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Financial Statement analysis report on Hindustan Unilever limited, dabur and marico.

SUBMITTED BY: Keshav Singhal (B.S)


Sandeep Swain (INFRA) Anuradha Bist (INFRA) Priya Ranjan (INFRA)

SUBMITTED TO:
Dr. Manipadma Datta

PREFACE

As students of management, practical knowledge is a must with full theoretical concepts. Therefore in` order to acquire the knowledge we were given this assignment as prime concepts to include in our assimilation of topic which is financial statement analysis from an industrial &corporate perspective. So for this said purpose we have made this assignment report in which we have compared the three FMCG companies .Hindustan Unilever Limited, Dabur and Marico.

I hope that our sincere efforts in this field of study would be considered and accepted by our respected faculty.

EXPERIENCE IS THE BEST

TEACHER

This Proverbs plays a guiding role in the curriculum of the subject Corporate Accounting & Reporting. As only theoretical knowledge does not impart complete education, it is necessary that practical exposure being accompanied to add meaning to education.

We have prepared this project on HUL, dabur and marico as a part of the practical studies. We have tried to discuss the firms financial information details in a comprehensive manner. Through this acknowledgement, we express our sincere gratitude and opportunities given to us analyze the companies standing, in an overall perspective.

A Student is always incomplete without the guidance of his teacher


INDEX

PREFACE ACKNOWLEDGMENT INTRODUCTION EXECUTIVE SUMMARY HISTORY OF HUL, DABUR & MARICO. BALANCE SHEET OF HUL BALANCE SHEET OF DABUR BALANCE SHEET OF MARICO RATIO ANALYASIS MEANING OF RATIO ANALYASIS OBJECTIVE OF RATIO ANALYSIS CLASSIFICATION OF RATIO CURRENT RATIO DEBT EQUTY RATIO PRICE EARNING RATIO IMPORTANCE OF RATIO ANALYSIS PURPOSE OF RATIO ANALYSIS INVESTOR PERSPECTIVE OUR RECOMENDATION CONCLUSION

INTRODUCTION

To understand the information contained in financial statements with a view to know the strength or weaknesses of the firm and to make forecast about the future prospects of the firm and thereby enabling the financial analyst to take different decisions regarding the operations of the firm.

EXECUTIVE SUMMARY: Indias consumer market is riding the crest of the countrys economic boom. Indias fast moving consumer goods (FMCG) sector is the fourth largest sector in the economy of India with a total market size in excess of US$ 13.1 billion. If we go by statistics, roughly around 73% of the Indian population lives in the rural areas- thats a very large market. Many giant players, both foreign as well as domestic, are competing in the market with a view to capture it. The growing consumerism in India shows the rapid increase in Indian consumer purchasing power, it shows strengths and opportunity that lies in rural Indian markets especially for FMCG products. As a result of it we have opted to undergo analyzing the financial statements and on basis of it, we shall do a peer to peer analysis and compare their market position (HUL DABUR & MARICO)in Indian FMCG Company having excellent distribution channel and deep rural reach in India As the major part of the market is yet to be extracted completely, one needs to evolve a set of strategies and plans to tap the potential Indian consumer market. To capture such a great opportunity, only good product and brand awareness will not be sufficient but proper distribution channel must be present in holistic approach. Thereby sufficing the need to assimilate the objectives of these companies as the objective of financial statements would be to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions. Financial statements should be understandable, relevant, reliable and comparable as it gives a correlation about reported assets, liabilities, equity, income and expenses which are directly related to an organization's financial position.

Therefore, financial statements are intended to be understandable by readers who have "a reasonable knowledge of business and economic activities and accounting and who are willing to study the information diligently."

HISTORY OF HUL DABUR & MARICO HUL HUL works to create a better future every day and helps people feel good, look good and get more out of life with brands and services that are good for them and good for others. With over 35 brands spanning 20 distinct categories such as soaps, detergents, shampoos, skin care, toothpastes, deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and water purifiers, the Company is a part of the everyday life of millions of consumers across India. Its portfolio includes leading household brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair & Lovely, Ponds, Vaseline, Lakm, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Walls and Pureit. The Company has over 16,000 employees and has an annual turnover of around Rs.19, 401 crores (financial year 2010 - 2011). HUL is a subsidiary of Unilever, one of the worlds leading suppliers of fast moving consumer goods with strong local roots in more than 100 countries across the globe with annual sales of about 44 billion in 2011. Unilever has about 52% shareholding in HUL. Hindustan Unilever Limited (HUL) formerly Hindustan Lever Limited (it was renamedin late June 2007 as HUL) is India's largest Fast Moving Consumer Goods company,touching the lives of two out of three Indians with over 20 distinct categories in Home &Personal Care Products and Foods & Beverages. These products endow the companywith a scale of combined volumes of about 4 million tones and sales of nearly Rs. 13718crores. touching the lives of two out of three Indians with over 20 distinct categories inHome & Personal Care Products and Foods & Beverages. The companys Turnover isRs. 20, 239 crores (for the 15 month period January 1, 2008 to March 31, 2009).

HULis also one of the country's largest exporters; it has been recognized as a Golden Super Star Trading House by the Government of India. The mission that inspires HUL's over 15,000 employees, including over 1,300 managers, is to "add vitality to life." HUL meetsevery day needs for nutrition, hygiene, and personal care with brands that help peoplefeel good, look good and get more out of life. It is a mission HUL shares with its parentcompany, Unilever, which holds 52.10% of the equity. The rest of the shareholding isdistributed among 360,675 individual shareholders and financial institutions.

HUL's brands like Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair & Lovely, Pond's,Sunsilk, Clinic, Pepsodent, Close up, Lakme, Brooke Bond, Kissan, Knorr Annapurna,Kwality Wall's are household names across the country and span many categories soaps, detergents, personal products, tea, coffee, branded staples, ice cream and culinary products. These products are manufactured over 40 factories across India. The operationsinvolve over 2,000 suppliers and associates. HUL's distribution network comprises about4,000 redistribution stocks, covering 6.3 million retail outlets reaching the entire urban population, and about 250 million rural consumers DABUR: Dabur India Limited is the fourth largest FMCG Company in India and has a turnover of approximately US$ 750 Million (Rs. 3417.1 Crore FY 2010) & Market Capitalization of over US$ 3.5 Billion (Rs 15500 Crore), with brands like Dabur Amla, Dabur Chyawanprash, Vatika, Hajmola and Real. The company was started by a doctor Dr. S.K. Burman in 1884. The brand name

Dabur is derived from the words Da for Daktar or Doctor and bur from Burman. From those humble beginnings, the company has grown into Indias leading manufacturer of consumer healthcare, personal care and food products. Over its 125 years of existence, the Dabur brand has stood for goodness through a natural lifestyle. An umbrella name for a variety of products, ranging from hair care to honey, Dabur is consistently ranked among Indias top brands. Its brands are built on the foundation of trust that a Dabur offering will never cause sdanyone slightest of harm. The trust levels that this brand enjoys are phenomenally high. In early 1900s, the next generation of Burmans took a conscious decision to enter the Ayurvedic medicines market and that led to the commercial start of Dabur. They set up a R&D center which paved way for the growth. In 1940 Dabur diversified into personal care products with the launch of its Dabur Amla Hair Oil which was a hit with Indian consumers. In 1949 it launched Dabur Chyawanprash and by 1970 launched Dabur Lal Dant Manjan. Dabur shifted its base to Delhi in 1972. Hajmola was launched in 1978 and the candy version came in 1989 (another brand Swad had created the new market of digestive candies at that time) and soon became a huge success. In 1996 it entered processed foods market with Real Fruit Juice. The brand went on to become the biggest success of the company and in 1997 the Foods division was created, comprising of Real Fruit Juice and Homemade cooking pastes to form the core of this divisions product portfolio.

OVERVIEW OF DABUR

One of the largest FMCG company has a turnover of approximately US$ 750 Million (Rs. 3417.1 Crore FY 2010) Differentiated products-strong herbal and natural products and more than 120 year of experience. Wide distribution network-covering 1.9 retail outlets and high penetration in urban and rural areas. Brand strength-various strong brand in diverse categories. Mother brand Dabur has a strong image in customers mind. Leading brand of Dabur India Ltd. Is vatika, anmol sarsono amla, dabur hajmola, dabur amla, dabur chyanprash and lal dant manjan, each brand having 100 crore turnovers. Vatika hair oil and shampoo is the high growth brand of the company. Dabur honey is the market leader with over 40% market share in branded honey market. Dabur chayanprash is the largest selling ayuravedic medicine with over 65% market share. In digestive tablets category hajmola is the leader with 75% market share. Dabur lal dant manjan has 35% of market share having top position in baby massage oil market.

% of Dabur products in the market Baby oil & skin care=7% Home care=6% Hair care=32% Digestive & candies=9% Health supplements=24% Oral care=22%

SALES STRATEGY Accenture proposed that Dabur improve its supply chain management, sales and distribution capabilities and use IT as a strategic enabler for its business strategy. From an IT perspective, Accenture recommended a two-pronged

strategy: migration to a nimbler outsourcing model that would generate value through agility and support business initiatives and maintenance of its SAP enterprise resource planning (ERP) system. To bring these initiatives to life, Accenture assembled a team of highly skilled industry experts, as well as professionals with extensive SAP design and implementation experience. Working closely with Dabur, the Accenture team initiated a number of highimpact projects, including:-

MARICO: Marico is a leading Indian Group in Consumer Products and Services in the Global Beauty and Wellness space. Maricos Products and Services in Hair care, Skin Care and Healthy Foods generated a Turnover of about Rs.13.6 billion (about USD 380 Million) during 2006-07. Marico markets well-known brands such as Parachute, Saffola, Sweekar, Hair & Care, Nihar, Shanti, Mediker, Revive, Manjal, Kaya, Sundari, Aromatic, Camelia, Fiancee and HairCode. Maricos brands and their extensions occupy leadership positions with significant market shares in most categories- Coconut Oil, Hair Oils, Post Wash Hair Care, Anti-lice Treatment, Premium Refined Edible Oils, niche Fabric Care etc. Marico is present in the Skin Care Solutions segment through Kaya Skin Clinics (31 in India and the Middle East), the Sundari range of Spa skin care products (in the USA & other countries) and its soap franchise (in India and Bangladesh). Marico's branded products are also present in Bangladesh, other SAARC countries, the Middle East and Egypt. The Overseas Sales franchise of Maricos Consumer Products (whether as exports from India or as local operations in a foreign country) is one of the largest amongst Indian Companies and is entirely in branded products and services. Marico was selected as one of the eight Indian companies in S & P's list of Challenger Companies from various nations, compiled globally by Standard & Poor's in June 2007.

Marico has also won various other Awards such as the following: 3 top Awards instituted by CNBC-TV18, U21 Global and Watson Wyatt Worldwide, in following categories: Indias Employer of Choice for 2007 , Award for HR Excellence & Award for Best Employer in the Consumer Products and Healthcare Sector. Gold Effie (2007) for its Corporate campaign and a Bronze Effie (2007) for Saffola. Kaya - Best Retailer in the Beauty and Fitness category, India retail Forum (September 2007) NDTV Profit - Business Leadership Award, FMCG Personal Hygiene Category (July 2007). One of India's 10 best marketers (Business Today September 2006). Brand Leadership Award at the India Brand Summit 2006 (September 2006). Kaya - Retailer of The Year Award (for the 2nd consecutive Year) at India Retail Summit 2006.

The Gulf Marketing Review Award in the Middle East 2006. Every month, over 70 Million consumer packs from Marico reach approximately 130 Million consumers in about 23 Million households, through a widespread distribution network of more than 2.3 Million outlets in India and overseas. Maricos focus on sustainable profitable growth is manifest through its consistent financial performance a CAGR of 19% in Turnover and 19% in Profits over the past 3 years- while setting a record of several consecutive quarters of year on year growth- 32 for Profits and 28 for Sales. VALUES OF MARICO INDUSTRY Opportunity seeking Bias for Action Consumer Centric Excellence Innovation openness & transparency Global outlook Boundary lessness Marico has a set of articulated values that were created at the inception of the organization, revisited and modified once in the year 1997 and lately in 2003, through the collective wisdom of Mariconians. The values since then have been an integral part of the working of all Mariconians. Our values are preferred practices that are employed in pursuit of our Business Direction. They sum up the philosophy that will build the culture to drive business growth.

Why Dabur and Marico has chosen as peers for Financial comparison with HUL Dabur and Marico has chosen as their sales revenue is very close to HUL

Vitality of Company's financial performance through Financial Ratios Financial Statement Analysis will help business owners and other interested people to analyse the data in financial statements to provide them with better information about such key factors for decision making and ultimate business survival To use financial statements to evaluate an organisations Financial performance Financial position.

To have a means of comparative analysis across time in terms of: Intracompany basis (within the company itself) Intercompany basis (between companies) Industry Averages (against that particular industrys averages)

To apply analytical tools and techniques to financial statements to obtain useful information to aid decision making.

The commonly used tools for financial statement analysis is: Financial Ratio Analysis BALANCE SHEET OF HUL:

BALANCE SHEET OF DABUR:

BALANCE SHEET OF MARICO

RATIO ANALYSIS:

Fundamental Analysis has a very broad scope. One aspect looks at the general (qualitative) factors of a company. The other side considers tangible and measurable factors (quantitative). This means crunching and analyzing numbers from the financial statements. If used in conjunction with other methods, quantitative analysis can produce excellent results. Ratio analysis isn't just comparing different numbers from the balance sheet, income statement, and cash flow statement. It's comparing the number against previous years, other companies, the industry, or even the economy in general. Ratios look at the relationships between individual values and relate them to how a company has performed in the past, and might perform in the future.

MEANING OF RATIO: A ratio is one figure express in terms of another figure. It is a mathematical yardstick that measures the relationship two figures, which are related to each other and mutually interdependent. Ratio is express by dividing one figure by the other related figure. Thus a ratio is an expression relating one number to another. It is simply the quotient of two numbers. It can be expressed as a fraction or as a decimal or as a pure ratio or in absolute figures as so many times. As accounting ratio is an expression relating two figures or accounts or two sets of account heads or group contain in the financial statements. MEANING OF RATIO ANALYSIS:

Ratio analysis is the method or process by which the relationship of items or group of items in the financial statement are computed, determined and presented.

Ratio analysis is an attempt to derive quantitative measure or guides concerning the financial health and profitability of business enterprises. Ratio analysis can be used both in trend and static analysis. There are several ratios

at the disposal of an analyst but their group of ratio he would prefer depends on the purpose and the objective of analysis. While a detailed explanation of ratio analysis is beyond the scope of this section, we will focus on a technique, which is easy to use. It can provide you with a valuable investment analysis tool. This technique is called cross-sectional analysis. Cross-sectional analysis compares financial ratios of several companies from the same industry. Ratio analysis can provide valuable information about a company's financial health. A financial ratio measures a company's performance in a specific area. For example, you could use a ratio of a company's debt to its equity to measure a company's leverage. By comparing the leverage ratios of two companies, you can determine which company uses greater debt in the conduct of its business. A company whose leverage ratio is higher than a competitor's has more debt per equity. You can use this information to make a judgment as to which company is a better investment risk. However, you must be careful not to place too much importance on one ratio. You obtain a better indication of the direction in which a company is moving when several ratios are taken as a group.

OBJECTIVE OF RATIOS

Ratio is work out to analyze the following aspects of business organizationA) Solvency1) Long term 2) Short term 3) Immediate

B) Stability C) Profitability D) Operational efficiency E) Credit standing F) Structural analysis G) Effective utilization of resources

Classification of Ratio
Profitabilit y Liqudity Ratio Leverage Ratio Activity Ratio Coverage Ratio

Gross Profit Rattio

Current ratio

Debt Equity Ratio

Stock Turn Over Ratio

Debentures Service Coverage Ratio Interest Coverage Ratio

Net Profit Ratio

Liquid Ratio

Profitability Ratio

Total Assets Turn Over Ratio

Return on Capital Employed Ratio Return on Shareholder s Fund

Capital Gearing Ratio Long Term Funds to Fixed Assets

Debtors Ratio

Creditors Ratio

Return on Equity Ratio

Book Value Per Share

Operating Ratio

Working Capital Turn Over Ratio

Expenses Ratio

Earning Per Share Ratio

Dividend Per Ratio

Prise Earning Ratio

CURRENT RATIO: Liquidity refers to the ability of a firm to meet its short-term (usually up to 1 year) obligations. The ratios, which indicate the liquidity of a company, are Current ratio, Quick/Acid-Test ratio, and Cash ratio. These ratios are discuss

This ratio compares the current assets with the current liabilities. It is also known as working capital ratio or solvency ratio. It is expressed in the form of pure ratio.

Formula:

CURRENT RATIO = CURRENT ASSET CURRENT LIABILITY

The current assets of a firm represents those assets which can be, in the ordinary course of business, converted into cash within a short period time, normally not exceeding one year. The current liabilities defined as liabilities which are short term maturing obligations to be met, as originally contemplated, within a year. Current ratio (CR) is the ratio of total current assets (CA) to total current liabilities (CL). Current assets include cash and bank balances; inventory of raw materials, semi-finished and finished goods; marketable securities; debtors (net of provision for bad and doubtful debts); bills receivable; and prepaid expenses. Current liabilities consist of trade creditors, bills payable, bank credit, and provision for taxation, dividends payable and outstanding expenses. This ratio measures the liquidity of the current assets and the ability of a company to meet its short-term debt obligation.CR measures the ability of the company to meet its CL, i.e., CA gets converted into cash in the operating cycle of the firm and provides the funds needed to pay for CL. The higher the current ratio, the greater the short-term solvency. This compares assets, which will become liquid within approximately twelve months with liabilities, which will be due for payment in the same period and is intended to indicate whether there are sufficient short-term assets to meet the short- term liabilities. Recommended current ratio is 2: 1. Any ratio below indicates that the entity may face liquidity problem but also Ratio over 2: 1 as above indicates over trading, that is the entity is under utilizing its current assets DEBT EQUTY RATIO

Formula: DEBT EQUTY RATIO = TOTAL LONG TERM DEBT OWNERS FUND Debt equity ratio is also called as leverage ratio. Leverage means the process of the increasing the equity shareholders return through the use of debt. Leverage is also known as gearing or trading on equity. Debt equity ratio shows the margin of safety for long-term creditors & the balance between debt & equity.

PRICE EARNING RATIO

It saws the relationship between the market price of share and earnings per share .it significance the price that is currently ruling in the market for each rupee of earnings being made by company per share. As general rule, the higher this ratio, the better it is for owners. This ratio is widely used by the analysts to the value of firms performance as exempted by investor . The higher the P/E ratio, the better is for owners. Formula:

PRICE EARNING RATIO = MARKET VALUE OF SHARE EARNING PER SHARE

IMPORTANCE OF RATIO ANALYSIS:

As a tool of financial management, ratios are of crucial significance. The importance of ratio analysis lies in the fact that it presents facts on a comparative basis & enables the drawing of interference regarding the performance of a firm. Ratio analysis is relevant in assessing the performance of a firm in respect of the following aspects: 1] Liquidity position, 2] Long-term solvency, 3] Operating efficiency, 4] Overall profitability, 5] Inter firm comparison 6] Trend analysis.

PURPOSE OF RATIO ANLYSIS: 1] To identify aspects of a businesses performance to aid decision making

2] Quantitative process may need to be supplemented by qualitative Factors to get a complete picture. 3] 5 main areas: Liquidity the ability of the firm to pay its way Investment/shareholders information to enable decisions to be made on the extent of the risk and the earning potential of a business investment Gearing information on the relationship between the exposure of the business to loans as opposed to share capital Profitability how effective the firm is at generating profits given sales and or its capital assets Financial the rate at which the company sells its stock and the efficiency with which it uses its assets

ANALYZING COMPANY STATUS WITH CHARTS:

Sales
HUL. And its competitors from 2006-2010

25000

20000

Dabur

HUL
15000 Column1

Marico
Column2

10000

5000

0 2006 2007 2008 2009 2010

Net Profit
HUL. And its competitors from 2006-2010

2500

2000

1500

Dabur HUL

Column1
1000 Marico

Column2
500

0 2006 2007 2008 2009 2010

Share Capital
HUL. And its competitors from 2005-2009

250

200

150

Dabur HUL Column1

100

Marico Column2

50

0 2006 2007 2008 2009 2008

Fixed Assets in Crores


800
700 600 500 400 300 Dabur HUL Column1 Marico Column2

200
100 0 2006 2007 2008 2009 2010

RATIOS DESCRIPTION:

HUL: Key Financial Ratios of Hindustan Unilever ------------------- in Rs. Cr. -------------------

Mar '11 Investment Valuation Ratios Face Value Dividend Per Share Operating Profit Per Share (Rs) Net Operating Profit Per Share (Rs) Free Reserves Per Share (Rs) Bonus in Equity Capital Profitability Ratios Operating Profit Margin(%) Profit Before Interest And Tax Margin(%) Gross Profit Margin(%) Cash Profit Margin(%) Adjusted Cash Margin(%) Net Profit Margin(%) Adjusted Net Profit Margin(%) Return On Capital 13.53 12.25 12.41 11.75 11.75 11.56 11.56 102.47 1.00 6.50 12.34 91.18 11.04 60.98

Mar '10

1.00 6.50 12.82 81.45 10.70 60.36

15.74 14.59 14.70 12.76 12.76 12.29 12.29 106.78

Employed(%) Return On Net Worth(%) Adjusted Return on Net Worth(%) Return on Assets Excluding Revaluations Return on Assets Including Revaluations Return on Long Term Funds(%) Liquidity And Solvency Ratios Current Ratio Quick Ratio Debt Equity Ratio Long Term Debt Equity Ratio Debt Coverage Ratios Interest Cover Total Debt to Owners Fund Financial Charges Coverage Ratio Financial Charges Coverage Ratio Post Tax Management Efficiency Ratios Inventory Turnover Ratio Debtors Turnover Ratio Investments Turnover Ratio Fixed Assets Turnover Ratio 7.91 24.28 7.91 5.63 8.99 29.24 8.99 5.35 11,243.63 -12,163.75 10,529.33 395.13 -421.50 342.84 0.86 0.43 --0.84 0.46 --87.57 80.67 12.19 12.20 102.47 85.25 81.40 11.84 11.84 106.78

Total Assets Turnover Ratio Asset Turnover Ratio Average Raw Material Holding Average Finished Goods Held Number of Days In Working Capital Profit & Loss Account Ratios Material Cost Composition Imported Composition of Raw Materials Consumed Selling Distribution Cost Composition Expenses as Composition of Total Sales Cash Flow Indicator Ratios Dividend Payout Ratio Net Profit Dividend Payout Ratio Cash Profit Earning Retention Ratio Cash Earning Retention Ratio AdjustedCash Flow Times

8.31 5.63 61.54 35.15 -20.02

7.66 5.35 51.08 32.05 -22.62

53.29 19.20 19.35 7.25

50.67 18.61 18.35 7.31

71.20 64.98 22.71 29.99 -Mar '11

75.20 69.40 21.25 27.59 -Mar '10 10.09 11.84

Earnings Per Share Book Value

10.68 12.19

DABUR:

Key Financial Ratios of Dabur India

------------------- in Rs. Cr. -------------------

Mar '11 Investment Valuation Ratios Face Value Dividend Per Share Operating Profit Per Share (Rs) 1.00 1.15 3.59

Mar '10

1.00 2.00 6.34 33.05 7.14 87.10

Net Operating Profit Per Share 18.81 (Rs) Free Reserves Per Share (Rs) Bonus in Equity Capital Profitability Ratios Operating Profit Margin(%) Profit Before Interest And Tax Margin(%) Gross Profit Margin(%) Cash Profit Margin(%) Adjusted Cash Margin(%) Net Profit Margin(%) Adjusted Net Profit Margin(%) 19.06 17.76 17.91 15.58 15.58 14.27 14.27 4.02 93.41

19.17 17.97 18.06 15.88 15.88 15.03 15.03 61.62

Return On Capital Employed(%) 44.16

Return On Net Worth(%) Adjusted Return on Net Worth(%) Return on Assets Excluding Revaluations Return on Assets Including Revaluations

46.29 45.21 5.85 5.85

58.04 56.29 8.60 8.60 68.96

Return on Long Term Funds(%) 53.79 Liquidity And Solvency Ratios Current Ratio Quick Ratio Debt Equity Ratio Long Term Debt Equity Ratio Debt Coverage Ratios Interest Cover Total Debt to Owners Fund Financial Charges Coverage Ratio Financial Charges Coverage Ratio Post Tax Management Efficiency Ratios Inventory Turnover Ratio Debtors Turnover Ratio Investments Turnover Ratio Fixed Assets Turnover Ratio Total Assets Turnover Ratio 8.65 19.67 8.65 4.39 2.46 56.06 0.23 50.47 41.66 0.99 0.78 0.23 0.01

0.93 0.68 0.14 0.02

52.35 0.14 42.53 36.46

11.31 23.62 11.31 4.31 3.44

Asset Turnover Ratio Average Raw Material Holding Average Finished Goods Held Number of Days In Working Capital Profit & Loss Account Ratios Material Cost Composition Imported Composition of Raw Materials Consumed Selling Distribution Cost Composition Expenses as Composition of Total Sales Cash Flow Indicator Ratios

4.39 63.26 29.32 26.70

4.31 52.96 22.08 3.76

53.15 0.93 14.89 4.09

48.61 1.22 16.55 4.31

Dividend Payout Ratio Net Profit49.42 Dividend Payout Ratio Cash Profit Earning Retention Ratio Cash Earning Retention Ratio AdjustedCash Flow Times 44.32 49.40 54.74 0.49

46.86 43.13 51.67 55.64 0.23

Mar '11 Earnings Per Share Book Value 2.71 6.33

Mar '10

4.99 8.64

MARICO: Key Financial Ratios of Marico ------------------- in Rs. Cr. -------------------

Mar '11 Investment Valuation Ratios Face Value Dividend Per Share Operating Profit Per Share (Rs) Net Operating Profit Per Share (Rs) Free Reserves Per Share (Rs) Bonus in Equity Capital Profitability Ratios Operating Profit Margin(%) Profit Before Interest And Tax Margin(%) Gross Profit Margin(%) Cash Profit Margin(%) Adjusted Cash Margin(%) Net Profit Margin(%) Adjusted Net Profit Margin(%) 14.62 13.30 13.44 11.75 11.75 13.29 13.29 1.00 0.66 5.59 38.20 12.52 90.33

Mar '10

1.00 0.66 5.47 32.85 8.03 91.08

16.63 15.26 15.37 13.51 13.51 11.65 11.65 34.07

Return On Capital Employed(%) 23.87

Return On Net Worth(%) Adjusted Return on Net Worth(%) Return on Assets Excluding Revaluations Return on Assets Including Revaluations

36.11 28.77 14.21 14.21

41.11 43.26 9.38 9.38 48.71

Return on Long Term Funds(%) 34.31 Liquidity And Solvency Ratios Current Ratio Quick Ratio Debt Equity Ratio Long Term Debt Equity Ratio Debt Coverage Ratios Interest Cover Total Debt to Owners Fund Financial Charges Coverage Ratio Financial Charges Coverage Ratio Post Tax Management Efficiency Ratios Inventory Turnover Ratio Debtors Turnover Ratio Investments Turnover Ratio Fixed Assets Turnover Ratio Total Assets Turnover Ratio 5.98 21.99 5.98 6.18 1.70 18.77 0.63 12.30 12.46 0.99 1.70 0.63 0.14

1.35 1.23 0.66 0.16

21.49 0.66 19.04 15.22

6.36 25.73 6.36 7.88 2.20

Asset Turnover Ratio Average Raw Material Holding Average Finished Goods Held Number of Days In Working Capital Profit & Loss Account Ratios Material Cost Composition Imported Composition of Raw Materials Consumed Selling Distribution Cost Composition Expenses as Composition of Total Sales Cash Flow Indicator Ratios Dividend Payout Ratio Net Profit Dividend Payout Ratio Cash Profit Earning Retention Ratio Cash Earning Retention Ratio AdjustedCash Flow Times

6.18 52.83 32.20 105.42

7.88 69.98 25.89 89.85

61.29 5.26 14.30 6.58

54.78 9.96 16.18 7.30

14.96 13.75 81.23 83.09 1.98

20.01 18.07 80.99 82.75 1.38

Mar '11 Earnings Per Share Book Value 5.13 14.21

Mar '10

3.86 9.38

Comparison with Competitors Balance Sheet HUL ------------------- in Rs. Cr. ------------------Dabur India Marico

Mar '11

Mar '11

Mar '11

Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities 215.95 215.95 0.00 0.00 2,417.30 0.67 2,633.92 0.00 0.00 0.00 2,633.92 HUL 174.07 174.07 0.00 0.00 927.09 0.00 1,101.16 17.57 235.78 253.35 1,354.51 Dabur India 61.44 61.44 0.00 0.00 811.68 0.00 873.12 332.42 220.07 552.49 1,425.61 Marico

Mar '11

Mar '11

Mar '11

Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets 3,759.62 1,590.46 2,169.16 299.08 1,260.68 2,811.26 943.20 281.91 4,036.37 1,099.72 1,358.10 6,494.19 0.00 6,264.21 1,324.98 7,589.19 1,095.00 0.00 2,633.92 766.88 269.32 497.56 11.92 519.23 460.58 202.46 26.08 689.12 461.81 166.33 1,317.26 0.00 539.05 535.36 1,074.41 242.85 82.95 1,354.51 421.20 198.74 222.46 45.52 470.36 454.22 118.98 13.95 587.15 369.93 4.22 961.30 0.00 242.07 31.96 274.03 687.27 0.00 1,425.61

INTERPRETAION FROM ABOVE RATIOS: PROFITABILITY RATIOS: Profitability Measures assess the firm's ability to operate efficiently and are of concern to owners, creditors, and management

Return on Asset (ROA) ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. (Net Profit / Avg. Total Asset) * 100 Return on assets measures a companys earnings in relation to all of the resources it had at its disposal (the shareholders capital plus short and longterm borrowed funds). Thus, it is the most stringent and excessive test of return to shareholders. If a company has no debt, the return on assets and return on equity figures will be the same. Return on Equity (ROE) The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. (Net Earnings/Shares holder Equity) * 100 Gross Profit Margin (GPM) It gives a good indication of financial health. A financial metric used to assess a firm's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as the source for paying additional expenses and future savings. (Gross Profit/ Net Sales) * 100

Net Profit Margin (NPM) This number is an indication of how effective a company is at cost control. The higher the net profit margin is, the more effective the company is at converting revenue into actual profit. The net profit margin is a good way of comparing companies in the same industry, since such companies are generally subject to similar business conditions. (Net Profit/ Net Sales) * 100

Inferences Drawn:
100 90 80 70 60 50 40 30 20 10 0 HUL 2010 HUL 2009 Marico 2010 Marico 2009 Dabur 2010 Dabur 2009 ROA(%) ROE(%) Gross Profit Margin(%) Net Profit Margin(%)

ROA and ROE The ROA value gives investors an idea of how effectively the company is converting the money it has to invest into net income. In case of HUL it is always more if last 2 years then Marico and Dabur. In 2010, ROA was around 87% for HUL, It clearly signifies that for every Rs.1/- of investment as asset, HUL earning 87paise where it is quite low in case of Dabur and Marico. Now, assets comprise of share holder equity and long term borrowed funds. In case of HUL, Debt to equity ratio is zero implies HUL as a No debt company. Hence ROE is same as ROA for HUL, In case of Dabur and Marico, ROE is lying around 45% to 60% which suggests companys pay back as per investment made by share holder. On the other hand if we look at ROA of these two companies, it is fluctuating near to 20 % in the last two years. As we know, ROA tells about company performance while keeping all the assets into consideration and not only shareholder equity alone. ROE is certainly a hint that management is giving shareholders more for their money. On the other hand, if ROA is low or the company is carrying a lot of debt, a high ROE can give investors a false impression about the company's fortunes. Hence it is necessary to analyse the different ratio in one picture frame rather than looking at them simultaneously. One other important prospective, as HUL is a zero debt company (ROE=ROA) while other two are not. Implies HUL is not using debt financing. From investor point of view, I might appreciate the fact the company has zero debt but debt is cheaper then equity. If the company have taken care of debt financing it could have increased up its operations and revenues. However for companies which have very large market capitalization like HUL, not using debt financing signifies the low risk and self dependency in investors eye. Discussing about NPM and GPM, the different between NPM and GPM is Net Profit (NP) = Gross Profit (GP) overhead The profit margin tells you how much profit a company makes for every Rs.1/it generates in revenue or sales. Eg. NPM = 20% means for every Rs.1/Hence higher the NPM and GPM, indicates better financial health of a company.

Mathematically GPM will always be greater than or equal to NPM as there will some overhead expenses. Practically, overheads are not zero hence GPM > NPM. The lower the difference between NPM and GPM, the better. If the difference is more that signifies the operational efficiency of the company. This difference is less in case of HUL as compare to other peers considered relatively. Hence we can comment on good operational efficiency of HUL with respect to Dabur and Marico.

LIQUIDITY RATIOS: Liquidity Ratio: The higher the current ratio, the more capable the company is of paying its obligations. In case of HUL the ratio is lying between 0.8 to 0 .9 whereas for Dabur its .9 to 1.2. At the same time for Marico, it is above 1.2. By looking at Current ratio only we can say Marico has the highest ability to meet short-term debt obligations. However, the current assets also include inventory of a company. Generally inventories are not readily converted into cash hence we need another ratio that does not includes inventory in current asset to give a more precise picture of any firms liquidity. That ratio is quick ratio. For HUL the difference between quick ratio and current ratio is very significant as compare Marico and Dabur which implies heavy inventory in HUL. The difference is least in Marico and then Dabur studied for last two years. Hence we have concluded on liquidity parameter Marico is on top followed by Dabur and then HUL. Inventory Turnover Ratio: Keeping more inventory is not a false behaviour(as in case of HUL), one might argue having enough inventory can guard you against various un-favourable situation like in-ability to produce the goods due to any factor, excess demand due to factors like season, natural calamity etc. The excess inventory gives enough confidence to firm to act in future. However with no doubt this inventory should be in rotation i.e. inventory turnover ratio should be good. So that the same amount of goods will present in ware house but it will keep rotating. The inventory turn ratio of Dabur is quite high comparatively to Marico and HUL. In-fact Marico has the lowest inventory ratio. Thus analysing quick ratio and inventory ratio in single frame, Marico has highest quick ratio

but lowest inventory turn ratio implies Marico maintaining high inventories but its sitting period of good in inventory is more comparison to HUL and Dabur which are maintaining low inventory but quickly converting it into revenues. Apart from Inventory turnover ratio, we will be discussing on fixed asset and Total Asset turnover ratio to comment on operational efficiency. Fixed Asset Turnover Ratio A higher fixed-asset turnover ratio shows that the company has been more effective in using the investment in fixed assets to generate revenues. Investments made on Plant, Property and Equipments (PPE). The fixed turnover ratio is decreasing in case of all the three companies. However the decrease in ratio is due to investments made in PPE by HUL and Marico where as in case of Dabur it is disinvestment in fixed asset. To analyse fixed turnover ratio, one must analyse at least four five years of patterns as investment made on PPE would yield higher production in significant amount of time. As per our scope of analysis we have concluded Marico is utilizing its fixed assets in the way resulting addition to sales revenue to maximum followed by HUL and then Dabur.

P/E Ratio In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. If market price of any firms stock is raising and proportionately dividend is not increasing resulting increase in P/E ratio, yet as an investor I might be interested as in the hope the currently market price of share is high and increasing over time being receiver of low dividend (targeting for long term). P/E ratio noticed high in last year for HUL, implies higher expectation of earning/willingness to pay to earn per unit of income. The difference in ratio is not much in the three companies considered to comment on financial health comparison but P/E directly affected by market situation also. D/E Ratio A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. Higher D/E ratio can facilitate company to use the benefits of debt financing as Debt is not always bad and Debt is always

cheaper then equity. But very high D/E creates serious troubles in decision making process and affects the flexibility of top management in any firm. On the contrary low D/E implies a company is not enough using the debt. Discussing about D/E of HUL it is zero means it is a no debt company. D/E is quite high in case of Marico and comparatively very less in Dabur. This implies the risk factor in HUL is very less and financial leverage is least in comparison of Dabur and Marico. Also in case of Dabur and Marico, the ratio has decreased in the last two years indicating lowering of risk.

INVESTOR PERSPECTIVE & OUR RECOMMENDATION: FOR HINDUSTAN UNILEVER: A look at the 2 years closing chart pattern of Hindustan Unilever should convince investors of different experiences and propensities why this is a musthave stock among the several thousand being traded on the BSE and NSE.

There is an old saying: You cant keep a good man down. That expression could just as well describe the HUL stock. Note that when the stock dropped to its new closing low of 220 in Mar 10, all four technical indicators reached higher bottoms (marked by blue arrows). The positive divergences signaled the end of the bear period. The stock embarked on a fresh bull rally within an upward-sloping channel that is still intact. From Sep 10 through Jan 11, the stock reached three closing tops each a little higher than the previous one. This time, the technical indicators all touched lower tops. The negative divergences led to a sharp drop below the 200 day EMA, followed by a triple-bottom reversal pattern from Feb to May 11. Once again, positive divergences from all four technical indicators that touched higher bottoms, hinted at a resumption of the rally. The stock reached a new closing high of 343 in Jun 11 at the upper-end of the upward-sloping channel. Negative divergences in the technical indicators warned of a correction. There are two points of interest here. The first is that the stocks price movements provide long-term trading opportunities, as it swings up and down within the upward-sloping channel. The second, more important one, is that between Nov 10 and Sep 11 the stock has gone up to touch new highs, and is in a bull market - even as the Sensex and Nifty are in clear down trends. All three EMAs are rising and the stock is trading above them a sign of a bull market. The strategy should be to use dips towards the lower end of the upward-sloping channel to add. All four technical indicators MACD, ROC, RSI and slow stochastic are correcting an overbought situation. The correction from the new closing high of 353 may continue a bit longer. Bottomline? The stock chart pattern of Hindustan Unilever is in a bull market, making steady rather than spectacular progress. Growth and margins are back on the upswing. Valuations are not cheap, but the stock is worth its weight in gold. Regular dividends are an added attraction.

FOR DABUR: Dabur India

The stock investing tip to buy stocks of Dabur India for short term time frame can be considered as an option. The target price could get achieved in one to two months. Dabur is one of the good FMCG stock as everyone knows. This tip is purely based on analytical indications. Dabur India touched its 52 week high recently at Rs 218.95. 52 week low was

at Rs 121. Current EPS is Rs 4.87 and P/E stands at 41.37. Although P/E ratio looks high, FMCG stocks have always been considered as safe stocks in stocks markets and so command a higher P/E. If you look at the 6 months chart, support line is around Rs. 195 which could be considered as stop loss. The target once again could be near to its 52 week high i.e. 218. This level provides moderate amount of returns in short term i.e. 1 - 2 months.

MARICO: Recently, management of Marico Industries, a good FMCG company, talked about their stock from investor's perspective. They actually guided the investors with a warning that investors should not be too optimistic about Marico stock for may be couple of quarters due to various business reasons. One of the reason they sight for slow growth/no growth is rise of input cost of raw material at almost 80%. Another reason is political unrest in Africa and Middle east where company has been doing business which is almost zero now. And the third reason is in anticipation of domestic economic slowdown. With ever rising high inflation, purchasing power of people is bound to be less and people would be willing to spend less on FMCG products. Sighting all three reasons, company management wants it's stock investors to not to expect high growth from company for next may be 2-3 quarters. It is an appreciable effort from management compared to most of the managements who keep misguiding small investors with artificial high growth promises! As a result, stock has corrected more than 10% in a day. It may slip down up to 120 range where it could be a good stock to buy for long term.

CONCLUSION

As we have given the project work to compare the three well known FMCG companies i.e. HUL DABUR and MARICO .We came to know about the financial condition of the three companies relatively good with HUL being in ideal condition for investment. They are able to generate customer and these companies are providing new services and products with latest innovation to customers. At the end I can say that Hindustan Unilever Ltd. Is in good financial position and marico & dabur can be titled as the market followers and can promptly become the challengers in near future.

REFERENCES: 1) 2) 3) 4) 5) [1]. http://www.investopedia.com [2]. http://www.investorwords.com [3]. http://www.hul.co.in [4]. http://www.marico.com [5]. http://www.dabur.com 6) http://investmentsfordummieslikeme.blogspot.com