors turnover ratio shows how quickly receivables or debtors are converted into cash. It is a test of the liquidity of the debtors of a company. It shows the relationship between credit sales and debtors of a company. Dabur India Ltd has secured 8th and 7th rank in 2003-2004 and in 2004-2005 which is very low in compare to other FMCG companies. Fixed Assets Turnover Ratio: - The fixed assets turnover ratio measures the efficiency with which fixed assets are employed- a high ratio indicates a high degree of efficiency in assets utilization. For improve the fixed assets turnover Dabur should fully utilize all the assets. It has secured 6th rank in both the financial year. Total Assets Turnover Ratio: - The total assets turnover ratio shows the companys ability in generating sales from all financial resources committed to total assets. Dabur India Ltd has secured 6th rank in both the financial year.

54

RATIO COMPARISON OF DABUR

55

STATEMENT SHOWING THE RATIO CAMPARISON OF DABUR OF LAST 3 YEARS Years Current Ratio 2003-2004 1.27 2004-2005 0.79 2005-2006 1.47

Ranking on Current Ratio

1.6 1.4 1.2 1 Times 0.8 0.6 0.4 0.2 0 1.47 1.27 0.79

2003-2004

2004-2005 Years

2005-2006

INTERPRETATION:
Current ratio comes under the liquidity ratios which means the ability of the company to meet its current obligations. This year(2005-2006) current ratio has increased in compare to the last two years which means that company have sufficient money for its current obligation. It is 1.47% this year.

56

STATEMENT SHOWING THE RATIO CAMPARISON OF DABUR OF LAST 3YEARS Years Debt Equity Ratio 2003-2004 0.22 2004-2005 0.15 2005-2006 0.45

Ranking on Debt Equity Ratio

0.45 0.45 0.4 0.35 0.3 0.25 Times 0.2 0.15 0.1 0.05 0

0.22 0.15

2003-2004

2004-2005 Years

2005-2006

INTERPRETATION:
Debt equity ratio comes under the leverage ratios and shows the relationship between creditors and owners of the company. This year (2005-2006) ratio goes very high, which is 0.45% in compare to the last two years. This shows a large share of financing by the creditors of the firm. This ratio also indicates the margin of safety to the creditors.

57

STATEMENT SHOWING THE RATIO CAMPARISON OF DABUR OF LAST 3YEARS Years Long Term Debt Equity Ratio 2003-2004 0.17 2004-2005 0.11 2005-2006 0.31

Ranking on Long Term Debt Equity Ratio

0.31

0.35 0.3 0.25 0.2 Times 0.15 0.1 0.05 0 0.17 0.11

2003-2004

2004-2005 Years

2005-2006

INTERPRETATION:
Long term debt equity ratio also comes under the leverage ratios and shows the relationship between creditors and owners of the company. This year (2005-2006) goes very high, which is 0.31% in compare to the last two years. This shows a large share of financing by the creditors of the firm. This ratio also indicates the margin of safety to the creditors.

58

STATEMENT SHOWING THE RATIO CAMPARISON OF DABUR OF LAST 3YEARS Years Gross Profit Ratio 2003-2004 11.25 2004-2005 14.35 2005-2006 15.64

Ranking on Gross Profit Ratio

14.35 16 14 12 10 Times 8 6 4 2 0 11.25 15.64

2003-2004

2004-2005 Years

2005-2006

INTERPRETATION:
The gross profit ratio comes under the profitability ratios and this year (2005-2006) it has increase in compare to last two years. It is 15.64% this year. It represents the limit beyond which fall in sales prices are outside the tolerance limits.

59

STATEMENT SHOWING THE RATIO CAMPARISON OF DABUR OF LAST 3YEARS Years Net Profit Ratio 2003-2004 8.82 2004-2005 11.67 2005-2006 13.80

Ranking on Net Profit Ratio

13.8 14 12 10 Times 8 6 4 2 0 2003-2004 2004-2005 Years 2005-2006 8.82 11.67

INTERPRETATION:
The net profit ratio also comes under the profitability ratios and this year (2005-2006) it has increase in compare to last two years. It is 13.80% this year. This high net profit margin would ensure adequate return to the owner as well as enable a firm to withstand adverse economic condition when selling price is declining.

60

STATEMENT SHOWING THE RATIO CAMPARISON OF DABUR OF LAST 3YEARS Years Return on Capital Employed 2003-2004 29.50 2004-2005 49.70 2005-2006 49.47

Ranking on Return on Capital Employed

49.7 50 40 Times 30 20 10 0 2003-2004 2004-2005 Years 2005-2006 29.5 49.47

INTERPRETATION:
The return on capital employed also comes under the profitability ratios and this year (2005-2006) there is little bit of decrease in compare to last years. It is 49.47% this year. It refers to the long term funds supplied by the lenders and owner of the firm. It is equal to noncurrent liabilities plus owners equity. So it shows that Dabur have sufficient sources of the long term funds.

61

STATEMENT SHOWING THE RATIO CAMPARISON OF DABUR OF LAST 3YEARS Years Return on Net Worth 2003-2004 29.78 2004-2005 48.79 2005-2006 82.47

Ranking on N et Worth
82.47

100 80 Time s 60 40 20 0 2003-2004 2004-2005 Y e ars 29.78 48.79

2005-2006

INTERPRETATION:
The net worth also comes under the profitability ratios and this year (2005-2006) it has increase in compare to last two years. It is 82.47% this year. This ratio is most important ratio to judge whether the firm has earning a satisfactory return for its equity holders or not. Comparing it with the past record of the company, we can interpret that company have a fund for its equity holders.

62

STATEMENT SHOWING THE RATIO CAMPARISON OF DABUR OF LAST 3YEARS Years Debtors Turnover Ratio 2003-2004 14.46 2004-2005 27.78 2005-2006 50.83

R anking on D ebtors Turnover Ratio

50.83 60 50 40 T imes 30 20 10 0 2003-2004 2004-2005 Ye ars 2005-2006 14.46 27.78

INTERPRETATION:
Debtors turnover ratio comes under the activity ratios and this year (20052006) it has increases in compare to last two years. It is 50.83% this year. The debtors turnover ratio take place when company sell its goods on credit also. It is used as a marketing tool by a number of companies. This high Debtors turnover ratio indicates the number of time debtors turnover of last year in Dabur India Ltd. So it shows that Dabur India Ltd is very efficient in its management of credit.

63

STATEMENT SHOWING THE RATIO CAMPARISON OF DABUR OF LAST 3 YEARS Years Average Collection Period 2003-2004 25.23 2004-2005 13.14 2005-2006 10.16

Ranking on Average Collection Period

25.23

30 25 20 Times 15 10 5 0

13.14

10.16

2003-2004

2004-2005 Years

2005-2006

INTERPRETATION:
The average collection period comes under the activity ratios and this year (2005-2006) it has decreases in compare to last two years. It is 10.16% this year. This ratio measures the average number of days customers take to pay their bills, indicating the effectiveness of credit and collection policies of the business. The average collection period of Dabur India Ltd. is very low in this year. The company should try to increase the duration of the average collection period to compete with its competitors, by offering the customer high cost in credit sales.

64

STATEMENT SHOWING THE RATIO CAMPARISON OF DABUR OF LAST 3YEARS Years Fixed Assets Turnover Ratio 2003-2004 4.06 2004-2005 4.33 2005-2006 6.88

Ranking on Fixed Assets Turnover Ratio

6.88 7 6 5 Times 4 3 2 1 0 2003-2004 2004-2005 Years 2005-2006 4.06 4.33

INTERPRETATION:
Fixed assets turnover ratio comes under the activity ratios and this year (2005-2006) it has increases in compare to last two years. It is 6.88% this year. This ratio shows the efficiency of utilizing fixed assets of the company. Comparing with the previous period, it indicates that the investment in fixed assets has been made by the company, Dabur India Limited.

65

FINDINGS
On the basis of data and available information. Certain findings arrived that relates the Ratio Analysis of the company. It is observe that the Dabur India Ltd. has good profit margin and companys liquidity is also good. It has important from the viewpoint of creditors and shareholders that company have sufficient fund to pay them. In the comparison of profitability ratio in Dabur India Ltd. the gross profit ratio 14.35% and net profit ratio 11.67% both are increases in the year 2005-2006 in compare to last two year. The current ratio 1.47% is also increase in the year 2005-2006 in compare to last two year. It shows that current assets increase over current liabilities. The debt equity ratio 0.45% is also increase in the year 2005-2006 in compare to last two year. It shows that a large share of financing by creditors in the company, which is positive sign for the company. The return on capital employed 49.47% is having little bit of decrease in 20052006 in compare to last year. But then also its better then some other FMCG companies. It shows that Dabur India Ltd. have sufficient sources of the long term funds. The fixed assets turnover ratio 6.88% has increases in 2005-2006 compare to last two years. It shows the efficiency of Dabur India Ltd. in utilizing the fixed assets of the company, comparing with the previous period. It also shows that company has increases its investment in fixed assets. The debtors turnover ratio 50.83% has increases in 2005-2006 in compare to last two years, which shows that Dabur India Ltd. is managing its management of credit very well. The average collection period is decreases to 10.16% in compare to last two years. This low average collection period shows a low cost in extending credit to customers from Dabur India Ltd.

66

CONCLUSIONS AND RECOMMENDATIONS

Through the ratio analysis of seven admired companies in the same sector. The various positive and negative results came out, on the basis of these results I would like to recommend that The company should try to increase the duration of the average collection period to compete with its competitors, by offering the customer high cost in credit sales. The company should try to maintain its net worth for having satisfactory fund for equity share holders. The company should give more emphasis to sufficient utilization of the resources and funds. The company should improve the return on capital employed, as a source of long term fund. The company should reduce its variable cost to increase gross profit margin which is very low relatively other FMCG companies.

67

SWOT ANALYSIS
STRENGTHS
A trusted, successful & globally known brand Maintain its quality (achieved ISO 9000 certificate and other quality related awards) Old brand recognition Wide R & D department

WEAKNESSES
Less Economies of scale Poor Advertising of Dabur Nature Care

OPPORTUNITIES
Increasing health consciousness among people Increasing Market share Brand Loyalty among people Entry in international retail chain through FDI

THREATS
Well-established Competitors Brands like Colgate, Pepsodent &Close up has High brand image & Consumer Awareness

To accelerate growth and maintain margins

68

LIMITATIONS
Although it has been my endeavor to take all necessary precautions to ensure that the information gathered is authentic and maximum facts are presented but I faced certain constraints while doing so. The constraints and limitations faced are as mentioned below:

1) Time: The nature of the report required detailed and meticulous information gathering. In
this sense time was a limiting factor and a major constraint to accomplish the given task. Also sometimes the information was not available on time. This caused a lot of pilferage of time unnecessary of duplication of effort.

2) Human error: The feedback provided by the company executives, consumers and
others approached has been assumed to be correct. But there might have been wrong and biased facts given. The opinion of few cannot be generalized in any manner.

3) Non cooperation: While by and large the people approached were helpful some people
were non-cooperative. Also a lot of information was withheld due to its sensitive nature. 4) Calculation error: The report required calculation of figures and at last have to analysis them also, so mistake can be arises during calculations.

5) Difficulty in comparison: One serious limitation of ratio analysis arises out of the
difficulty associated with their comparability. Such comparisons are vitiated by different procedures adopted by various companies. The difference may relate to: Difference in the basis of inventory valuation (eg. Last in first out, first in first out and average cost) Different depreciation methods (eg. Straight line v/s written down basis) Estimated working life of assets, particularly of plant and assets. Treatment of extraordinary items of income and expenditure, and so on.

6) Conceptual Diversity: The other limitation of ratio analysis is that there is different of
opinion regarding the various concepts used to compute the ratios. There is always room for diversity of opinion as to what constitutes shareholders equity, debt, assets, profit and so on. Different companies may be use these terms in different senses or the same company may use them to mean different things at different times.

69

Appendices

70

71

Balance Sheet As At 31st March 2004 SCHEDULE SOURCES OF FUNDS:

SHAREHOLDERS FUNDS A) SHARE CAPITAL B) RESERVES AND SURPLUS LOAN FUNDS: A) SECURED LOANS B) UNSECURED LOANS DEFERRED TAX LIABILITY

AS AT 31st MARCH, 2004 (Rs. lac)

2,862.49 24,003.32 1,909.37 2,071.91

26,865.81 3,981.28 796.95

TOTAL APPLICATION OF FUNDS:

FIXED ASSETS A) GROSS BLOCK B) LESS: DEPRECIATION C) NET BLOCK INVESTMENTS DEFERRED TAX ASSETS CURRENT ASSETS, LOANS AND ADVANCES: A) INVENTORIES B) SUNDRY DEBTORS C) CASH & BANK BALANCES D) LOANS & ADVANCES

31,644.04
27,450.18 -11,955.85

15,494.33 17,122.67 57.01

10,951.93 4,207.22 1,188.72 5,584.34 21,932.21

LESS: CURRENT LIABITIES AND PROVISION A) LIABILITIES B) PROVISIONS

16,452.07 7,169.81 23,621.88 (1,689.67) 659.70

NET CURRENT ASSETS MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted)

TOTAL

31,644.04

72

Balance Sheet As At 31st March 2005 SCHEDULE SOURCES OF FUNDS:

SHAREHOLDERS FUNDS C) SHARE CAPITAL D) RESERVES AND SURPLUS LOAN FUNDS: C) SECURED LOANS D) UNSECURED LOANS DEFERRED TAX LIABILITY

AS AT 31st MARCH, 2005 (Rs. lac)

2,864.20 30,943.15 1570.38 3,292.60

33,807.35 4,862.98 1,277.51

TOTAL APPLICATION OF FUNDS:

FIXED ASSETS D) GROSS BLOCK E) LESS: DEPRECIATION F) NET BLOCK INVESTMENTS DEFERRED TAX ASSETS CURRENT ASSETS, LOANS AND ADVANCES: E) INVENTORIES F) SUNDRY DEBTORS G) CASH & BANK BALANCES H) LOANS & ADVANCES

39,947.84
32,672.44 -13,511.83

19,160.61 27, 094.25 131.75

12,802.57 4,928.27 1,065.38 6,400.96 25,197.18

LESS: CURRENT LIABITIES AND PROVISION C) LIABILITIES D) PROVISIONS

23,838.05 8,384.94 32,222.99 (7,025.81) 581.04

NET CURRENT ASSETS MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted)

TOTAL

39,947.84

73

Balance Sheet As At 31st March 2006

74

SCHEDULE SOURCES OF FUNDS:

SHAREHOLDERS FUNDS E) SHARE CAPITAL F) RESERVES AND SURPLUS LOAN FUNDS: E) SECURED LOANS F) UNSECURED LOANS DEFERRED TAX LIABILITY

AS AT 31st MARCH, 2006 (Rs. lac)

5,733.03 39,053.84 1,923.23 134.29

44,786.87 2,057.52 1,671.50

TOTAL

48515.89

75

APPLICATION OF FUNDS:
FIXED ASSETS G) GROSS BLOCK H) LESS: DEPRECIATION I) NET BLOCK INVESTMENTS DEFERRED TAX ASSETS CURRENT ASSETS, LOANS AND ADVANCES: I) INVENTORIES J) SUNDRY DEBTORS K) CASH & BANK BALANCES L) LOANS & ADVANCES

34,129. 37 -14,245. 69 7 27, 507.77 131. 74 11,560,9 0 2,694, 25 3,804, 41 10,376. 66 19,883.3

LESS: CURRENT LIABITIES AND PROVISION E) LIABILITIES F) PROVISIONS

NET CURRENT ASSETS MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted)

28,436. 22 19,342. 06 11,388. 94 30,731. 00 (2,294. 78) 3,287. 48 9 48,515.8

TOTAL

BIBLIOGRAPHY

76

REPORT REFERRED: Annual report of Dabur India Limited for the year 2003-2004 Annual report of Dabur India Limited for the year 2004-2005 Annual report of Dabur India Limited for the year 2005-2006 Annual reports of HLL Balance Sheet of other FMCG companies

WEBSITE SEARCH: www.dabur.com www.indiainfoline.com www.myiris.com www.hll.com www.google.com

77